New Delhi : Tata Power announced the sale of its 30 per cent stake in Indonesian coal company PT Arutmin for USD 500 million (Rs 3,150 crore) to cut its debt. The development comes in the wake of the company’s Mundra UMPP project facing under recovery challenges.

The company, however, does not see any fuel supply shortage after exiting Arutmin as it will continue to hold its interest in another Indonesian coal company Kaltim Prima Coal (KPC).

Tata Power through its wholly-owned subsidiary has signed an agreement to sell its 30 per cent stake in Arutmin and associated companies in coal trading and infrastructure to a Bakrie Group entity, a company statement said.

Tata Power, India’s largest private power producer, had bought 30 per cent stake each in PT Arutmin and KPC for $1.1 billion in 2007.

“Tata Power is facing under recovery challenges at its Mundra UMPP operations and cash flow concerns and therefore decided to exit PT Arutmin Indonesia to get additional cash flows and reduce its consolidated debt,” it said. Tata Power shares closed 2.71% up at Rs 73.95 on the BSE.

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