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Jindal Steel and Power Announces Next Phase of Expansion Plans

Jindal Steel and Power (JSPL) has announced next phase of expansion plans. The core focus right of the company is to sweat out assets and make JSPL net debt free.

 

The company will thereafter be embarking on a journey to expand its profitability and volumes through Angul expansion from six million tpa to 12 million tpa taking JSPL’s overall steel capacity to 16 million tpa in India.

 

The company plans to tread on this next phase of growth in a measured way by not deviating from the two key guard rails -- keeping Net Debt to EBITDA below 1.5 times during all times and keeping sustainability of financial and ESG matrices at the forefront.

 

The company is all set to double its steelmaking capacity at Angul, Odisha, to 12 million tpa (from six million tpa currently), raising its crude steel capacity by 66 percent to 15.9 million tpa.

 

Key projects driving volume expansion at Angul include 4.25 million tpa blast furnace (BF), 2.7 million tpa direct reduced iron (DRI) and 6.3 million tpa steel melt shop (SMS) broadly replicating the present facilities at Angul.

 

The company will take 30 months to commission 4.25 million tpa BF-BoF, with commissioning expected starting December 2023. This will be followed by 2.7 million tpa DRI plant, with commissioning expected in February 2025.

 

These projects along with the related raw material capacities -- two million tpa coke oven, oxygen plant etc -- will account for almost two-thirds of the planned Rs 18,000 core capex.

 

Further, the company intends to reduce costs and improve its product mix at Angul. It plans to construct a slurry pipeline between Barbil-Angul (200 km) in conjunction with 12 million tpa pellet plant in two phases of six million tpa each, which will reduce iron ore logistics costs and bring in additional cash flows from pellet sales.

 

Phase-I of the pellet plant is expected to get commissioned in September 2022 and Phase-2 will be commissioned September 2023.

 

In order to improve its product mix, JSPL is also planning to construct a 5.5 million tpa hot strip mill (HSM), which will increase the company’s flat steel making capacity from 2.2 million tpa currently to 7.7 million tpa. 

 

These margin expansion projects of both backward and forward integration account for the remaining one-third capex and have a strong IRR delivering a short payback period.

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