Hindalco to start Utkal project before June 2012

Aditya Birla group flagship Hindalco Industries plans to commence operations at its greenfield Utkal Alumina project before June 2012.

The 1.5 million tonne alumina refinery project, started as a Rs4,400 crore joint venture between Norsk Hydro, Alcan and Indal (earlier promoted by Alcan) in 1992, has been unable to take off due to opposition from locals on concerns over displacement and environmental damage to the area. But the company is confident of bringing it on stream soon.

“We have always said that the refinery will be ready by September or October 2011 but it got delayed because of our problems with our contractors. I will be really surprised if it goes beyond June 2012,” Debnarayan Bhattarcharya, managing director, Hindalco Industries said on the sidelines of the company’s annual results announcement.

Bhattarcharya, who is also the vice chairman of Novelis, a Georgia-based world leader in downstream aluminium products, said going forward Hindalco will aggressively grow its aluminium business and reduce exposure to international aluminium price fluctuations by building its robust greenfield asset base, a proper backward integration and increased focus on value added products through expertise from Novelis.

To this end, the Utkal Alumina refinery holds a lot of importance for the company.

“Utkal has been a very promising project since it was announced, but the company has really gone slow on it. In fact, last year it had said it will be ready by July 2011, and now it has postponed the date further,” said an analyst with a leading domestic brokerage house.

He said unless the company gives complete clarity on the project and the exact timeframe by when it will be ready, investors will continue to have doubts on its prowess of implementing its greenfield plans.

In its annual report of FY2009-10, Hindalco had mentioned that the construction of 1.5 mtpa Utkal Alumina refinery along with a 90 mw captive cogeneration plant is in full swing and is expected to be complete by Q2 of FY12.

“There have been some delays because the earlier contractors had failed to meet their work committments. Now a new set of contractors have been roped in and there is some cost overruns on the civil side. But the project is now expected to be complete in 2012,” said Sunirmal Talukdar, chief financial officer, Hindalco Industries.

Bhattarcharya said that once the project is ready, the alumina from the refinery will be sufficient to feed the other two upcoming Mahan and Aditya smelters, the other two greenfield projects. “By 2016, when all our projects come on-stream, the company will be one of the lowest cost producers of the aluminium and will also be largely isolated from LME price volatility,” he said.

For the year ended March 2011, the company posted consolidated revenues of Rs72,078 crore, a jump of 19% over last financial year, and Ebidta of Rs8,433 crore,a fall of 19%, mainly due to unrealised gains on derivatives amounting up to rs2,736 crore.

Utkal Alumina has seen its reins change hands quite a few times over the two decades that the project has been in the making.

Hindalco acquired Indal, and thereby its stake in the project, in 2000. Norsk Hydro, which held 45% in the project, exited in 2001, following which Alcan increased its stake to 45% from 35% earlier and Indal to 55% from the earlier 20%. Then, in 2007, Hindalco acquired the remaining 35% stake in the project from Alcan.