Financial Daily from THE HINDU group of publications
Friday, Feb 15, 2002
Industry & Economy
Corporate - Mergers & Acquisitions
Pechiney may bid for Nalco control
CHENNAI, Feb. 14
FRENCH aluminium major, Pechiney, is likely to bid for a controlling stake in National Aluminium Company (Nalco).
Pechiney already has a working relationship with Nalco. The French company provides the Bhubaneswar-based PSU the technology for alumina and aluminium production. Its interest in Nalco is in tune with its plans to invest in India to bridge its alumina deficit in the long-term.
"Pechiney has been working in partnership with Nalco, supplying technology for aluminium and alumina production. The possible privatisation of Nalco could be an opportunity to strengthen this partnership," Ms Chrystele Ivins, Head of Media Relations, Pechiney, told Business Line.
Pechiney produces 12 lakh tonnes of aluminium annually and Nalco's annual capacity of 2.3 lakh tonnes can help it bridge its small deficit.
In April last, Mr Jean-Pierre Rodier, Pechiney Chief Executive Officer, said that in the longer term "(a possibility is) to build a new alumina plant in India. There is some prospect in India. We know India is, besides Australia, one of the few countries with valuable bauxite ore of good quality."
Interestingly, Pechiney has applied to the Foreign Investment Promotion Board (FIPB) to infuse capital in bauxite mining in Orissa.
Pechiney is considering different options to increase its alumina production worldwide.
Last year, it had expanded its Bauxilum plant in Venezuela after signing a $208-million deal. It is also looking to expand its alumina facility in Queensland Alumina, Australia by six lakh tonnes. In buying Nalco stake, Pechiney could get the capacity to mine 48 lakh tonnes bauxite, the raw material to produce aluminium, and own a 15.75 lakh tonne alumina refinery. The other advantages of Nalco are a 730 MW power plant and a captive port for exports.
The Government is keen to divest its stake in Nalco and is likely to call for expression of interest during the second half of next fiscal.
Before that, it plans to offload 30 per cent of its 87.5 per cent stake in Nalco by issuing global depository or American depository receipts. The Government may divest 26 per cent of its shares through disinvestment or strategic sale.
On Thursday, Nalco was quoted at Rs 76.85 on BSE, up 1.5 per cent over Wednesday's price after touching a high of Rs 78.85 during intra-day trade.
An important reason for international aluminium companies to look towards Asia as an option, particularly India, Vietnam and China, is that production costs are lower. Power costs, especially, hold the key to this.
Higher power costs saw quite a few units shut shop in the US and other western nations last year.
Though aluminium prices are currently ruling around $1,380 a tonne against $1,715 a tonne two years ago, analysts see good scope for the prices to rise in tune with increasing demand.
Aluminium demand is seen rising by 2-3 per cent annually in the normal period and five per cent during good years. Currently, global supply is around 25 million, while scrap aluminium accounts for another 10 million tonne supply.
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