The Hindu Business Line : RPG group proposes third party sale of power

THE RPG group plans to begin third party power sales. This is proposed to be done through group company Phillips Carbons Black Ltd. The company has already begun talks with the State governments in this respect.

Phillips Carbons, which is among the leading carbon black manufacturers in Asia, is planning to set up a power plant at its Baroda unit. The plant, based on `off-gas' would be set up at an estimated investment of Rs 32 crore and is expected to be operational from 2004. Out of this, 5 MW would be utilised by Phillips Carbons, while the remaining would be sold to third parties.

The company expects to boost its bottomline by Rs 15 crore from this trading activity from 2005 onwards. Regarding off-gas, sources said that during the manufacturing of carbon black certain gases are generated, which were earlier incinerated.

"This is now proposed to be utilised through a waste recovery mechanism and used for power generation," sources said, adding that Phillips Carbons is also likely to qualify for `carbon trading' under the Clean Development mechanism of the Kyoto Protocol.

As for power trading, under the Electricity Act 2003, trading in electricity is allowed under a transmission and distribution licence.

Sources said that with its entry into co-generation and power trading there would be a change in Phillips Carbons' profile from a mere manufacturer of carbon black — an industry whose fortunes were tied to that of the automobile sector, since it is a vital input for tyre manufacture.

"These activities are expected to insulate Phillips Carbons from the cyclical nature of the carbon black market," sources said.

Plans are also afoot to begin third party sales of power from the Durgapur unit of Phillips Carbons where the capacity of the power plant was being increased from 15 MW now to 35 MW. The output would be increased for higher internal consumption and third party sales.

Sources said that while the Gujarat Government has already given an in-principle clearance to the RPGoenka group for commencing this activity, talks are being held with the West Bengal Government.

Phillips Carbons, which has finalised Rs 180 crore capacity augmentation plans at the Baroda unit and at Durgapur, has a 41 per cent of the carbon black market share.

It has also inked an assured offtake deal with an international tyre major for export of carbon black sources said, adding that the domestic market too looks good with an annual growth of 10 per cent in tyre production. The National Highway project too is expected to catalyse a shift from rail to road transport, boosting carbon black consumption.

Sources said that tyres (the business group under which Phillips Carbons falls) has a 30 per cent share in the turnover of the Rs 7,200-crore RPG group which has in its fold about 20 companies spanning seven business segments.

The biggest contribution comes from the power group which has a 43 per cent share and covers companies such as CESC, Noida Power and KEC International.

Power, tyres and retailing were three of the focus areas identified by the group which has now gone into a consolidation mode selling companies which it does not see in its core area of activities.