Tata Power to raise Rs 1,400 cr by selling 15% in 2 coal SPVs

Tata Power will raise $300 million (Rs 1,400 crore) by selling a 15% stake in two special purpose vehicles (SPVs), which own coal mines,to fund acquisitions and cut debt. The SPVs, Bhira Investments and Bhivpuri Investments, will issue shares to private equity firm Olympus Capital Holdings Asia, the firm said in a media statement.

Tata Power holds a 30% stake in two coal mines in Indonesia, called KPC and Arutmin, through these SPVs. Olympus Capital will subscribe to shares that are not eligible for dividends, but are subject to a capital protection arrangement. These shares are convertible into ordinary shares after five years.

“The long-term, flexible financing enhances our ability to achieve our strategic goals of securing sustainable sources of supply for our rapidly-growing power generation base,” said Tata Power managing director Prasad Menon.

In 2007, Tata Power had acquired a 30% stake in KPC and Arutmin coal mines for $1.2 billion, which was funded through bridge or short-term loans from banks and money advanced by Tata Power by way of so-called shareholder loans. These SPVs have a combined debt of $675 million.

The Indonesian mine produces 55-60 million tonne of coal annually. Of this, Tata Power uses around 12-14 million tonne of coal for its 4,000-mw Mundra power project.

Tata Power has been raising money for the past year to finance its operations in India and overseas. In November last year, it raised $300 million through a foreign currency convertible bond and in July last year, it had raised $335 million (about Rs 1,800 crore) GDR issue in July. It is in the process of investing around Rs 23,600 crore in various power projects.