"Tata Power, facing under recovery and cash flow challenges due to its Mundra UMPP operations has signed options agreements to sell 5 percent stake in PT Kaltim Prima Coal to get additional cash as well as to reduce its consolidated debt," the company said in a BSE filing.

The company will sell its stake to Indonesian coal firm Bakrie Group entity.

Post stake sale, Tata Power's stake PT Kaltim Prima Coal (KPC) will be 25 percent.

As part of the deal, Tata Power through its subsidiaries has the option to sell 30 percent stake in Power Infrastructure Companies, which are associated with PT Kaltim Prima Coal, to the Bakrie Group entity.

"The aggregate consideration for Tata Power's 5 percent stake is USD 250 million, subject to certain adjustments," the filing said.

"The option to partially sell KPC and its related power company has the potential to provide the company the flexibility raise additional funds to meet the current challenges," Anil Sardana, Managing Director, Tata Power said in the statement.

On January 31, Tata Power announced sale of its 30 percent stake in Indonesian coal company PT Arutmin for USD 500 million.

The company signed an agreement to sell its 30 percent stake in Arutmin and associated companies in coal trading and infrastructure to a Bakrie Group entity.

Tata Power's 4,000 MW ultra mega power project at Mundra in Gujarat continues to face trouble due to increase in the price of Indonesian coal.

It had approached the electricity regulator CERC seeking higher tariff for Mundra project.

The Central Electricity Regulatory Commission (CERC) had said that since there had been a rise in the price of imported coal from Indonesia, the private power utility should be compensated.

A panel set up by the regulator reportedly suggested nearly 50 paise hike in tariff of the Mundra plant.

(Agencies)

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