MRPL gets nod for Spic Petro revival

Chennai, Oct 30 | Updated: Oct 31 2005, 05:47am hrs
The oil ministry has reportedly cleared an ONGC proposal to pick up a majority stake in the jinxed Spic Petrochemicals Ltd (SPL), promoted by the Southern Petrochemicals Industries Corporation Ltd (SPIC).

ONGC has evinced keen interest in reviving the project, which has been hanging fire for almost a decade, due to the dispute between Spic and the Chennai Petroleum Corporation Ltd (CPCL). Though both the warring sides had resolved the dispute through an out-of-court settlement, Spic, a sick company itself, was unable to revive the project of its own and has been looking for a new joint venture partner.

Informed sources told FE that the oil ministry had given its green signal to ONGC to pick up a majority stake in the Spic Petrochemicals. ONGC would make the equity investment through its wholly-owned subsidiary MRPL. "After ONGC conveyed its initial feedback about the feasibility of reviving the project, the oil ministry had given its clearance to ONGC to pick up a majority stake in the Spic Petro. ONGC would make the investment through MRPL. However, the final details would only be known after they complete the due diligence and valuations," sources said.

Both ONGC chairman Subir Raha and Spic patriarch AC Muthiah had earlier gone public saying that both sides were in discussions to revive the ailing project. According the initial plans, it may require an additional Rs 200 crore to commence the revival work on the project and to make it fully operational, the total investments would go up to Rs 2,000 crore from the original estimate of Rs 1,400 crore to Rs 1,500 crore.

Another Chance
ONGC has evinced interest in reviving the project
Revival was stalled due to a dispute between Spic and the CPCL
Spic, a sick company, was unable to revive on its own
Chips went down for Spic Petro when CPCL sued Spic and obtained a stay against the execution of the project alleging violations of a JV agreement by Spic in 1997. Spic had invested close to Rs 250 crore in the venture, while an IDBI-led consortium had provided a credit line of close to Rs 1,100 crore in the venture.

The project was being developed to manufacture purified terephthalic acid (PTA) and polyester filament yarn (PFY). When the project was stalled, the PFY plant was more than 70% complete and the PTA plant had progressed close to 15%.