Just two months after acquiring Anglo-Dutch steel company Corus for $12 billion, the Tatas have announced another mega acquisition abroad. Tata Power, the largest private power utility in India, has signed definitive agreements to purchase 30 per cent equity stakes in two major Indonesian thermal coal producers, P T Kaltim Prima Coal and P T Arutmin Indonesia, and a related trading company owned by P T Bumi Resources Tbk for $1.1 billion. The acquisition will be made by forming an offshore special purpose vehicle (SPV) and funding will be carried out through a combination of debt in the SPV and internal accruals and borrowing from Tata Power. Tata Power has also signed an offtake agreement with KPC as part of the deal, which entitles it to buy about 10 million tonnes (mt) of coal per annum. This purchase will ensure much-needed support for Tata Power’s coming west coast power projects over the next five years, which would account for 7,000 mw and require 21 mt of coal. The Indonesian coal companies that the Tatas are investing in are together among the three largest exporting thermal coal mines in the world. “They have an excellent coal export infrastructure and are strategically well placed to act as a supply source for the increasing regional demand. Together, KPC and Arutmin produced approximately 53.5 mt of coal in 2006, of which over 95 per cent was sold in the export market,” the Tata Group said. “These companies are world class assets and have enjoyed robust financial performances recently, given rising production volumes and increases in coal prices,” it added.
