This is the first time in India a steel producer is looking at such a large Merger & Acquisition opportunity in green energy. Steel production is a source of up to a tenth of global carbon-dioxide emissions
ArcelorMittal, the world’s biggest steel maker is keen to acquire Sprng Energy, Indian renewable platform of Actis, as the steelmaker looks at cleaner energy sources to decarbonise production around the world and in India, according to people in the knowledge of the development.
This is the first time in India a steel producer is looking at such a large Merger & Acquisition opportunity in green energy. Steel production is a source of up to a tenth of global carbon-dioxide emissions.
ArcelorMittal has joined the buyout race in competition with Royal Dutch Shell, Adani Group, Singapore’s Sembcorp Energy, and Canadian pension fund CPPIB after Macquarie, another initial contender chose to opt out of this potentially $2 billion transaction (enterprise value) which saw 17 initial contenders, the sources added.
The acquisition will be part of a $10 billion global green transformation strategy that kicked off in 2020 and is spearheaded by Group CEO, Aditya Mittal (46) who took charge last year, from his father Laxmi Mittal, of the sprawling empire that stretches across Europe, Asia, Americas and Africa. Steel companies are under pressure from policy makers, climate activists and Wall Street to shun legacy practices of carbon emission. Goldman Sachs is advising the company.
Arcelor Mittal’s India operations are centred around Essar Steel India, located in Hazira, Gujarat, which it acquired in 2019, for Rs 42,000 crore – the largest asset sale through the country’s bankruptcy courts – with its 40% joint venture partner Nippon Steel Corporation of Japan. The technical diligence is ongoing to be followed by management meetings and final bids by mid-March.
The company has already created global renewable subsidiary to build a strategy around carbon capture, production of green hydrogen – both as a fuel and a reductant, energy storage that will help convert many of their coal burning blast furnaces, the carbon-heaviest of steelmaking technologies, and slash emissions.
The plan is to reach 600,000 tonnes by 2022, deliver its 30% CO2 emissions target by 2030, and achieve net zero by 2050 using hydrogen in the more advanced direct-reduced-iron (DRI) and electric-arc-furnace (eaf) plants, instead of the prevailing natural gas. European steelmaking has been traditionally led by coking coal fired blast furnaces that are used to soak up oxygen from oron ore but are doubly carbon-intensive as well as generate ‘dirty’ energy to fire up the furnaces. Arcelor Mittal is also keen to use smart carbon with lower carbon footprint, utilising hydrogen.
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