Stakeholders divided over Dabhol LNG

The Dabhol power project continues to be jinxed. This time it involves the liquefied natural gas terminal at the project site in Ratnagiri, which will be used for storing 5 million tonne of gas for the power project.

Hiving off the LNG terminal has now become a bone of contention between the parties involved in the operation of the project. Sources said Petronet LNG, GAIL (India) and NTPC are at loggerheads with the IDBI-led FIs on whether the debt portion of the LNG terminal should be transferred to the power project while hiving off the terminal as a separate entity.

Petronet, which is being reined in to operate the LNG terminal at Dabhol, is interested in taking over the terminal minus the debt ? a move opposed by FIs.

??No one will like to inherit a huge debt on an asset yet fully operational. We certainly cannot play Robin Hood,?? said a Petronet official. It is learnt that for the partially complete LNG terminal, the Ratnagiri Gas and Power (RGPPL) ? which was formed to run the beleaguered 2,150 mw Dabhol power project ? has placed orders worth Rs 650 crore.

This is in addition to the over Rs 600 crore that may be required to complete the breakwater in the sea and another Rs 70 crore to finish the LNG jetty. With all these back up facilities, the LNG terminal would be ready only by March 2009.

The total debt of the Dabhol project is Rs 9,100 crore, of which around 30%, or Rs 2,730 crore, is for the LNG terminal. The debt-equity ratio of the project is at a skewed 6:1, against the usual 3:1 for power projects. If the debt of the LNG terminal were to be hived off to the power project, it may add to the burden, feel FIs.

??We cannot write off the debt on LNG terminal, or transfer it to power project. The terminal cannot be hived off minus debt,?? said an FI official. With FIs not in a mood to a take a haircut on debt, Petronet may have hard time fixing a right price for the asset. It has asked RGPPL to give details of due diligence report made by consultants when the terminal was transferred from the foreign lenders.

Source: The Times of India, Mumbai, October 11, 2006
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