Any closure of upstream assets in the UK on reaching end-of-life will cost Tata Steel more than £100 million, top executives from the steel major told analysts last week. The company further said that the UK operations reported a cash burn of $150 million in the second half of FY22-23, higher than what they had guided earlier.
Tata Steel has been in discussions with the UK government, seeking financial support for a green transition of its UK assets. So far, it said, the talks have remained inconclusive.
In an interview with Moneycontrol, TV Narendran, Chief Executive Officer and Managing Director, Tata Steel, said that in the worst-case scenario, if the UK government did not help finance a green transition, different UK (upstream) assets would be closed as they reached end-of-life.
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“The plan under discussion with the UK government is for a support of more than £1 billion, which includes transition from a blast furnace to an electric arc furnace. In case of closure, the cost is estimated to be in hundreds of millions of Pounds,” analysts with Centrum wrote in a note on May 3.
In the interview last week, Narendran had indicated that some of the assets would reach end-of-life in two years.
Further, Tata Steel also informed that the UK business had incurred a cash burn of $150 million, analysts said. "Tata Steel, Netherlands, has £600 million in cash, while the UK business burnt $150 million in the last six months,” analysts with Anand Rathi noted in a May 4 report on Tata Steel.
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In the quarter ended September 2022, Koushik Chatterjee, Executive Director and Chief Financial Officer, Tata Steel, had said, “The assets in the UK are older than in the Netherlands, and in fact, older than the rest of Tata Steel’s portfolio. It will become maintenance heavy in course of time.”
In FY23-24, Tata Steel plans to spend Rs 16,000 crore in capex, of which Rs 700-800 crore would be towards maintaining the UK assets, the company informed analysts.
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