Ispat may buy 26% in JSW's Ratnagiri Project

MUMBAI: Ispat Industries, the Dolvi-based steelmaker that was acquired by Sajjan Jindal's JSW Group in December last, will buy 26% in the group's 300 megawatt Ratnagiri Power Project.

The proposed transaction in JSW Energy will be for about 100 crore, said people familiar with the development, and is in line with the plan announced by Mr Jindal on backward integration for Ispat.

The stake purchase will allow Ispat to use electricity generated from the plant for captive consumption to produce steel at Khopoli.

Ispat Industries would buy the 26% stake in a special purpose vehicle which will own 300 MW power units of JSW Energy. The remaining 74% will be held by JSW Energy.

According to power industry norms, Ispat is required to own 26% in any power project to make it a captive unit and to avail tax benefits.

Post acquisition of Ispat in December, JSW said Ispat's cost of electricity at 6 a unit, would be reduced to 4.5-4.8 due to synergies. Ispat may save close to 250 crore annually, said a JSW statement.

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.

"We'll try to bring down the cost of production for Ispat by activating synergies," Mr Jindal had said.

The company has categorically denied such speculative news as well reiterate that there is no truth in the news item", says a JSW spokesperson.