The Hindu Business Line : Hindalco buying Alcan’s 45% stake in Utkal Alumina

On course
Hindalco hopes to complete the project at the earliest
Roughly 66% of the land acquisition is complete
Transfer of ownership for rest of the land is in progress

Our Bureau

Mumbai, July 18 Aditya Birla group company Hindalco on Wednesday agreed to buy Alcan’s 45 per cent stake in their joint venture Utkal Alumina International Ltd, three months after Canada-based Alcan formally announced its decision to exit the company.

The transaction is set for closing in the next 30 days (approximately), said a statement from Hindalco which had the first right of refusal in an equity sale by Alcan in the company.

The financial terms of the agreement to buy out Alcan cannot be disclosed, said Mr Debu Bhattacharya, Managing Director, Hindalco.

The Indian aluminium major, which already holds 55 per cent stake in Utkal Alumina, will wholly own the project after it buys out Alcan and will not look for another partner, he added.

Constraints

The joint venture was formed in 1992 to set up the bauxite mining and refinery project in the Rayagada district of Orissa. Bauxite was to be sourced from the Baphlimali reserves in that disctrict.

But there were local protests at the mining activities in the region as well as delays in obtaining Government clearances.

Sources close to the development said this was the reason why Alcan decided to exit the joint venture.

Announcing its decision to exit the company in April this year, Alcan said: “Given the constraints within the governance structure that limit Alcan’s ability to participate in key decisions, we believe that we have acted in the best interests of all our stakeholders.”

But subsequently clearances were obtained and the project is now “coming up nicely,” said Mr Bhattacharya. Work on it started in mid-2006.

Being a greenfield project in such a remote region, it will take another three to four years for completion. “But we hope to complete it as fast as we can to ride the alumina cycle,” said Mr Bhattacharya.

First phase complete

According to the company’s annual report as of March 2006, roughly 66 per cent of the land acquisition is complete and transfer of ownership for the balance 34 per cent for the Utkal project is in progress. The first phase of the government-approved rehabilitation and resettlement package is complete, with the basic infrastructure on its way to completion. The detailed engineering contract for the project has been awarded.

The 1.5 million-tonne project will cost Rs 4,500 crore; and still constitutes only a part of Hindalco’s huge expansion plans. The company, which recently acquired aluminium products maker Novelis for $6 billion, is also establishing an integrated aluminium project, Aditya Aluminium, consisting of a 1.5 million-tonne alumina refinery, a 325,000-tpa aluminium smelter and a 650-MW captive power plant in Orissa.. It is also planning a 750-MW power plant in Madhya Pradesh.

Hindalco’s stock on Wednesday gained 3.22 per cent on the BSE, closing at Rs 184.30.

More Stories on : Aluminium | Mergers & Acquisitions | Hindalco Industries Ltd

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