• PAGE ONE
• INDEX
• HOME

SCI to hold 50 pc stake in venture with Mitsui

P. Manoj

NEW DELHI, Oct. 29

THE Shipping Corporation of India (SCI) will hold 50 per cent equity worth around $92.5 million in the proposed joint venture shipowning and operating company which is bidding for the LNG shipping deal of Petronet LNG Ltd (PLL).

The remaining 50 per cent in the joint venture company will be held by the foreign consortium partners: Mitsui O.S.K.Lines -- K Line and NYK Line of Japan. A memorandum of understanding (MoU) to this effect was signed by both the parties recently, Govern ment sources said.

SCI has managed to get a 50 per cent stake this time in a joint venture with the Japanese shipping line compared to the LNG shipping deal for Enron Power Plant where it had to content with a 20 per cent stake. Mitsui O.S.K.Lines has a 60 per cent stake i n the Enron shipping contract, while the remaining 20 per cent is held by Atlantic Commercial Finance Inc., an Enron affiliate.

However, having secured a 50 per cent stake in the joint venture company which is bidding for the PLL deal, SCI finds itself on the wrong side of the tender conditions and has sought a change in the bidding clause.

The final bid documents issued by PLL has stipulated that the consortium leaders on the foreign and the Indian sides should hold not less than 26 per cent equity throughout the 25 year charter hire period. It has also stated that the share of the other c onsortium partners should always be less than the consortium leaders.

But, with RasGas, the gas supplier deciding to pick up a 15 per cent stake in the joint venture shipowning and operating company, SCI perceives the possibility of its holding going below the 50 per cent limit prescribed in the MoU.

Under normal circumstances, the 15 per cent share of RasGas would have to be carved out equally from the equity share holding of the foreign and domestic partners. This means 7.5 per cent each from both the sides and, accordingly, SCI's equity will be re duced to 42.5 per cent. But the cumulative holding of foreign partners, including RasGas will go up to 57.5 per cent.

This again leads to another problem as the bid documents issued by PLL had clearly mentioned that the cumulative foreign equity holding in the shipowning and operating company should not exceed 50 per cent at any time during the charter hire period.

In order to protect the company from any dilution of equity as set out in the MoU, SCI has suggested a change in the bid documents to state that no other consortium partners other than an Indian shipping company should hold more equity than the consortiu m leaders.