TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
India, UAE firms to build $4b smelter
An India-based aluminum producer and a company from the United Arab Emirates (UAE) plan to spend US$4 billion to build a smelter and supporting infrastructure, including a power plant, in Tanjung Api-api, South Sumatra
Change Size
An India-based aluminum producer and a company from the United Arab Emirates (UAE) plan to spend US$4 billion to build a smelter and supporting infrastructure, including a power plant, in Tanjung Api-api, South Sumatra.
National Aluminium Company Ltd (NALCO), India’s largest aluminum maker, and UAE-based Ras Al Khaimah Minerals and Metals Investment FZ LLC (RMMI) Friday signed an MoU to form a joint venture to build the facility which will process alumina into aluminum.
“We will begin the construction soon and expect the smelter to begin its operation in 2013,” NALCO’s finance director B.L. Bagra told reporters after the signing ceremony.
Bagra said that $2.5 billion of the planned investment would be spent on the smelter and the remaining $1.5 on the power plant, a port and railway.
According to Bagra, the smelter will be designed to process 1 million tons of alumina a year and is expected to produce 0.5 million tons of aluminum annually. The alumina will be imported from India which produces about 2.1 million tons of alumina per year.
Bagra said NALCO and RMMI decided to build the smelter in Indonesia instead of in India because Indonesia has better quality coal and cheaper mining costs which will cut the costs for the power plant.
“Aluminum smelters require a lot of electricity. The energy sources can be coal, hydro, gas, or nuclear. We have a lot of energy resources in India, but still we find it makes sense to put our power plant and coal mine here in Indonesia (where) electricity will be relatively economic. So the cost of production should be more competitive,” Bagra said.
The captive power plant will have a capacity of 1,250 megawatts and will need 5 million tons of coal a year. Bagra said NALCO and RMMI are in talks with several domestic coal producers to secure coal supplies.
Of the $4 billion investment, two thirds will be financed by loans.
RMMI’s director Naveen Chandralal said the com-pany would contribute 24 percent equity to the project and NALCO would contribute 76 percent.
Bagra said NALCO was looking forward to share its equity in the project with local investors. He said that NALCO had been in talks about this with Indonesia’s mining company PT Aneka Tambang (Antam) and others.
Bagra added NALCO also planned to offer its equity in the project through an initial public offering which will be held when the project is nearing the commissioning stage, or in about two years from now.
“We may list it in the Jakarta stock exchange or in Singapore,” he said.
Alwi Shihab, President Susilo Bambang Yudhoyono’s special envoy to the Middle East, said the MoU showed that Indonesia was still attractive to foreign investors. But, he added, all parties needed to work hard to bring the MoU to the stage of realization.
“We hope the MoU would not (simply) be put on the shelf alongside so many MoUs signed in the past,” Alwi said.
Bagra said NALCO acknowledged that the current global economic crisis was not favorable for commodities, including aluminum.
But, “The crisis and low price may not last longer than two or three years. This is the required time for smelter construction. We should be able to finish the project in time, so that we will be ready when the market recovers.”
