India's JSW Plans to Invest $40 Billion in Steel and Power Expansions

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Researched by Industrial Info Resources (Sugar Land, Texas)--The JSW Group (Mumbai) is planning to invest about $40 billion in its subsidiaries JSW Steel Limited (BOM:500228) and JSW Energy Limited to significantly expand its steel and power generation capacities by 2020. JSW Steel will ramp up its steel production capacity from the present 4.8 million tons per year to 32 million tons per year with an investment of $25 billion, while JSW Energy is targeting a generation capacity of 15,000 megawatts (MW) of thermal power with an investment of $15 billion.

Additionally, JSW is also in talks with international majors to foray into the nuclear power and infrastructure segments. The group has reportedly raised $10 billion for the initial phases of its planned projects and has also commenced expansion work to ramp up steel production to 10 million tons per year and to develop power projects with an aggregate capacity of 4,000 MW.

JSW Steel holds a 15% share in India's steel market and a 22% share of the galvanized steel sector. The company has already invested $2.5 billion over the last 18 months to ramp up its steel manufacturing capacity and is looking to invest $1.5 billion in the current fiscal year, $250 million of which will be expended in securing raw material for its projects. JSW Steel will acquire stakes in iron ore mines in Chile, Indonesia and Mozambique. It will focus on expanding its steel facilities in Salem, Tamil Nadu, and Vijaynagar, Karnataka, from the present 4.8 million tons per year to 8 million tons per year in the current fiscal year and subsequently to 20 million tons by 2020. The production capacity of the Salem plant will be doubled to 2 million tons per year within one year. It will invest an additional $212.5 million in its Vijaynagar plant to set up a beneficiation facility to process ore waste into a usable grade of iron. The Vijaynagar plant will rely on iron ore mines in Karnataka, which have reserves of 500 million tons, which is estimated will fulfill the plant's requirements for a period of 30 years.

JSW Steel will also develop new facilities in Jharkhand and West Bengal, each of which will add 10 million tons per year to the company's steel manufacturing capacity by 2020. It is currently scouting for land in Jharkhand and has already completed the land acquisition process for its proposed facility in West Bengal. The West Bengal plant will commence commercial production of 6 million tons of steel annually within the next 30 months. Each of these projects reportedly involves investments of $10 billion. The company will procure raw material from iron ore mines in Jharkhand, which have reserves of 300 million tons. The proposed plant in West Bengal will use iron ore imported from Chile, where JSW has acquired eight mining concessions and expects to produce 20 million tons per year of iron ore by 2011 with an investment of $500 million.

JSW Energy currently operates a 260-MW coal-fed power plant in Vijaynagar and plans to develop a 600-MW thermal power plant based on imported coal at the same location. JSW Steel also operates a 230-MW coal-fired power plant in Vijaynagar. JSW Energy will set up a 1,200-MW coal-based power plant in Ratnagiri, Maharashtra. It will invest $150 million in a debt-to-equity ratio of 70:30 to develop a 400-kilovolt transmission evacuation system for the Ratnagiri project. It has entered into a joint venture with Mahatransco, an agency of the state government of Maharashtra, and the two companies have established Jaigad Power Transco, a special purpose vehicle for the project. JSW will own a 74% stake in the project and Mahatransco will hold 26%. Jaigad Energy has also applied to the state government to become a power transmission licensee in Maharashtra and plans to set up lignite-based and hydropower plants in the country.

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