Lanco, Eredene cannot reduce stake or exit, says Ennore

Lanco, Eredene cannot reduce stake or exit, says Ennore

Bangalore: Ennore Port Ltd has said India-focused infrastructure investor Eredene Capital Plc. can’t reduce its potential financial commitment to a new container-loading facility and nor can Lanco Infratech Ltd withdraw from the project.

“We have not received any application from any of the consortium members seeking our approval to either withdraw or partially exit from the consortium," an Ennore Port spokesman said. “They simply can’t do that without our prior written consent. In any case, it is not permitted in the concession agreement at this stage of the project, so the question of our approval does not arise." Consortium members would be violating the agreement if they have already done that, he said.

A concession agreement sets out the terms of a contract and the projects in motion. The model concession agreement framed by the Union government for public- private partnership projects in the ports sector does not provide for a change in the composition or shareholding structure of the successful consortium until two years after a terminal starts commercial operations. The Ennore project is in the pre-construction stage.

“We are not in a position to comment on your questions at this time," a spokesman for the London-based Eredene said in an email response to a query on whether it had asked Ennore port for permission to change the shareholding pattern and whether this had been approved.

A spokesman for Lanco said he was not in a position to offer comment because the executive looking after the project was travelling and could not be reached.

Eredene Capital, traded on the Alternative Investment Market (AIM) of the London Stock Exchange, is part of an international consortium led by Spain’s biggest port terminal operator Grup Marítim Tcb, which was awarded a contract in August 2010 in a public auction to develop a container terminal at Ennore Port at an investment of Rs1,407 crore.

The consortium members include Obrascon Huarte Lain SA, Lanco Infratech and Eredene Capital. Grup Maritim and Obrascon hold 26% stake each in the Bay of Bengal Gateway Terminal. Lanco and Eredene had 24% stake each.

The consortium has been struggling to tie up funds of up to Rs1,300 crore for the project despite three extensions. The last extension granted to the consortium ended on 30 April. Due to the consortium’s failure to meet that deadline, Ennore Port has encashed the bid security of Rs14 crore.

On 13 July, the board of Ennore Port agreed to give the consortium a final extension till end-September to arrange funds for the project. The port has decided to scrap the contract if the consortium fails to meet the deadline.

“The consortium is continuing in its efforts to secure debt funding. However, there is no guarantee that acceptable terms will be agreed with the State Bank of India. If viable debt funding cannot be obtained then the consortium may forfeit the concession," Struan Robertson, the non-executive chairman of Eredene Capital, said in a statement on 13 July, while announcing the preliminary financial results of the company for the year to March.

“If the Ennore project does go ahead, Eredene has negotiated (with other consortium members) to reduce its contribution to the total investment to approximately £14.2 million (around Rs97 crore), and as a result the company is in a position to return £15.3 million of the £29.5 million after expenses raised principally for the Ennore project through the share placing in May 2011," Robertson said in the statement.

India’s law ministry last week turned down an application from ABG Ports Pvt. Ltd to withdraw from a consortium led by Singapore’s PSA International Pte Ltd that was awarded a contract in September to develop a new container loading facility at Jawaharlal Nehru port, saying this was not permitted by the model document.