Tata Power takes coal mine stakes in Indonesia

Tata Power, India’s second-biggest utility by annual sales, will borrow $950 million 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 did not 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, which fuels half the country’s power generation, as the government aims to almost triple capacity to 193,000 megawatts by 2012 to meet demand in the world’s second-fastest-growing major economy. Tata Power agreed on March 31 to pay $1.3 billion to buy a 30 percent stake in Kaltim Prima Coal and Arutmin from 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.

Information from: www.iht.com