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HPCL Likely to Pick Up 11% in Kannur Airport

  • State-run oil marketing company HPCL mulls picking up 11 per cent equity in Kannur International Airport (KIAL) in Kerala. HPCL wants sole rights for design, development, operation and maintenance of all fuel facilities and into-plane operations at the airport. The airport is expected to be operational by 2015.“If the deal sails through, HPCL will invest Rs 55 crore by 2013-14. The airport fuel facility would be on open-access model. HPCL needs to actively pursue and secure airport fuel storage and into-plane operation,” said an official privy to the development, requesting anonymity.
  • Open access model breaks up the jet fuel supply chain into three parts – supply of fuel to storage tank, airport storage and into-plane operations. The model has been adopted in newly developed airports in Delhi, Hyderabad and Bangalore. HPCL’s peers – IOC and BPCL – have already forayed into this new operation model.HPCL board discussed the opportunity in its meeting on February 9. “Kannur airport is a medium scale, green-field airport at which HPCL can garner foothold in the open access model at a relatively low level of investment. Successful participation in the project will enable the company to showcase its credentials when more green-field airports come up for development in future,” the official added.
  • In case, any other oil-marketing company also make similar offer to Kannur International Airport (KIAL), HPCL wants the investment to be split in proportion to equity held. Other state-run oil marketing company BPCL is learnt to have shown interest to pick up equity in Kannur airport. However, Financial Chronicle could not confirm BPCL’s move to invest in an airport.If two oil-marketing companies invest in the airport, no one would get sole rights to develop and operate the fuel facility. Then it would be set up through a joint venture of the two entities. Kerala government has invited equity participation up to 23 per cent by public sector companies for its fourth international airport. Out of this, 4.3 per cent of equity is reserved for state public sector enterprises. HPCL chairman SR Choudhury was not immediately available for comment on the issue. SMS sent to him remained unanswered.

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