Olympus enters Tata-Indo mining deal

As part of the deal, the PE firm will take a 14-15% stake in each of the two SPVs, issued through fresh shares with differential rights, which offer no dividend rights for five years, but are convertible into regular shares after such time, according to a Tata Power statement. Both SPVs hold interests in Indonesian coal mines Kaltim Prima Coal (KPC) and Arutmin, which were purchased from PT Bumi Resources Tbk in 2007 for $1.2 billion, giving Tata an overall 30% stake. Bumi maintains its majority shareholder position with 70%.

In March of 2009 Tata refuted claims that it would be selling its stakes, saying, “This acquisition is a key part of the company’s growth strategy and we have no intention to sell our stake in the coal mines to Bumi Resources or any other party.”

Daniel Mintz, Founding Managing Director of Olympus Capital, told AVCJ that the group was not in fact looking for minority interests. “It’s important to recognize that we’re not entering this as a strategic seeking an offtake agreement from the mines,” he said. “It’s a financial transaction that enables Tata Power’s Coal SPVs to raise capital to be used for additional acquisitions or debt paydown,” Mintz said. “Tata Power is building significant power generating capacity in India for which they seek additional sources of coal supply; this transaction will create capital for that… these are world-class mines that we’re investing in.”

Although foreign investment into Indonesia has become more prolific across many sectors, recent regulatory changes and risks are adversely impacting mining investment. According to analysts, the New Mining Law enacted at the end of 2008 introduced a license based system that replaced the long-standing Contract of Work (CoW), which gave foreign investors contractual safeguards and certainty around their mining investments over periods of 30 years or longer.

A Senior Director at KPMG Indonesia noted that whilst the new law provided for direct foreign investment into certain mining assets previously restricted only to Indonesian nationals or companies, and industry players are learning to deal with some of the provisions in various implementing regulations that were not well received, the abolition of the COW system will continue to impact investment levels.”

According to the 2009 BP Statistical Energy Survey Indonesia is the third-largest exporter of steaming coal in the world, following Australia and China. The country’s coal reserves are largely located in Sumatra, though KPC and Arutmin operate on the island of Kalimantan. KPC is ranked as one of the world’s largest open-mining operations. 

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• Topics
• Southeast Asia
• Expansion
• Infrastructure
• Olympus Capital Holdings Asia
• Daniel R. Mintz