The Hindu Business Line : IDFC clears Rs 115-cr project funding for Kakinada Port

INFRASTRUCTURE Development Finance Company (IDFC) has approved a long-term project funding of Rs 115 crore to Kakinada Sea Ports Ltd (KSPL) to facilitate the long-pending financial closure of the first phase of Kakinada port in Andhra Pradesh, more than five years after it started commercial operations in April 1999.

"The Credit Committee on Tuesday approved a debt funding of Rs 115 crore having a tenure of 11 years to KSPL," an IDFC official told Business Line.

This will also help in financial closure of the Special Purpose Vehicles (SPVs) formed by KSPL with strategic investors to set up an LNG terminal and a container handling facility at Kakinada port.

Out of the total debt of Rs 115 crore, IDFC will give around Rs 60 crore as its own share while the balance will be contributed by a couple of other banks on the same terms and conditions as IDFC.

"Initially, IDFC will give the entire amount so that the financial closure can be achieved. Subsequently, we will bring in a couple of other banks to contribute the balance portion of the debt," the official disclosed.

The Phase I development of Kakinada port, involving a cost of Rs 175 crore, envisages back-up area development, railway line connectivity and procurement of equipments. The promoters of KSPL have chipped in with Rs 60 crore towards equity contributions.

KSPL is a special purpose vehicle floated by Larsen & Toubro, Konsortium Logistik Bhd, Malaysia through its investment vehicle Konsortium Ports Pte, Mauritius, Salgaokar Mineral Industries Ltd (SMIL) to develop the deep water port at Kakinada on a Operate, Manage, Share and Transfer basis for a 30-year concession period. All the three project promoters holds equity stakes of 26 per cent each while the balance 22 per cent is held by financial institutions.

As per the Concession Agreement, KSPL will have to pay a Minimum Guaranteed Amount (MGA) or 20 per share of the gross revenues during the first five years and 22 per cent thereafter for the balance licence period, whichever is higher, to the Andhra Pradesh Government.

Currently, the port operates three berths having a total quay length of 610 metres and once the dredging is completed by September/October, it will cater to vessels of all sizes requiring a draft of 12.5 metres, a KSPL official told Business Line.

The port has achieved a cargo throughput (predominantly comprising liquid cargo) of 5 million tonnes from April to August this fiscal as against the 5 million tonnes handled during the whole of last financial year.

The financial closure was delayed as the promoters had to re-negotiate the Concession Agreement with the State Government since it contained lot of clauses that were not very attractive to the lenders.

"The promoters took a long time to re-negotiate these clauses in the Concession Agreement and make it bankable, delaying the financial closure of the project. The Agreement was finally re-negotiated in August 2003," the IDFC official said.

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