Kazakh copper producer Kazakhmys PLC (KAZ.LN) said Tuesday that it had signed an agreement with AES Corp. (AES) to acquire for up to $1.5 billion the largest power plant in the country, along with a coal mine that feeds it.
Kazakhmys said in a statement that it would buy the Ekibastuz coal-fired power plant and the Maikuben West coal mine in Kazakhstan, financed by a loan of $2.1 billion.
"The acquisition of Ekibastuz and the captive coal mine at Maikuben West is consistent with our strategy of diversifying our portfolio and secures the future of an asset that is of importance to the development of Kazakhmys and the region," Chief Executive Oleg Novachuk said.
"It offers considerable opportunities to develop commercial relationships through surplus power generation."
Ekibastuz is to double its capacity in the next five years from its current 2,250 MW, the company said.
The associated coal mine at Maikuben has coal output of 3.1 million metric tons and an estimated mine life of about 30 years, Kazakhmys added.
AES will be retained under a management service contract through 2010.
Kazakhmys said it expects to close the deal in the second quarter of this year. An initial payment of $1.1 billion will be made at the deal's close and AES will be entitled to an additional payment of up to $381 million between 2008 and 2010 "should certain profitability and performance targets be met," Kazakhmys said.
Completion of the deal is subject to the approval of the Kazakh government.