The National Aluminium Company (Nalco) is in the process of retiring its high cost debt and becoming a debt-free company this year.

It plans to retire Rs700 crore of its loans during this financial year, since it has no large capital expenditure in FY2005. Therefore, the cash flows would be used for retiring its debt, company officials said.

However, the company will be taking up a number of expansion programmes in the financial year 2006. The capex for phase II expansion would start from FY2006. The estimated capex for FY2006 is Rs500 crore.

Nalco is awaiting the final nod from the cabinet committee on economic approval (CCEA) for its second phase of the expansion plan. The project involves additional 500,000 tpa alumina capacity, 110,000 tpa aluminium smelter and 120 MW captive power plant, involving a capital expenditure of Rs4,100 crore.

The company is expecting the final approval for the mega expansion soon, which is expected to be completed within four years.

Nalco expects higher volume and revenue growth, since its expanded aluminium smelter is expected to contribute to additional volume this year. Nalco can now produce 340,000 tonnes of aluminium in FY2005 vis-à-vis 290,000 tonnes in FY2004.

The new rolling mill, which it had acquired a couple of years ago, has not yet commenced operation, as the approval for further investment is still awaited.

In line with the increase in domestic coal prices, the price of coal for Nalco''s captive power plant is likely to go up by 10 per cent. The company buys coal from Mahanadi Coalfields located around 14km away from its smelter. Another important input, calcined pet coke, is expected to witness about 20 per cent rise in prices.

Demands for alumina and aluminium products are growing. sector. Nalco''s earnings would be driven by higher realization of alumina, higher aluminium prices and additional aluminium volume, according to analysts.