Tata Power to sell Wadi unit to ACC

The Tata Power Company is planning to sell its 75 mw power plant at Wadi in Karnataka back to the Associated Cement Companies (ACC).

The Tata Power board is meeting on July 26 to consider the transfer of power generation units with a combined capacity of 75 mw at Wadi in Karnataka, the company said in a notice to the Bombay Stock Exchange.

The Wadi plant has an installed capacity of 4.7 million tonne and is the largest unit in ACC which has a total installed capacity of around 19 million tonne. If the deal goes through, this will be a case of Tata Power reselling the power plant to ACC.

In the late nineties Tata Power, decided to buy the group's captive power plants. At that time, the Tata group held about a 10 per cent stake in ACC. Apart from ACC's power plant it also bought Tata Steel's 67.5 mw unit at Jojobera.

Later, the Tata group sold its stake in ACC, as a part of its decision to focus on core areas, to Gujarat Ambuja Cements. ACC however continued to source its power requirements from the Tata Power Company.

The sale is expected to result in substantial cost savings to ACC. The cement company's power and fuel bill stood at Rs 356.15 crore in 2003-04 against Rs 344.38 crore in the previous year.

The move to buy the power plants is a part of ACC's strategy of saving around Rs 100 crore annually by setting up three captive power plants.

The plants are to be set up at Tikaria in Uttar Pradesh, Chanda in Maharashtra and Madukarrai in Tamil Nadu. The total investment for setting up these three units is estimated at Rs 187 crore.

The cost of cement production for ACC is expected to come down by Rs 220-to Rs 225 a tonne after the commissioning of these plants.