Utkal To Raise Rs 350 Cr Overseas

Nearly 25 per cent of the debt component of the Rs 4000 crore Utkal Alumina project, amounting to about Rs 350 crore will be raised from the foreign market.

This apart, 60 per cent of the Rs 2,400 crore equity base of the company is also expected to come in dollars because of the involvement of international aluminium majors like Alcan and Norsk Hydro in the project. As against this, the total foreign investment component of the project is pegged at 20 per cent of the project cost.

However, the details about the financing of the project are likely to take a final shape after the appointment of financial advisors.

Though the international sanctions following the nuclear blast has raised fears about the company's efforts to source such a sizeable portion of its debt from foreign market getting affected, the Alcan officials, however, have dismissed these apprehensions as unfounded. "We do not think this will affect us", said Emery P LeBlanc, Alcan's executive vice president (raw materials and chemicals) of Alcan Aluminium Ltd. According to the officials, Canada will not restrict commercial activity in India. In an exclusive interview with Business Standard LeBlanc and Brian Sawyer, director (planning and joint venture) of the company said, "We will be surprised if the nuclear tests here affect business transactions", they reiterated ,

Meanwhile, Alcan proposes to source a part of the alumina requirement for its upcoming Alma smelter in Canada from Utkal Alumina. The Alma smelter will be having a capacity of 3,75000 tonnes per annum and require about 700,000 tonnes of alumina for conversion purposes. The smelter is slated to go on stream in 2001 coinciding with the commissioning of Utkal Alumina.

Apart from feeding the Alma smelter, the company, Sawyer said, also needs huge quantity of alumina for the brown field expansion of capacity of the company's existing smelters in four countries including the US.

The Alcan officials said the offtake of alumina from the one million tonne export oriented alumina project coming up in Orissa will be in proportion to the equity holding of the promoters.

While newly inducted Alcan along with its Indian arm Indal, Tata Industries have 20 per cent equity each in the project, the other promoter Norsk Hydro holds the lion's share of 40 per cent stake in the project.

In fact, the senior executives of the Canadian firm said they had pitched for a equity holding of more than 20 per cent in the project, but had to accept 20 per cent stake ultimately. "But then we were the late comers and the other partners were already there", said Sawyer.

The appointment of financial advisor of the project is now the main issue before the Utkal board. Out of about nine investment banks who had shown interest to take up the position, three have been shortlisted.

Following the appointment of the financial advisor, a number of decisions on the project will be expedited. The licensing agreement for technology will also be signed in few weeks' time. Alcan and Aluswiss of Switzerland are the joint technology supplier for the project.

Main consideration at this point is lining up financial arrangements for Utkal, for which a key financial committee has been set up. Apart from contribution from the joint venture partners, fund will be raised from other sources as well. While debt is 60 per cent, equity is 40 per cent.

"We are having board meetings quite often now", they said. However, according to Sawyer, the financial closure for the project will spill over to next year. The project, which is now being headed by a rotating chairman, will have one chairman, to be elected by the board.