Ispat Group to invest $3bn in Bangladesh

The Vinod- and Pramod Mittal-controlled Ispat Group is all set to invest around $3 billion (Rs 12,000 crore) in Bangladesh in a gamut of sectors, including gas exploration and production, power, petrochemicals and coal mining.

Global Oil and Energy, an investment outfit of the Ispat Group, today signed a preliminary memorandum of understanding (MoU) with Bangladesh's state-run Board of Investment (BoI) for this purpose. The group will begin funding after the completion of the detailed feasibility study. The actual quantum of investment by the group might vary, depending upon the outcome of the feasibility report.

Sources in the Ispat Group said the neighbouring country had huge potential for big investment opportunity due to its gas reserves. The group would begin with investing in the gas sector in Bangladesh. Projects in the steel, coal and mining sectors would follow.

A delegation led by group Chairman Vinod Mittal today also met the BoI officials.

Industry sources said the investments would include $300 million for mine development, $100 million for oil exploration and production, $500 million for power plants, $1.5 billion for petrochemicals and $500 million for liquefied natural gas (LNG) and related projects.

They said the investment, if cleared, would be the largest in Bangladesh.

Industry observers, however, cautioned about the Ispat Group's investment in Bangladesh, saying "it all depends on the pricing and availability of gas". They also warned that the projects might run into rough weather if the next government opposes it. "There is a bit of political uncertainty for an investment proposal being signed with an interim government," they added. A caretaker government has been ruling Bangladesh since January.

The Vinod and Pramod Mittal combine is the second Indian promoter to announce such large investments in Bangladesh.

Tata group Chairman Ratan N Tata had signed an expression of interest (EoI) in October 2004 for a $3 billion investment in Bangladesh, the single largest investment in the country.

Under the planned deal, Bangladesh had agreed in principle to guarantee a 20-year supply of natural gas for the Tata projects: a $700 million 1,000 mw power plant, $600 million fertiliser plant and a $700 million steel mill with a capacity of 2.4 million tonnes. To run all the three plants, Tata would require up to 600 million cubic feet of gas per day.

But the project went into limbo following the political turmoil in Bangladesh. However, experts said the project might be revived after an elected government comes to power.

It may be recalled that steel baron Laxmi Niwas Mittal, elder brother of Vinod Mittal, is setting up a plant in Jharkhand, the stronghold of Tatas.

Global Steel, the holding arm of Global Oil and Energy, operates and manages about 14 million tonnes of steelmaking capacity and associated businesses in mining, energy and logistics in various parts of the world.