Nalco: All Set for Massive Capacity Build Up
With National Aluminium Company (Nalco) being conferred the elevated status of a Navratna company by the government, what sort of commercial and managerial autonomy the company is expecting to implement in its expansion plans?
The coveted Navratna status is conferred on select Public Sector Enterprises (PSE’s) which emerge as significant players in the economic development of the country, having comparative advantage and capacities to become global giants. With this elevated status, National Aluminium Company now enjoys more managerial powers and commercial autonomy, to chart its own course in the world market.
Accordingly, the ceiling on equity investment to establish financial joint ventures and wholly owned subsidiaries in India or abroad shall be 15 percent of the net worth of the PSE in one project limited to Rs 1000 crore. The overall ceiling on such investment in all projects put together shall be 30 percent of the net value of the PSE. The power to incur capital expenditure without government approval is to the extent of Rs 150 crore or equal to 50 per– cent of the net worth whichever is less.
What would be the investment component of the massive amount of Rs 40,000 crore that Nalco would be making in the next five years? Which are the areas of expansion that the investment would cater to?
In order to emerge as a company of global repute, we have drawn ambitious growth plans involving a colossal investment of around Rs.40,000 crore in the next five years. At the moment investmentout of this sum would be made in projects, including smelter and power projects in Indonesia, South Africa and Iran. The investments would offer good business opportunities to supply construction equipment and raw materials:
The countries and the investment component would be in the following order.
In Indonesia, there is a proposal to set up a 5 lakh MT smelter plant and 1250 MW coal based power plant involving an investment component of US$ 2.1 billion and $1.3 billion respectively. The project would be funded 100 percent by Nalco. While there are also projects to set up a 5 lakh MT smelter plant and 1250 coal based power plant in South Africa as well involving an investment of US$ 2.1 billion and US$ 1.3 billion. The project will be a proposed joint venture of Nalco with Tata Africa.
Projects are also in Iran for setting up a 1.55 lakh MT smelter plant in first phase and a gas based power plant in second phase with an investment of $1 billion. However, the details of the gas based power project are not yet finalized. The project would be undertaken through a joint venture of Nalco with Alpha (in which Kerman Development Organisation is the major partner).
However, let me clarify that these foreign projects are not exclusive, rather these are pursued simultaneously, with an objective that any one or two of these would ultimately be taken up on the basis of viability and gestation period.
What is the status of these overseas projects?
For Indonesia M/s M.N. Dastur & Co has been engaged as consultants to prepare feasibility report, which will be ready in a month’s time. Tanjung Enim and Tanjung Api-Api are the probable sites.
For South Africa, involving an investment of Rs 16,000 crore our prospective joint venture partner M/s Tata Africa are following it up with the Government of Republic of South Africa. While for the Iranian venture, the MoU has been signed this year. The project will be implemented in two phases with the joint venture partners. To start with Nalco may buy power from this project, which is available at a cheaper rate from gas based power plants and then at a later stage the company will try to set up its own gas-based power plant.
When would be the company’s first and second phase of expansion plan is likely to be completed? What would be the investment incurred in the expansion programme and which are the areas that would be expanded through the investment?
The first phase expansion was completed during February 2004 with an investment of Rs 3600 crore. Creditably, except for the part funding of the capital cost of the original project in the early 80s to the tune of Rs 1288.62 crore by way of private equity, Nalco has not depended on the government budgetary support at any point of time. Continuing with its self– propelled growth, now the second phase expansion is under implementation with an investment of more than Rs 5000 crore, which is scheduled to be completed by 2008 end.
With the investment in second & third phase is going on how much would it add to the capacity of Nalco in terms of bauxite mines, alumina refinery, aluminum smelter and captive power plant?
With the second phase of expansion the capacity of the bauxite mines would be enhanced to 63,00,000 MT from 48,00,000 MT as made under first phase of expansion. For alumina refinery the capacity under second phase would stand expanded to 21,00,000 MT up from 15,75,000 MT. While for the aluminium smelter the capacity after the second phase expansion would be 4,60,000 MT up from 3,45,000 MT under first phase expansion. And for power plant it would be 1200 MW up from 960 MW.
The original capacities of our bauxite plant is 24,00,000 MT. Alumina refinery 8,00,000 MT, alumina smelter 2,30,000 MT and power plant 600 MW.
Plans are afoot for third phase of expansion, which is likely to entail an expenditure to the tune of Rs 6000 crore. Under this expansion, the bauxite mining capacity shall be enhanced to around 90 lakh tones from 63 lakh tones, alumina refining to 30 lakh tones from 21 lakh tones aluminium smelting to 6.3 lakh tones and power generation to 1700 MW from 1200 MW per annum.
What is the present status of Nalco’s greenfield expansion projects comprising mine and refinery complex in Andhra Pradesh involving an investment of Rs 7000 crore? When is the project likely to be commissioned?
A mines and refinery complex is being planned in Andhra Pradesh. The bauxite mines capacity would be of 42-lakh tones, while the refinery will have a capacity of 14 lakh tones. The draft MoU is under negotiation with the Government of Andhra Pradesh. Appointment for forest clearance and mining lease is under process.
What is the status of the smelter and power complex in Ib valley in Jharsuguda district involving an investment of Rs 8500 crore?
The project investment approval is expected by the end of the year 2009, provided allotment of water and land is made by the state government within 3 to 4 months. The pre-feasibility report has been made and composite application submitted to IPICOL for clearance under a single window system.
What about the port facilities expansion programme at Vizag?
With our ongoing expansion, we are required to upgrade our export and import facilities at Visakhapatnam Port, which is in order.
Can you mention about your capacity utilization, products and value added product sales achieved last year? What has been the new marketing initiatives taken by the company to boost sale?
I would like to mention that Nalco has reported 104.12 percent capacity utilization of its aluminiumsmelter at Angul, with a production of 3,59,213 tonnes of aluminium cast metal in 2007-08 as compared to 3,58,734 tonnes in the previous year. Similarly, the alumina refinery at Damanjodi has reported 100.04 percent capacity utilization with a production of 15,75,500 tonnes of alumina hydrate as against 14,75,200 tonnes in the previous year.
The company has also achieved the highest ever metal sales of 3,58,878 tonnes during 2007-08 earning the highest ever export turnover on primary aluminium at million 270.46 against the previous high of 247.05 million USD during 2006-07. This represents an increase of 3.12 percent against the MoU target of 3,48,000 tone set up the Ministry of Mines.
In view of long–term sustenance in the domestic market in face of additional availability of metal, Nalco has introduced the memorandum of understanding with domestic customers since 2002-03. This scheme has been quite successful so far. The company has also strengthened the domestic distribution channel by opening nine stockyards in different parts of the country. Through this, Nalco has achieved quantum jump in domestic sales and has maintained its domestic market share of 27 percent.
The company is now adopting newer technologies for increasing production of billets of superior quality, for marketing both in domestic and overseas market.
NBMCW October 2008
