Indian Oil to raise Rs700 crore via bonds to fund Ennore LNG terminal

Indian Oil to raise Rs700 crore via bonds to fund Ennore LNG terminal

Indian Oil Corp. Ltd (IOCL) is planing to sell bonds worth Rs700 crore to part-finance the construction of its upcoming natural gas terminal at Ennore in Chennai, two people familiar with the development said.

The country’s largest oil marketing company is building the Rs5,000-odd-crore terminal for import, storage and regasification of liquified natural gas (LNG) at Ennore’s Kamarajar Port.

The terminal will be owned by Indian Oil LNG Pvt. Ltd, an equal joint venture with a partner who is yet to be finalized.

“The company has decided to raise Rs700 crore through compulsory convertible debentures (CCDs) for part-financing capital expenditure. The fund-raise will complete shortly,” said an investment banker aware of the development. He spoke on the condition of anonymity.

In an emailed response, IOCL said, “The joint venture has raised part of the funds through CCDs through the first tranche and is in the process of raising the second tranche through CCDs.”

“IOCL has not been able to find an equity partner yet. Till the company finds one, it has decided to raise funds and finance the project,” said the second official cited above.

Construction of the terminal, which began in August 2015, is now 80% complete, IOCL added. When completed, this will be the first LNG regasification terminal on India’s east coast.

“Increased global gas availability and the lower gas prices have come as welcome developments to provide a big boost to the gas sector in India and presents attractive growth opportunities to players in the business,” IOCL said in its annual report for 2016-17.

According to a 31 October report of CARE Ratings, the rise in LNG consumption is aiding the construction of LNG terminals.

Besides IOCL, Gujarat State Petronet Ltd (GSPL) and Adani Enterprises are jointly setting up an LNG terminal in Mundra, said a Care report.

IOCL is said to have acquired 50% equity with GSPL LNG (an associate of the Gujarat State Petroleum Corp.), in setting up and handling the 5 MMTPA capacity terminal, the Care report said.

State-run Hindustan Petroleum Corp. Ltd has formed an equal joint venture with Shapoorji Pallonji Port Pvt. Ltd to build a 5 MMTPA capacity LNG terminal at Chhara Port in Gujarat’s Gir. Jaigarh LNG terminal in Maharashtra is being constructed by Hiranandani Energy, which has signed a large contract with a US-based firm that wants to bring its own gas through this terminal.

Andhra Pradesh was started by Shell and Engie in 2011 but they exit the project early this year over concerns about demand for imported gas in India. Now, GAIL is negotiating with Andhra Pradesh government on the possible structure of the project, the CARE.

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