Tata Power may soon divest over $1 bn stake in Indonesian mines.

India's largest private power producer Tata Power has lost the motivation to continue with its investment in Indonesian mines KPC as international coal prices drop. The company, which sold a five per cent stake in these mines along with a 30 per cent stake in related power infrastructure companies in July for $250 million, said a sale of the remaining holding could 'follow soon.'

Tata Power bought a 30 per cent stake in two Indonesian thermal coal producers PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia (Arutmin) and the related trading company owned by PT Bumi Resources (Bumi) in early 2007 for Rs. 4,740 crore. According to analysts, the remaining 25 per cent stake in the coal mines is valued at a little over $1 billion (Rs. 6,000 crore).

The stake purchase followed Tata Power winning a bid for the imported coal-based 4,000 Mw Mundra Ultra Mega Power Project (UMPP). Its calculations were based on plans to import coal from Indonesia when international prices were around $40 a tonne at the time of bidding in 2006. But global coal prices surged past $100 a tonne in 2011 and the Indonesian government banned exports below a notified price from September 2011. This made import of coal unviable for Tata Power.


BS