NEW YORK (Reuters) – Jindal Steel & Power Ltd (JNSP.NS) is looking for alternative coal and iron ore projects following a disagreement with Bolivia over power supplies for it $2.1 billion venture in the country, the company’s top executive told Reuters on Wednesday.
Chairman and managing director Naveen Jindal said the company is now looking elsewhere in South America, as well as in Africa and Australia.
Jindal Steel has given Bolivia notice it is making plans to scrap its iron ore and steel investment in the country because the government had not met contract terms to supply natural gas for the project.
“For the last five years we were so focused on Bolivia that we stopped looking as well, but now we are looking elsewhere. We know we can make it happen elsewhere,” Jindal said in an interview on the sidelines of the AMM Steel Success Strategies conference.
The search is also part of the company’s plan to raise its self-sufficiency in raw materials to 80 percent to 90 percent by 2015 from 70 percent currently.
The project in Bolivia – the country’s single largest foreign investment – will be scrapped unless the government offers more support and accepts a smaller version of the original venture due to smaller than expected gas availability.
“If they respond to that favorably, then we can talk. We are keen to do the project, but on fair terms, Jindal said. “So if they offer one fourth of the amount of gas which they had promised before, they have to realize that the whole project has to be reconfigured.”
Withdrawal from the Bolivian project could cost Jindal about $200 million, he added.
According to the contract signed in 2007, Bolivia undertook to supply 10 million cubic meters per day of natural gas, but it is now offering only a fourth of that.
“If they resolve it, we are happy to invest, otherwise there are many other investment options all over the world,” he said.
The new project is half the size of the original venture. About $1 billion would be invested, with annual output of 500,000 tonnes of steel and a million tonnes of direct reduction iron, a raw material used in steel making. Iron ore and pellet production, however, would be broadly unchanged at about 10 million tonnes and 2 million to 5 million tonnes per year, respectively.
The government also needs to address bank guarantees and import taxes on equipment that is imported because it is not available locally, Jindal added.
(Reporting By Silvia Antonioli; writing by Josephine Mason; editing by Andre Grenon)