Godawari Power Trims Steel Billet Production by 80 percent to Sell Surplus Power in Open Market

In a bid to insulate its bottom line from the prevalent economic crisis, steel-billet manufacturer Godawari Power and Ispat Limited (Raipur, Chhattisgarh, India) has decided to cut production by 80 percent and sell the power saved in the open market, reports Industrial Info Resources (Sugar Land, TX). This move will help the firm to realize greater earnings from the sale of power than from the use of captive power in the manufacture of steel billets that have lower realizations.

The firm, which owns a 43-megawatt (MW) captive power plant in Chhattisgarh, sold about 23 MW of power per day during the months of September and October. The power was sold at a realization of 0.1631 U.S. cents per kilowatt-hour (kWh) in the open market during nonpeak hours and was supplied to the state grid of Chhattisgarh at 0.509 U.S. cents per kWh during peak hours. Average earnings from the sale of power, which amounted to 0.1325 U.S. cents per kWh of power, were more than double the average earnings of 0.612 U.S. cents per kWh of power obtained from the production of steel billet.

Godawari Power does not incur major expenses in operating its captive power plant. Flue gas is primarily used to generate 31 MW of power and thermal coal is used to generate the balance. Godawari Power sources flue gas from its sponge iron facility and procures coal from Coal India Limited (Kolkata, West Bengal). On the other hand, the firm saw a drop in the production of steel billet in October 2008 because of the unavailability and rising prices of pig iron, a primary raw material in the manufacture of billet. Prices of pig iron rose to $591.23 per ton from $530.07 per ton in the previous quarter. Further, sponge iron prices had plummeted affecting price realizations for the firm.

Godawari Power has a total installed capacity of 400,000 tons per year of steel billet and plans to manufacture about 80,000 tons in the current fiscal year. The firm is also looking to trim its production of ferroalloys to free up additional power for sale in the open market. It has a total installed capacity of 16,500 tons per year of ferroalloys.

In August, the company entered into a memorandum of understanding with Chhattisgarh to set up manufacturing facilities for sponge iron, pig iron, steel billet and ferroalloys in the state at an investment of $320 million. Godawari Power recently announced plans to invest $57 million over the next two years to expand the capacity of existing plants and to acquire an iron ore pellet plant. The firm also plans to invest $48 million to set up an iron ore pellet, beneficiation and crushing plant. It plans to commission a 7.5 million-ton-per-year iron ore mine this quarter and an upcoming pellet plant in Raipur by June 2009.

Godawari Power has formed a separate subsidiary, Godawari Power Limited, as part of plans to develop a 1,000-MW power plant in Chhattisgarh and is scouting for suitable sites for the project. It also awaits announcements from the Coal Ministry pertaining to the allocation of coal blocks that are expected to be made in December or January. The company will then apply for an allotment to develop the proposed power project.