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Response from Petronet LNG - Important Update

posted Oct 11, 2011, 11:03 PM by Biharilal Deora CFA
We have received the following update from Petronet LNG management for some of the follow-up queries asked by teams. 
  • When can we expect 2.5MMTPA expansion at Dahej to be commissioned? Is there any further expansion plan at Dahej that PLL is exploring? : Answer - The additional 2.5 MMTPA at Dahej shall be available after commissioning of 2nd Jetty i.e. schedule in Last Quarter of 2013 (Calendar year).
  • Decision about 750MW power plant was to be taken in Oct 2011. Can you confirm anything as of now? : Answer - The Power Plant is of 1200 MW with an option to start with one unit of 400 MW. However, this decision is deferred for the time being.
  • Decision about LNG terminal on the east coast was to be taken in Oct 2011. Can you confirm anything as of now? : Answer - This decision is to be taken by April-June 2012 and we are as of now in the process of Detailed Feasibility Study.
  • What is regasification margin? How is it calculated? : Answer - The regas margin at Dahej was calculated by ensuring the company 16% Equity IRR post tax on its long term supplies.
  • The present regasification margin & charges per mmtpa/ mmbtu in case of long term GSPA? : Answer - It is Rs. 33.15/MMBTU
  • Marketing and regasification margins in case of spot purchase of LNG? : Answer - Regas charges remains same. However, the Marketing Margin depends upon the prevailing situation and has not fixed value to it.
  • Margins in case of direct marketing? : Answer - Refer the answer above.
  • Average cost of debt for Dahej + Kochi project? : Answer - Looking at the prevailing interest rate scenario, it should be 9.5% p.a.
  • Marginal tax rate for company, given the fact that Dahej and Kochi are SEZ? : Answer - Dahej is not SEZ but Kochi is. However, due to absence of clarity in tax laws since it is under the same company, we take full rate of taxation i.e. 30% + surcharge.
  • The long term off taker agreements mention the re-gasification margins as 16%. We would like to get some more clarity on how these margins are worked out. : Answer - These margin were worked out on the basis of Equity IRR over the period of the contract. The contract period for Dahej was 25 years.
  • Regarding the long-term contract with RASGAS, cost is indexed to JCC, but no significant information is available on the sensitivity (because the prices of your long term contract will double following full indexation with JCC in Jan 2014). Can we please know the complete formula for calculating the price of LNG: Answer - Due to confidentiality, we can not disclose the formula however PLL is not impacted by the increase or decrease in the price of LNG since it is sold on back-to-back basis to its offtakers i.e. Gail, IOCL and BPCL.
  • To undertake future projects, company has to raise more debt. The annual reports suggest cost of borrowing ranging between 4.5 and 8%. With the increase in debt how much the cost of borrowing would be affected. : Answer - The average cost of borrowing as of now is 9% which will go based on prevailing interest rate to 9.5% on fully drawn basis.
  • We understand that the Capacity utilization has increased from 75% in FY10 to 85% in FY11. Do you see capacity utilization for the existing capacity for FY12 & FY13 to witness same growth rate? : Answer - The capacity utilization at Dahej Terminal during FY12 & FY13 is expected to be 100%+.
  • How much do you expect the demand for Spot Cargos to change by, in % terms, given the sharp rise in price to $16/mmbtu levels? : Answer - We do not see demand coming down substantially even at higher level of spot prices for short term. However, if the prices remain at this level for sufficiently longer duration and crude does not move up, there will be some challenges.
  • Kochi plant (5mmtpa) is expected to be commissioned by 3Q FY12, by when do you expect it to run at full capacity levels? : Answer - We think there will be gradual ramp-up of capacity utilization and it will take 3-4 years to run at full capacity.
  • Potential debt repayment schedule? : Answer - We have different debts with different debt repayment profile. You may consider average debt life of 7 years
 
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