GAIL to reduce stake in ONGC’s Dahej petrochem project to 11.6%

16-Jun-14

GAIL India Ltd will cut its equity stake in ONGC's mega petrochem project at Dahej - Petro-additions Ltd (OPaL), to 11.6% from 19% as the project faces major cost overrun. The 1.1 mln ton plant was at that time estimated at the time of conception to cost Rs 12,440 crore. But since then the project cost has been revised thrice upwards - to Rs 15,870 crore in end 2008, to Rs 19,535 crore in June 2010 and now to Rs 21,396 crore, as per economicetimes.com. The project, in which Oil and Natural Gas Corp (ONGC) has 26% stake, was originally to be funded in 70:30 debt-equity ratio (70% loan and 30% equity contribution from promoters). However, this was to change to 60:40 debt-equity ratio at the date of commissioning, which is now estimated to be around February 2015. Consequently, promoter's contribution would be Rs 8,558.40 crore while the remaining Rs 12,837 crore would come by way of debt. The official said GAIL's Rs 996.28 crore equity in revised scheme would fetch it 11.64% stake. ONGC has however decided to keep its stake at 26% and so its equity contribution would rise from Rs 1,668.88 crore 2,225.18 crore. Gujarat State Petroleum Corp (GSPC), which originally was to hold 5% stake, will now have 3.75% interest at its Rs 320.94 crore equity contribution. While in the previous scenario (debt-equity ratio of 70:30) 53.5% equity remained to be tied, now with GAIL and GSPC stake undergoing reductions the untied equity stands at 58.61% of Rs 5,016 crore. The project was originally to commission in 2012 and was subsequently revised to January 2014 but it is still sometime from starting operations. ONGC has reasoned the increase in project cost primarily to additional cost of Phase-II captive power plant and increase in cost of building the Phase-I electricity generating unit as well as interest cost on debt during construction phase.