Cement Energy and Environment

Green Field Plants &Expansion ORIENT CEMENT GULBARGA PLANT TO GO ON STREAM Orient Cement ltd, part of the $1.6-billion diversified CK Birla Group, expects to get its "greenfield' plant in Gulbarga, Karnataka, on steam by June 2015. The cement major has already invested Rs. 1,300 crore of the estimated Rs.1 ,900 crore for the plant, which has a capacity of producing 3 million/tonnes per annum. It will meet the demands of parts of Karnataka , Maharastra and Andhra Pradesh. Courtesy: The Hindu Business Line, Hyderabad, 24.01.2015, Pg. No. 11-12 Merger & Acquisition WAVE OF CEMENT M&AS SEEN AHEAD Cement firms may prefer to buy existing assets with limestone sources as opposed to investing in new plants Nothing's concrete yet, but get read y for a wave of cement mergers and acquisitions (M&As) - that's the message from bankers, analysts and cement company executives. Aditya Birla Group's Ultratech Cement ltd, Rajasthan based JK Lakshmi Cement ltd, Heidelberg cement India Ltd , JSW Cement Ltd and Orient Cement Ltd are among the companies evaluating potential acquisitions, they add. The reason, in a business that analysts describe as perennially consolidating -for reasons related to economies of scale and the need to localize or at least regionlaise manufacture to meet local or regional demand is limestone. "Land and limestone are two simple reasons why cement companies are focusing on acquisitions . For any new project, land is an issue and for the cement sector, in specific, quality limestone is no longer available," said a director at a foreign investment advisory firm, who consults with cement sector companies. The director asked not to be identified as he is not authorised to talk to the media. According to the Indian Bureau of Mines, India has total cement grade limestone reserves of just under 9 billion tonnes. Based on this, a Planning Commission working group on mine exploration and development for the twelfth five year Plan between the years 2012 and 2017, said that no cement capacity addition would be possible beyond 2023-24 if the cement sector grew at a projected rate of 12%, given the environment constraints over tapping cement grade limestone resources, of which India has around 120 billion tonnes. "Exploration for the limestone deposits has extensively been carried out in the country but all the available resources cannot be exploited due to various constraints such as quality, poor infrastructure, in inaccessible areas , forest cover, environmental sensitivity, surface encumbrances," said the report. This is one reason why cement firms prefer to buy existing assets with limestone sources as opposed to investing in new plants. "Looking at acquisitions provides an option to grow as well as preserve the limestone reserves the company already," said Pankaj Kulkarni, director, JSW Cement, which is evaluating cement assets across India for a potential buyout. Kulkarni declines to share specifics. Ultratech, which is Ind ia's largest cement firm with a capacity of 60 million tonnes per annum, also continues to be on the lookout. In December, Ultratech acquired two cement plants from Jaiprakash Associates Ltd for ~5400 crore. Earlier in 2013, Ultratech bought Jaypee's 4.8 million tonne cement capacity in Gujarat for ~3 , 800 crore. "Uitratech has been evaluating cement assets," said two bankers who are aware of the company's plans and asked not to be identified. A spokesperson for Ultratech declined to comment. Prashant Bangur, Director, Shree Cement Ltd, said that acquisitions happen at a price of ~130 per tonne while setting up a new cement plant cost ~80 per tonne. However, the discount means a wait of six to seven years before the capacity is operational," explained Bangur. "And those without enough limestone reserves for future growth are looking at buyouts:' 7