The cement major is hoping to raise over Rs 200 crore in the process. The power plants on the block are the recently-commissioned ones at Kymore and Jamul with an aggregate generating capacity of 50 mw.

Senior ACC officials said that they have now ruled out the possibility of a direct funds infusion from the Tatas, after the financial institutions decided to block the move. "Since maintaining power plants is not ACC's core business, selling them to a power company to raise funds is an obvious move to meet the company's funds requirement of Rs 750 crore," they added.

The two captive power units, set up by TEC at Jamul and Kymore--which house two of ACC's most modern cement plants--will be sold at the built-up cost. Thesale is expected to fetch the company anywhere between Rs 200-250 crore.

The move also synergistically fits into the growth plans of TEC which has identified acquisition and maintenance of captive power plants as a critical step towards becoming an integrated power company in the long run.

TEC, earlier in the fiscal, had bought out two captive power plants from ACC for a consideration of Rs 90 crore. Last fiscal it had also acquired Tata Steel's captive unit at Jojobera, in Bihar, which has a generating capacity of 300 mw.

The power company has also signed a memorandum of understanding with Indian Aluminium Co to acquire the latter's 60 mw captive unit at Hirakud in Orissa, and subsequently increase capacity when the aluminium smelter is expanded.

ACC, which has lined up capital expenditure of Rs 750 crore over the next 30 months to maintain its leadership position, proposes to increase its total capacity by 25 per cent to 15 million tonnes from 12 million at present, a significant climbdown from itsearlier announcement in 1995 of increasing capacity to 17 million tonne by the year 2000.

The expansions include increase of one million tonnes capacity through the debottlenecking of four existing plants at Gagal, Chander, Kymore and Madukkarai.

The company also proposes to double capacity at Wadi, in Karnataka, to four million tonnes. It is believed that the final clearance for the Wadi expansion will come only in the last leg as ACC is also keeping its options open on acquisitions.

To meet its capex requirement, ACC is coming out with a 1:4 rights issue at a premium of Rs 45 a share in May to raise Rs 189 crore. The equity float will expand the equity base of ACC by 25 per cent, from Rs 137.57 crore to Rs 171.96 crore.

The board of directors of ACC had earlier decided to mop up Rs 100 crore through a preferential allotment of 90 lakh warrants and/or equity shares to the Tata group. The proposal, which would have hiked the Tata stake to around 17.83 per cent in the cement major, was spiked by thefinancial institutions led by IDBI.

INSIGHT
No other option

One has to remember that ACC has lined up a capital expenditure programme in excess of Rs 750 crore and given the failure of the preferential allotment, the company has little recourse but to utilise this option of selling some of its captive power plants to raise funds.

However, it would be prudent here to point that when TEC maintains and operates these captive power plants, they would obviously do so on a commercial cost-plus basis, which will definitely affect ACC's power costs in the long run.

However, for TEC, this acquisition route makes ample sense. Especially since it has not been able to put up its Bhivpuri plant in Maharashtra. The acquisition, if it materialises, would help TEC's growth plans towards becoming an integrated power company in the long run.