The Telegraph
Sunday , September 15 , 2013
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ONGC pulls out of Haldia Petro race

Calcutta, Sept. 14: ONGC Ltd, the public sector behemoth, has dropped out of the race for the Bengal government’s share in Haldia Petrochemicals after the state disallowed the company to form a consortium with Indian Oil.

A top official of ONGC tonight said it was no longer interested in HPL after it became evident that the state would turn down its request.

“We told the state about our intention to form a consortium with one of the shortlisted bidders some time back. But so far it has not been accepted. It is now certain that the request would not be accepted. In this scenario, ONGC is no longer interested in HPL,” the official told The Telegraph tonight.

The company did not participate in the customary pre-bid meeting here today.

Initially, the state government had agreed to allow consortiums to be formed. It sent out letters to all bidders seeking no objection for change in share purchase agreement regarding consortium.

While three public sector units and Cairn India had agreed to form a consortium before the final price bid, Reliance was opposed to it. The memorandum was later modified to exclude the possibility, prompting objections from ONGC.

ONGC became the second company after Essar to exit the race, taking some sting out of the sale process.

Key clause changed

Though the state did not agree to a consortium, it agreed to relax a crucial clause allowing the selected bidder to offload a part of the stake after the completion of the deal.

Previously, the selected bidder was asked to give a commitment that it would not sell the stake bought from the government within five years of the deal.

The proposed change, state officials believe, would effectively resolve the niggling issue of bidding in consortium as demanded by some players. However, it did not impress ONGC. The ONGC official quoted above said the company was not “interested in such changes in the clause”.

The West Bengal Industrial Development Corporation, the seller of the stake on behalf of the state, today communicated the change during the pre-bid meet.

Apart from ONGC, all the other four bidders — Reliance Industries, Cairn India, IOC and GAIL — participated in the meeting where the state was represented by industry secretary C.M Bachhwat and WBIDC managing director Krishna Gupta along with consultancy Deloitte, the transaction adviser to WBIDC.

The state officials, however, said the final decision would be taken by the group of ministers on HPL.

The bidders today were told that the final share purchase agreement would be circulated among bidders within the next two weeks, making it difficult to call the price bid before the end of September.

“We were told that the selected bidder will be allowed to sell up to 49 per cent of the stake bought from WBIDC. There will be no lock-in period on that,” a representative of a bidder today said.

The clause 5.b of the preliminary information memorandum had stated: Selected bidder needs to provide an undertaking that bidder shall continue to run the present plant in its entirety as a going concern and shall not transfer/agree to transfer its stake in HPL for a minimum period of five years from the date of the completion of divestment.

The clause is now being modified with the selected bidder being asked to maintain majority of its stake, 51 per cent, for the next five years.