Oilfield Allocation To Be Reviewed

International Seaports Ltd (ISPL) has decided to bring down their equity to 26 per cent in the Dhamra Port Project in Orissa as part of their agreement with the Orissa government.

However, during the construction period, ISPL would hold a minimum of 51 per cent of the equity, TV Anantharaman, chief executive of the company said. ISPL is a tripartite joint venture between engineering major Larsen & Toubro, Stevedoring Services of America Inc and Pearl Shipping of Thailand.

The concession agreement signed between ISPL and the Orissa government provides for such divestment. However, the divestment is unlikely to be done at one go. Instead, it is expected to be staggered over a period, so as to allow the promoters to realise the maximum equity internal rate of return, in line with the cash flows from the project.

Ideally, valuation of the port tends to rise if there is an increase in the net cash flows to the project.

The entire project is being done on a build own operate share and transfer basis. This format allows for sharing the project profits with the Orissa government. But the government is not an equity holder in Dhamra Ports and accordingly, there has been a possibility that the state government could exercise its share in the ports profits in the form of equity so as to realise more revenues in the form of capital gains as well, FI officials said.

The estimated cost of the project is about Rs 1200 crore and Rs 200 crore in the form of interest during construction (IDC). The entire equity is to brought in by the project promoters initially.

The project is being funded on a 70:30 debt equity ratio. ICICI and SBI Caps are among the agencies appointed for syndicating the project finance for the port. Among the banks which have offered funds for the project include the State Bank of India. Debt requirement of the project is expected to be in the region of about Rs 800 crore.

Creditors recourse to the project is exclusively restricted to the revenue streams and physical assets including the jetty. The costs of the port also include provision of 62 km of rail and road linkages. The port is to be constructed with a draft of about 18 metres and will be in a position to berth two Panamax class vessels (80,000 dead weight tonnes) or a single Capesize vessel (165 000 DWT) and one Handymax (15000 25000 dwt) vessel. The berths will have a total length of 1000 metres.

The port, when completed in April 2001, will be in a position to handle about 2 million tonnes per annum in the initial phase according to the MoU. According to this MoU schedule, cargo would increase by 25 mt when all the equipment is in place which include state of art bulk and container handling facilities.