Mining firm Sterlite Industries, the Indian subsidiary of London-listed Vedanta Resources Plc plans to raise $2.0 billion through an issue of American Depositary Shares (ADS) with the aim of listing on the New York Stock Exchange and using the funds raised to build a power project and also expand its core business.
Vedanta outlined its plan in a filing with the US Securities and Exchanges Commission on Wednesday. The company announced that it plans to build a $1.9 billion, 2,400-megawatt power project in Orissa, the first one by the company involving commercial sale of energy. The business will be operated through Sterlite Energy Ltd, a wholly owned subsidiary of Sterlite Industries India Ltd.
Sterlite told the Bombay Stock Exchange that it planned to raise Rs. 12,500 crore in all, which works out to about $2.7 billion. This, apart from American shares, would include Foreign Currency Convertible Bonds (FCCBs), Global Depositary Receipts (GDRs) or equity shares to investors including Qualified Institutional Buyers.
Vedanta said in a statement that the proceeds of the ADS issue will also be used to buy out the government's 29.5 per cent holding in Hindustan Zinc Ltd.
Reuters, quoting the U.S. offer document, said Vedanta's aluminium producing unit, BALCO, had signed an agreement with the government of Chhattisgarh to study the feasibility of investing $1.12 billion to build a power plant and an integrated coal mine there.
It said Hindustan Zinc planned to invest $300 million to build a 170,000 tonnes-a-year zinc smelter.
The Vedanta statement said Sterlite also planned to use the proceeds to reduce its debt and also look at possible overseas acquisitions.
Vedanta had made a $750 million issue of convertible bonds in February this year. This issue has a maturity period of 20 years, but the bondholders can opt for conversion from the current year itself.
Merrill Lynch and Company, Morgan Stanley and Citigroup are acting as joint book runners for the proposed US offering.
Meanwhile, Sterlite posted a 68 per cent jump in net profit for the quarter ended September 30. Net profit after tax stood at Rs 136.56 crore for the second quarter, whereas the same was at Rs 81.10 crore in the same quarter last year.
Total income was Rs 3,330.56 crore for the second quarter, up from Rs 1,739.39 crore in the year-ago period.
Trouble in Zambia
Vedanta Resources ran into trouble in Zambia after the Environmental Council of Zambia ordered the closure of a tailings plant following reports of pollution in a nearby river. This plant owned by Vedanta subsidiary Konkola Copper Mines (KCM) had produced 50,000 tonnes of the metal last year.
Company officials refused to respond to e-mailed questionnaires sent on this subject.
AFP reported that on Tuesday Environment minister Kabinga Pande told the Zambian parliament that KCM will be taken to court for breaching environmental protection and pollution laws after a leak at its leaching plant polluted the Kafue river.
“Much as we have gone out of our way to accommodate new mine owners, we are not going to condone complacency on their part and the deliberate flouting of our laws," Pande was quoted as saying.
Mining at the Nchanga mine of KCM has been stopped. This followed after the government ordered the shut down of the leaching plant at the mine. This is the largest among the four mining assets owned by KCM in Zambia.