Power Finance Corp to refinance Petronet loans

Power Finance Corporation (PFC) is likely to refinance Petronet LNG Ltd's (PLL) outstanding high cost borrowings. The two companies are in discussions to determine the interest rate and quantum of debt.

"Talks are on for refinance of part of their debt. We are looking at their domestic and foreign debt, but will offer rupee denominated refinance facility," said a PFC executive, adding that the company would have to make its own arrangements for repayment in dollars.

PLL has project finance of Rs 1,260 crore taken at 9 per cent interest rate. Of this, the company has a loan of Rs 450-500 crore for its Dahej terminal.

"We will take the loan if it is offered at less than 9 per cent rate," said a PLL official. PLL also plans to come out with two bond programmes amounting to about Rs 1,100 crore for funding the expansion of Dahej LNG terminal and prepaying its existing debt.

The company would be signing agreements with the Asian Development Bank (ADB) and the Kreditanstalt fur Wiederaufbau (KFW) of Germany for partial guarantee for the bond programmes.

PLL is finalising a $67-million credit enhancement guarantee from the ADB for a Rs 400-crore bond programme.

The money raised through bonds will be at 1 per cent lower interest rate and will be used to prepay partially, the existing long-term debt of Rs 1,804 crore.

ADB also holds 5 per cent equity in PLL.

The company also plans to go for Rs 700-crore programme, though not immediately. This programme is likely to be guaranteed by KFW.

Money from the bonds will be utilised to fund Rs 1,000-crore expansion programme for the Dahej terminal.

The expansion of Dahej terminal from a capacity of 5 to 10 million tonne per annum (mtpa) will begin next year and is expected to be completed by 2008.

Along side, the company would be setting up another LNG terminal at a cost of Rs 2,000 crore in Kochi in Kerala, said PLL officials.

The Kochi terminal has a capacity of 2.5 million tonne. This terminal was planned along with the Dahej terminal but the company put it on hold in order till such time the demand for gas picked up in the region.

It is being planned in a way to raise its capacity to 5 million tonnes in future and the construction would be completed in two and half years.