Ispat may buy 26% in JSW Energy's Ratnagiri power project
Sources say Ispat Industries may buy a 26% stake in an SPV (special purpose vehicle) which will own 300 MW power units of JSW Energy.
By Nisha Poddar, 
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| MUMBAI: Sajjan Jindal owned Ispat Industries is taking it’s first steps towards backward integration to turnaround the company, as announced by JSW Steel at the time of the Ispat’s acquisition in December, 2010. Sources said, Ispat is close to buying 26% stake in JSW Energy’s 300 MW Ratnagiri power project for a little over Rs 100 crores. This will allow Ispat to use the electricity from the plant for captive consumption to produce steel at it’s Khopoli plant.
Sources say Ispat Industries may buy a 26% stake in an SPV (special purpose vehicle) which will own 300 MW power units of JSW Energy, the rest of the 74% will be held by JSW Energy. According to the regulations Ispat is required to own 26% in any power project to make it a captive unit for it’s operations. Sources suggest that JSW is also contemplating a direct sale of JSW Energy’s stake to Ispat for meeting the regulatory obligation. “In that case the stake sale will be less than 1%” a source with direct knowledge said. JSW Steel declined an official comment on the development.
At the time of Ispat’s acquisition, JSW Steel said that Ispat’s cost of electricity is at Rs 6/unit and will be reduced to Rs 4.5-4.8/unit post synergies. Ispat may save close to Rs 250 crores a year if JSW’s plan materializes. Power cost accounts for 8-10% of the total cost of production of steel. Ispat produces 3.3 million tonnes of steel at Khopoli and requires around 200 MW of power to run the plant.
This is part of Ispat’s backward integration as part of an endeavour to make it profitable. Sajjan Jindal had earlier said, “We will try to bring down the cost of production for Ispat by activating our synergies.” On the raw material front also, JSW Steel has planned out ways in which Ispat can benefit in the long-term.
The company has categorically denied such speculative news as well reiterate that there is no truth in the news item", says a JSW spokesperson.
Sources say Ispat Industries may buy a 26% stake in an SPV (special purpose vehicle) which will own 300 MW power units of JSW Energy, the rest of the 74% will be held by JSW Energy. According to the regulations Ispat is required to own 26% in any power project to make it a captive unit for it’s operations. Sources suggest that JSW is also contemplating a direct sale of JSW Energy’s stake to Ispat for meeting the regulatory obligation. “In that case the stake sale will be less than 1%” a source with direct knowledge said. JSW Steel declined an official comment on the development.
At the time of Ispat’s acquisition, JSW Steel said that Ispat’s cost of electricity is at Rs 6/unit and will be reduced to Rs 4.5-4.8/unit post synergies. Ispat may save close to Rs 250 crores a year if JSW’s plan materializes. Power cost accounts for 8-10% of the total cost of production of steel. Ispat produces 3.3 million tonnes of steel at Khopoli and requires around 200 MW of power to run the plant.
This is part of Ispat’s backward integration as part of an endeavour to make it profitable. Sajjan Jindal had earlier said, “We will try to bring down the cost of production for Ispat by activating our synergies.” On the raw material front also, JSW Steel has planned out ways in which Ispat can benefit in the long-term.
The company has categorically denied such speculative news as well reiterate that there is no truth in the news item", says a JSW spokesperson.
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