PETRONETNSEQ1 FY2023August 05, 2022

Petronet LNG Limited

7,490words

99turns

10analyst exchanges

5executives

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Management on call

Sabri Hazarika

EMKAY GLOBAL FINANCIAL SERVICES LIMITED

Vinod Kumar Mishra

DIRECTOR (FINANCE) - PETRONET LNG LIMITED

Rakesh Chawla

GROUP GENERAL MANAGER &

Debabrata Satpathy

GENERAL MANAGER

Ashwani Agarwal

MANAGER (FINANCE) - PETRONET LNG LIMITED

Key numbers — 40 extracted

Rs 14264 Crore

od afternoon to all of you. I will start with the major highlights. Our turnover has increased to Rs 14264 Crores in this quarter as compared to Rs.11160 Crores in the previous quarter and Rs.8598 Crores in the

Rs.11160 Crore

he major highlights. Our turnover has increased to Rs 14264 Crores in this quarter as compared to Rs.11160 Crores in the previous quarter and Rs.8598 Crores in the corresponding quarter, so there is a growth of

Rs.8598 Crore

sed to Rs 14264 Crores in this quarter as compared to Rs.11160 Crores in the previous quarter and Rs.8598 Crores in the corresponding quarter, so there is a growth of around 66% in the turnover as compared to

66%

previous quarter and Rs.8598 Crores in the corresponding quarter, so there is a growth of around 66% in the turnover as compared to corresponding quarter and almost 28% as compared to the previous q

28%

there is a growth of around 66% in the turnover as compared to corresponding quarter and almost 28% as compared to the previous quarter and apart from that I will just give the highlight, how has b

Rs. 937 Crore

quarter and 190 TBTU in the previous quarter and if you look at the profitability, PBT has been Rs. 937 Crores in the current quarter as against compared to Rs. 851 Crores in the corresponding quarter and Rs

Rs. 851 Crore

k at the profitability, PBT has been Rs. 937 Crores in the current quarter as against compared to Rs. 851 Crores in the corresponding quarter and Rs. 984 Crores in the previous quarter and PAT has been repor

Rs. 984 Crore

res in the current quarter as against compared to Rs. 851 Crores in the corresponding quarter and Rs. 984 Crores in the previous quarter and PAT has been reported at Rs. 701 Crores in this quarter as compared

Rs. 701 Crore

e corresponding quarter and Rs. 984 Crores in the previous quarter and PAT has been reported at Rs. 701 Crores in this quarter as compared to Rs. 636 Crores in the corresponding quarter and Rs. 750 Crores in

Rs. 636 Crore

n the previous quarter and PAT has been reported at Rs. 701 Crores in this quarter as compared to Rs. 636 Crores in the corresponding quarter and Rs. 750 Crores in the previous quarter. IICTf

Rs. 750 Crore

at Rs. 701 Crores in this quarter as compared to Rs. 636 Crores in the corresponding quarter and Rs. 750 Crores in the previous quarter. IICTflONtET ---<.o Ll • IT I D So if you compare

10%

---<.o Ll • IT I D So if you compare with the corresponding quarter, there has been growth of 10% in both PBT and PAT and further if you look at the performance, operational performance has been

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Guidance — 20 items

Vinod K Mishra

“If you look at the terminal of GAIL, Dabhol terminal was in operation in the fourth quarter, but right now it is not working, so till October, it will be our terminal which will be busy, so maybe that is the reason.”

Vinod K Mishra

“Basically, you know, Q1 will be better, because Dabhol is closed for this period.”

Vinod K Mishra

“We are going on as per the schedule and perhaps we have already contracted with IOCL for four LNG dispensing stations and we are going ahead and this is very likely to start shortly and may be in next six months you will see that it will be there and one more station.”

Maulik Patel

“Another question is on that you talked about the petchem project and the biogas, can you throw some light and what stage we are right now for these two projects?”

Vinod K Mishra

“First is petchem project, we are in fact and intending to have a plant which is called PDH- PP plant, to be put up at Dahej, for that we are still doing some feasibility because we have already done PFR and now we are in the process of getting DFR, so all these things will be analyzed and if there is a return of at least 16%, 17% IRR then only we will be going for this kind of project, because there has been huge crack in this particular product in the company.”

Vinod K Mishra

“I think unless and until we are sure that we will be having some good IRR, we will not undertake it.”

Maulik Patel

“I had one last small question if you allow me to, Sir, how do you assess the situation of LNG demand in the country with respect to the upcoming Reliance Energy auction which IICTflONtET ---<.o Ll • IT I D will be approximately 3 million to 4 million ton of LNG demand that can be replaced?”

S Ramesh

“Okay, if you look at fundamental question about gas supply and what GAIL has mentioned in terms of reducing supplies to their contracted customers to the take or pay , so when you say you are having use or pay obligation, can’t there be a situation where the offtakers ask you to restrict your volumes to the frame of use or pay and would not it imply some risk of reduction in volume even in the current year / next year?”

Vinod K Mishra

“This is true that Bangalore line has to be in place in future, but again there has been an issue around 250 kilometer from Coimbatore to Bangalore, which is remaining, so there has been in fact problems with the farmers in the state but now we have come to stage where government has come to agreement with the farmers that whatever line is to be laid, it will be laid along the highway, so it is not passing through farmers’s land.”

V Subbaraman

“Can you give us an update on that and also help us understand how much capex you are budgeting for the current and next year?”

Risks & concerns — 9 flagged

Can you explain why the other expenditure has gone up other than the impact of the FX loss?

— S Ramesh

Okay, if you look at fundamental question about gas supply and what GAIL has mentioned in terms of reducing supplies to their contracted customers to the take or pay , so when you say you are having use or pay obligation, can’t there be a situation where the offtakers ask you to restrict your volumes to the frame of use or pay and would not it imply some risk of reduction in volume even in the current year / next year?

— S Ramesh

But opex will be very high because again we have to arrange ship for this FSRU purpose, so that is IICTflONtET ---<.o Ll • IT I D again a challenge we have to see where from we can have that so that we can have some facility for regasification on that, so this is all what is going on, but we are very serious about this project and perhaps in next few months you will see some progress.

— Vinod K Mishra

Trading through that arm is a challenge.

— Vinod K Mishra

At this point of time, if you go for a long term contract, you will in fact enter into contract which is very high price and in future it will be difficult to in fact sell that LNG, so we are waiting for right environment when the prices of LNG, spot LNG come down and perhaps that will be the right atmosphere and we are hopeful that next year it will be there and hopefully we will then negotiate a good contract.

— Vinod K Mishra

Right now it is difficult to comment that it could be added because if you look crude linked contract, Indian consumers are habitual to this crude linked contract, even if GAIL is buying in henry hub, nobody is interested in henry hub, so that is all again a question mark, we are habitual to having this crude linked indexes rather than gas based and of course in future, customers may agree to henry hub also.

— Vinod K Mishra

It is not like that The utilization level of Dahej, at 87% is still running and if spot LNG price is very high, still we are able to utilize 87% of capacity, which is not less and it is such a difficult and turbulent market, so if you compare with Q1 of the corresponding quarter, it is 1% higher, i.e.

— Vinod K Mishra

Escalation is whereas per contract 5%, we are already doing it, right now it is 57.05, so I think this is as per the contract and uniformly it will continue to be sure, I do not think there is any challenge coming from anybody and this is a tariff which is being charged at all the terminals which are there.

— Vinod K Mishra

In fact, Dahej has been a benchmark, so I do not see any challenge as such of the 5% hike every year.

— Vinod K Mishra

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Q&A — 10 exchanges

Thank you for the opportunity, Sir. Two questions; one was that GAIL in their concall mentioned that Gazprom is unable to actually deliver on their commitment of volumes of LNG. Now some portion of that obviously flowing through our terminals, so what mitigation options we have if GAIL is unable to bring those volumes. Contractually how are we placed with respect to this, if these volume does not come through or GAIL is unable to source it from the alternative sources?

Vinod K Mishra

You are right. There has been some trouble in Gazprom contract of GAIL, but as far as we are concerned, there is a contract with Use or Pay clause. They have booked the capacity to the extent of 2.5 MMTPA on Use or pay basis. Whatever volumes are there after agreeing in ADP, they will have to bring to that extent, otherwise we will apply use a pay clause. So we are secure to that extent, but overall if you see it is not a very good scenario that somebody’s defaulting, it is impacting the ultimate consumers, because leave apart our terminal, the customer is suffering, because long term gas whic

Thanks for the opportunity. Couple of questions. One is that RasGas volume which we are sourcing is 8.5 million tons, if you look at last three years on a calendar year basis, this is consistently below that number. Last year we were sourcing 8.5 million ton of volume and probably supplying less?

Vinod K Mishra

No, it is not 8.5 million, it is 7.5 million, one million ton has been assigned to offtakers. Of course that was part of the deal ,when we renegotiated the price with Ras Gas in 2015. In that deal it was agreed that we will take additional volume of one MMTPA and that is what to be assigned to offtakers subsequently. Accordingly as per the deal, we have assigned that 1 MMTPA to offtakers, so we have in our portfolio 7.5 MMTPA now, so that is the reason. Another question is on that you talked about the petchem project and the biogas, can you throw some light and what stage we are right now for

Good evening and thank you very much. Can you share the Regasification margin you have earned in this quarter?

Vinod K Mishra

Regas revenue this quarter has been Rs.537 Crores as compared to Rs.463 Crores in the previous quarter and as compared to Rs.552 Crores in the corresponding quarter. Is there any inventory gain or trading gain in this quarter? Yes, there has been inventory gain of Rs.35 Crores and trading gain of Rs.104 Crores. Can you explain why the other expenditure has gone up so much, other than the FX loss which I presume are going to other components in the P&L? This inventory gain if you look at as I told you as compared to corresponding quarter have been higher by Rs.35 Crores, but otherwise if you lo

Thank you very much for the opportunity. My first question is on the LNG trading subsidiary that you have setup so can you help us understand the plan that you have here and any update that you can provide on the gas sourcing that you are planning given that you may have to sign a new contract before the RasGas contract expires that is one. Secondly, you were conducting prefeasibility studies on the FSRU terminal in Gopalpur. Can you give us an update on that and also help us understand how much capex you are budgeting for the current and next year? Thank you.

Vinod K Mishra

First question is regarding the RasGas contract which is expiring in 2028. So the thing is that already the task force has been formed, and this task force is assigned with the work of extending the contract beyond 2028 and the task force is led by none other than MD and CEO of Petronet LNG Limited and consists of director level personnel from IOCL, GAIL, BPCL. In fact this high level task force is already in talk with the RasGas management as we have to conclude this by December 2023. So we have time till December 2023 to conclude all the negotiation for extension of the contract with RasGas.

Thank you for doing the call. Just one question I had was on this LNG sourcing on a long term, you talked about RasGas and high-level committee that has been informed. Can you just talk a bit about what you are seeing apart from Qatar in terms of gas sourcing because a lot of your Asian peers and China, Thailand etc, have already signed long-term contracts IICTflONtET ---<.o Ll • IT I D with Cheniere etc, so what has been India strategy around if you can just give us some color on that?

Vinod K Mishra

This time particularly is not good for new long term sourcing also because right now prices are so high in the spot market. If we go for any long-term contract, it comes with very high slope, so we are waiting for some time because if price comes down then we can think of having a good long term contract. Right now everybody will ask the slope, which is very high, seeing that LNG spot prices are going at $43, $44, so at this price if you go to the market even for the long term contract, you find slopes as very high. So we are looking forward to some opportunities but of course high prices are

Good evening, Sir. Thanks for the opportunity and thanks for having this call. My first question is actually a book keeping, so how much of the Gorgon volume may be going to Dahej in this quarter?

Vinod K Mishra

5.2 TBTUs. The next question is related to this only, so we had guided sometime back that utilization at Kochi terminal will start picking up, but its utilization remains at 15% to 20%. So until when we continue to get the Gorgon volume at Dahej, so if you can help us understand that why is the situation at Kochi is remaining stagnant and what is the road forward for Kochi and also like if I can confirm the Kochi regas tariff that we are charging at this moment? First question is why utilization level has not increased, so this is very right question you have asked. I will explain it. So if yo

Thank you for the opportunity. I just had one basic question. When you take it gross margin for this quarter versus last quarter, I am sure there are multiple things, margins have declined right, what would be the reason for that?

Vinod K Mishra

Last year gross margin you are asking, can you repeat your question please? Yes Sir, if you compare quarter-on-quarter or even last year quarter to this year, year-on- year gross margins have come down may be two, quarter-on-quarter I was seeing 250-bps odd and from last year also it is down, so I just wanted to know what is the reason for that? Trading margin was high in the last quarter, so that was the major reason, but of course this quarter, there is not that much of trading margin. Going forward for the rest of the year given the conditions that we are in the gas prices if you consider t

Thank you for the opportunity. Just two questions from my side. One being a follow-up from previous participant’s question, you mentioned that the Kochi terminal utilization levels are low because of high gas prices particularly spot gas prices, but when the cargo volumes would be coming under the long term contract, they would probably be still available at a reasonable price, if you could provide some clarity on that?

Vinod K Mishra

Gorgon contract is already committed to the offtakers. It can be in fact taken by offtakers either at Dahej or at Kochi. We are not having too much of customers in Kochi, two offtakers are bringing their volume to Dahej also, I think in future when there will be right atmosphere prices at the reasonable and affordable then this entire Kochi volume, this Gorgon volume will go to Kochi only, but right now because of pipeline connectivity to Bangalore and other things, it is not possible to shift that volume there, but one thing is vey clear that customer in that region do not have that long term

Thanks for the opportunity, Sir. You did mention about the project that you envisage for the next few years, what would be the annual capex run rate may be this year and next year if you could explain on that?

Vinod K Mishra

Capex this year and next year? Yes. If you look at the projects we are undertaking, these tanks works is also already going on and this is likely to be completed by 2024 beginning almost, so may be next two years we have to spend the Rs.1250 Crores, so Rs.600 Crores each year roughly. At a company level for the other projects also taking the jetty expansion or the Dahej expansion so in total at a company level what would be the annual capex? Capex, if you look at, Rs.1200 Crores capex we have planned this year as per budget, so this year Rs.1200 Crores and it may be same next year, next year m

Thank you very much all of you and in fact I would like to thank all of you for reposing faith in us and in fact our management will continue to strive to increase the bottom line from quarter-on-quarter, year-on-year basis and will do all efforts that company grows like anything and in fact we have seen last year also that we have shown this commitment to work higher profits and it has been difficult time, no doubt for the entire LNG industry, but we are able to maintain our profitability in all the situations so far we have faced and this quarter also we have performed very well actually whe

Management

Speaking time

Vinod K Mishra

Moderator

Probal Sen

S Ramesh

Nitin Tiwari

Samaiah V

Hemal

Maulik Patel

Ankur Agrawal

V Subbaraman

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Opening remarks

Sabri Hazarika

Good evening everyone. On behalf of Emkay Global, I am pleased to welcome you all to the Q1 FY2023 post results conference call of Petronet LNG Limited. We have with us the senior management of Petronet LNG led by Mr. Vinod Mishra, Director (Finance), Mr. Rakesh Chawla, Group General Manager and President (Finance), Mr. Gyanendra Sharma, Chief General Manager and Vice President (Marketing), Mr. Debabrata Satpathy, General Manager (Finance and Accounts), Mr. Vivek Mittal, General Manager (Marketing) and Mr. Ashwani Agarwal, Manager (Finance). So today’s session would be a brief on the results by the management followed by the question and answer round. So without any further delay now I would request Mr. Mishra to come up with the opening remarks. Over to you Sir!

Vinod K Mishra

Thank you Sabri. Very good afternoon to all of you. I will start with the major highlights. Our turnover has increased to Rs 14264 Crores in this quarter as compared to Rs.11160 Crores in the previous quarter and Rs.8598 Crores in the corresponding quarter, so there is a growth of around 66% in the turnover as compared to corresponding quarter and almost 28% as compared to the previous quarter and apart from that I will just give the highlight, how has been the performance of Dahej and Kochi terminal. During the current quarter we have been able to achieve 196 TBTU in Dahej terminal as compared to 194 TBTU in the corresponding quarter of the previous year and 178 TBTU in the previous quarter. So if you look at there has been a better performance as compared to previous quarter and also as compared to corresponding quarter and total throughput in both the terminals taken together has been 208 TBTU as against 209 TBTU in the corresponding quarter and 190 TBTU in the previous quarter and

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