Explorer to mobilise funds for Russian acquisition
ONGC Videsh (OVL), the overseas arm of state-run explorer ONGC, will raise $1 billion in April from the overseas market and use the amount for part-payment towards 15% stake picked up by the Indian explorer in Russia’s Vankorneft for $1.25 billion in September 2015.
“The acquisition has to be completed by May. So, we would raise this money by next month. This could be a combination of both overseas bond and bank loans,” a senior official at OVL directly dealing with the issue told FE.
The official said OVL is going for dollar denominated borrowings because it has to make the payments in the foreign currency.
In November 2015, OVL re-financed a loan of $1,775 million at an attractive rate of Libor plus 120 basis points.
Currently, OVL has foreign currency debts to the tune of $4.8 billion.
On Wednesday, OVL signed a new memorandum of understanding (MoU) to acquire another 11% in the same asset — Vankor oil and gas fields in East Siberia. If this sails through, OVL would have to fork out nearly $900 million for the additional stake.
FE had reported on December 25, 2015, that in the past, OVL’s decision of going for a euro bond had paid off. The company had raised $2.2 billion in 2014 via dollar-and euro-denominated bonds for its Mozambique acquisition.
Of the total amount, 525 million euro was raised through euro-denominated bonds. It was reported this year that the exchange rate changes had led to a gain of `700 crore in terms of interest outgo.
Rosneft assets are already producing oil, with bulk of capex spent and should generate free-cash hereon.
Credit Suisse said in a March 14 report that the recent acquisitions adds 19% to ONGC’s oil production (and doubles overseas oil output). The assets are of good quality and transaction appears likely at fair value.
Rosneft owns a 100% stake in the Vankor fields, and had signed definitive agreements with ONGC in September 2015 for the sale of a 15% stake, for $1.25 billion. OVL could purchase an additional 11% in the asset.