Tatas to exit Indonesia mine for $500m Looks To Cover Losses From Mundra Power Plant In Absence Of Tariff Hikes

New Delhi: Tata Power has decided to exit one of the two coal mines it holds in Indonesia for $500 million in a bid to raise cash for covering losses from operating the Centre’s first showcase project at Mundra in Gujarat and reduce consolidated debt.      Tata Power would sell its 30% stake in the PT Arutmin Indonesia (Arutmin) mine and associated companies in coal trading and infrastructure to an entity of Indonesia’s Bakrie Group, the promoter of Bumi Resources.      But it would continue to hold the stake in PT Kaltim Prima Coal (KPC), which owns one of the largest thermal coal producing mines in the world. KPC would also continue to supply coal to the group’s power plants, Tata Power said in a statement.      The company had acquired the stakes in 2007 for $1.1 billion to feed the Mundra power project, the first of a batch of four 4,000MW plants the government had conceived as public-private partnership projects to quickly ramp up generation capacity.      The move by the country’s largest private power producer reflects the predicament – which many observers say has reached crisis proportions – faced by generation utilities as populist politics block tariff revisions in line with rising costs and the rupee’s declining value.      Three years after starting production at Mundra, Tata Power has been left carrying a can of Rs 1,800-crore loss in FY12 as it could not raise tariff to cover increased cost of imported coal. In April 2011, it sought a revision citing rise in cost of coal imports and the regulator said the company should be compensated for the increase in coal cost.      The regulator ordered consumer states to form a panel to decide on compensating the firm for higher cost of coal imports from Indonesia. The panel headed by HDFC chairman Deepak Parekh suggested a compensatory tariff of 45-55 paise per unit but the states have turned down the proposal.      Other private power producers such as the Adani Group and Anil Ambani’s Reliance Power too face similar situations. Attempts to mitigate the situation through options such as blending imported and domestic coal too have not worked due to difference in the quality of the two varieties and inadequate supply from Coal India.  UNLOCKING VALUE  March 2007 Tata Power acquires 30% stake in two coal blocks in Indonesia for $1.1bn to mainly support its ultra mega power plant in Gujarat. The coal mines are owned and operated by Bumi Resources  Jan 2014 Tata Power sells stake in Arutmin coal block to a Bakri Group entity for $500m, citing the challenging coal price scenario. The Group is the promoter of Bumi Resources. Some time back, the Indonesian government changed coal pricing rules, benchmarking them with international prices. The Indian company continues to own the other block, Kaltim Prima Coal  Mundra power project has been making losses. Tata Power made a provision of 1,800cr towards it in FY12