Petronet may float subsidiary for Kochi LNG project

Petronet LNG Limited may form a subsidiary company for its proposed LNG (liquefied natural gas) terminal project in Kochi. The company which is coming out with an initial public offer (IPO) in March also said that its entire terminal project in Dahej in Gujarat on the west coast had been insured at a cost of Rs 5,000 crore.

Addressing a press conference here, Suresh Mathur, managing director and CEO of Petronet LNG, said that the proposed 2.5 million tonne a year terminal project in Kochi could take off only by 2006-07.

"The Kochi project is linked to NTPC's Kayamkulam power project in Kerala. Indications are that this will happen only by 2006-07. Moreover, for us to set up a terminal project in Kochi, our customers "� GAIL, IOC and BPCL "� need to tie up sales contracts for at least 60-70 per cent of the total capacity," Mathur said.

Mathur indicated that the current debt to equity ratio of 70:30 of Petronet LNG would not change even if the Rs 1,600-crore Kochi project took off as by that time the company hoped to generate enough cash flows.

"The equity portion of the project would be met through internal accruals by that time the project takes off. By 2005-06 we expect to have a topline of close to $ 1 billion," he said.

The company has already tied up with GAIL, IOC, and BPCL for the entire output from its Dahej terminal which is close to five million tonne a year.

Discounting any geographical risk because of the Dahej terminal being located on the west coast and being close to Pakistan, P Dasgupta, the director for finance, Petronet, said that in the case of hostilities breaking out between India and Pakistan any damage or loss to the company would be met by the central government.

"We have also insured ourselves against all possible exigencies including terrorist attacks for an amount of Rs 5,000 crore. Close to 95 per cent has been reinsured in the American market. The premium works out to around 0.52 per cent of the total cover and United India, New India Assurance, ICICI Lombard, and Iffco Tokio have participated in the insurance cover."