VGS Group Narrows Circle for KAP LNG (India)

US-based VGS Group, Inc’ Board of Directors announced today that it had narrowed the pool of maritime focused finance companies vying to write the package for the company’s FRU-FSU asset basis at the Kakinada Anchorage Port LNG Import Terminal Project (KAP) on India’s East Coast.

The total valuation of the KAP Project’s floating asset base lies well north of USD $250 Million and the project developer issued an RFP soliciting both mortgage and lease finance based structuring proposals in the amount of USD $180 Million. The Project’s major assets, the FRU and FSU, will be held under US title.

The financing proposals of four internationally rated vessel finance companies are now under consideration by the VGS Board of Directors and a final selection has been determined to be made by September 30th of the current year.

Shanghai-based Wison Offshore and Marine Ltd and VGS Group inked the deal for the new build FRU in early July of this year, with the FEED being submitted to VGS shortly afterwards. The barge-based FRU, scheduled for commissioning in late 2013 and has a 3.5 MTA capacity. The floating platform is being constructed to allow for the addition of a second 3.5 regas module onsite in mid 2016 to accommodate the rapidly growing natural gas demand requirements of East India.

VGS Group has partnered with IL&FS, one of India’s largest infrastructure developers, to develop the project. Under this arrangement, IL&FS and VGS Group will jointly own the project’s offshore and onshore pipeline and VGS Group will own and operate the FRU and FSU and supply the gas under an existing agreement to Lanco Kandopalli Power Limited (LKPL) for use at LKPL’s Andhra Pradesh based 1,475 MW combined cycle plant, as well as to other future gas buyers in the market.

Gaurav Tiwari, VGS Group President, issued a statement reporting his firm’s progress in carrying out the negotiations with multiple finance providers, saying in part “As have others, our corporate leadership has come to the realization that 100% ownership of assets is not today’s pre-requisite for success in this industry. We now are strategically focused on a model that speaks to effective deployment of capital, particularly equity capital. This, we feel as an organization is a core principle. This is not an altogether new idea in the LNG industry, it has been embraced and adopted by the major players in the floating LNG facility space. What we are doing is looking at what others have done and looking to make good use of the best practices we have seen emerging around us over the past few years.”

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LNG World News Staff, August 31, 2012