OVL to raise $2.5 billion foreign loans to buy Mozambique stake
The first facility for a 5-year term amounting to $1.775 bn was signed with consortium of reputed international banks
New Delhi: ONGC Videsh Ltd (OVL) will raise $2.5 billion from two consortium of international banks to finance its acquisition of 10% stake in Rovuma area 1 offshore basin in Mozambique.
“The first facility for a five-year term amounting to $1.775 billion was signed with consortium of reputed international banks, including Australia and New Zealand Banking Group Ltd (ANZ), Bank of Nova Scotia, BTMU (Bank of Tokyo-Mitsubishi UFJ Ltd), DBS Bank Ltd, Mizuho Bank Ltd, RBS (Royal Bank of Scotland Plc), Société Générale S.A., SBI (State Bank of India) and SMBC (Sumitomo Mitsui Banking Corp.)," Oil and Natural Gas Corp. Ltd (ONGC), the parent of ONGC Videsh, said in a statement on Wednesday.
OVL, Oil India Ltd (OIL) and Bharat Petroleum Corp. Ltd (BPCL) together hold 30% in the largest gas find off Africa’s east coast that is valued at $60 billion, with estimated recoverable reserves of 35-65 trillion cubic feet.
ONGC had initially planned to raise $1 billion but later increased the amount after receiving overwhelming response from the banks, the company said.
“SMBC took the leadership role in this facility with commitment of $700 million and acting as facility and escrow agent. This is the single largest offshore five-year loan facility arranged by an Indian company during the last three years," the ONGC statement said.
This comes in the backdrop of ONGC’s plans to dip into its reserves to help it meet its capital expenditure requirements for 2013-14 and 2014-15, indicating the challenges facing the state-owned oil explorer whose fields are ageing, yields diminishing, and which ends up funding some part of the subsidy the government extends to oil marketing companies.
“The second facility is in the nature of a bridge finance of $725 million for a one year term with consortium of reputed international banks including ANZ, BNP Paribas, BTMU, Citi, DBS, RBS and SBI. In this Facility Citi took the leadership with Facility and Escrow agency roles," the ONGC statement said.
US-based Anadarko Petroleum Corp. is the project operator for Rovuma. Other partners include Empresa Nacional de Hidrocarbonetos EP of Mozambique, Mitsui and Co. Ltd of Japan and PTT Exploration and Production Public Co. Ltd of Thailand. The production from Rovuma basin is expected to start in 2018.
ONGC had cash reserves of ₹ 13,200 crore as on 31 March. The firm has a capital expenditure plan of ₹ 35,000 crore and ₹ 36,000 crore for the current and next fiscal years, respectively. ONGC requires internal accruals to finance its capex and the impending gas price increase will boost its revenues. Domestic gas prices are set to increase from 1 April. “Under the government’s new gas pricing mechanism, gas prices are likely to almost double from the current $4.2 per million British thermal units. The mechanism is applicable for five years beginning 1 April 2014," Standard & Poor’s Ratings Services said in a 14 January report.
OVL has raised $4.8 billion from overseas in the current fiscal. OVL with 33 projects in 17 countries is currently producing about 160 thousand barrels of oil and oil equivalent gas per day and has total oil and gas reserves of about 433 million metric tonnes as on 31 March 2013.
According to ONGC’s Perspective Plan 2030, the company is targeting production of more than 130 million tonnes of oil equivalent (mtoe) in 2030, of which half will come from assets owned by OVL. The company is to announce its third-quarter earnings on Thursday. ONGC’s net profit rose 2.8% in the quarter ended 30 September on account of the rupee’s depreciation. Net profit increased to ₹ 6,064 crore on a 12.7% increase in revenue to ₹ 22,384 crore.
ONGC’s share of subsidies to state-owned fuel retailers such as Indian Oil Corp. Ltd, Hindustan Petroleum Corp. Ltd and BPCL—which lose money on account of selling diesel, domestic cooking gas and kerosene below cost—was ₹ 13,764 crore in the third quarter (October-December) of 2013-14.
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