Aluminium Sector. Investor Update - February 2010

Transcription

1 Aluminium Sector Investor Update - February 2010

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3 Cautionary Statement and Disclaimer The views expressed here may contain information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness, reasonableness or reliability of this information. Any forward looking information in this presentation including, without limitation, any tables, charts and/or graphs, has been prepared on the basis of a number of assumptions which may prove to be incorrect. This presentation should not be relied upon as a recommendation or forecast by Vedanta Resources plc ("Vedanta") or any of its subsidiaries. Past performance cannot be relied upon as a guide to future performance. This presentation contains 'forward-looking statements' that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as 'expects,' 'anticipates,' 'intends,' 'plans,' 'believes,' 'seeks,' or 'will.' Forward looking statements by their nature address matters that are, to different degrees, uncertain. For us, uncertainties arise from the behaviour of financial and metals markets including the London Metal Exchange, fluctuations in interest and or exchange rates and metal prices; from future integration of acquired businesses; and from numerous other matters of national, regional and global scale, including those of a environmental, climatic, natural, political, economic, business, competitive or regulatory nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements. This presentation is not intended, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities in Vedanta or any of its subsidiary undertakings or any other invitation or inducement to engage in investment activities, nor shall this presentation (or any part of it) nor the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision. 2

4 Table of Contents Page Overview of Vedanta s Aluminum Business 3 Lanjigarh Alumina refinery 10 Korba (Balco) 17 Jharsuguda 20 Commercial Energy 2400MW IPP 27 HSE and People 32 CSR 40

5 Aluminium Overview Bauxite Mines Reserves and Resources of 116mt 38 mt at Balco and 78 mt at Niyamgiri MoU with Orissa state for supply of 150 mt of Bauxite at VAL India has 4 th largest reserves of coal (c.253 bn t) and 4 th largest reserves of bauxite (c.2.4 bn t) in the world (1) Alumina Refinery Phase I: Current alumina refining capacity of 1.4 mtpa; Capacity expected to increase to 2.0 mtpa by Q4 FY2010 Phase II: Additional 3.0 mtpa by mid Jharsuguda VAL: Current aluminium smelting capacity of 250 ktpa, to increase to 500 ktpa by Q4 FY2010 and further addition of 1,250 ktpa by September 2012 Orissa Aluminium Smelter BALCO: Current capacity of 245ktpa, 325 kt addition by September Lanjigarh 1 Captive Power Plants Capacity post expansion: 3,525 MW (300 MW in Lanjigarh, 1,215 MW in Jharsuguda and 2010 MW at Balco) Coal linkages in place Deferred 1,980 MW CPP at Jharsuguda 1 2 Niyamgiri mine and Lanjigarh refinery Jharsuguda Aluminium Smelter Captive Power Plant Note. 1. Source : Investment Commission of India

6 Clearly Defined Path to 2.5 mtpa Bauxite Alumina Aluminium Power Bauxite Mines Alumina Refinery Aluminium Smelter CPP s mt 5.0 mtpa 2.5 mtpa 3,255 MW Received Supreme Court of India s approval : August 2008 Final permit expected for Niyamgiri hills bauxite mine : End FY mtpa refinery : Current Capacity 0.6 mtpa refinery debottlenecking ; Q4 FY mtpa : Mid ktpa at Balco and 250 ktpa at VAL : Current capacity 250 ktpa at VAL : Q4 FY ktpa at Balco: Q2 FY ,250 ktpa at VAL : Q2 FY MW : Current capacity BALCO 1,215 MW VAL (Jharsuguda) : Last two units to be commissioned : Q4 FY MW VAL (Lanjigarh) : Current 90 MW, balance 210 MW :Mid ,200 MW at Balco, first unit to be commissioned :Q3 FY 2011 and full completion by Q2 FY2012 Note: Bauxite:150mt MOU with Orissa Government Balance smelter capacity through debottleneckings

7 Orissa has huge, high quality Bauxite deposits

8 Coal Availability 1) Captive Coal Block Balco Taraimar 211 MnTon Forest Clearance obtained, Land Acquisition In progress Under development expected by Q Sterlite Energy Limited Rampia 112 MnTon Exploration started Expected by Q ) Long Term Coal Linkage available

9 Integrated, Structurally Low Cost Aluminium Producer Aluminium Cash Costs: Indian Vertically Integrated Companies 2009 Cost ($/t) Low cost drivers Efficient Technology Co-located bauxite mine (Niyamgiri) Low cost captive power Current Spot Price $2,122 (1) NALCOt) Angul (c.$1,014/ t) BALCO Korba (c.$1,146/ Hindalco Renukoot (c.$1,190/ t) 0 8,000 16,000 24,000 32,000 40,000 Cumulative Production ('000 tpa) Source: Vedanta for BALCO number, CRU for other companies Cash cost Quartiles Note: 1. Based on LME Cash Price for 17 February 2010

10 Aluminium operations Balco plant operating at higher than rated Production and cash costs Production (kt) Estimated Production (Kt) Cash Costs ($/t) capacity 1,743 1,624 1,796 1,452 1,347 Jharsuguda plant ramping up till December end 448 pots commissioned Surplus power being sold at Balco and Malco power plants H1 08 H2 08 H1 09 H2 09 H1 10 Notes: (1) Production includes contribution from ramp-up of Jharsuguda smelter (2) Cash costs refer to costs for Balco 2 EBITDA EBITDA ($mn) EBITDA Margin Alumina sourcing largely from Lanjigarh 34% 33% 30% 18% Bauxite sourcing at Lanjigarh from Balco and % other external sources H1 08 H2 08 H1 09 H2 09 H1 10 Note: (1) From H1 10 sale of surplus power is part of power segment

11 Aluminium & Alumina capacity builtup Production and proposed capacity-aluminium Production (kt) Exit capacity (kt) 2,050 2,500 Expansion projects Lanjigarh Expected Completion 1, mtpa alumina refinery Q4 FY mtpa debottlenecking Q4 FY mtpa expansion Mid e 2011e 2012e 2013e Production and proposed capacity-alumina 5,000 Jharsuguda 500ktpa smelter 1,215 MW CPP 1.25mtpa smelter Q4 FY2010 Q4 FY2010 Q2 FY2013 BALCO 325ktpa smelter Q2 FY2012 1,400 2,000 1,200 MW CPP Q2 FY e 2011e Note: (1) Capacities in 2010e and beyond refer to exit rates, includes debottlenecking at BALCO , Vedanta Resources plc

12 Lanjigarh Alumina refinery

13 Strategic advantages Location Advantages Close proximity to raw material (Niyamgiri Bauxite Deposit) Several other deposits within a radius of Kms Close proximity to State Highway No 6 at 10 Kms Close proximity to Railway network 15 Kms rail link Easy access to Power supply 132 KV line connectivity at 12 Kms Proximity to Balco and Jharsuguda aluminium smelters Easy access to Port facilities at Vizag & Kakinada Road Map Capacity Build up 1.4mt 2X0.7mt 2mt Debottlenecking 5mt Additional lines 3X1mt

14 Technology and environment State of the art technology: Basic Process design by Worley Parsons Environmental friendly pipe conveyor connecting mine to refinery Low Temperature/Pressure Digestion High rate deep cone thickener for settling/washing for better caustic recovery Disaster Filters for polishing liquor to ensure International quality of Alumina Agglomeration plus growth precipitation for better yield Interstage cooling in precipitation Gas suspension calciners. Environmental Highlights: High Concentration Slurry Disposal (HCSD) for Red Mud and Ash Zero discharge

15 Projected Ramp-Up of Alumina & Power Existing Production De-bottlenecking 5.0 million tpa 300 MW Power Expansion Exit capacity 3.0 million tpa 210 MW Power 1.4 million tpa 90 MW Power 0.6 million tpa 66 FY 2009 Existing FY 2010 De-bottlenecking 79 FY 2011 Expansion FY 2012 Post Expansion 14

16 Lanjigarh refinery : Existing operations 1 st stream of 0.7 MTPA commissioned & stabilized. Name plate capacity achieved Captive Co-generation Power Plant commissioned 2 nd stream trial runs completed Trial runs undertaken for increasing capacity through debottleneck. Alumina quality as per best International norms achieved. Zero effluent discharge system implemented. All statutory environmental requirements met. ISO-9001,14001, OSHAS certified.

17 Lanjigarh refinery : expansion project status 3 mtpa (1mtpa x 3 lines) Expansion: Three additional streams each of 1 MTPA capacity increasing the total plant capacity to 5 MTPA All the new facilities shall be accommodated in the existing plant area. Adequate Bauxite deposits available around Lanjigarh to sustain production at expanded capacity Existing infrastructure shall be augmented for increased capacity Single consultant for basic engineering and detailed engineering. Project execution through LSTK packages World best proven equipments/packages selected Independent PMC consultant appointed to monitor time and cost

18 Project Partners - Lanjigarh

19 Korba (Balco) Bauxite mine Alumina refinery Aluminum smelter and CPP

20 Balco Existing operations Plant 1 Old VSS technology/ high cost smelter of 100ktpa, shutdown in March 2009 Refinery under ramp down because alumina quality not suitable for new generation prebake technology Mines: Mainpat & Kawardha Bauxite converted into Alumina in Lanjigarh New plant of 245 ktpa commissioned in 2005 Operating at better than designed capacity and operational efficiency Value added product Rolled product 100 KT capacity Wire rods 180ktpa capacity Power Power from 270MW thermal plant being sold in commercial market at attractive merchant tariffs Power from 540MW thermal plant feeds new 245ktpa smelter Proximity to coal mines ~30 Kms

21 Awards Received in Ideas UK 2009 (Installation of bath hopper in pot superstructure) Ideas UK 2009 (Innovation Category Online Pot Cut-out) International Green Apple Award (Balco Fuse Technology) National Safety Award Institute of Engineer s Award (Safety Innovation Award) IMEA Award (Manufacturing Excellence Award)

22 Innovations Applied for Patent Aluminium Reduction Cell Online cut out of pot (India as well as US patent) With the innovation of this technology it was possible to cut out pots at full load thereby eliminating pot abnormality in terms of operating conditions due to power outage taken for pot cutout and no production losses due to any reduction in line amperage during cut out of pots. Aluminium Reduction Cell Fuse Technology (India as well as US Patent) Balco developed a fuse, with which it is possible to power on pots as full load without reducing the line amperage to 0 KA. This innovation was critical to reduce the production losses during the power outages, disturbances to the operating and for stable power plant operations.

23 Key Results - LTIFR

24 Balco : expansion project status mtpa Aluminium Smelter Project Pot Room: No. of lines 1 No. of pots in each line 336 Pot amperage 340 ka Metal production million TPA Smelter Project to be commissioned by First metal Q3 FY 2011 Pot line Commissioned (0.325 mtpa) Sept 11 CPP (300 MW * 4 units) Coal based, subcritical First unit of 300 MW start up : Oct10 Four units to be commissioned : Dec 11 Construction resumed after disruption due to chimney collapse

25 Jharsuguda Aluminium Smelter -CPP IPP

26 Existing Projects- At Jharsuguda

27 Aluminium: Jharsuguda Locational advantage Proximity to coal mines for cost efficient power generation Well connected by road and rail Close to eastern ports Proximity to Lanjigarh Alumina source Road Map 2 lines of 250 kt each, adding to 500kt and 1215 MW CPP 4 lines of 312.5kt each, adding to 1,250kt

28 Aluminium smelter mtpa Pot Room: No. of lines 2 No. of pots in each line 304 Pot amperage 320 ka Metal production 0.5 million TPA State of Art GP -320 ka potline technology First potline commissioned Second potline under commissioning by March 2010

29 CPP 1215 MW 1215 MW Captive Power Plant 135 MW* 9 units Coal based SEPCO executing EPC contract Project progressing as per schedule Seven units of 135 MW commissioned. Balance units to be commissioned by March 2010

30 Aluminium smelter expansion 1.25 mtpa Pot Room: No. of lines 4 No. of pots in each line 336 Pot amperage 340 ka Metal production 1.25 million TPA 340KA Cell Technology Smelter Project to be commissioned by First metal Q1 FY 2011 Three Pot lines Commissioning (0.94 mtpa) Sept 11 Fourth Potline Commissioning (0.31mtpa) Sept 12

31 Project Partners - Jharsuguda

32 Jharsuguda Commercial Energy (2400 MW IPP)

33 2400 MW IPP Project Energy capacity (MW) Construction progressing well Unit 1 (600 MW) to be commissioned in Q4 FY2010 Balance three units to be progressively commissioned by Q3 FY2011 1,800 2,400 2,400 Linkage in place 1,200 Infrastructure in place and being further augmented to help reduce cost of local logistics e Q Q Q Q Note: Capacities in 2010e and beyond refer to exit rates

34 MAIN POWER HOUSE TG First Unit LP Turbine casing HIP Turbine casing

35 WATER SYSTEMS

36 Project Execution Philosophy Common package for basic and detail engineering Parallel engineering, procurement & construction Large packages to minimize interface & take advantage of economies of scale Involving the vendors / EPC suppliers in the Scope optimization Optimizing on time and cost by guiding Foreign vendors to partner with Indian suppliers for sourcing Extended support to vendors & contractors during execution Continuous project review mechanism & taking pro-active remedial action Project pre-audit & review mechanism Community participation involvement and job creation opportunities for local community Effective Project Monitoring through Primavera software. Layout Plan Maximum Land Usage

37 Health, Safety, Environment and People

38 Health, Safety and Environment HSE driven from the top Documented Safety Philosophy as Safety Principles Certified for compliance to ISO : 2004 and OHSA : 2007 within year of its operation, March KPI Actual Target Actual Till Sept Benchma rk LTIFR <0.30 Site has integrated safety organization and ownership on safety lies with line functions HSE is driven through process innovation- HSE goals drive technology through Process Safety Pre Startup Safety Review. Contractor Safety Management is in place to get same level of safety practices. System for pre-employment and periodic medical examination. HSE Training, Awareness & Communications

39 Environment Performance KPI Actual Target Actual in Sep Stack Emissions (a)bake Oven FTP < 50 mg/nm3 <50 mg/nm3 <50 mg/nm3 ( 2 ns Stack) (b) Pot Room FTP <100 mg/nm3 < 100 mg/nm3 <100 mg/nm3 ( 2 NsStack) (c) Power Plant ( 7 Stacks) Average emissions higher than norms due to stabilization < 100 mg/nm3 Average emissions is <100 mg /Nm3 Primary Energy Consumption (Kwh/Kg Al) (Without normalization) (13.3 ALCAN) Fluoride Emissions Not Measured < 0.8 kg/ t Al 0.73 kg/t Al Water Consumption (cub m/mt Al) ( 0.87 ALCAN) Fluoride Discharges ETP was getting commissioned 2.06 < 2.0 mg/lit 0.46 mg/lit

40 Achievement of better than design parameters in the 1 st year of operations Parameters Unit Design Present Current Efficiency % Current KA Power Consumption kwhr / T Al Metal Purity % of Al (100% pots)

41 Organization and People Comparable with World Bench Mark Manpower Productivity Each Department is a Business Unit ( SBU concept) More than 450 Young engineers & ~ 630 fresh science graduates and ~ 225 laterals Recruited specialists / experts from the best smelters & power plants across the world such as Dubal, Alba, Mozal and Comalco. More than 100 Engineers have been trained in China, Norway, Sweden, Dubal, Alba on smelter, power technology and Best Operating Practices Continuous learning & development environment Focus on asset optimization and process improvements through six sigma. Job Rotation Inter functional rotation of professionals to ensure all round development ERP Implementation SAP implemented Reward Scheme Company Level: Monthly Production linked Incentive Individual Level: CEO Kitty, Stars of the Business, Individual Bonus etc LTIP/STIP Stock Options to Key Employees

42 People composition presently at site Operation 2099 Project 469 Contractor Total 18623

43 People Stratification Gender wise Distribution Talent composition Our Philosophy is to engage 30% female employees

44 Summary Integrated operations with own mining, refining, power generation and smelting Minimal transportation cost of Coal, Bauxite, Alumina giving structural cost advantage Tried and tested technology We already have 3 lines commissioned Low project execution risks Proven track record of completing projects in time and within budget Sequential construction/commissioning of pot lines, currently 4 lines under construction Experienced project team Proven and repeat internationally reputed project partners On track to become among worlds top 5 aluminium producers with 1 st decile cost position

45 Corporate Social Responsibilty

46 CSR Interventions HEALTH INFRASTUCTURE LIVELIHOOD FOCUS AREAS EDUCATION SANITATION SOCIAL & CULTURAL Socio - Economic- Cultural development all around VAL -JSG

47 R&R Brief Profile Our R & R Policy has been recognized as the Best in the Country. 145 PDF as per R&R Policy 2006 (Govt of Orissa). Provided with all basic amenities and infrastructure facilities. Cultural empathy is the high note of our R&R Colony. Each family with 10 decimals land Each house 2 BR,1 Kitchen,1 Varanda,1 bathroom and all electrical amenities

48 Health & Sanitation Deliver curative & preventive health care Mobile Health Unit. HIV/ AIDS awareness program for employees & the community Multi specialty health camp, Mop- Up Pulse Polio program Potable water supply. Removal of cataract from two blocks of Jharsuguda district. Community Toilet for proper sanitation Sponsor Waste management through Village Cleaning drives.

49 Social Investment- Education A vital role in moulding the future Infrastructural Support Primary School. Partnership with DAV International High School for promoting better educational facility for peripheral areas. Sponsored additional teachers to peripheral primary school for special academic input. Recognition of meritorious student Promoting and encouraging celebration of National Festivals in surroundings.

50 Peripheral Village Infrastructure Laid Concrete Road in peripheral villages. Street Lighting in peripheral villages. Renovated water bodies. Developed effective Drainage System. Supported religious and cultural infrastructure

51 Sustainable Livelihood & Entrepreneurship Empowers the social fabric of the village Micro enterprise interventions 108 SHG s with Over 1200 women members 27 eligible graduate PAPs recruited as proud employees at VAL. Promotes entrepreneurship by creating opportunities for PAPs/PDFs in peripheral development activities.

52 PAPs Income generation through SHGs Activities in Vedanta Jana Jivika Yojna(VIJJY) Sl. no Enterprise 1 No of SHG Members Involved Advanced Leaf Plate Unit 12 2 Poultry Unit 17 3 Marigold Cultivation 18 Vegetable 4 Cultivation 28 5 Fishery 20 Community 6 Farming 26 7 Spice Packaging 12 TOTAL 133

53 Site Visit IPP (2400 MW) New Smelter (1.25 Mn Ton) Existing Smelter (0.5 Mn Ton) CPP (1215 MW)

54 Safety INFO (1) All production areas are Restricted Areas To manage the risk and hazards associated with the process You are requested to follow the Leader who guides you on use of appropriate PPE and in any emergency situation. Helmet, Gloves, Glasses and Shoes are basic minimum safety requirement for all areas of the plant.

55 Safety INFO (2) Additional PPE are required to manage the specific risks associated with various production activities. Evolution of Heat Do not Touch any object No Soft Drink Cans Drink plenty of water to avoid dehydration Magnetic Field in Pot Rooms No analog watches No magnetic cards (e.g. Credit cards ) Persons having pace makers are not allowed Moving operation vehicles - Be alert Dust - Use masks in dust prone areas Noise - Use ear plugs in noisy areas

56 HAVE A SAFE VISIT