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Wednesday, April 02, 2008

Bharat Oman Refineries files IPO papers with SEBI

Bharat Oman Refineries (BORL) has filed a draft red herring prospectus with the Securities and Exchange Board of India on March 28, 2008 for its initial public offering (IPO). BORL intends to raise approximately Rs 3850 crore as the equity contribution for a refinery project at Bina. BORL is promoted by Bharat Petroleum Corporation (BPCL), a fortune Global 500 Company, with interests in downstream oil refining and marketing of petroleum products.

BORL is in the process of constructing a grassroots petroleum refinery in Bina in the state of Madhya Pradesh, at an approximate capital cost of Rs 10400 crore. The project is intended to he funded with a mix of debt and equity in the ratio of 1.6:1. BORL has entered into an agreement with a consortium of lenders that provides for the debt component of approximately Rs 6400 crore.

The present issued and paid-up equity share capital of BORL is Rs 151 crore, which is primarily comprised of equity shares held by BPCL and Oman Oil Company S.A.O.C. The remaining equity of Rs 3850 crore will be raised through the issue of equity shares to BPCL, the Government of Madhya Pradesh, certain investors pursuant to a pre-IPO placement and the public pursuant to the IPO.

The refinery is designed to have a crude oil processing capacity of 6 million metric tonnes per annum and a higher complexity factor of 9.1, as measured using the Nelson Complexity Index. The project also includes a crude oil importing and storage system in Vadinar in the state of Gujarat, consisting of a single point mooring facility that can receive crude oil shipments from very large crude carriers in sizes of up to 320,000 dead weight tonnage and a crude oil terminal with a capacity of 480,000 cubic meters. The crude oil terminal will be connected to the refinery through an approximately 935 kilometer long crude oil supply pipeline. The project also includes a 99 megawatt captive co-generation power plant that will meet the power and steam requirements of the refinery. Petroleum coke produced by the refinery will be utilised towards the fuel requirements for this power plant. The refinery is expected to commence commercial operations in or around January 2010.

BORL has entered into an off-take agreement with BPCL pursuant to which BPCL has agreed to purchase substantially all of the refinery's petroleum products. BPCL intends to construct a marketing terminal at Bina and a pipeline connecting the marketing terminal to its existing product pipeline to enable it to transport a portion of refinery's petroleum products through its existing distribution channels. BORL will draw upon BPCL's project execution skills to help BORL to complete the project on schedule. BORL expects to realize significant operational synergies with BPCL, including with respect to crude sourcing, operations and maintenance, marketing of petroleum products and sharing of petroleum-related infrastructure.

The Government of Madhya Pradesh has granted several financial benefits and fiscal concessions to BORL in connection with the construction and operation of the refinery.

BORL believes that its project strategies, such as the flexibility in the design for crude processing at the refinery, the superior product slate of the refinery, including premium quality auto fuels with ultra low sulfur specification (maximum), the strategic location of the crude import facility, freight advantages resulting from the inland location of the refinery and potential residue upgrade to value-added products will enhance its gross refining margins.


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