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24-03-2010
Essar and Indonesia: The future beckons

 

Essar and Indonesia: The future beckons
After acquiring the US-based Trinity Coal Company, which has 200 million tons of coal reserves, for USD 600 million, the Essar Group is scouting for mines across the world. Essar is also close to signing a coal mine acquisition deal in Indonesia where it currently operates a cold rolling steel plant and owns exploration rights in an exploration block.
The Minerals vertical of the Essar Group is on the lookout to acquire a global portfolio of mines in Asia, Africa and the Americas, with a focus on securing iron ore, coal and limestone resources that can fuel Essar’s captive needs in the steel, oil & gas and power businesses. Essar is keen on leveraging on Indonesia’s vast mining resources and wants to contribute to the country’s industrial growth in sectors like power and oil & gas (especially oil refining).
Mine acquisition is part of Essar’s strategy to continue to achieve backward integration and to secure raw material needs for its global steel and power operations.
Trinity Coal, which is the latest addition to Essar’s global portfolio of mines, has reserves of 200 million tons of coal – split equally between metallurgical coal and steam coal – and is amongst the top 10 coal producers in the US.  It currently produces approximately 7 million tons of coal annually and plans to ramp up production to 10 million tons per year.
 
Essar’s growth plans
The Essar Group is a multinational conglomerate and a leading player in the sectors of Steel, Energy, Power, Communications, Shipping Ports & Logistics, Construction and Minerals. With operations in more than 20 countries, the group employs 60,000 people and has revenues of about USD 15 billion.
Essar’s steelmaking capacity of 14 million tonnes is spread across plants in Canada, India and Indonesia and it is aiming to increase this capacity to 20-25 million tonnes. It also owns iron ore reserves of over 1.4 billion tonnes in Minnesota. As part of its oil & gas business, the company is looking to have a global refining capacity of over 1 million barrels a day. And Essar Power is targeting a generation capacity of 11,000 MW from a current capacity of 1,200 MW. The Group has committed an investment of USD 10 billion in expanding its Power and Oil & Gas businesses.
With such ambitious growth plans, Essar continues to pursue overseas opportunities that will help the Group secure its raw material assets and tap into nascent markets. Indonesia is a land that is rich in natural resources and has a favourable climate for doing business. Besides its interest in Indonesia’s mining resources, the Group wants to contribute to the country’s industrial growth by building world-class facilities that generate employment for thousands of Indonesians.
Essar’s long-term business strategy is to ensure that its operations have proximity to global markets. It is also focusing on vertical integration within its businesses through securing access to raw material sources in geographies where it has operations. In the last 2-3 years, the Group has acquired a steel plant in Canada, a controlling stake in an oil refinery in Kenya, oil & gas production blocks in Nigeria, Madagascar, Indonesia and Australia, as well as coal and iron ore mines in the Americas, Asia and Africa. Essar is investing heavily in the promising African telecom market and has launched a GSM services brand called yu in Kenya. Additionally, Essar’s business process outsourcing company, Aegis, has made a series of global acquisitions over the last three years and now has 40 delivery centres across India, Sri Lanka, the Philippines, USA, Costa Rica, Australia, Kenya and South Africa.
 
Essar in Indonesia
The Essar Group made its first foray outside India by setting up a cold rolled steel plant in Indonesia more than a decade ago. PT Essar Indonesia currently has a cold rolling capacity of 400,000 tonnes and a galvanizing capacity of 150,000 tonnes.  The plant also has a service centre that includes units like hot rolled and cold rolled slitters, four corrugation lines, floor deck, cut-to-length lines and truss making lines. Essar’s investment in Indonesia is not restricted to Steel alone. Essar has won oil & gas exploration rights at the South-East Tungkal block in Indonesia’s proven Central Sumatra basin.
The Group shares a strong association with Indonesia and its people. When an earthquake severely damaged the West Sumatera province of Indonesia on September 30, 2009, PT Essar – as part of it Corporate Social Responsibility initiatives – donated Essar Steel’s corrugated roofing sheets towards the reconstruction of public infrastructure, including housing and schools.
For four decades, Essar has been at the core of the Indian economy. It looks forward to building an equally significant presence in Indonesia and partnering the nation in realising its goal of economic development.
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About the Essar Group: A brief profile
Essar has formidable size and scale in all its core business verticals:
•       Steel: A global steel producer with 14 million tonnes per annum of current capacity, aiming to achieve a global capacity of 20-25 million tonnes
•       Energy: An integrated oil & gas company, with 70,000 km of exploration and production assets worldwide, over 290,000 bpd of global refining capacity and a chain of 1,300 oil retail outlets in India
•       Power: A current generation capacity of 1,200 MW that will be expanded to 6,000 MW by 2012. The goal is to reach 11,000 MW in the near future
•       Communications (Telecoms): A global player in the communications sector with presence in telecom services (over 90 million subscribers), telecom retail (over 1,300 branded telecom retail outlets) and business process outsourcing (40,000 people working from 40 global delivery centres in 9 countries)
•       Shipping Ports & Logistics: An integrated logistics provider with investments in shipping, ports & terminals (building 150 million tonnes of cargo handling capacity), logistics and oilfield drilling assets
•       Projects: The world-class Engineering, Procurement and Construction (EPC) capabilities that the business leverages to not only run large-scale industrial projects but also build them from the grounds up. Over the last four decades, our Projects Business Group has built all our industrial assets in India in the businesses of steel, oil & gas, power, telecom towers, and ports & terminals
•       Minerals: Essar owns a growing portfolio of iron ore and coal mines in Asia, Africa, Latin America and North America
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