GAIL stake in ONGC petrochem project to come down to 11.6%

Due to major cost overrun, stake in the project will come down

State-run gas utility GAIL India Ltd will cut its equity stake in ONGC's mega petrochem project at Dahej to 11.6% as project faces major cost overrun.

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 since then the project cost has been revised thrice upwards - first to Rs 15,870 crore in end 2008, then to Rs 19,535 crore in June 2010 and now to Rs 21,396 crore.

"We had in 2008-09 decided to invest up to Rs 1,000 crore in taking an equity stake in OPaL. At that time this money got us 19% stake. Since then project cost has gone up and so has promoters contribution. Our board has decided to keep out investment capped at already sanctioned Rs 1,000 crore and so our stake in the project will come down," a GAIL official said.

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, he said.

The project was originally to commission in 2012 and was subsequently revised to January 2014 but it is still sometime from starting operations.

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

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.