Cash-strapped GSPC saved by Gujarat government

Vol 14, PW 18 (10 Mar 11) People & Policy

GSPC has been forced to turn to its parent and promoter for a critical infusion of funds.

PETROWATCH learns the Gujarat government has hastily come to GSPC’s rescue, announcing that GSPC will be granted Rs500cr ($111.26m) towards the cost of developing its Deen Dayal gas discovery in the Krishna Godavari basin offshore Andhra Pradesh. Gujarat authorities originally planned to contribute just Rs300cr ($66.77m) but state finance minister Vaju Vala made a ‘supplementary demand’ to the state assembly on February 25.

“State government undertaking GSPC is in need of funds in the current financial year for developmental and exploration activities,” declared Vala, as he delivered the Gujarat budget. “The money is also needed for GSPC group companies and investment in corporate assets.

” As a result, Gujarat coughed up another $44.49m for GSPC, taking the total cash injection to $111.26m. “This is the first time GSPC has asked the Gujarat government for funds in nearly a decade,” comments an amazed source in Gujarat’s finance department.

GSPC says it needs this money as it plans to spend nearly $1.8bn by 2015 to develop the Deen Dayal West field, including drilling costs for 15 wells and capital expenditure on facilities. GSPC borrowed Rs3000cr ($675m) last October (2010) from a consortium of banks led by Bank of Baroda, on a term loan repayable over 10 years at a 9% rate of interest.

It had earlier raised Rs1040cr ($234m) in December 2009 by privately placing 5% of its equity with SBI Caps and nine other companies including seven owned by the Gujarat government. In the past 20 months GSPC has borrowed Rs4820cr ($1.62bn) taking its total debt up to a staggering Rs12,863cr ($2.86bn).

GSPC’s total ‘carried forward’ debt is Rs8043cr ($1.77bn) of which Rs4626cr ($1.02bn) is through secured loans while Rs1922cr ($424m) is through unsecured and short term loans and Rs1495cr ($330m) is from Gujarat State Financial Services.