Calcutta, Oct. 7: Sajjan Jindal’s steel plant at Salboni in Bengal is likely to be an indirect beneficiary of the forthcoming initial public offering (IPO) of JSW Energy Ltd.

The maiden flotation, which aims to raise up to Rs 3,000 crore, is likely to lower the financial burden on the JSW group and the promoters will need to shovel less cash into its new power projects. This will leave Jindals with more money for the steel plants.

The IPO will also take care of the financing of the 1,600-mega-watt (MW) power project in Bengal and lower the cash requirement from JSW Bengal Steel, the company that will set up the 10mt plant at Salboni.

JSW Energy plans to build the 800x2MW plant at an estimated investment of Rs 7,680 crore. The project will supply power to the steel plant. It will be financed in a debt-equity ratio of 3:1.

“Now that the power investment is taken care of, JSW Bengal will be able to achieve financial closure for the first phase,” sources said.

JSW Bengal plans to build a 3mt steel plant in the first phase, which will include coal mining, iron ore beneficiation, sinter plant, coke oven, blast furnace, steel melting shop and rolling mill. The cost is estimated to be Rs 9,000-10,000 crore, down by at least Rs 3,000 crore from what was initially envisaged.

Banks are also likely to look at the Bengal project favourably with a 7mt plant at Vijaynagar in Karnataka providing steady cash flow and the domestic market showing a good appetite for steel. The JSW group had earlier stated that financial constraints had delayed the construction of the Bengal plant.

Power venture

The power plant in Bengal will be developed by JSW Steel Ltd and JSW Energy Ltd in a 24:76 joint venture within the 4,500 acres earmarked for the steel project.

When the group had inked the agreement with the Bengal government for the steel and power projects, it had promised to sell surplus power to the state grid. It would use about 600MW internally, supplying the remaining 1,000MW for the state under a power purchase agreement.

Bengal is comfortably placed among JSW Energy’s projects under development as it has land under possession as well as access to coal blocks.

Other projects under development are in Maharashtra (3,200MW), Chhattisgarh (1,320MW) and Jharkhand (1,620MW).

JSW Bengal has got coking coal blocks in Sitarampur and Kulti and thermal coal in Ichhapur.

It has also got Gourangdih ABC thermal coal block near Asansol.

The state irrigation department has allotted 25 million gallon water per day from the Rupnarayan river. Environmental clearances from the Centre have also been received. At present, the company is in discussion with suppliers for boiler, turbine and generator based on the super-critical technology.