Business Standard

Brookfield to buy RIL’s gas pipeline for ₹13,000 crore

Files a preliminar­y placement memorandum

- SHINE JACOB

Canadian investor Brookfield­led India Infrastruc­ture investment trust (InvIT) is set to acquire East West Pipeline (EWPL), earlier known as Reliance Gas Transporta­tion Infrastruc­ture, from Mukesh Ambani for ~13,000 crore.

Brookfield on Thursday filed a preliminar­y placement memorandum, through which InvIT (set up by Brookfield as sponsor and 90 per cent investor) will invest ~13,000 crore to acquire EWPL.

Reliance Industries Ltd (RIL) will get the right to acquire equity shares of Pipeline Infrastruc­ture Private Ltd (PIPL), held by InvIT at an equity value of ~50 crore, at the end of 20 years.

Based on the understand­ing, the existing pipeline usage agreement has been reworked, giving a significan­t participat­ion in net earnings of PIPL to RIL.

“As part of the transactio­n, InvIT will acquire 100 per cent equity in PIPL, which currently owns and operates the pipeline," said an RIL statement.

The 1,400-km pipeline, owned by Mukesh Ambani’s holding companies, connects Kakinada on the Andhra coast to Bharuch in Gujarat, had ran into losses owing to a drop in natural gas production in Reliance Industries (RIL) blocks in the KrishnaGod­avari basin. Following the production drop, the pipeline was reportedly running at nearly 5 per cent of its capacity to transport 80 mmscmd (million standard cubic metres a day) of natural gas.

EWPL is also connected to pipelines of other operators like GAIL and Gujarat State Petronet for onward delivery of gas to other parts of India.

Following the deal, RIL’s current investment in preference shares, valued at ~4,000 crore, will continue and will be converted into equity after 20 years.

The pipeline project is considered to play a vital part in the fortunes of KG basin, as three projects — including R-Series, satellite cluster and MJ

(D55) — that are expected to be the game-changers for RIL and its partner BP Plc, are likely to start first production from 2020. The three projects put together have around 3 trillion cubic feet of discovered gas resources, where the companies are investing around ~40,000 crore.

Based on the reworked usage agreement, the reserved capacity has been reduced to 33 mmscmd against 56 mmscmd.

The deal adds any unutilised capacity payment by RIL will be the difference between ~500 crore a quarter and the revenue earned by PIPL.

Moreover, RIL will continue to be entitled to transport gas, either by itself or of any customers, free of cost against any outstandin­g unutilised capacity payments.

At the current approved final tariff of ~71.66 per million metric British thermal units (MMBTU), if the average volume of gas transporte­d is 22 mmscmd, RIL will not be liable to make unutilised capacity payments.

The next review of tariff in April 2020 will consider upward revisions of tariffs arising from determinin­g a lower revised capacity of the pipeline.

 ??  ?? The pipeline, owned by Mukesh Ambani’s holding companies, is considered to play a vital part in the fortunes of KG basin
The pipeline, owned by Mukesh Ambani’s holding companies, is considered to play a vital part in the fortunes of KG basin
 ??  ??

Newspapers in English

Newspapers from India