Market Insights

CALS Creates Blueprint for Future

Posted on 28 January, 2010 | Tags:

CALS Refineries Limited (Cals), a BSE listed company, is setting up a 100,000 BPSD crude oil refinery at Haldia in West Bengal in its first phase with investment of about Rs 5500 crore. The company is a part of the Spice Energy Group, a group having diversified interests in power, shipping, mining, bio-fuels and upstream exploration and refining.
Cals is a professionally managed company under the able leadership of seasoned professionals like M S Ramachandran, Chairman (who is ex-chairman of Indian Oil Corporation) and P N Devarajan, Key Advisor (formerly RIL cum Essar Group President). The refinery execution cum implementation team is headed by Manabendra. Guha Roy, Chief Executive Officer, having more than 40 years of rich experience in various core sector including Oil and Gas sector and Ramesh Bhosale, Chief Financial Officer, a veteran in M&A and project finance.
In Phase-1, Cals is relocating 5 MMTPA (100,000 bpd) crude oil refinery units from Germany and Canada which were in operation until August / September 2008. The project is being financed by debt-equity ratio of 65:35 respectively. Company has planned further expansion to take its total refining capacity to 10 MMTPA (200,000 bpd) with additional investment of Rs 5000 Crores. The time gap between commissioning of its Phase 1 and Phase 2 is envisaged to be minimal with Phase 1 scheduled to be commissioned by October 2011. Cals has set the internal goal of commissioning both the phases of its Refinery by March 2012 to avail the tax holiday benefit as per the current declarations made financial budget. Cals project has bettered in its financial model the typical Indian industry GRM average due to its high Nelson Complexity factor of 11.8 with the product slate products like Propylene and Benzene with no production of Fuel Oil.
The decision of Cals to relocate operating refinery gives the advantage of shorter project completion time and lesser investment as compared to 'Greenfield' project. This makes Cals business model inherently robust and absorbent to cyclical Crude Oil pricing scenario. Cals has already entered into tie-ups with global oil major, for part of crude oil supply and part of products off-take for exports while Memorandum of Understanding has been signed with an Indian Public Sector Navratna Company for balance of products off-take from its Phase 1 and entire production from its Phase 2 refinery. Cals has engaged world renowned engineering company M/s Ventech Engineers, USA for re-engineering and supervision and monitoring of dismantling and relocation as 'Project Management Consultant'. M/s Mott MacDonald is engaged for engineering and procurement services for offsite / utilities facilities. Internationally renowned inspection agencies have certified residual life for the units being relocated. Refinery project has already received clearance from Ministry of Environment and Forests, Government of India. Cals is highly appreciative of impeccable support and cooperation from the government of West Bengal, be it allocation of encumbrance free 400 acres of land or right of way for laying crude oil / product pipeline or fiscal incentives for successful on time completion of the project, which will catalyze the industrialization of West Bengal. Presently ground filling cum levelling and boundary wall construction has made substantial progress and civil construction work shall be started soon. Arrival of equipment is planned only after rainy season The global financial meltdown has led to some delay in refinery project implementation schedule. However, as the economy begins to revive financial closure of the project is expected to be completed soon.
The project matches the global average size of a refinery and the average age has been appraised by SBI Caps for Indian debt portion while BNP Paribas has been mandated for raising balance equity with Promoters already invested USD 200 Million as initial equity into the project.

"CALS will create history in future"
Manabendra Guha Roy, CEO, Cals Refineries