Cement companies are attempting to cut down on costs especially that of power and fuel by embracing green power. The move has not only helped cement companies earn brownie points on cutting carbon emissions but also minimised the impact of fall in realisation on the bottomline.
The country’s largest cement company, UltraTech Cement, had slashed its power and fuel cost by 8 per cent in last three quarters to ₹12,311 crore against ₹13,444 crore in the same period last year. Its EBITDA increased 22 per cent to ₹2,279 crore (₹1,862 crore) in the last three quarters.
UltraTech has been on the forefront of generating electricity through waste heat recovery system (WHRS) and green power projects.
UltraTech’s plans
Charting out the company’s alternate fuel plans, Atul Daga, CFO, UltraTech Cement, said the WHRS capacity has gone up to 324 mw as of December quarter (278 mw) and the company has a target to reach 511 mw by FY27 with the addition of Kesoram Industries and India Cements capacity.
The company targets to source 24 per cent of power requirement from WHRS for a cement capacity of 211 million tonnes to be achieved by FY27.
With the acquisition of India Cements and Kesoram Industries, the company has revised renewable energy target to 2.1 GW.
Adani’s green power strategy
Adani Group companies – Ambuja Cements and ACC – are also betting big on fuel mix and green power to reduce cost. Ambuja Cements’ standalone power and fuel cost was down 14 per cent in last three quarters of FY25 at ₹2,579 crore (₹2,995 crore), while that of ACC dipped 13 per cent to ₹2,636 crore (₹3,027 crore). Ambuja Cements commissioned 200-mw solar power project in Khavda, Gujarat, in the December quarter with a target to achieve 1,000 mw of renewable energy by FY26.
Despite the increase in overall cost in the last three quarters, Ambuja Cements’ EBITDA increased 4 per cent to ₹2,533 crore (₹2,426 crore) while that of ACC was up 22 per cent at ₹2,279 crore (₹1,862 crore).
Ajay Kapur, CEO, Ambuja Cements, said the company plans to increase the WHRS to 218 mw by March-end from 197 mw currently.
Both WHRS and solar power would ensure that 60 per cent of power requirements for the planned 140 mtpa of cement capacity will be through green power. The green power mix will go up to 83 per cent if clinker units are also included. This would help reduce the power cost by about ₹100 a tonne by FY28, he said.
Shree Cement and Dalmia Bharat also reduced their power cost by 19 per cent and 8 per cent to ₹3,746 crore (₹4,648 crore) and ₹2,130 crore (₹2,326 crore) in the last three quarters of this fiscal.
Palak Devadiga, Research Analyst, StoxBox, said the leading cement companies are constantly working on improving their energy consumption from solar and other renewable sources to significantly reduce power.
Though the demand for cement is sluggish, it is expected to revive in the coming quarters, driven by infrastructure development and government policies for rural and urban housing, she said.
Vishnu Kant Upadhyay, AVP – Research & Advisory at Master Capital Services, said fuel is one of the major costs for cement production and its costing depends on supply-demand, which is prone to price fluctuations.
Shifting to renewable energy will lead to less fluctuations in fixed costs which could help in both margin expansion during excess demand and protect EBITDA during a period of contraction, he said.