Tata Power to buy coal worth Rs 12,000 cr from Indonesian miner in FY23

Related-party transaction with Indonesian mine will need shareholder nod

Tata Power Company (TPCL) plans to buy coal worth some Rs 12,000 crore from its Indonesian miner this financial year, saying the deal will give it the fuel without “interruptions”.

The company owns a 30 per cent stake in the mine and as the order will be a related-party transaction, it has sought its shareholders’ approval in the forthcoming meeting after its audit committee cleared the agreement. The coal is priced at an arm’s length basis and the transaction has been valued by an independent valuer.

Coastal Gujarat Power, which merged with Tata Power in April, signed an agreement with PT Kaltim Prima Coal (KPC) in 2008 for long-term coal supply. The agreement includes all amendments for sourcing coal from KPC on the basis of price linked to the Indonesian government notified monthly benchmark.

“The transactions between the two companies not only help smoothen business operations for both the companies, but also ensure consistent flow of desired quality and quantity of goods and services without interruptions and generation of revenue and business for both the companies to cater to their business requirements,” said Tata Power in a notice to its shareholders. The tenure of the coal sales agreement between Tata Power and KPC is valid till financial year 2032-33 (FY33) but the shareholders’ nod is being sought only for the ongoing fiscal, it said.

Tata Power has also sought approval to give construction contracts worth Rs 2,930 crore to Tata Projects (TPL), an associate company. Tata Power holds 47.78 per cent stake in TPL, while the rest is owned by its promoter Tata Sons. The company said, after competitive bidding, it placed orders with TPL for execution of flue gas desulphurisation (FGD) projects at its 4,150 Mw Mundra Thermal Power Generation plant and 447 MW Jojobera plant.

The project will be executed between FY23 and FY25 and the orders were placed after the audit committee cleared the transactions. In the rest of the ongoing fiscal year, Tata Power also intends to enter into other construction projects with TPL.

Tata Power has signed several transactions with Tata Steel, a listed associate company.

Tata Power sells power to Tata Steel for its manufacturing facilities and distribution. Tata Power also sells and stores spares for use in their manufacturing processes. At the same time, Tata Power provides tolling services to TSL whereby coal is provided by TSL for conversion into power. The company said its audit committee has recommended entering into related-party transactions (RPTs) with TSL worth Rs 2,630 crore to be signed during the ongoing fiscal.