Tata Power cuts sale consideration for Arutmin mine in Indonesia to $246 mn

Prior liabilities, other changes account for the lower sale consideration for Tata Power’s stake in PT Arutmin

The sale consideration is expected to be received in a phased manner over next few years, says Tata Power. Photo: Mint
The sale consideration is expected to be received in a phased manner over next few years, says Tata Power. Photo: Mint

Mumbai: Tata Power Co. Ltd has reduced the sale consideration for its stake in Indonesian coal miner PT Arutmin to Bakrie Group after adjusting for some prior-period liabilities and other changes.

The revised overall sale consideration for Arutmin and related infrastructure assets now stands at about $400 million from $510 million earlier.

The past liabilities include settlement of past claims with a mining contractor of about $80 million after a court order and other statutory liabilities of about $50 million.

Tata Power did not say when this long-pending deal would close.

The sale consideration for PT Arutmin Indonesia is now revised to $246.64 million, Tata Power said in an exchange filing on Wednesday. “The management indicated that they are waiting for clearances from regulatory authorities for closure of the deal,” said an analyst, who attended Tata Power’s conference call with investors on Wednesday after the company reported its earnings. He asked not to be named as he is not authorized to speak to reporters.

In 2014, Tata Power agreed to sell a 30% stake it held in PT Arutmin Indonesia, and its associated infrastructure assets, to the Bakrie Group for about $510 million. An important step before the sale was restructuring the investment companies, which has taken longer than earlier anticipated.

“Consequent to certain closing adjustments to the sale consideration and other changes agreed between the parties, the selling companies have signed revised definitive agreements with PT Cakrawala Langit Sejahtera (PT CLS) a Bakrie group entity November 28, 2016,” Tata Power said in a BSE filing on Wednesday.

The filing added that the sale consideration for the related infrastructure companies has also been revised to $154.28 million from the earlier value of $120 millions, pursuant to closing adjustments relating to prior period.

These consideration are expected to be received in a phased manner over next few years, Tata Power said.

Tata Power had acquired a 30% stake in two Indonesian thermal coal companies owned by PT Bumi Resources—PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia—in 2007 for about $1.1 billion. The purchase was to control costs of fuel for its Mundra Ultra Mega Power Project (UMPP) in Gujarat.

The investment firms are a common part of the two mine firms and needed to be divided or restructured so that Tata Power could retain its stake in KPC.

The stake sale was intended to bring down debt as Mundra continued to face challenges and the company sought to address its cash flow concerns.

The losses at Mundra have created stress on Tata Power’s balance sheet due to cost under-recoveries—the cost of electricity generated at the plant is more than the selling price.

The infrastructure company PT Mitratama Perkasa (PTMP), in which PT Sumber Energi Andalan Tbk (Sumber) holds Tata Power’s 30% equity; and Trust Energy Resources Pte. Ltd, a 100% subsidiary of Tata Power, which holds Sumber, have entered into an agreement with Rwood Resources Ltd, a Bakrie Group entity, for divestment of 94.61% stake in Sumber, the filing said.

Tata Power’s shares rose 2.35% to Rs.73.90 on BSE on Wednesday, a day after the company reported better-than-expected profit in second quarter ended 30 September.

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