Mumbai: GMR Energy Ltd, or GEL, the flagship company for the GMR Group’s energy investments with sizeable interests in coal mines in South Africa, Indonesia and India, on Friday said that it has through its overseas subsidiary, entered into definitive agreements to acquire a 30% equity stake in PT Golden Energy Mines Tbk (GEMS), a Sinar Mas Group company in Indonesia.
GEL will be paying cash consideration of $450-$550 million for the transaction, funded through a combination of debt and internal accruals. The acquisition will be made through an offshore special purpose vehicle (SPV) domiciled in Singapore.
In a statement, GMR Group said it is an significant step to seek fuel security and also enhance its coal portfolio.
As a part of the transaction, GEL has entered into an off- take Agreement with GEMS, which entitles it to purchase coal over the next 25 years, with the annual off take quantity steadily increasing to 10 million Tonnes over the coming years.
The statement said the transaction is subject to the fulfillment of several conditions precedent and is expected to close in calendar year 2011.
G M Rao, group chairman, GMR Group said “GMR is active in thermal power generation and Sinar Mas is in coal mines. All this makes us a very potent combination. This collaboration with one of the biggest and most reputed business Groups in Indonesia, can in the coming days, be a forerunner for further huge possibilities across countries.”
Raaj Kumar, chief executive Officer, GEL said this transaction represents a unique opportunity to invest in a high quality asset with strong growth potential, given its coal reserves of over 860 Million Tonnes and coal resources of 1.9 Billion Tonnes.
He added that the off take agreement will give GEL access to the required quality of coal from one of the lowest cost producers in Indonesia.