HPCL refinances Rs 50,000 crore Rajasthan refinery debt, eyes Rs 1,000 crore annual interest savings

Hindustan Petroleum Corp HPCL has refinanced about Rs 50000 crore of debt at its Rajasthan refinery securing a reduction of around 105 basis points in borrowing costs and targeting annual interest savings of about Rs 1000 crore through a broader restructuring of the projects finances Chairman and Managing Director Vikas Kaushal said on FridayThe refinancing effective October 3 is expected to save the company about Rs 470 crore to Rs 550 crore annually Kaushal told analysts on an earnings callAdditional equity infusions conversion of subordinated loans into equity and interestfree state support are expected to further ease the refinerys financing burden as HPCL ramps up operations at the facilityThe 9 million tonnes a year refinery in Rajasthan was built at a cost of Rs 79459 crore with HPCL 74 per cent and Government of Rajasthan 26 per cent as equity partnersHPCL Rajasthan Refinery Limited HRRL the joint venture company part refinanced existing project loans through Rs 8000 crore in rupee term loans from a consortium comprising the National Bank for Financing Infrastructure and Development NaBFID India Infrastructure Finance Company Limited IIFCL ICICI Bank Limited UCO Bank and Punjab amp Sind Bank a Rs 2000 crore working capital demand loan from Bank of Baroda and fundbased and nonfundbased credit facilities aggregating to Rs 400 crore from ICICI Bank LimitedThe term loan proceeds will be utilised for the part refinancing of existing project loans while the working capital facilities will support HRRLs working capital requirements and help address cash flow mismatches associated with the project including its allied utilities and facilities at Pachpadra District Balotra RajasthanKaushal said the financial restructuring is aimed at improving the economics of the Rajasthan refinery a major new asset that HPCL expects to bring towards full operating capacity by December The company is also working to stabilise its other complex refining assets and contain costs as volatile crude prices and rising losses on domestic cooking gas threaten nearterm earningsWe have significantly altered the debt structure of the company he said adding that the refinancing and other measures could reduce annual interest costs by about Rs 1000 crore compared with the previous yearThe Rajasthan government infused Rs 1500 crore of equity into the refinery during the September quarter while HPCL converted Rs 4300 crore of subordinated loans into equity Kaushal said The conversion is expected to lower interest costs by about Rs 350 crore Further equity calls are planned over the next one or two quartersThe state has also committed to providing about Rs 1100 crore annually in interestfree loans with the first instalment already received according to KaushalHPCL is seeking to improve the refinerys financial performance as it moves beyond commissioning and begins shipping substantial volumes of products The facilitys commercial operation date was declared on June 22 and it is currently running at about 60 per cent utilisation broadly in line with earlier guidanceAlmost all secondary processing units are operating in hot circulation with two units still to be brought into that state HPCL expects to complete the remaining commissioning work including the sulphur recovery unit before moving towards fullcapacity operationsThe company expects throughput to reach a run rate of 8 million to 9 million tonnes per annum around December give or take a week or two Kaushal saidThe refinery recorded a gross refining margin of about USD 12 per barrel in the September quarter HPCL expects margins to rise above USD 20 per barrel in the fourth quarter as it transitions to processing highersulphur crude which the facility is designed to handleProduct shipments have already increased sharply Kaushal said the refinery shipped about 15000 tonnes of products on the day before the call compared with no shipments three months earlier October shipments are expected to exceed 400000 tonnes generating revenue of more than Rs 4000 crore for the monthKaushal said the refinery could post a positive monthly profit before tax in October although he stressed that this was an expression of managements optimism rather than formal guidance given the volatility of refining margins and the early stage of operationsWe are very excited on the Rajasthan We are very bullish on it he saidThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever