Tue, 03 Apr 2007
India's Tata Power Company Limited (TPCL) raised many eyebrows here by agreeing to acquire 30 percent stakes in Indonesia's top coal-mining firms -- PT Kaltim Prima Coal (KPC) and PT Arutmin Indonesia -- for US$1.3 billion.

The deal is the second biggest purchase in Indonesian corporate history after Phillip Morris's $5.2 billion acquisition of cigarette maker PT HM Sampoerna in 2005.

"It's the biggest amount ever invested by an Indian company in Indonesia," Indian Embassy deputy chief of mission T.S. Tirumurti told The Jakarta Post on Monday.

Bumi's share price had been rising for a number of weeks on the news of Tata's bid, and ended up at Rp 1,300 on March 29, one day before the agreement.

The deal begs the question: How does one make quick bucks in Indonesia?

Ask the Bakrie Group for the answer.

The Bakrie Group is set to profit handsomely from the deal. The Group bought its 100 percent stake in KPC from BP Plc. and Rio Tinto for $500 million, and its 100 percent stake in Arutmin for $185 million from BHP Billiton in 2003.

Thus, the Bakrie Group will made a $315 million profit virtually overnight from the sale of its 30 percent stakes in the two firms. In addition, it will continue to control almost 70 percent of each company.

Last year, Renaissance Capital agreed to buy Bakrie's 100 percent stakes in the two coal miners for $3.2 billion. But Renaissance canceled the deal at the last minute over fears of declining production.

Combined coal production by KPC and Arutmin in 2006 amounted to 53.5 million tons, around 95 percent of which was exported.

Bumi, Asia's third-largest coal producer, is planning to boost coal production to around 60 million tons this year, thanks to fresh money from TPCL.

Bumi recorded a net profit of $222.30 million in 2006, a big jump from the $123.26 million notched up in 2005, on total 2006 sales of $1.85 billion.

As a result of the deal, TPCL will also acquire a stake in PT Indocoal, a coal-trading company.

-- Veeramalla Anjaiah



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