The Hindu Business Line : L.N. Mittal to pick up stake in HPCL's Bhatinda project

NEW TIE-UP: (From right) The Minister for Petroleum and Natural Gas, Mr Murli Deora, the Minister of State, Mr Dinsha Patel, and the HPCL Chairman and MD, Mr M.B. Lal, at a press conference in the Capital on Tuesday. — Ramesh Sharma

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New Delhi Feb. 20 International steel giant Mr L.N. Mittal has finally decided to partner the public sector Hindustan Petroleum Corporation Ltd (HPCL) for the Guru Gobind Singh Refineries Ltd (GSSRL) at Bhatinda, Punjab. Mr Mittal's group has decided to pick an equal stake in the project for which it will invest Rs 3,300 crore for a 49 per cent stake in the Rs 16,700-crore refinery. Exxon, Saudi Aramco, TOTAL SA, and BP were some of the other players who had envisaged interest in the project sometime or the other, but a deal remained inconclusive.

Break-up

Speaking to newspersons here on Tuesday, the Union Petroleum Minister, Mr Murli Deora, while patting HPCL for getting the first foreign direct investment in a public sector refinery, said "HPCL is entering into a joint venture with Mittal Investments for the nine million tonnes per annum project and allied facilities. HPCL and Mittal Investments will hold 49 per cent equity each in the project."

The remaining two per cent stake will be allocated to the financial institutions. The current estimated cost of the project is Rs 16,700 crore.

The project would be financed with the debt equity ratio of 1.5:1 making the equity portion work out to Rs 6,600 crore.

The project cost also includes the proposed crude oil pipeline from Mundra port in Gujarat to Bhatinda and a crude oil terminal.

A formal agreement is likely to be signed early next month, coinciding with Mr L.N. Mittal's visit to India on March 2. Mr Deora said the HPCL board on Monday cleared the proposal of Mittal Investments joining the refinery project, which is likely to be commissioned by 2010-end.

Mittal Investments is wholly owned by the Mittal family and is registered in Luxembourg. It holds 38 per cent in Mittal Steel Company, the Netherlands-based flagship company of the L.N. Mittal Group.

About approvals from the Foreign Investment Promotion Board and the Cabinet Committee on Economic Affairs, the Petroleum Secretary, Mr M.S. Srinivasan, said both the approvals are pre-requisites to the formation of the joint venture, as both the companies would invest over Rs 1,000 crore.

Investments

HPCL has already invested about Rs 500 crore in the Bhatinda project.

Besides, the present FDI limit in public sector refineries is 26 per cent, which the Petroleum Ministry has been requesting to raise to 49 per cent.

"We are confident that this being the first such case, it will get a favourable consideration from the FIPB," Mr Srinivasan said.

On Tuesday, HPCL's stocks closed at Rs 287.80 after opening at Rs 285.10 and touching the days high of Rs 293 at the BSE.

As regards the interest envisaged by Oil India Ltd to join the project, he said, the State-owned explorer may join the project at a later date. On whether the HPCL was still looking for tapping the capital market for GSSRL, Mr M.B. Lal, Chairman and Managing Director, HPCL, said, at this juncture there were no such plans.

Asked what kind of synergy HPCL was looking for by roping in the Mittals into the project, Mr Lal said, Mittals will help in acquiring refineries abroad as well as tapping the natural gas business, besides other exploration and production activities.

HPCL has also discussed its Visakhapatnam Petrochemical complex with Mittal for a proposed partnership. The two have also submitted an express of interest for acquiring a stake in a refinery in Nigeria and a separate agreement would be in the offing for it.

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