Tata Power has signed option agreements to sell 5% stake in PT Kaltim Prima Coal (KPC) for an aggregate consideration of $250 million (Rs 1,500 crore), subject to certain adjustments. This is to get additional cash flow as well as to reduce its consolidated debt, the company said in a statement.
The company said that this has been done in light of it facing under-recovery and cash flow challenges due to its Mundra UMPP operations.
In addition, the entire 30% stake in KPC related power infrastructure companies is also covered for sale in the above agreement, it added.
Tata Power, however, would continue to hold 25% equity stake in PT Kaltim Prima Coal (KPC) if the option is exercised. KPC will also continue to be part of supply chain for Tata Power Group's coal off-take requirements. Accordingly, Tata Power through its wholly-owned subsidiaries, has signed an option agreement which gives it the option to sell 5% equity stake in PT Kaltim Prima Coal and associated companies in coal trading, to a Bakrie Group entity.
"The option to partially sell KPC and its related power company has the potential to provide the company the flexibility to raise additional funds to meet the current challenges. If the option is exercised there will be no impact to the coal supplies on our plants since we will stay invested in the KPC mines to the extent of 25% and our coal supply agreement will continue as it is. There will also not be any dilution of our rights under the KPC SHA as a result of the 5% sale," Anil Sardana, managing director, Tata power said.
Tata Power through its wholly owned subsidiaries has also signed an option agreement which gives it the option to sell its 30% equity stake in the Power Infrastructure Companies which are associated with KPC, to the same Bakrie Group entity.
The above options will vest based on certain conditions being fulfilled. The aggregate consideration will be determined once the option is exercised and will be based on the valuation methodology agreed with the buyer. "Based on the current estimates the Arutmin and PTMP sale are targetted to be completed within the current financial year on fulfillment of the conditions required for closing," Sardana said.