India's largest aluminum maker, the National Aluminum Company LTD (NALCO), and a company from United Arab Emirates (UAE) planed to spend US$4 billion to build a smelter and supporting infrastructure, including a power plant, in Tanjung Api-api, South Sumatra, Indonesia, a newspaper said yesterday.

The singing of the agreement was carried out Friday.

"We will begin the construction soon and expect the smelter to begin its operation in 2013," NALCO's finance director B.L. Bagra was quoted by the Jakarta Post as saying.

The director said that US$2.5 billion of the planned investment would be spent on the smelter and the remaining US$1.5 billion on the power plant, a port and railway.

According to Bagra, the smelter will be designed to process 1 million tons of alumina a year and is expected to produce 0.5 million tons of aluminum annually. The alumina will be imported from India which produces about 2.1 million tons of alumina per year.

The firms decided to build the smelter in Indonesia instead of in India because Indonesia has better quality coal and cheaper mining costs which will cut the costs for the power plant.