Stemcor, Ispat form Rs 900 crore JV

UK-based Stemcor and steel major Ispat Industries have entered into a joint venture (JV) to set up a coke oven plant at the latter's unit near Mumbai at an investment of Rs 900 crore.

"Stemcor will hold 76 per cent stake while Ispat will hold the rest. The project will cater 100 per cent captive metcoke requirement of Ispat on a cost plus basis," investment banking sources told said.

"The JV, Amba River Coke Co, will have an equity of around Rs 300 crore and a debt funding of Rs 600 crore," sources said, adding, "Stemcor has already given the mandate to leading banks in India for syndicating the debt."

The JV will also have a back-to-back agreement for long- term sourcing of coking coal from Australia.

The coke oven battery's capacity will have the provision to be scaled up to 1.5 million tonnes per annum. It will also generate captive power for Ispat's Dolvi integrated steel plant from the coke oven gas.

The plant would generate about 150 mw of power. It is already commissioning 110 mw gas-based power plant which will also be completed by the end of next year. Ispat is one of the largest importer of metcoke from China.

Chinese metcoke prices are highly volatile and in the current year prices have increased from $200 a tonne to $450 a tonne. The captive coke oven would save around $200 a tonne of coke, sources said.

Stemcor is Ispat's international steel trading partner also. Coking coal contract prices, which are at around $100, is being negotiated internationally between Australian coal suppliers and Japanese steel mills for an increase of around 30 per cent next year.

This is the only such coke JV in the country. The project is expected to be completed in the next two years. Stemcor is a $6 billion trading company and wants to increase its steel business in India. It plans to invest Rs 1,500 crore for setting up a 4 million tonne pelletisation plant in Orissa through Stemcor India, its Indian subsidiary .

Ispat registered a profit of about Rs 23 crore in the first half of the current financial year. The steel company, whose current capacity is 3 million tonnes of hot-rolled coil, aims to increase its capacity to 3.6 million tonne in the next one year.

By the end of the 11th Plan, the company envisages a 5-million tonne capacity. Ispat has signed a MoU with the Jharkhand government to set up a greenfield 3 million tonne project in Jharkhand at an estimated investment of about Rs 8,000 crore.

Besides, the steelmaker has also announced plans to invest Rs 1,500 crore in various projects in Madhya Pradesh after it was alloted a coal block. It would make the investment through special purpose vehicle and would employ about 500 people, it has said.

COKE-SURE

The project will cater to captive metcoke requirement of Ispat on a cost plus basis

The JV will also have a back-to-back agreement for long- term sourcing of coking coal from Australia.

Stemcor is also Ispat's international steel trading partner

Stemcor plans to invest Rs 1,500 crore for setting up a 4 million tonne pelletisation plant in Orissa through its Indian subsidiary