GAIL cuts stake in OPaL to 15.5%

With the project cost escalating by 9.5%, GAIL took the decision

State-run gas utility GAIL India Ltd has cut its equity stake in ONGC's Dahej mega petrochemical project to 15.5% after project cost further escalated by 9.5%.

GAIL had in 2008-09 picked up 19% stake in ONGC Petro-additions Ltd (OPaL) which is building a mega petrochemical complex at Dahej in Gujarat.

The 1.1 million tonnes plant was at that time estimated to cost Rs 12,440 crore but the project cost was in 2010 revised to Rs 19,535 crore.

But now Oil and Natural Gas Corp (ONGC), the principal promoter of OPaL, has further revised the cost upward to Rs 21,396 crore with December 2013 set as the commissioning date, sources privy to the development said.

GAIL, a Navaratna PSU, had originally decided to pick up 19% in the project but when project cost was revised to Rs 19,535 crore, it decided to restrict its participation to 17%. This was done because the company board had powers to approve an investment of only up to Rs 1,000 crore.

Consequently, it decided to make an equity contribution of Rs 996.28 crore towards the 17% stake, they said.

But now that the project cost has gone up by a further, the promoters equity contribution has increased from Rs 5860.5 crore to Rs 6,418.8 crore at 70:30 debt-equity ratio.

GAIL, sources said, is not inclined to make any additional equity contribution and has decided to cap its investment in OPaL at the capital it has already approved -- Rs 996.28 crore. This in in the revised project cost would fetch it only 15.5% stake.

Sources said GAIL would however continue to hold rights to market 38% of the polymer and other chemicals produced by OPaL even at the reduced equity stake.

ONGC holds 26% stake in OPaL and has to make Rs 1,668.88 crore equity contribution. Gujarat State Petroleum Corp (GSPC) holds 5% while the remaining 53.5% equity or Rs 3,434.05 crore is yet to be tied up.

Sources said ONGC had initially decided to make an equity contribution of Rs 970.32 crore for a 26% stake in OPaL. But at the latest project cost, it will have to make Rs 1,668.88 crore contribution for the same amount of stake.

ONGC, which has advanced the date of commercial operation by a year to December 2013, 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.

GSPC, a government of Gujarat nominee, has communicated that it would like to retain its 5% stake in OPaL but its total contribution till date is Rs 29 crore only. At the revised cost, it has to make an equity contribution of Rs 320.94 crore.