Dahej expansion to be completed in October: Petronet LNG

Petronet LNG Ltd on Monday posted a nearly 55 percent jump in its standalone net profit at Rs 377.86 crore for the quarter ended June 30, 2016. The company had reported a net profit of Rs 244.12 crore in the corresponding quarter a year ago, it said in a BSE filing.

The increase in EBITDA/tonne during the first quarter was on the back of increased capacity utilisation, RK Garg, Director-Finance, Petronet LNG, told CNBC-TV18.

He added that its plant in Dahej continues to see robust demand and further expansion of the Dahej terminal will be completed in October. He further said that the company is also seeing an increase in the throughput at Kochi terminal.

While the Dahej terminal has a nominal capacity of 10 MMTPA (equivalent to 40 MMSCMD of natural gas), the Kochi terminal has a capacity of 5 MMTPA (equivalent to 20 MMSCMD of natural gas). The company is in the process to build the third terminal at Gangavaram, Andhra Pradesh.Below is the verbatim transcript of RK Garg’s interview to Latha Venkatesh, Sonia Shenoy and Anuj Singhal on CNBC-TV18.Anuj: Highest ever profit but the street was enthused by the Dahej volumes; this were the kind of numbers street wanted for a long time. Do you think you can continue with these kind of volumes going forward now? A: Yes, we are already on the verge of completing our expansion of Dahej from 10 million tonne to 15 million tonne. There has been quite robust demand in the market of natural gas so this will help in further enhancing the capacity once our full expansion is complete. We are hoping that it will be over by October this year.Latha: What would your likely output be in this full year, you are going at 130 percent, does it get even higher than 130 percent? What can we estimate or work with in terms of volumes this year? A: 130 percent is compared with 10 million tonne of capacity. As I mentioned that our expansion is going to be complete by next month, then we will be having 15 million tonne of capacity. All depends upon the market and we hope that market is quite okay, LNG prices are quite reasonable. Even consumers are looking for more gas and especially more gas is being consumed in power and fertiliser with the scheme of government of India with respect to power development fund where some of the stranded power plants are now getting gas and they are utilising this gas. So, we hope that I think the demand would continue and we will continue to have utilisation of capacity at optimum. Latha: Assuming demand, what is your output likely to be, assuming that the demand is there? A: Once we complete 15 million tonne then we will be able to exactly tell you how much would be achieved. We are quite hopeful that we will be using our capacity to maximum. Sonia: Your EBITDA per unit has also risen to almost 40 now, 38.2 to be precise. Is this a trend that will continue on the upside? A: The reason for this increase is primarily because of capacity utilisation. As you know that we have done around 130 percent of the capacity and which has helped increasing the overall profitability because maximum amount, when we use more capacity, it hits the bottomline. So, that has helped increase the EBITDA level also. Sonia: From this EBITDA margin of 12 percent odd, what is the expectation by the end of the year? A: Very difficult to give you number as of now but we feel that the way that the company is proposing, I think we will continue to perform to meet the requirement of our consumers. Anuj: Is it suffice to say that this could have been the best quarter because a lot of things worked for you, volumes were high, cost came down 12 percent and that meant that were clearly a bigger impact on margins. Would you say it will be fair to say that these kind of numbers would be tough to repeat on a quarterly basis? A: I will not say that, I will say that we have been doing reasonably well. This was one of the best quarters; let us hope we will have more best. Latha: Your pact with RasGas, that covers the gas that you will be needing, even for the balance 5 million that expansion which will come on stream in October?A: The way that we have now restructured our business model is in addition to long-term gas we are importing from Qatar, as well as we will be importing from Australia. We have given capacity of our terminal to other parties who wanted to bring their own LNG and use our terminal – GSPC and Torrent and other companies. So, they would be bringing their own volume after expansion and using our terminal. So, we will be getting our re-gasification charges based on our services, what we provide to them. So, long-term volume would continue from Qatar plus we will continue to buy some stock volume, depends on the market plus this re-gas volume. Sonia: Wanted to also ask you about the Kochi operations, that continues to remain a drag, it is just at about 5 percent uitilisation levels, can you tell us what the expectation is, how much could it rise to over the next couple of quarters and by when do you see it break into the black?A: The issue is basically connectivity and the evacuation of gas from Kochi terminal to other market. However whatever the pipeline is existing as of now, we have seen some increase in the throughput there, at least in this last quarter. One consumer which was not off taking, they have started off taking. There is little hope that more volume would go in Kochi refinery expansion is taking place during this year itself. We will have some volume to Kochi refinery in addition to what we are supplying right now. Recently I understand that deal has awarded one segment of pipeline which is going towards Mangalore. So, we are quite hopeful and we are quite positive on this that pipeline would be made in near future and once that is done, definitely the output would increase. Latha: What is the update on the pipeline, you are seeing it in a year or two years?A: Very difficult to tell you until what has started on the ground but let us hope and we will let you know the update.