Under the microscope: Elengy Terminal’s financial close next month, says CEO

Published: April 30, 2015
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Up till now the company has spent millions of dollars on construction of a jetty, a 24km-long pipeline and related facilities. DESIGN: CREATIVE COMMON

Up till now the company has spent millions of dollars on construction of a jetty, a 24km-long pipeline and related facilities. DESIGN: CREATIVE COMMON

KARACHI: Engro Corporation’s subsidiary, Elengy Terminal, expects to achieve financial close of its $450-million project by next month, said a top company official.

“The terminal is already operational and imports have begun as the company used bridge financing and its own equity for the expenditure needed,” said Engro Elengy Terminal CEO Sheikh Imranul Haque.

The International Finance Corporation (IFC) has also bought a 20% stake in the project – a move that will add credibility to the project and iron out critical issues.

People in the industry have often questioned the project’s implementation, especially in absence of a financial close. Any LNG supplier would only consider the bankability of a project to assess its feasibility, they argue.

“If I had waited for a financial close then the project would have been delayed,” said Haque. “And what difference does it make? We have made payments to each and every supplier and contractor.”

The total costs of $450 million include the lease expense of chartering a Floating Storage and Regasification Unit (FSRU) for the 15-year duration of the project.

Up till now the company has spent millions of dollars on construction of a jetty, a 24km-long pipeline and related facilities.

“Only Engro had the capacity to do all this,” he said, speaking on initiating LNG imports despite difficulties.

It has not been a smooth sail for the fast-track LNG project since work on it began last year. Controversies ranging from unfair advantages Engro had over competitors to improper planning at the port have continued to surround it.

Yet the company pressed ahead with development and inauguration.

Use of the FSRU – a large ship with on-board storage tanks and a facility to convert the LNG into gas – as a carrier has also been questioned.

“But it is written in our agreement,” he said. “We can use the FSRU as a trade vessel to transport LNG. This is an asset for the government. Isn’t it better to use it than leaving it empty?”

While this might be true, this stop-gap arrangement was never part of the original project design, which envisaged use of carriers refilling a permanently anchored FSRU.

Elengy has nothing to do with LNG imports, which is the sole responsibility of the government to arrange.

But the government will use up to 67% capacity of the 600mmcfd terminal, while the remaining can be used by the company.

Gas shortages have shut factories across the country and hampered investment in textile, steel and other industries. Private sector could import LNG but that would require use of gas pipelines owned by SSGC and SNGPL.

“Rules allowing third parties to use pipeline infrastructures must be notified immediately,” Haque said. “We have been pushing for that.”

About the five-year tax holiday, which has been granted by the Economic Coordination Committee, he said that was already allowed in the LNG Policy and was part of Elengy’s financial projections.

“I fail to understand why everyone is so concerned about returns we are getting on this project and the capacity payments. The Independent Power Projects get a similar treatment,” he said.

Published in The Express Tribune, April 30th, 2015.

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