GAIL India sees FY12 capex up 48% y/y: exec

GAIL India sees FY12 capex up 48% y/y: exec

New Delhi: State-run gas utility GAIL India expects an annual 48% jump in its capex for this fiscal, and plans to partly fund it through overseas borrowing, for expanding its local pipeline network.

GAIL has planned a capital expenditure of 7,692 crore ($1.71 billion) for the year to March to add 1,800 kilometres of pipeline, its chairman B.C. Tripathi said at a press conference on Monday to detail the firm’s March-quarter results.

GAIL’s March quarter profit fell 14% from a year ago to 783 crore as it paid a record subsidy to state oil retailers.

India has raised upstream firms’—GAIL, Oil and Natural Gas Corp and Oil India—compensation to state fuel retailers to about 38.7% of their revenue losses on subsidised sales in 2010/11 versus 33.33% earlier.

“Our profit would have been higher if the subsidy was maintained at last year’s levels," Tripathi.

The company expects to borrow 3,325 crore ($739.8 million) in fiscal 2012 , including $450 million through external commercial borrowings and foreign bonds.

“This will be our first external commercial borrowing and bond issue," Tripathi said. It is cheaper to raise funds overseas than in India due to higher domestic interest rates.

He said GAIL’s board on Monday approved raising $150 million through external commercial borrowings.

The funds would be raised at 134 basis points above LIBOR, its finance head P. K. Jain.

GAIL currently owns India’s biggest pipeline network of about 8,600 kilometres and daily transmits about 170 million cubic metres of gas, said R. D. Goyal, its head for business development.

GAIL plans to spend 28,641 crore over three years to March 2014 to expand its pipeline network and plans to fund it through borrowings of 13,675 crore over the same period.

“We have huge capex plans for the next two-three years so our borrowings are going to be higher," Tripathi said.

He said falling gas output from Reliance Industries’ east coast block would not impact its transmission volumes as the gas utility aims to import one spot cargo of liquefied natural gas (LNG) every month to make up for the shortfall.

Its head of marketing Prabhat Singh said the firm would import one spot LNG cargo in June and July and would review the gas demand scenario as fuel demand from power plants is less during the monsoon season.