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GAIL evaluating RGTIL for possible acquisition

This comes in the backdrop of PNGRB cancelling RGTIL’s licence for four projects
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First Published: Fri, Oct 26 2012. 05 05 PM IST
GAIL’s chairman and managing director B.C. Tripathi. The company also said second-quarter profit dipped to Rs985 crore from Rs1,094 crore in the corresponding period last year Photo: Bloomberg
GAIL’s chairman and managing director B.C. Tripathi. The company also said second-quarter profit dipped to Rs985 crore from Rs1,094 crore in the corresponding period last year Photo: Bloomberg
Updated: Sat, Oct 27 2012. 09 29 PM IST
New Delhi: State-owned GAIL (India) Ltd , India’s largest gas transmission and marketing company, is evaluating buying Mukesh Ambani ’s privately owned firm Reliance Gas Transportation Infrastructure Ltd (RGTIL).
This comes in the backdrop of India’s petroleum ministry cancelling RGTIL’s licences for four projects. Petroleum and Natural Gas Regulatory Board (PNGRB), India’s downstream regulator, had expressed concerns over delays in the commissioning of pipelines.
“We are evaluating the opportunity and at a suitable time will take a decision,” said B.C. Tripathi, chairman and managing director, GAIL. “Gas transmission is a core business of GAIL. There are some issues for due diligence. PNGRB’s approval is one of the issues.”
A Reliance Industries Ltd spokesperson did not respond till press time.
GAIL’s second-quarter profit fell to Rs.985 crore from Rs.1,094 crore in the corresponding period last year owing to an increase in subsidy payouts, lower volume of petrochemical sales and a decrease in fuel transportation.
“There was lower volume of gas transmission due to a drop in supplies from KG-D6 fields,” said Tripathi.
Revenue for the July-September quarter increased 17% to Rs.11,361 crore, the company said on Friday.
The subsidy burden share by GAIL on account of under-recovery, or the revenue loss borne by government-owned oil marketing firms from selling fuel below cost, increased 39% to Rs.786 crore in the three months ended September.
“GAIL’s 2QFY2013 result was below our estimates,” Bhavesh Chauhan, senior research analyst at Angel Broking Ltd, said in an emailed statement. “The company’s top line grew by 17.1% y-o-y to Rs.11,361crore (below our estimate of Rs.12,196 crore) mainly due to lower than expected performance from LPG transmission segment which had revenue writeback of Rs.123 crore due to revision in pipeline tariff by PNGRB.”
GAIL, one of the promoters of Ratnagiri Gas and Power Pvt. Ltd (RGPPL), on Friday said that the liquefied natural gas (LNG) terminal associated with the Dabhol power plant will be commissioned by January. Earlier attempts to commission the terminal were unsuccessful and the efforts were called off due to safety concerns.
“Construction is expected to be completed by November-end. We are expecting the first cargo by December and commissioning should happen by January 2013,” said Tripathi.
State-run NTPC Ltd and GAIL own 32.47% each in the utility. The Maharashtra government has a 16.94% stake, while the rest is owned by public sector banks and financial institutions.
The terminal has a capacity to handle 5 million tonnes per annum (mtpa) of LNG. While 2.1 mtpa will be required for the plant, RGPPL has entered into a long-term agreement with GAIL to commercially utilize the terminal.
Natural gas is shipped as a liquid and is reconverted at LNG terminals.
The Dabhol terminal is part of an integrated power project that had an installed capacity of 2,150 megawatts (MW), which was later scaled down to 1,967.04MW.
The project generated 11,619 million units (MUs) in 2011-12, against a capacity of 17,000 MUs at 80% efficiency.
Ratnagiri Gas and Power, earlier known as Dabhol Power Co., was conceived in the 1990s and was originally promoted by the now bankrupt US-based Enron Corp. The cost to build the project was estimated to be Rs.10,038 crore at the time of asset transfer to the government in mid-2005. It has since escalated by Rs.2,594 crore to Rs.12,897 crore. A capital expenditure of Rs.3,800 crore has been made towards the project. As of 31 March, the firm had a paid up share capital of Rs.2,465 crore.
Shares of GAIL rose 0.83% to end at Rs.363.45 on BSE on Friday, while the benchmark Sensex fell 0.71% to close at 18,625.34 points.
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First Published: Fri, Oct 26 2012. 05 05 PM IST
More Topics: GAIL | Mukesh Ambani | Reliance Gas |
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