Karaikal Port to raise Rs 2,500 cr to fund LNG terminal

Karaikal Port, a private port developed by Chennai-based infrastructure firm MARG, is advanced talks with three multinational companies to set up a liquefied natural gas (LNG) terminal inside the port. The cost of the new terminal is pegged at Rs 2,500 crore and three firms - one each from the US, West Asia and Singapore - have shown interest.

Karaikal Port is backed by Jacob Ballas Capital India, Standard Chartered Private Equity, IDFC and Ascent Capital Advisors. Reddy told Business Standard the company is looking for strategic investors who can also be equity investors. The Port is planning to set up a three million tonne per annum (mtpa) capacity LNG Terminal with an investment of around Rs 2,500 crore.

Confirming the development, G R K Reddy, chairman and managing director of MARG Group, told Business Standard : "Three investors have shown interest and we are in the final stage of negotiations. We want the terminal to be operational in the next 24-30 months." He, however, declined to share the divulge the names of the companies.

He added the port is strategically located and 800-Mw capacity plants in and around the port are in need of gas. These plants are operating at less than 30 per cent capacity due to non-availability of gas.

As the government wants to develop more green cities, demand for city gas is rising. Also, with vehicles moving from diesel to LNG, the demand for LNG is expected to grow as well.

The US firm cited above has around 500,000 acres of land in the US and has already got gas resources. The company is also backed by some of the large New York-based funds, Reddy said. Similarly, the company from West Asia has access to gas resources, while the Singaporean firm is mainly into trading of gas.

Karaikal Port's decision comes at a time when ports in the eastcoast are increasingly going for LNG terminal. At Ennore Port, around 45 km from Chennai, Indian Oil Corporation is setting up a 5 mtpa LNG terminal with an investment of around Rs 4,500 crore. At Gangavaram Port in Andhra Pradesh, Petronet LNG is setting up a 5 million tonne project at an investment of around Rs 4,500 crore and the company already operates an LNG terminal in Kochi.

At Kakinada, Andhra Pradesh Gas Distribution Corporation, GDF Suez, Shell and GAIL are setting up a 5 mtpa floating LNG terminal, a 2-3 mtpa in Mangalore Port by the consortium of ONGC, BPCL, Mitsui and New Mangalore Port Trust is coming up.

Karaikal Port is located around 300 km along the coast south of Chennai. Currently, the port has a capacity of 28 mtpa and handles coal, fertilisers, petroleum products (liquid cargo), edible oil, minerals & ores, and container/general cargo. Currently, the Port has five berths and around Rs 4,000 crore invested, including current and proposed infrastructure.

According to the company's website, the Port is envisaged to have a total of nine berths capable of handling 47 mtpa by 2018.

The port is envisioned to be developed in three phases with the final phase getting operational in 2017. Phase - I of development, which was completed in April 2009, comprises two Panamax-sized general cargo berths.