Tata Power to Buy Bumi Mines Stake for $1.3 Billion

Tata Power Co., India's second-biggest utility by sales, agreed to pay $1.3 billion for a 30 percent stake of two coal mining units in Indonesia to secure supplies of the fuel.

PT Bumi Resources, Asia's third-largest coal miner, will sell stakes in PT Kaltim Prima Coal and PT Arutmin Indonesia.

Chairman Ratan Tata is expanding the group's 96 companies, which control about 3 percent share of India's $854 billion economy, to build a global brand and spread investment risks.

Tata Power's acquisition comes with an entitlement to purchase 10 million metric tons of coal from one of the mines, securing supplies of the fuel for its power plants coming up on
India's west coast. The new plants are part of Tata Power's $4 billion expansion plan to double power generation capacity to more than 4,500 megawatts.

Tata Power will pay $1.1 billion for Bumi's units ``prior to working capital and other adjustments,'' the company said in a statement from Mumbai.

Asian thermal coal prices have risen on supply constraints and higher demand from China. Chinese thermal coal imports rose by 28 percent year-on-year in January, the Beijing-based
Customs General Administration said Feb. 28.

The Kaltim Prima mines are 50 kilometers (31 miles) north of the equator on the east coast of Kalimantan, in Indonesian Borneo. The mines hold 3.56 billion tons of coal reserves,
according to the company's Web site. Arutmin operates four open-pit mines in the southeastern portion of Kalimantan.

Tata Power shares have declined 11 percent on the Bombay Stock Exchange in the past year, even as the benchmark Sensitive stock index gained 16 percent during the period.

The Tata group has spent almost $14 billion in the past two years to acquire companies overseas. Flagship company Tata Steel Ltd. this month completed a US$12 billion takeover of U.K. steelmaker Corus Group Plc, catapulting the company up world rankings to become the sixth-largest steelmaker, from 56th.

The group's previous overseas acquisitions include Tata Steel's purchase of Singapore's Natsteel Ltd. in August 2004 for 13 billion rupees ($287 million), and Thailand's Millennium
Steel Pcl for 18.2 billion rupees in December 2005.

Tata Tea Ltd. bought the U.K.'s Tetley Group Plc for $407 million in 2000 and followed it with a $677 million purchase of a 30 percent stake in U.S.-based Energy Brands Inc., also known as Glaceau. The group's hotels unit, Indian Hotels Co., last year bought the Ritz-Carlton hotel in Boston for $170 million.

Tata Power beat six other bidders, including India's Reliance Energy Ltd., to buy the stake. Bumi decided to sell part of its stake in the coal mines after it failed to raise
$3.2 billion through a share sale last year.

Coal miners in Indonesia, which in 2005 overtook Australia as the world's biggest exporter of coal used in power stations, are benefiting as economic growth in China boosts demand for coal to generate electricity.