New Delhi: Auto company Argentum Motors Pvt. Ltd, which acquired Daewoo Motor Co.’s car factory in Surajpur in a bankruptcy auction a year ago, plans to sell the electricity it produces from its captive plant, said a top executive.
“As a first (in starting to operate the plant), we will sell it...put it on the grid,” said B.V.R. Subbu, chief executive officer of Argentum. “It’s a shame that it is idle.”
Subbu said he will only need 20MW power to operate the car factory, on the outskirts of Delhi, at full capacity.
Looking ahead: Argentum chief executive B.V.R. Subbu says starting the power plant is only the first step as he sets about becoming the largest producer of vehicle power trains for passenger vehicles in the country.
Subbu did not specify how much the company will earn from selling the power, which will be produced from heavy fuel oil that is more expensive compared with coal.
Private power producers have a capacity of 19,275MW or 13.5% of the total capacity in the country, according to the ministry of power. If Subbu is able to sell at a price of Rs4.5 per unit, the average tariff a private producer gets according to the website of the country’s electricity regulator, Argentum stands to earn revenues of more than Rs50 crore a year and profits of Rs5 crore by selling half of the 40MW capacity.
Still, Subbu said that starting the power plant is only the first step as he sets about becoming the largest independent producer of vehicle power trains, or engines and transmission systems, for passenger vehicles in the country.
Argentum, promoted by Ajay Singh, founder of SpiceJet Ltd,and Ashish Deora, a Web entrepreneur, along with Subbu paid Rs800 crore for acquiring the Daewoo factory in February 2007. The debt recovery tribunal, auctioneer of that property, handed over the assets to Argentum in November.
The company is spending an additional Rs120 crore in getting the plant ready for production. It is also investing Rs80 crore more in setting up a chassis-making plant for trucks in Chennai, besides utilizing Daewoo’s research and development centre to set up an engineering design centre.
The company’s business model is similar to that of Magna International Inc., one of the world’s largest auto component suppliers that makes everything from doors to seats and even manufactures the whole car for other companies.
“We can offer savings of up to $100 million (Rs404 crore” for European car makers, said Subbu, insisting that he wanted to concentrate on engines and transmissions before deciding on making cars. “Nowhere can you get a single source for this kind of capacity.”
Argentum expects to start making components for engines and transmissions by the end of June, said Subbu.
The company is also going to start production in the press shop of the factory—to make sheet metal parts such as doors—for export to Europe.
Subbu said Argentum was in talks with various companies for supply of these parts, but said “it is premature to talk about order books since companies want to look at the facilities first.”
Although Subbu didn’t talk about revenues, he said he expected to break even in two years.