Sterlite Industries (India) Limited - Sterlite Industries India Ltd.

1,250,000 tpa Aluminum Smelter
Vedanta Aluminium is investing an estimated Rs. 116,800 million ($2,296.0 million) to set up a 1,250,000 tpa aluminum smelter. As of
March 31, 2009, Rs. 16,109 million ($316.7 million) has been spent on the project. Vedanta Aluminium’s investment in Jharsuguda includes
the costs of building the smelter and all necessary infrastructure including railway networks, water pipelines and a township for employees. In
addition, Vedanta Aluminium is considering building a 1,980 MW coal-based captive power plant to provide all the power requirements of its
1,250,000 tpa smelter at an estimated cost of Rs. 80,000 million ($1,572.6 million). It received formal approval to set up a special economic
zone in a portion of the area on February 27, 2009. This special economic zone is a designated duty-free enclave approved by the Government
of India which is treated as foreign territory for purposes of trade operations, duties and tariffs. The 1,250,000 tpa aluminum smelter is
expected to be progressively commissioned from March 2010 and to be completed by September 2012 and Vedanta Aluminium expects to
produce 150,000 tons of aluminum ingots in 2010. Subject to certain conditions, there is no customs duty or excise duty for the import or
procurement of capital goods, raw materials, consumables, spares and other products into the special economic zone. There is a 100% income
tax exemption for a period of five years, a 50% income tax exemption for a further period of five years and a further exemption for up to 50%
of profits that are reinvested into the zone for a period of five years under Section 10AA of the Income Tax Act, 1961, or the Income Tax Act.
Our Commercial Power Generation Business
Overview
Although electricity generation capacity has increased substantially in recent years, the demand for power in India to support its growing
economy has in recent years exceeded, and continues to substantially exceed, the available generation supply. Per capita consumption of power
in India, despite significant increases in recent years, continues to lag behind power consumption in other leading developed and emerging
economies by a large margin. See “— Our Industry — Commercial Power Generation Business — Consumption.” India has large coal
resources of 264.5 billion tons as of April 1, 2008, according to Geological Survey of India, and the coal industry is in a process of government
deregulation that is expected to increase the availability of coal for power generation, among other uses. To sustain the recent economic growth
in India, the Ministry of Power in India has set a target to provide an installed capacity of 212,000 MW by 2012 by adding approximately
100,000 MW of generation capacity from the 2007 installed capacity. As part of the planned target of approximately 100,000 MW of additional
capacity by 2012, the Government of India has proposed setting up nine UMPPs. Each of these projects is expected to be commissioned during
the period from 2008 to 2012 and four have already been awarded as of March 31, 2009.
We believe that these factors make the commercial power generation business an attractive growth opportunity for us to diversify our
business and that, by leveraging our project execution and operating skills and experience in building and managing power plants and by
applying our mining experience to the mining of coal blocks that we have been and will continue to seek to have allotted to us by the
Government of India, we may compete successfully in this business.
Our Experience with Captive Power Plants
We have been building and managing captive power plants since 1997. As of May 31, 2009, the total power generating capacity of our
captive power plants and wind power plants, including the captive power plants of our 29.5%-owned subsidiary Vedanta Aluminium, was
2,078.7 MW, including six thermal coal-based captive power plants with a total power generation capacity of 1,604 MW that we built within
the last five years.
The following table sets forth information relating to our and Vedanta Aluminium’s existing power plants as of May 31, 2009:
Fiscal Year Commissioned Capacity Location Fuel Used
(MW)
1988 (1) 270 Korba Thermal coal
1997 24 Tuticorin Liquid fuel
2003 14.5 Debari Liquid fuel
2003 6 Zawar Liquid fuel
2003 14.5 Chanderiya (2) Liquid fuel
2005 22.5 Tuticorin Liquid fuel
2005 154 Chanderiya Thermal coal
2006 540 Korba Thermal coal
2007 75 (3) Lanjigarh Thermal coal
2007 107.2 Gujarat and Karnataka Wind (4)
2008 80 Chanderiya Thermal coal
2009 80 Zawar Thermal Coal
2009 16 Gujarat and Karnataka Wind (4)
2009 675 (3) Jharsuguda Thermal Coal
2,078.7
Notes:
(1) Commissioned by BALCO prior to our acquisition of BALCO in 2001.
(2) Transferred from Debari to Chanderiya in March 2009.
(3) Captive power plant of Vedanta Aluminium, our 29.5%-owned subsidiary that is 70.5%-owned and controlled by Vedanta. The
Lanjigarh captive power plant is expandable to 90 MW, subject to government approvals.
(4) Our wind power plants are not for captive use.
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