BPCL to borrow Rs 70,000 cr by 2024 to part-fund expansion

MUMBAI | Updated on August 31, 2019

The investment will be BPCL’s largest in an upstream project overseas B_JOTHI RAMALINGAM

State-run oil refiner Bharat Petroleum Corporation Ltd (BPCL) will borrow as much as Rs 70,000 crore by 2024 to part-fund a Rs 1,10,000-crore expansion to bolster its refining and marketing infrastructure, raise petrochemical capacity, invest in upstream and gas ventures, the company’s finance director N Vijayagopal, has said.

Three-fourths of the borrowing will be in dollars and the balance is rupees, in line with BPCL’s policy of raising as much as 75 per cent of its requirements – short and long-term - in foreign currency, due to the attractive rates and the natural hedge it offers as the firm sells products that are essentially linked to dollar prices.

The capex will also be used to part-fund equity infusion of as much as Rs 10,000 crore over the next five years in Bharat Petro Resources Ltd (BRPL) to help the wholly-owned upstream unit, invest some $2.5 billion in the LNG project in Mozambique, where it has a 10 per cent participating interest.

“We have to invest Rs 10,000 crore in the equity of BPRL over the next five years, about Rs 2,000 crore will go each year to BPRL, depending on the progress of the Mozambique LNG project,” Vijayagopal said on the sidelines of a media conference on Friday.

The company will fund this year’s capex of Rs 7,800 crore mostly from internal resources.

Debt is not a problem for BPCL, the finance director said. “We are a very low geared company. Our debt is 0.7:1 today at a stand-alone level and 1:1 at a consolidated level. After the Rs 1.1 lakh crore expansion, at the consolidated level, the debt-equity ratio will be 1.5:1, which is very comfortable. Currently, the total debt on our book will be around Rs 25,000 crore, including working capital. We don’t believe in zero debt, it’s a myth,” Vijayagopal said.

Bharat Gas Resources Ltd (BGRL), another wholly-owned unit of BPCL, has signed a Sales and Purchase Agreement to source 1 million tonnes (mt) of LNG a year for 15 years from the Mozambique LNG project, and the supplies are expected to start from 2024-25.

The LNG sourcing deal was finalised at a “very attractive price”, Vijayagopal said. “We have the Qatar and Gorgon contracts, but Mozambique is cheaper than these two,” he added.

Published on August 31, 2019

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