Petronet LNG

Petronet LNG reported a very poor performance for Q2FY14 and this trend of poor show had been indicated during its Q1 performance. For the current Q2, the company’s net profit dropped over 42% (YoY) at Rs.182 crore. And the company has blamed this poor show, like in Q1, on lower capacity utilisation and higher depreciation and interest charges on account of capitalisation of the Kochi terminal, which was commissioned, with its 5 MMTPA in Q2. But this is not a one-off problem. This terminal is not expected to run beyond a 7-8% capacity in first year as it neither has customers nor the pipeline to carry the fuel to Karnataka and Tamil Nadu, which is to be put up by GAIL. Till then, it is expected to be sold to a few handful local power companies and to BPCL’s Kochi plant. This situation is expected to ease only by 2015.

The company’s net sales grew by 26% at Rs 9,493 mainly due to higher prices of LNG (liquefied natural gas) during the quarter. Volumes declined by 9% to 123TBTU mainly due to lower tolling volumes from GAIL and GSPC. The cost of LNG re-gasified increased by 30% at Rs 9,032 crore.

Petronet is going in for forward integration to overcome this glut and has got the approval to set up a 1200 megawatt (MW) power plant in Kochi to be commissioned in three phases of 400 mw each. But the first phase is expected to come up only by 2015. Lack of infrastructure build is causing a bottleneck for a healthy company like Petronet, which otherwise has approvals to expand its 10 mtpa Dahej LNG terminal to 15 mtpa by 2015. It is also looking at another 5 mtpa in two phases which will make Petronet’s Dahej terminal the biggest in the world.

Meanwhile, Petronet LNG is in talks to offer up to 18% stake in its Gangavaram terminal project to a strategic partner. Petronet has 74% stake in the terminal while Gangavaram port has 8% stake and it is looking at a producer of supplier of gas and many companies are said to have evinced interest. The company plans to build a 5 million tonne a year LNG terminal at Gangavaram in the east coast by 2016.