25% stake sale in GSPC-Adani LNG terminal to take longer

The consortium's plan to sell 25% has taken a backseat as GSPC doesn't have a CEO to grant the deal-related approvals

Adani Group and Gujarat State Petroleum Corporation (GSPC)’s Rs 4,500-crore, five million tonnes per annum (mtpa) liquefied natural gas (LNG) terminal at the Mundra special economic zone in Gujarat will take more time to build than the original target of December 2016.

GSPC and Adani Group also plan to sell 25 per cent stake in the terminal. However, it has been stuck because GSPC does not have a CEO to grant approvals.

“After former GSPC chief D J Pandian was elevated as Gujarat chief secretary, GSPC has been without a head. The request for proposal (RFP) has not been made and we understand the deal may not happen in the current financial year,” said an official directly involved in the stake sale process.

RFP is a solicitation made often through a bidding process, by an agency or company interested in procurement of a commodity or service to potential suppliers to send business proposals.

Pandian’s elevation last month has left a vacuum at GSPC. Pandian is considered instrumental in building GSPC into a major player in the oil and gas sector, having presence in the entire value chain of hydrocarbon sector.

Pandian was at the helm of affairs when GSPC developed an extensive gas grid network for transmission and distribution of natural gas throughout Gujarat.

GSPC will hold 50 per cent stake in the project, while Adani Group will take 25 per cent. The project is to be financed in a debt to equity ratio of 70:30. The terminal capacity will be expandable up to 10 mtpa.

GSPC and Adani have zeroed in on three players - India Gas Solutions (IGS), Oil and Natural Gas Corporation (ONGC) and Indian Oil Corporation (IOC).

If IGS bags the stake, it would be the company’s first venture in India after its formation in 2011. IGS was formed as a 50:50 joint venture between BP and Reliance Industries after BP bought a 30 per cent stake for $7.2 billion in 21 oil and gas production-sharing contracts in India, including the KG-D6 block.

The due diligence on the stake sale was completed in December 2013 and players were asked to submit commercial proposals based on capacity booking by January 15, 2014. The bids were to be opened in March and a final closure of the deal was to take place by June 2014. However, in the wake of elections in May, the process was put off.

“The stake sale may not happen before the next financial year as being government organisations, ONGC and IOC would need various rounds of approvals,” said another official who is the know of the deal.

Those winning the bid will be required to pump in Rs 400 crore over a period of three years for the project. In August 2013, eight players filed an expression of interest  for the 25 per cent stake. Other than the shortlisted players, the bidders included GAIL India, Petronet-LNG, Torrent Energy, Japan’s Mitsui & Co and Toyota Tsusho Corporation.

According to a company executive, Petronet LNG, despite its experience, was not shortlisted as there could have been a conflict of interest. On the other hand, IOC and ONGC hold 12.5 per cent stake each in Petronet-LNG. IOC is also setting up a 5 mtpa LNG terminal at Ennore in Tamil Nadu.

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