Nalco may call off Indonesian aluminium project

State-owned National Aluminium Company (Nalco) may call off its proposed Rs 16,000 crore aluminium smelter and captive power plant project in the island nation of Indonesia if they manage to get clearances and coal linkages for a similar project in Odisha. The proposed project in Indonesia is stuck and awaiting various approvals.

“We have already got permission for land and water for a similar project in Odisha. We have already applied for coal linkages and if we manage to secure coal linkages to this project we may not continue with the Indonesia project,” a senior company official told Financial Chronicle. Nalco is planning to set up a 0.5 million tonnes per annum capacity smelter in Odisha and 1,250 mega watt coal fired captive power plant to feed the smelter.

When contacted by FC, BL Bagra, chairman at Nalco, said as of now, the company has kept their Indonesia project on hold due to delays in getting various approvals. “The project has got delayed, mainly because the coal company has not been able to achieve financial closure for their project. Further, the coal mining company is undergoing a restructuring in its ownership. In view of these uncertainties, we have decided to focus in the domestic market.”

Bagra added that the investment in the Odisha project will be similar too the Indonesia project, around Rs 16,000 crore. Nalco had signed a MoU with UAE-based RAK Minerals for sourcing coal for the 0.5 million tonnes aluminium smelter and 1,250 mega watt captive thermal power plant in East Kalimantan, Indonesia. Nalco planned to buy eight to 10 million tonnes per annum of thermal grade coal of which four to five million tonnes per annum was earmarked for its east Kalimantan project and rest for its energy requirements in India but the island nation project got stuck due to non-availability of coal.

Production of primary aluminium is an extremely power intensive business and non-availability of coal at the right price could potentially affect the project economics, said experts. Nalco’s plan in Indonesia was driven by local availability of good quality coal at a reasonable price.

Sanjay Jain, an analyst at Motilal Oswal, said, “Getting coal linkages is very difficult and the company is not able to utilise its existing capacities due to lack of coal. Without coal linkages the company should not go ahead with any project as it will be of no use.”

Bhavesh Chauhan, an analyst at Angel Broking, said, “It is too early to comment if the company would benefit from a similar project in India as even if they are coming up with a new project it would take at least eight to nine years for the project to get completed. There are chances of the company getting a coal mine as auctions are likely to happen in a years time.”