The Hindu Business Line : RPL tying up funds for refinery project

Reliance Petroleum Ltd (RPL), which is setting up a Rs 27,000 crore greenfield petroleum refinery and polypropylene plant in a special economic zone in Jamnagar, has entered into a preliminary agreement with banks and financial institutes to provide for a syndicated term loan facility for approximately Rs 6,750 crore. The company proposes to fund the project through a debt of Rs 15,750 crore and equity of Rs 11,250 crore, including proceeds from the public issue.

Any additional equity raised in excess of Rs 11,250 crore will be used as additional contingency for the project, sources said, adding that the company also intends to seek additional financing through export credit agencies for approximately Rs 4,500 crore to Rs 6,750 crore.

Further funding

RPL also anticipates raising further debt fund of approximately Rs 2,250 crore to Rs 3,375 crore in accordance with the funding requirements for the project, sources said.

RPL, a 100 per cent subsidiary of Reliance Industries Ltd (RIL), is a start up company, formed to set up a greenfield refinery and polypropylene plant. The proposed plant will be located adjacent to the existing refinery and petrochemicals complex of RIL.

The company proposes to commission the project by December 2008. Along with the existing 6,60,000 barrels per day of RIL refinery this new refinery will make Jamnagar the single largest location for refinery assets, the sources said.

World's biggest

The new refinery will have a capacity of 5,80,000 barrels a day (29 million tonnes per annum) capacity, making the complex the world's biggest. Elaborating on how the new project will enjoy the benefits of low capital costs, the source said the new refinery would gain from RIL's prior experience in constructing and operating the refinery. "We expect these factors will result in a significant reduction in the capital cost of the project and enable the company to achieve lower costs per barrel," the sources said.

Besides, the strategic location of Jamnagar and fiscal incentives by virtue of being located in an SEZ, the proposed refinery is being designed to refine variety of feedstock. The company is looking at capitalising on demand-supply imbalances in global petroleum products.

Given the limited additions expected to global refining capacity and the forecast increase in demand for petroleum products in key markets, any current excess of refining capacity is expected to decrease further, leading to higher utilisation of existing refineries. Further, increasingly stringent specifications will result in fewer existing refineries being able to meet the increasing demand for such products.

The configuration of the proposed refinery is expected to provide the company with the ability to optimise crude oil input, product slate and quality.

Vastu perfect

It may come as a surprise but the existing refinery and petrochemical complex in Jamnagar of Reliance Industries is Vastu perfect. RIL, the promoters of RPL, before embarking on the project have consulted a Hyderabad-based Vastu expert.

This is not the first time that such an expert has been consulted, RIL officials said. Before setting up the existing refinery also the expert was consulted.

The Vastu expert not only advises the company on the location of the property for the project, but also indicates where what facility of the refinery and petrochemical plant should be set up. In the existing refinery, at the South West part the tallest and the heaviest structure has been created as per the Vastu requirements

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