Petronet LNG plans gas-based power plants

Shirish Nadkarni
OGJ Correspondent

MUMBAI, Oct. 25 -- Indian state-run natural gas importer Petronet LNG Ltd. plans to diversify into the power sector and to establish an 1,100-Mw, gas-based power plant, near its Dahej LNG regasification terminal.

Given the synergies with the LNG terminal, the power project is expected to cost about 30 billion rupees ($760 million).

The diversification move by the country's largest LNG importer is a risk-mitigating exercise to protect the LNG capacity it plans at its two regasification terminals at Dahej and Kochi, said Petronet's Chairman and Managing Director P. Dasgupta.

The company is expanding the capacity of the Dahej LNG terminal to 12.5 million tonnes/year from 7.5 million, and it is creating an LNG regasification capacity of 5 million tonnes/year at the Kochi LNG terminal.

"There is a limit beyond which we cannot hold LNG in tanks," said Dasgupta. "Therefore, a logical way to utilize our capacity would be to venture into power production and maintain our existing profit lines. The existing synergies with our LNG plant will to a great extent help in reducing the cost of putting up a power plant, for which we have already applied for 60 hectares of land near Dahej."

If this model succeeds at Dahej, the company would look at implementing a similar power project at its Kochi terminal.

The Petronet chief said financing of the power project would be a mix of debt and equity. "A firm proposal on the investment plan for this project will be put up before the board in April 2008," said Dasgupta. "There are various options to fund the equity portion, and Petronet might even consider a 25% rights issue," he said. Other options, including a foreign currency convertible bond (FCCB), a public issue, or a preferential issue, would amount to diluting the promoters' stake, he added.

"If the promoters are comfortable with these options, we will look at them, or else we will go in for a rights issue," said Dasgupta.

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