OREANDA-NEWS. March 24, 2011. State-run refiner Hindustan Petroleum Corporation Limited (HPCL) targets to invest Rs 45,000 in the next six years starting April 1 to more than double its output. “At present, HPCL markets around 26 million tonnes per annum (mtpa) of petroleum products, whereas it produces nearly 16-17 mtpa. There is a gap of 8-9 mtpa. In next six years, we plan to ramp up production to 42 mtpa,” a senior company official told Financial Chronicle, requesting anonymity.

The exercise will cost the state-run refiner close to Rs 45,000 crore. This will include setting up of a green-field refinery in Ratnagiri, Maharashtra and modular expansion of brown-field refinery in Visakhapatnam, Andhra Pradesh. In addition, setting up of new retail outlets, depots and laying pipelines will expand marketing network.

The company is in the process of finalising 1,500 acre-land that will support 18 mtpa green-field refinery in Ratnagiri. The refinery will be near to upcoming port in Dabhol. Setting up of new refinery will cost HPCL between Rs 18,000 and Rs 22,000 crore. Engineers India Limited (EIL) is likely to submit a detailed feasibility report in month’s time.

“After the land acquisition is completed in six month, construction of the first phase of a nine mtpa refinery is expected to commence by second quarter of 2011-12 and completed by completed by 2015-16,” said the official. HPCL is planning to expand existing refinery in Visakhapatnam to 15 mtpa against 9 mmtpa at present. It will cost the refiner between Rs 8,000 and 9,000 crore.

HPCL plans to fund its expansion through debt to equity ratio of 2:1. Recently, HPCL tied up debt of USD  400 million. SBI is lead arranger of the loan in consortium with seven domestic and foreign banks.“Sourcing of funds is not an issue. Most of it is likely to be sourced from overseas borrowings. HPCL has AAA rating for domestic borrowing and sovereign power rating for forex borrowings,” the official added.

Currently, HPCL has debt of nearly Rs 20,400 crore. It has Rs 8,000 crore worth of oil bonds which mature during 2024-26. HPCL has also received Rs 4,600 crore as subsidy from government for selling fuel below market cost for first nine months of 2010-11.