Sterlite to raise $2 bn for power plant

Sterlite Industries (India), a unit of billionaire Anil Agarwal's Vedanta Resources, plans to raise as much as $2 billion in its first share sale in the US to pay for a new power plant.

Sterlite, India's largest copper producer, would sell shares that will trade on the New York Stock Exchange, the company said in a filing to the Securities & Exchange Commission.

By building a power plant, Agarwal is starting his second new venture three weeks after agreeing to pay $1.4 billion for 71 per cent of India's biggest non-state iron-ore exporter. The response to the stock sale may show if he can achieve the goal of becoming one of the world's top-five metals and mining companies.

"Agarwal aims to be a big player in power generation after securing supplies for his metals business," said Sanjay Makhija, vice-president at Mumbai-based Fortune Financial Services.

"We are bullish on the stock and expect the issue to be fully subscribed. Globally, people want to invest in India."

Vedanta Resources, which owns 72 per cent of Sterlite, last month defeated rivals including Arcelor Mittal to buy Sesa Goa. The takeover gave the company its first iron ore mine in India, where steel demand is growing at almost twice the global average fuelled by the world's second-fastest pace of growth.

Sterlite is planning a $1.9 billion, 2,400-mw plant in Orissa, where Vedanta is building a 1.4 million tonne alumina refinery accompanied by a 500,000 tonne a year aluminium smelter. Production at one unit of the refinery began in March, according to the share-sale document.

Orissa, which holds a quarter of India's iron ore and coal deposits, has prompted steelmakers including Arcelor Mittal and Posco to announce ventures in the state. That may give Sterlite bulk users for the proposed power project, which will be built over four years.

"With India's large coal resources and demand for power relative to supply, this business represents an attractive growth opportunity," the company said in the sale document.

India's economic growth of more than 8 per cent in the past four years has caused electricity demand to exceed supply. The nation must add 70,000-mw capacity in the next five years to ease a shortage, according to the power ministry. China plans to add 95,000 mw this year alone.

Sterlite has built six of its seven power plants that can generate a total 1,046 mw.

The company's shares rose as much as 3.8 per cent to Rs 570 before trading at Rs 561.7 on the Bombay Stock Exchange (BSE). The stock has almost quadrupled in the past two years, mirroring gains in prices of copper and aluminum. Citigroup, Morgan Stanley & Co, Merrill Lynch & Co and Nomura Holdings will manage the sale, according to the document.