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Nalco open to equity dilution in $3.9 bn project in Indonesia

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State-owned today said it is considering selling stake in its $3.9 billion (over Rs 18,000 crore) in Indonesia in lieu of acquiring equity in in the island country.

"We are open to selling stake in the aluminium project to the firm, which offers us its coal mines. In return, we will acquire stake in the coal mine offered to us," Nalco Director Finance B L Bagra told PTI.

Nalco holds 76 per cent stake in the Indonesian project, while RAK Minerals & Metals Investments, a unit of RAK Investment Authority, holds 24 per cent.

"We will always maintain majority stake in the project," he added. The project comprises setting up of a five-lakh -tonne smelter and an integrated 1,250 MW power plant in Indonesia.

The company will import required alumina to run the smelter from its India operations. The company is looking for captive coal block to run the plant and had yesterday invited companies interested in selling coal mines.

Nalco is looking for a coal mine with an estimated reserves of 500 million tonnes and an annual production capacity of 10 million tonnes starting from 2014 for running the project.

There are about 200 coal mines in East Kalimantan province, where the project is proposed, Bagra said.

"Last day for submitting offers to our is September 30, 2010. We plan to launch financial bids in October-November," he said.

Asked if Nalco's JV partner RAK Minerals could be a possible partner for coal supply to the project, Bagra said, "They are already developing coal deposits there. They can also submit proposal to us. At present, they are our potential partner in the aluminium project."

As per the agreement with Rak Minerals, the UAE-based company will set up infrastructure like railway and port in the island country to cater to the project.

The project was facing regulatory delays and was shifted from earlier proposed site in South Sumatra to East Kalimantan.

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