Gujarat may offer an additional 50% stake in GSPC LNG to Adani
The LNG terminal project was originally conceived way back in 2008 by the Gujarat government
Gujarat may offer an additional 50% stake in Gujarat State Petroleum Corp. (GSPC) LNG Ltd to Adani Group, which already holds a 25% stake in the company, after Indian Oil Corp. Ltd decided to opt out of the race, said three state government officials close to the development, requesting anonymity.
The Gujarat government, which owns 50% in GSPC LNG, had been looking to induct a third partner for the remaining 25% stake. It may now allow the Adani Group to pick up the 25%, and offload up to 25% of its own stake in the company.
“We are looking at various options for commissioning the LNG terminal, which includes giving additional stake to the Adani Group," said one of the officials mentioned above.
The Gujarat government had set up GSPC LNG as a special purpose vehicle for implementing the project with a proposed capacity to re-gasify 5 million tonnes per annum (mtpa). The cost of the project was estimated at ₹4,500-5,000 crore.
The terminal’s capacity can be expanded to 10 mtpa and is designed to have a berth for receiving LNG (liquified natural gas) tankers and storage tank facilities for re-gasification and gas evacuation.
The terminal was inaugurated in September by Prime Minister Narendra Modi. Four months on, however, it is yet to be commissioned as the land lease and sub-concession agreements are yet to be signed between the promoters and the Gujarat government.
A commissioning cargo from the US had arrived at the Mundra LNG terminal in November last year but it had to be diverted to Hazira port as it was not allowed to discharge at Mundra, said an industry expert in the know of the development.
“Certain agreements are yet to be signed and we are hopeful of resolving all pending issues. We will soon decide a date for commissioning the project," said the second official.
Last year, the Gujarat government had set up a three-member expert committee headed by retired bureaucrat and former chairman of Petroleum and Natural Gas Regulatory Board, L. Mansingh, to assess the investment claims by Adani Group in the project.
An email query sent to Adani Group on 15 January remained unanswered.
“Adani Group has said that it has invested about ₹1,200 crore for dredging and other port-led development activities. The committee is examining their claims and is soon expected to file its report," the third official said.
Initially, GSPC had a majority stake in the project, but the organization has been under financial stress. Subsequently, the state’s energy and petrochemicals department funded the project and directly holds a 50% stake in GSPC LNG.
“The matter of transfer of equity to GSPC is under consideration and will be decided shortly," a GSPC group official said. He, too, requested anonymity.
The LNG terminal project was originally conceived way back in 2008 by the Gujarat government. Back then, it was planned to come up at Hazira and GSPC was to hold a 50% stake in the project with management control, while Adani and Essar Power Ltd were to hold 25% each. Essar later backed out of the project and the site of the terminal was shifted to Mundra.
The project has been facing delays due to uncertainty over equity sharing and project execution.
In 2013, Gujarat had also invited expression of interests for the project and various companies, including India Gas Solutions, a joint venture between Reliance Industries and UK’s BP Plc, besides Torrent Power and GAIL India and Petronet LNG, had participated.
The plan did not materialize, and, later on, Indian Oil planned to pick up a 50% equity stake in the project for which it got an in-principle approval from its board in August 2017.
IOCL, which has carried out due diligence of the project, informed Gujarat government recently that it might not go ahead with its investment plans.
IOCL had offered about ₹750 crore for the 50% stake in the project. This same offer is being put before the Adani group, said the two government officials cited above. According to the state government’s LNG Terminal Policy, it will, through its nominated agency, have the right of equity participation from 11% to 26%. It also has the right to reserve 15% of total re-gasification capacity and a maximum up to 2.5 mtpa on the first right of refusal basis.