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Journalism of Courage
Last week ONGC-OVL consortium bought a 10 per cent stake in the Rovuma oil field off the Mozambique coast from the Videocon group for 2.5 billion. The well had struck oil so there was plenty of reason for the valuation. Since 2008 when the Videocon group had bought a stake in Rovuma for 75 million,public sector OVL has also bought and abandoned stakes in several oil and gas fields abroad including several in Africa. Yet at the end of March 2013,OVL turnover is just 3.6 billion,while the single deal by Videocon has earned it a prize that is 70 per cent of the current size of OVL.
Sure,there are a number of factors that go into figuring out if an oil/gas field will turn gold but how did a specialist like OVL miss spotting the opportunity when a relative outsider like Videocon could see the promise?
Let us take an example within India,then. Last week again,ONGC commissioned a combined cycle gas based power station at Tripura as part of its diversification into the power sector.
The project including the wheeling cost of transmission of the power generated will be set up at an approximate cost of Rs 10,000 crore for the ONGC Tripura Power Company OTPC.
The project is a four way venture between ONGC,Tripura government,ILamp;FS and a proposed public equity. ONGC has a 50 per cent stake in the project; the sub contractors to the project BHEL,which built the power stations,did not pick up a stake. The state government has a 0.5 per cent stake in the project through the land they have offered as equity. ILamp;FS has a 26 per cent stake in the project and will arrange for the placement of the remaining residual equity of 23.5 per cent through an Initial Public Offer or arrange for placement through strategic investors.
The project looks a sweetheart deal since ONGC had the gas all along which it was unable to ship from the area since 2006. Offering it to OTPC at a base price of Rs 4.40 per cubic metre still worked out attractively than any other gas plants,like those of NTPC. And of course there is the minor issue that this power will raise electricity tariffs for the North Eastern states for which OTPC has already filed a petition with the electricity regulator. Low risk,captive raw material and in house technology.
Does the project still need an intermediary like ILamp;FS to sell the issue; even more how does this qualify as a private-public-partnership where risk taking is supposed to be an integral part of the project?
Subhomoy is a Deputy Editor based in New Delhi.
subhomoy.bhattacharjeeexpressindia.com
