Petronet LNG

Petronet LNG has disappointed investors and traders alike with a poor set of Q1FY15 numbers. It posted a 30% (YoY) decline in net profit at Rs.157 crore and this was mainly on the back of higher interest outgo, which rose by a whopping 225% to Rs.78 crore. This rise in interest charges was on account of capitalizing the books of accounts of its Kochi LNG terminal. Lower margins ar Dahej terminal also added to the woes. Like has been the trend for a few quarters now, the company has blamed this poor show on lower capacity utilization - the 5-million-tonne-a-year Kochi terminal is operating at just 1% of capacity and only 0.66 trillion British thermal units of natural gas was regasified. This was sold during current Q1 to Kochi Refinery. . But this is not a one-off problem 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.

The good news here is that it has obtained the board’s approval for leasing out its 5 mtpa Kochi terminal as a storage facility for international LNG players and hopes to start leasing by current Q3. The company has said that some 17-18 international marketers have shown interest. It will be used mainly by those importing gas, storing it to later either resell or store for own use.

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 20 mtpa. The 10 to 15 Mtpa expansion is estimated to be completed by end 2016 and the rest by end 2020.