Shipping Corporation likely to take on Petronet’s $140-million liabilities

Jyoti Mukul

New Delhi, Aug 31: The Shipping Corporation of India (SCI) board has decided to take on $140-million liabilities for LNG shipping project of Petronet LNG Ltd (PLL).

SCI, which is one of the joint venture partner in the project, holds 34.21 per cent equity each in the two companies proposed to be promoted for executing the $373.61-million shipping contract.
Divisions had cropped within the SCI board over the issue, since normally such ventures are funded on a project-recourse basis, which does not require the promoters to take on the liability on their balance sheets.

With this, the joint liabilities of promoters stand at $520 million. Other promoters include Mitsui OSK Lines (MOL), which holds 34.21 per cent, Nippon Yusen K and K Line, which hold 21.05 per cent and 10.53 per cent, respectively.

The total project cost is $373.61 million with a debt equity ratio of 3:1. Out of this, construction of two LNG vessels of 138,000 cubic metre each will cost $317 million. The consortium is looking for debt at a likely interest rate of LIBOR plus 225-230 basis point.

The consortium has to raise $280.2 million debt and is in talks with a host of international banks and financial institutions on a limited project recourse basis. It has appointed six international banks - Sumitomo Bank, Fuji Bank, ANZ Grindlays, Credit Lyonnais, Bank of Nova Scotia and ABB Structured Finance - to syndicate the debt.

The consortium for PLL contract will be forming two joint venture companies for construction and chartering of two ships. Two separate companies are proposed in order to limit the risks and related liabilities in the event of any mishap on the ships.