Ispat Energy May Offer Rs 100 Crore Equity To Institutions

The Ispat group is planning to offer equity to the tune of Rs 90-Rs 100 crore to financial institutions in Ispat Energy, the special purpose vehicle setting up a captive power plant in Dolvi, Maharashtra.

Senior executives in the Ispat group told Business Standard "We are exploring the possibility of asking the institutions to pick up a stake in the project. A final decision will be made soon."

Ispat Energy is setting up the captive power station for the group's steel plant at Dolvi.

The first phase of 1.5 million tonne is already operational and another 1.5 million tonne will be added later.

Ispat Energy is planning to set up the 245 mw power plant in two phases of 110 mw and 135 mw. The 110 mw first phase will cater to the requirements of the existing steel plant of 1.5 million tonne. The 135 mw second phase will be set up when the capacity of the steel plant is doubled.

The cost of setting up the 110 mw project has been estimated at RS 500 crone with a 70:30 debt equity ratio. The coming up of the power plant will help lower the cost of steel. This assumes special significance at this juncture due to the global recession in the steel industry and the anti dumping duty slapped on Indian steel by the US and the European Union.

Initially, the power project was conceived with a capacity of 353 mw. In May, 2001 this was pared to 250 mw.

The Dolvi project was initially slated to be a 51:49 joint venture between the Ispat group and the global energy major Enron.

The Houston-based multinational however walked out of the project. Ispat then sought to bridge the financing gap by raising debt from the institutions. This was turned down and now they are planning to offer equity.