ONGC Petro additions Ltd (OPaL), the company ONGC started for downward integration and expansion in the petrochemical field using its naphtha stream from Hazira and Uran and C2 + components from imported LNG , has seen a steady improvement in operating profit or EBITDA since 2016-17, but the unbalanced capital structure with high debt service cost and high amortization during the initial funding period resulted in losses sharp.
“During the first half of the current fiscal year (April to September), the OPaL achieved an after-tax profit of ??18 crore, ”said CGSB President and CEO Subhash Kumar.
Kumar, who pivoted the story of the turnaround with his background in finance, said OPaL was exiting the SEZ, which would improve profitability by ??800 crore per year and around ??600 crore in additional profits will be added if the government approves a proposal for the company to become a unit of CGSB or merge with it.
Oil and Natural Gas Corporation (ONGC) from 2002 to 2006 conceptualized several joint ventures to diversify into activities other than exploration and production (E&P) with an objective of adding value, downstream integration and monetization. of its own stranded gas assets.
These projects – OPaL, ONGC Mangalore Petrochemicals Ltd (OMPL) and ONGC Tripura Power Company (OTPC) have been successfully implemented and are now operating at full capacity.
CGSB, as the promoter, played a leading role in the selection of LSTK / PMC contractors, the execution of various raw material and removal agreements, the resolution of various complex techno-commercial, regulatory and tax issues. that crept in during the execution and commissioning of these projects.
In addition to solving operational, financial and regulatory issues, it has enabled joint ventures to be led by the best professional experts in the industry.
Kumar said that according to the CGSB 2040 strategy, in the future, 70% of the revenues should come from the refinery and petrochemical activities and 10% of the profits will come from the non-oil and gas sector, and therefore the role of these joint ventures. non E&P will continue to play a crucial role in the Group.
ONGC has a 49.36 percent stake in OPaL’s 1.1 million tonnes per year capacity, GAIL 49.21 percent and GSPC the remaining 1.43 percent.
“ONGC has played a crucial role in the history of OPaL’s recovery from assistance during the construction phase, its stabilization and its continued supply of raw material from its factory, which is crucial for profitability. of any petrochemical company.
In addition to an equity contribution of ??998 crore, ONGC also subscribed to warrants issued by OPaL in the amount of ??3,451 crores, ”he said.
The company also supported on its own ??7,778 CCD crores and provided Comfort Letters amounting to ??9,500 crore for loans, he said.
OTPC, in which ONGC holds 50% of the capital, has set up a 726.6 MW gas power station in Tripura. The factory started operating in March 2014. Kumar said OTCP is a classic case of an efficiently managed entity.
During the project phase, in order to avoid delays, all of the oversized cargo (ODC) was shipped via Bangladesh.
Plant has been generating profits since its inception and is one of the few gas companies to pay dividends. The OTCP covers approximately 30% of the electricity needs of the entire Northeast region at a competitive rate.
It is the primary customer for ONGC’s gas offtake in Tripura, taking around 60% of the total gas production and thus utilizing stranded gas in the region, freeing up the value of ??700 crores per year.
Thanks to these investments, the state of Tripura became a surplus of electricity compared to a state with lack of electricity, which made it possible to export electricity to Bangladesh.
To date with an equity investment of ??560 crore, CGSB received approximately ??310 crore as dividend and ??106 crore bonus on the sale of residual equity to GIP in 2015. Petronet MHB Ltd is another classic turnaround story where ONGC as a promoter played a crucial role in transforming a loss-making entity into a profit-making entity. dividends.
Through continuous guidance at board level and effective management, the company is consistently making profits, even during the pandemic period. ONGC earned a total dividend of ??208 crore on the total investment of ??274 crores.
In the case of OMPL, the stand-alone petchem unit was subject to small deviations due to the cyclical nature due to the supply / demand dynamics in the region.
To remedy this, ONGC initiated a merger of the company with its refinery subsidiary Mangalore Refinery and Petrochemicals Ltd (MRPL).
“The presence of ONGC throughout the value chain and beyond the E&P activity is also an effective means of mitigating the risks. The ONGC group is able to better protect itself from the volatile crude markets, because the combined entity will be exposed through the commodity cycles, ”he said.
The company had acquired the government’s 51.11% stake in HPCL to expand its presence in the middle and downstream sectors. “Going forward, ONGC’s major stake in HPCL and MRPL will become the determining factor in maximizing shareholder value,” he added.
This story was posted from an agency feed with no text editing. Only the title has been changed.
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