The Hindu Business Line : HPCL plans to firm up debt for Punjab refinery by year-end

HPCL is expecting to firm up over Rs 6,000 crore of rupee debt for its proposed nine-million-tonne Guru Gobind Sagar Refinery (GGSR) in Punjab by the end of this quarter.

The foreign debt component, which is linked to order for equipment, will be finalised at the time of financial closure, which is due in this year. The debt-equity ratio is pegged at 1.5:1.

The company has already pegged the project cost (including the Rs 2,500-crore crude pipeline from Mundra in Gujarat to Bhatinda in Punjab) at over Rs 12,000 crore. The cost of the core refinery is maintained at the 1998 level of Rs 9,806 crore.

HPCL sources said that the company was trying to commission the project as quickly as possible.

Negotiations with bankers and merchant bankers to tie up the rupee debt component expected to be in the region of Rs 6,000-7,000 crore are at an advanced stage. The whole process would be over latest by this calendar year.

Under-recoveries: Allaying fears that the underlying financial position of HPCL may affect the commissioning of the project - HPCL, along with other oil marketing companies, was forced bear high subsidy burden towards under-recoveries for almost two years - the sources said that the company had decided to make an "upfront payment" of the entire 52 per cent promoters' stake in the total equity component of GGSR at the time of financial closure. The decision has been taken to avoid delay in commissioning.

Joint venture: HPCL has already expressed its intention in taking up the project in 50:50 joint venture with a foreign partner, which is yet to be identified.

Accordingly, the company would divest half of its stake towards the prospective partner. The rest 48 per cent is slated to be raised through an IPO after the completion of the project.

Using the fluid catalytic cracking (FCC) route, the refinery will produce Euro IV grade fuel and a range of petrochemical products, including polypropylene and polystyrene, which are demand in the North Indian markets.

Being located in the hinterland, the refinery would primarily explore the opportunities in the domestic market.

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