Calcutta, Oct. 22: Bharat Petroleum Corporation (BPCL) plans to invest Rs 1,800 crore to upgrade its refinery at Mahul near Mumbai in order to comply with Euro-II and Euro-III emission norms.
Sources said funds for the investment, which will be made over a period of five years, will be raised either through a public issue or by floating a bond.
“The company has already decided to go for a public issue to part finance its total capital expenditure of Rs 7,500 crore during the Tenth Plan period. The refinery modernisation is one of the priorities so far as its capital expenditure plans are concerned,” they added.
As part of its plans to upgrade the refinery, BPCL will set up a crude distillation unit, a hydrogen plant, a hydro-cracker and a mounded LPG storage facility for better safety. It also plans to set up a third gas turbine to be self-sufficient in power.
Sources pointed out that the decision to upgrade the refinery has been taken in view of the stringent environmental norms being enforced by the government.
“Auto emission norms are becoming more and more stringent requiring all oil companies to market more environment-friendly fuel. The company has taken the right decision at an appropriate moment to retain its competitive edge,” they said.
BPCL may also resort to a bond issue in case its public issue plans do not fructify.
Borrowing funds from the market through a bond issue is not a very difficult task for a company like BPCL which has a very strong 1.5:1 debt-equity ratio.
The company’s strong cash flow position will be able to take care of a part of its investment plan. “ Our cash generation is roughly Rs 1,500 crore every year, while the working capital requirement stands at Rs 1,000 crore. Hence, the surplus cash can always be parked in the projects like modernisation of a refinery,” they said.
The company may not however go for any expansion project during the Tenth Plan period.
“BPCL’s production stands at about 20 million tonnes, taking into consideration the production of its subsidiaries Kochi Refineries and Numaligarh Refineries. Moreover, the proposed nine-million tonne Bina Refinery will bring nearly 30 million tonnes of products under its direct control,” they said.
BPCL is currently also trying to explore other major global markets to export petro products.
The company, which has 4,711 retail outlets, plans to give a standard look to all its outlets over the next few years.