`LNG Laxmi' to bring prosperity to SCI

P.Manoj

NEW DELHI, Nov. 13

A DIWALI gift is on the way to State-owned Shipping Corporation of India (SCI) when a consortium takes possession of a 137,000 cubic metre capacity LNG tanker from Japan's Mitsubushi yard on Thursday (November 15) after weathering a last minute financial storm.

Aptly named `LNG Laxmi', after the Goddess of Wealth and Prosperity, SCI's 20 per cent equity stake in the project worth $ 1 million will bring in returns in the form of time charter hire rates in proportion to its equity holding.

Though, the 20 per cent stake will ensure a board presence for SCI on the joint venture Greenfield Shipping Company, it falls short of ensuring veto powers for the State-owned shipping line.

This is the maiden foray by an Indian shipping company into the highly specialised and capital- intensive LNG shipping trade, marked by steady revenue streams over long periods, ranging from 10 to 25 years.

Says Mr P K Srivastava, Chairman and Managing Director, SCI: ``This was a pioneering effort by an Indian shipping company into LNG shipping. So we were very keen that we should not fumble. We are optimistic that the experience gained from Greenfield would lead us to more such ventures in future.''

Rightly so. While LNG Laxmi was being built, SCI also secured its second LNG shipping deal, when it teamed up with Mistui, NYK Line and K Line to clinch the contract from Petronet LNG Limited (PLL) for owning and operating two tankers of 138,000 cubic metre capacity each for transporting gas from Qatar to Dahej in Gujarat.

Though SCI had only 20 per cent stake in Greenfield, it managed to secure a higher holding of 34.21 per cent in the PLL deal worth Rs 130 crore. Originally, LNG Laxmi was ordered for transporting 2.5 million metric tonnes per annum of LNG from Oman to the controversial Dabhol Power Project in Maharashtra.

Greenfield was formed for owning and operating the tanker costing $220 million. The consortium members comprise Japan's Mitsui O.S.K. Lines holding 60 per cent stake, SCI and Enron-affiliate Atlantic Commercial Inc with 20 per cent stake apiece.

Greenfield had entered into a time charter agreement with DPC for transporting gas from Oman to its power plant in Maharashtra for a period of 20 years at a time charter hire rate of $98,600 per day.

With DPC in trouble, the time charter party signed between DPC and Greenfield will be scrapped. `LNG Laxmi' went through major birth pangs before the promoters were able to take possession of the vessel. In the process, Greenfield underwent a major change in the complexion of its promoters leading to a re-alignment in the equity holding pattern.When Enron announced its intention to exit from DPC by selling its equity in view of the problems facing the power plant, the bankers to the LNG shipping deal led by ANZ Investment Bank, decided not to disburse the last tranche of the project loan of $ 55 million, declaring an event of default.

This was after the 16-member lending consortium had provided $ 110 million as debt to fund the project out of a total loan commitment of $ 165 million. The three promoters were now required to invest an additional $ 55 million to bridge the gap in the project cost to take possession of the vessel or face the risk of the tanker being confiscated by the lenders to recover their investments.

Then came the knight in shining armour in the form of the Oman Government who was generous enough to bail out LNG Laxmi from the tentacles of the lenders. The Oman Government offered to time charter LNG laxmi for 20 years at a charter hire rate of over $70,000 per day besides picking up 50 per cent equity in Greenfield, buying out the 20 per cent stake of Atlantic as well as acquiring 30 per cent from Mitsui.

The financial crisis facing LNG Laxmi was thus sorted out. Oman Government would bring in $27.5 million as its contribution for holding a 50 per cent stake in Greenfield, Mitsui will invest an additional $ 16.5 million for its 30 per cent stake while SCI's extra contribution would be $11 million for its 20 per cent stake.

As per current plans, the Oman Government will sub-charter `LNG Laxmi' to Oman LNG in which it holds a 51 per cent stake to ferry some of its LNG cargo to Korea and Britain, among other destinations.