Major cement companies will invest up to Rs 1,700 crore in two fiscal years ending March 2022 to set up 175 MW of waste heat recovery system (WHRS) capacities for saving power cost, an Icra report said on Wednesday.
It takes an investment of up to Rs 8-10 crore to set up one MW WHRS, and the overall cost for the 175 MW for FY21 and FY22 will come at Rs 1,400-1,700 crore, it said.
The agency said domestic cement companies in recent years have been investing in alternative/renewable energy sources, replacing known sources such as fuel in the form of coal as well as thermal power generation which has afforded the players multiple benefits apart from reducing carbon dioxide footprint.
The usage of renewable sources of energy such as solar energy, wind energy and WHRS has been gaining momentum, in particular the latter has emerged as one of the cheapest sources of power generation given the negligible input costs, it said.
Cement manufacturing is an energy intensive process and power and fuel accounts for 25-28 per cent of the overall costs for a cement company, it said.
“By generating power using the hot gases produced during the manufacturing process, WHRS is more cost efficient and helps in augmenting the operating profitability,” its sector head for corporate ratings Anupama Reddy said.
The cost of power generation using WHRS technology is around Rs 1.3-1.5/kwh including depreciation and interest, as compared to Rs 4.5-5/kwh for captive thermal power, she said, adding that with 20-25 per cent WHRS replacement in total power capacity, the power cost savings for cement companies is estimated to be 14-18 per cent.
This will lead to a widening of the operating margins by 1.10-1.40 per cent, it added.
As of FY21 end, major players such as Shree Cement, UltraTech Cement, Nuvoco Vistas Corporation, Birla Corporation, JK Cement, JK Lakshmi, Dalmia Bharat, The Ramco Cements, ACC and Ambuja Cement together had installed WHRS capacities of 520 MW, the agency said, adding this contributes around 16 per cent of their total power requirement.
In FY22, there will be a pressure on operating margins because of the significant increase in the fuel costs, such as coal and pet coke, in the recent quarters, Icra said, adding the cement companies with renewable and WHRS capacities are likely to better withstand the pressure on margins.
They also face high environmental risk with the costs associated with air and carbon regulation compliance, and are undertaking initiatives to increase the renewable and WHRS capacities to mitigate this risk, it added.
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