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ArcelorMittal plans power venture in India

L N Mittal
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ArcelorMittal, the world’s biggest steel producer, has planned a foray into power generation in India. This will be the L N Mittal-promoted group’s second project in the energy sector; it has 49 per cent equity in Ltd that is implementing a petroleum refinery project in Bhatinda, Punjab.

The steel major had hired Prosad Dasgupta as chief executive officer of its power division, a person associated with Mittal’s new venture told Business Standard. Dasgupta was, till recently, managing director and chief executive officer of Ltd (PLL), the country’s biggest liquefied natural gas importer.

Dasgupta’s five-year term at PLL was to come to an end on August 31 and he was eligible for a two-year extension till he attained the superannuation age of 65 in 2012. He, however, quit the job last month and is expected to join his new assignment shortly.

India-born already has a small presence in the power sector through LNM India Internet Ventures. The company holds 8.79 per cent stake, currently valued at over Rs 513 crore, in Indiabulls Power, which is developing thermal power projects with a capacity of 6,600 Mw.

The person, who did not wish to be identified, added that was likely to set up thermal power plants to begin with and at a later stage may consider gas-based power plants. He did not give details of capacity and location for the proposed venture.

A spokesperson for ArcelorMittal said the company was looking to create a team to build captive power plants to serve its proposed steel manufacturing facilities in India. “Such power plants are expected to be built in Jharkhand, Orissa and Karnataka, based on thermal coal linkages,” the spokesperson said in an emailed response.

POWER PLAY

> The L N Mittal-promoted group to focus on thermal captive plants

> Hires ex-chief of Petronet to head power division

> Jharkhand, Orissa, Karnataka likely locations

> Most steel makers are into power generation

> The sector offers growth avenues in India

Traditionally, most steel producing companies are also present in power generation, mainly for meeting captive requirement. Through its power foray, the L N Mittal group will be joining the company of Tatas, the Ruia-promoted Essar group, Sajjal Jindal’s and Naveen Jindal’s JSPL, who are present both in steel and power generation businesses in India.

In ArcelorMittal’s case, however, its plan for mega steel plants in India have not fructified due to delays in land acquisition and grant of mining leases.

Mittal had lined up two huge integrated steel projects, worth $20 billion (Rs 90,000 crore), in Jharkhand and Orissa. The projects, announced in 2005 and 2007, respectively, were to be Mittal’s first attempts to build new plants since the steel tycoon created the world’s largest steel company, ArcelorMittal, through a big-bang deal.

However, there has been little progress in both projects. At the end of 2009, the company also approached the Karnataka government with a proposal to set up a steel plant at an investment of over $6 billion (Rs 28,000 crore).

The company also recently entered into a partnership agreement with Uttam Galva to buy 35 per cent stake in the latter, partly through share purchase from existing promoters and an open offer.

Mittal’s nine-million tonne joint venture refinery at Bathinda is scheduled to be completed in 2011. The investment in the refinery is through Singapore-based Mittal Energy Investment Pte Ltd.

The power sector in India is perceived as a growth opportunity, even as the current situation is characterised by shortages in terms of peak power demand and overall  supply. The peaking and energy shortages during 2009-10 on an all-India basis were 13.3 and 10.1 per cent, respectively. Shortages in many states are much more than the national average. With growing demand, huge capacity addition is required, which has thrown open growth avenues for industrial houses.

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