GMR Energy, the power unit of the Bangalore-headquartered GMR Infrastructure, plans to acquire a 30 per cent stake in T Golden Energy Mines Tbk (GEMS), a Sinar Mas Group company in Indonesia for $450-550 million in cash.
GMR Infrastructure said in a regulatory filing that it will fund the acquisition through a combination of debt and internal accruals.
As part of the deal, GMR has also signed a 25-year coal offtake agreement with GEMS starting from the beginning of next year, with the annual offtake increasing to 10 million tonnes over the coming years.
"The acquisition of a significant stake by GMR Energy in PT Golden Energy Mines is a key milestone in the growth of GMR's energy business. It will provide fuel security for our power plants under construction and also support further capacity addition and trading," said GMR Energy chairman, B V N Rao.
"The alliance will significantly enhance the fuel security of the power plants under construction and development by GMR Energy and will also provide a coal portfolio for trading activity," he added.
Founded by Chinese tycoon Eka Tjipta Widjaja, Jakarta-based Sinar Mas is one of the largest conglomerates in Indonesia. The group has interests in pulp and paper, agribusiness, property, financial services, crude palm oil and energy.
Golden Energy Mines holds four producing and six non-producing thermal coal blocks, having combined reserves of more than one billion tons. It also holds licences for six non-producing thermal coal blocks.
''GEMS represents a unique opportunity to invest in a high quality asset with strong growth potential, given its coal reserves of over 860 million tonnes and coal resources of 1.9 billion tonnes. The off-take agreement will give us access to the required quality of coal from one of the lowest cost producers in Indonesia,'' said Raaj Kumar, CEO of GMR Energy.