The Hindu Business Line : Financial closure of Dhamra port project by May

THE much-delayed Dhamra port project in Orissa, now being developed by L&T and Tata Steel as a 50:50 joint venture project at an estimated cost of Rs 1,700 crore, is set to reach financial closure by May, a company official said.

L&T is restructuring International Sea Ports (India) Pvt Ltd, a wholly-owned subsidiary of the Singapore-based ISPL, which was the original promoter of the port development project.

ISPL was a one-third each joint venture among L&T, Precious Shipping Company Ltd of Thailand, and Stevedoring Services Associates (SSA) Inc of the US.

Both Precious Shipping and SSA had walked out of the project in 2002 citing undue delays in finalising the concession agreement.

"L&T is in the final stages of restructuring ISPL which involves buying out the interest of the other two shareholders in the venture and converting ISPL into an exclusive 100 per cent L&T outfit. This will happen anytime now. Then, L&T and Tata Steel would bring in 50 per cent equity apiece to commence the port development project and we are expecting to reach financial closure by May," the official said.

The project will be funded on a debt-equity ratio of 60:40 for which the promoters are expected to raise over Rs 1,000 crore from institutional investors. The rest of the funds will come in the form of promoters' equity and preference shares besides mezzanine debt.

The project will be developed on the build, own, operate, share, transfer (BOOST) format for a concession period spanning 34 years including a construction period of four years from zero date.

The concession period can be extended by another 20 years subject to terms and conditions that are mutually agreed upon between the private promoters and the Orissa Government.

The State Government has adopted the variable revenue share model for developing the project.

Accordingly, the L&T-Tata Steel combine will have to share five per cent of the annual operating gross revenues with the Orissa Government for the first five years after commencing operations at the port. The revenue share percentage will increase to eight per cent from the sixth year onwards till the 10th year, after which it will rise to 10 per cent till the 15th year.

The revenue share will be 12 per cent from the 16th year onwards till the remainder of the concession period of 34 years, the official said.

Being a minor port under the overall jurisdiction of the State Government, Dhamra will enjoy the advantage of market-driven tariffs as it would be outside the ambit of the Tariff Authority for Major Ports (TAMP), the tariff regulator for major ports that are owned and controlled by the Union Government.

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