Denise Kee, Bloomberg
Singapore: Tata Power Co., India’s second-biggest utility by annual sales, will borrow $950 million (Rs3,856 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 to arrange a $600 million loan, which will be 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 supply of coal, which fuels half the country’s generation capability, as the government targets almost tripling capacity to 193,000 megawatts by 2012 to meet demand in the world’s second-fastest growing major economy. Tata Power agreed on 31 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.
“There is a global scramble for assets whether it is iron ore, base metals or coal,” said Rajiv Anand, who manages $3 billion of stocks and bonds at Standard Chartered Mutual Fund in Mumbai. “Given the fact that power plants in India are predominantly thermal, securing supply becomes critical.”
The $600 million loan will have a $400 million five-year portion and a $200 million seven-year portion, said the people involved in the deal.
Shalini Singh from the Tata Power’s corporate communications department didn’t reply to phone calls and e-mails from Bloomberg News. 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.
India’s economy, Asia’s fourth largest, grew a record 9.2% in the year ended March.
Anand of Standard Chartered Mutual Fund of said Indian power companies must look overseas to secure coal supply, especially Southeast Asia or Africa where the fuel is available at a reasonable price, as local supply is largely government- controlled.
Higher global demand and lower exports from China has driven up the price of coal.
Annual coal contract prices in Asia may surpass record highs in the next 12 months. Deutsche Bank AG analysts led by Peter Richardson in Melbourne predict $58 a metric ton next year and $59.50 in 2009, from about $55.50 for the year that started 1 April. Goldman Sachs Group Inc. expects $56 next year.