Tata Power [Get Quote] is evaluating opportunities to make another overseas acquisition of a coal mine.

A senior company management executive said the company was planning to zero in on smaller mines. 

Prasad Menon, managing director, Tata Power, said: "We are evaluating various opportunities."

The company is mulling the fresh acquisition to minimise the risk from the supply of 2 million tonnes of coal from Indonesia-based mines for its ultra mega power project (UMPP) at Mundra.

The Mundra UMPP will become operational in FY12. The company's management declined to provide details of the potential mines on the radar.

The company will adopt a judicious approach while making the mine acquisition given the current surge in coal prices and the rise in valuation of coal mines.

Spot coal prices were hovering around $120 a tonne, a rise of nearly 100 per cent compared with last year's rates, said analysts. 

Tata Power is implementing the 4,000 mw UMMP at Mundra through Coastal Gujarat Power, a special purpose vehicle.

Tata Power requires about 5 million tonnes of coal annually for the project. It will receive 3 million tonnes of coal a year from the Indonesian mines.

In April 2007, Tata Power had acquired 30 per cent stake in two coal mines in Indonesia-based PT Kaltim Prima Coal and PT Arutmin Indonesia to ensure adequate supply of the key input for its nearly 7,000 mw capacity expansion currently underway.

Under the agreement, Tata Power is entitled to purchase 10.1 million tonnes of coal per annum from the mines till 2021.

<B>To dilute stake for funds</B><BR>
Tata Power today said it will divest its holdings or sell assets to fund expansion activities, estimated to cost Rs 6,000 crore. By 2013, the company will raise its power generation capacity to 12,861 mw.

Of the Rs 6,000 crore, Rs 2,900 crore would come from internal accruals and Rs 1,900 crore would be raised by issuing warrants and preferential shares, the company said in a presentation today.