New Delhi: ONGC Videsh Ltd, the overseas arm of state explorer Oil and Natural Gas Corp (ONGC), has made a gain of about Rs 700 crore on a Euro loan it had raised to finance its Mozambique acquisition.
OVL had raised Euro 525 million (about USD 712 million) through a 7-year bond issue in July last year to part finance its USD 4.125 billion purchase of a 16 per cent stake in Mozambique's offshore Rovuma Area 1, which holds as much as 75 Trillion cubic feet of gas reserves.
"The decision to go for a Euro bond issue has paid dividends. We have made a gain of about Rs 700 crore on account of foreign exchange changes. When we raised the loan, one Euro was equivalent to USD 1.36. Today the ratio is 1.12:1," OVL Director (Finance) S P Garg said here.
The exchange rate change means OVL will have to repay Rs 700 crore less as its revenues are mostly dollarised.
The loan was raised at a highly competitive interest rate of 2.75 per cent per annum and the exchange rate changes have meant that OVL is saving Rs 50 crore in interest outgo per annum, he said.
Alongside the Euro 525 million raised through a 7-year bonds issue, OVL had also raised USD 750 million by selling dollar denominated bonds of 5-year tenure and another USD 750 million selling 10-year bonds.
Garg said the bond sale was the biggest ever from Asia. Also, it was the first euro issue for a government-owned corporate.
The 5-year and 10-year dollar bonds were priced at 160 basis points and 207 basis points above the 5-year and 10-year US treasury yields. A basis point is 0.01 per cent.
Garg said OVL decided to fund the Mozambique acquisition through cheapest available loan.
The effective rate of interest was 3.25 per cent for the 5-year dollar bond and 4.622 per cent for the 10-year dollar bond.
He said the bond proceeds were used to refinance OVL's bridge loans availed to immediately pay for the Mozambique acquisition.
In June 2013, OVL teamed up with Oil India Ltd to buy Videocon Industries' 10 per cent stake in deep water gas field in Mozambique's Rovuma basin for USD 2.48 billion.
OVL followed it up by acquiring another 10 per cent stake from Anadarko Petroleum Corp of the US for USD 2.64 billion in August 2013.
The Videocon stake was split between OVL and OIL in 60:40 ratio. To finance its six per cent buy, OVL in January 2014 raised USD 1.5 billion one-year bridge loan facility from a consortium of 9 banks.
To pay for the Anadarko stake acquisition, it had in February 2014 raised USD 2.5 billion in foreign loans.
Rovuma Area 1 is estimated to hold recoverable natural gas resources of upto 75 Tcf, which are to be converted into liquid gas (liquefied natural gas or LNG) for shipping to consumers like India.
