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Business News/ Companies / GAIL Q3 net up 31%, to invite bids for ships to transport LNG
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GAIL Q3 net up 31%, to invite bids for ships to transport LNG

GAIL will invite bids next month for ships to transport LNG from the US for 20 years beginning September 2017

At current prices, an LNG ship costs about $200 million to build. GAIL’s shipbuilding tender is worth around $2.8 billion and is being keenly tracked by global shipbuilders. Photo: Pradeep Gaur/MintPremium
At current prices, an LNG ship costs about $200 million to build. GAIL’s shipbuilding tender is worth around $2.8 billion and is being keenly tracked by global shipbuilders. Photo: Pradeep Gaur/Mint

New Delhi: GAIL (India) Ltd, India’s largest gas transmission and marketing company, will invite bids next month for ships to transport liquified natural gas (LNG) from the US for 20 years beginning September 2017.

The plan is to hire between seven and 14 ships. At current prices, an LNG ship costs about $200 million to build. GAIL’s shipbuilding tender is worth around $2.8 billion and is being keenly tracked by global shipbuilders.

“We plan to call for the bids next month. We are looking at long-term charter hire," GAIL chairman and managing director B.C. Tripathi said on Wednesday. “The number of ships we hire will depend on the volumes that we plan to transport. It will be a flexible tender."

While the government wants GAIL to explore the possibility of local yards building some of these ships to help India develop capabilities for building LNG carriers and become self-sufficient, Tripathi said, “The issue is still being debated with the ministry and the companies."

GAIL is concerned about the ability of Indian shipyards to deliver the vessels in time and their technological capability to build the ships. Delays in getting the ships built in time could expose GAIL to billions of dollars in liabilities to the gas seller in the US and gas consumers in India

GAIL posted a 31% increase in net profit in the December quarter to 1,679 crore due to the absence of subsidy sharing and higher price realization despite a fall in volumes. Revenue increased by 28% to 15,980 crore.

The government has capped the subsidy sharing burden of GAIL at 1,400 crore for the current financial year. GAIL’s subsidy burden share on account of under-recovery—or the revenue loss for government-owned oil marketing firms from selling fuel below cost—was 2,687 crore for the last fiscal year.

Natural gas sales fell to 79.74 mscmd (million standard cubic meters per day) in the quarter from 81.77 mscmd a year earlier. Petrochemical production was 122TMT compared with 126TMT. Polymer sales fell to 109TMT from 128TMT, the company said in a statement .

Earnings before interest, tax, depreciation and amortization—a measure of operating profitability—rose 11.5% to 2,232 crore, mainly on account of a higher profit from natural gas trading segment, Bhavesh Chauhan, senior research analyst at Angel Broking Pvt. Ltd, said in an emailed statement.

“There was an exceptional item related to gain on sale of long term investment of 345 crore," Chauhan, said.

With domestic gas supplies unable to meet demand, GAIL will be sourcing 26 cargoes in the current financial year. Though GAIL, with a borrowing of 11,000 crore, has a capital expenditure of 4,400 crore for the current fiscal, it has reduced the next year’s capital expenditure to 3,300 crore.

Tripathi said GAIL is in talks with Japan’s Chubu Electric Power Co. Inc. to cooperate on LNG sourcing.

This also comes in the backdrop of the ill-fated Dabhol power project. GAIL, one of the promoters of Ratnagiri Gas and Power Pvt. Ltd (RGPPL), has been struggling with the project. Cash-strapped RGPPL has debt of around 8,500 crore, with an outstanding debt service obligation of 837.94 crore for the current fiscal year. The integrated 1,967.04 megawatt power project has been shut down due to non-supply of gas and the lenders have raised concern over the servicing of the loan.

“We have an issue on the power project. We are struggling. I don’t have the answer," said Tripathi.

The Dabhol plant requires 9.7 mscmd of gas, but has been allocated 8.5 mscmd by a panel of ministers, of which it receives only 0.9 mscmd. Various plans were drawn up for the revival of the project but have made no headway.

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ABOUT THE AUTHOR
Utpal Bhaskar
"Utpal Bhaskar leads Mint's policy and economy coverage. He is part of Mint’s launch team, which he joined as a staff writer in 2006. Widely cited by authors and think-tanks, he has reported extensively on the intersection of India’s policy, polity and corporate space.
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Published: 30 Jan 2014, 12:17 AM IST
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