By Pratik Parija
Nov. 25 (Bloomberg) -- Jindal Steel & Power Ltd., owner of the biggest non-state electricity generation plant in India, aims to add hydroelectric, nuclear, wind and solar projects to its larger steel business as demand for power increases.
The company is considering hydroelectric plants of as much as 1,000 megawatts in India and Nepal and a 50 megawatt wind-power unit in India’s Maharashtra state, Managing Director Naveen Jindal said in an interview in New Delhi, where the company is based. It is also seeking to set up solar-power units in the northwestern state of Rajasthan, he said, without giving capacity details.
Jindal Steel & Power wants to benefit from India’s rising electricity demand, which McKinsey & Co. says may almost triple within 10 years. Increasing earnings from power will also counter reliance on steel prices, which have fallen as much as 40 percent from their July peak, according to Steel Authority of India Ltd., the nation’s second-largest steelmaker.
“Steel being cyclical, the company is diversifying its risk and getting into the energy business,” said Jayesh Shroff, who helps manage $2.4 billion worth of equities at SBI Asset Management Co. in Mumbai. “Power gives you stable cash flow.”
Jindal Steel & Power shares have fallen 77 percent this year on concern a global recession will cut steel consumption. The benchmark Bombay Stock Exchange Sensitive Index, or Sensex, has dropped 56 percent in the same period.
Spending Plan
The company plans to spend 232.2 billion rupees ($4.6 billion) to build two coal-fired plants that will produce 5,160 megawatts in six years. Jindal Steel currently produces 1,000 megawatts of commercial power and 340 megawatts for its own use at its plants in Chhattisgarh.
“We’re always looking at opportunities and if a great one comes our way, we are ready for that,” Jindal said in the interview yesterday. “We are concentrating on our expansion.”
The company will spend 1 billion rupees by March to build half the capacity of its Maharashtra state wind power project, Jindal said.
India’s energy requirements will rise to 335,000 megawatts by 2017 should the economy grow at an average of 8 percent for the next decade, McKinsey estimated. It will need as much as 440,000 megawatts of capacity and investment of $600 billion, with half the amount required to set up the generation plants.
The nation has the potential to generate 148,701 megawatts of hydroelectric power, according to estimates by the nation’s Central Electricity Authority. The nation’s peak electricity shortage may widen to 18.1 percent in the year to March, the authority said in August. The shortage widened to 16.6 percent in the year ended March 31 from 13.8 percent the previous year.
Hydroelectric power now accounts for about a fourth of India’s total generating capacity of 145,627 megawatts.
Jindal Steel also plans to bid for so-called ultra-mega power projects in the eastern state of Orissa, Jindal said.
“There is no sign that people are going to stop using refrigerators or air conditioners,” Jindal said. “Power is needed for agriculture, for industry and for every household.”
To contact the reporter on this story: Pratik Parija in New Delhi at pparija@bloomberg.net.
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