Singapore: Tata Power Co., India’s second-biggest utility, will borrow $950 million (Rs3,895 crore) to fund its purchase of stakes in two Indonesian coal mines, according to three people involved in the transaction.
The Mumbai-based company has hired Calyon Bank to arrange a $600 million loan secured by the coal mines and a $350 million loan guaranteed by Tata Power, said the people who didn’t want to be identified before an announcement by the borrower.
Calyon is marketing the loans to other banks, they said.
Indian power producers must secure supplies of coal as the government targets almost tripling the country’s generating capacity by 2012 to meet demand in the world’s second-fastest growing major economy. Tata Power agreed in March to pay $1.3 billion for a 30% stake in PT Kaltim Prima Coal and PT Arutmin from PT Bumi Resources, Asia’s third-largest coal miner.
“Given the fact that power plants in India are predominantly thermal, securing supply becomes critical,” said Rajiv Anand, who manages $3 billion of stocks and bonds at Standard Chartered Mutual Fund in Mumbai. “There is a global scramble for assets whether it’s iron ore, base metals or coal.”
Companies are buying $48.2 billion worth energy assets in the Asia-Pacific region this year, including coal mines, and are set to surpass $79.4 billion of such transactions in 2006, according to data compiled by Bloomberg.
Tata Steel Ltd, owned by Tata Power’s parent, in January bought the UK steel maker Corus Group Plc., the biggest takeover by an Indian firm. Tata Power’s $600 million loan will have a $400 million five-year portion and a $200 million seven-year portion, said people involved in the deal.
Shalini Singh from Tata Power’s corporate communications department didn’t reply to phone calls and emails from Bloomberg.
Carl Roberts, Calyon’s acting head of loan syndications for Asia Pacific, didn’t immediately respond to a voice message left on his office phone in Hong Kong.
Calyon, the investment-banking unit of Credit Agricole SA, was the No. 3 arranger of syndicated loans in Asia last year. Coal is the world’s fastest-growing energy source as rising oil prices prompt users to switch fuels, the US Energy Information Administration said in a report published on Monday. China, India, and the US will collectively account for 86% of the increase in global coal demand by 2030, it said.
India’s economy, Asia’s fourth largest, grew a record 9.2% in the year ended March. Coal fuels half the country’s 65,000MW generation capacity.