Tatas, Nalco to join hands for $3-bn aluminium plant in South Africa

New Delhi, Jun 26--India's second largest aluminium maker, National Aluminium Co Ltd (Nalco) and the Tatas are all set to ink a joint venture agreement to set up a $3-billion aluminium smelter and power plants in South Africa (SA). In the proposed joint venture, sources said, Tata Group through Tata Africa, will have a 49% stake, while Nalco will hold the remaining equity. According to sources, Tata Africa, will execute the project, has got the in-principle approval of the Tata Group for the project and an MoU with Nalco is expected to be signed in the next two weeks. Both Tata Africa and Nalco were not available for a comment when contacted by FE. Tata Africa is an investment arm for Tata Group in South Africa and has operations in eight African countries. However, the project is still quite a distance away as Nalco is yet to get the government approval to execute the project. As per the plans of the company, the smelter plant of 5 lakh mt will be set up at Richards Bay (Port) and power plant of 1,250 mw will come up at Mpu-malanga. Nalco, which is in the midst of a $1.2 billion expansion plan to be completed in December, has similar plans for Iran and Saudi Arabia. The company has already signed an MoU with the Indonesian government to set up a 5-lakh tonne smelter and a 1,250 mw captive power plant with investment to the tune of Rs 14,000 crore. In Iran, a 3.1-lakh tonne smelter has been planned in two phases, as a joint venture with Alpha (in which Kerman Development Organisation is the major partner). The Tata-Nalco JV will leverage the strong presence of Tata's in Africa, where they have been present since the 1970s; and operational, production and project implementation expertise of Nalco in the aluminium sector. However, the question arises, if spending close to Rs 10,000 crore in South Africa is a viable proposition. Since as per the plan most of the aluminium produced through the JV will not be meant for India, which already has an excess supply of aluminium. Aluminium production is highly power intensive and the 1,250 mw power station is expected to cater to the needs of the smelter plants. The process of producing aluminium is electrolytic one and involves power consumption of around 13,000 to 15,000 kilowatt per tonne of aluminium produced. "The key issue in South Africa is the availability of power. Because of the shortfall, cost of power has gone up by about 25% in SA. Getting a coal block and setting up a 1,250 mw power plant is very good. It is a very good move by both the Companies," said Ernst and Young Partner Navin Vohra.