Vedanta mega aluminium park project’s SPV to be formed expeditiously

Following the announcement of Vedanta's new investment plan in Odisha for around $3 billion (INR 25000), the group is all set to build an aluminium park at Jharsuguda. An investment of $50 million (INR 400 crore) will create a special purpose vehicle (SPV) for the park's development.

Initially approved by the State level single window clearance authority (SLSWCA) in 2010, the park project was held back due to land obstacles as most of the proposed land was a dense forest.

According to our sources, the Industrial Infrastructure Development Corporation (Idco) had pinpointed an alternate site far off the dense forest at a distance of around five km from the aluminium smelter of Vedanta at Jharsuguda. However, Vedanta Limited has agreed to set up the park in the new location.

The term "special purpose vehicle" refers to a subsidiary company formed to carry out a specific business activity. An SPV can be used in structured finance applications such as asset securitization, joint ventures, or property deals or to isolate parent company assets, operations, or risks.

The Idco official said, "Of the 257.17 acres of land initially proposed by Vedanta for the park, around 191 acres is dense forest and not feasible. As a result, the proposal was not able to be implemented. Another patch of land has been identified by the Jharsuguda administration to which both Idco and Vedanta have agreed."

IDCO and Vedanta Ltd will form a SPV jointly incorporating the aluminium park, in which each will contribute equity. The equity contribution from Idco will be in the form of land for setting up the park, and the equity contribution from Vedanta will be for incorporating the SPV and other development expenses. In addition to term loans, the SPV would seek funds from other sources. In the event the SPV incurs additional project costs, it will obtain a term loan to cover them.

With an exchequer contribution of around $341 million (INR 2,721 crore), Vedanta anticipates the proposed aluminium park would add around $565 million (INR4,500 crore) to the state's income. A facility like this will benefit small and medium enterprises, which can set up their own manufacturing plants and draw hot metal from Vedanta's aluminium smelter to produce their goods.

The company will supply 3 lakh metric tonnes of molten aluminium (hot metal) to downstream industries in the proposed aluminium park. Over four lakh people will be reached through the proposed project, creating around one lakh livelihood opportunities.