MC EXCLUSIVE Brookfield contemplating IPO of natural gas pipeline InvIT

The 48-inch pipeline, with a capacity of 85 million metric standard cubic meters per day, accounts for nearly 18 percent of India’s gas volumes transported.

Private equity major Brookfield, the biggest global investor in Indian infrastructure, is planning to launch an IPO of its infrastructure investment trust (InvIT) – known as Energy Infrastructure Trust - which houses natural gas pipelines that the investor acquired from Reliance Industries Limited in 2019, people aware of the development told Moneycontrol.

Energy Infrastructure Trust operates the country’s first bi-directional natural gas pipeline, a 1,485 km corridor connecting gas-producing fields on the east coast with key industrial and urban markets in the west.

The people cited above added that Brookfield has appointed a couple of advisors to begin work on the IPO. The quantum of fundraise through the IPO is still not finalized, they said, adding that the deal will include both primary and secondary share sales, with the IPO proceeds to be used for part repayment of the debt of the InvIT.

“In September, Brookfield sold large sums of units of InvIT to domestic investors for over Rs 1,800 crore in multiple block deals. These secondary share sales were meant to test the investor appetite for the pipeline InvIT, especially domestic investors, ahead of the proposed IPO of the trust,” said one of the sources.

As per stock exchange data, several wealth managers such as Neo Wealth, 360 One, Ambit Wealth, LGT Wealth and health insurer Star Health and Allied Insurance Company picked up Energy Infrastructure Trust’s units from Brookfield in the block trades executed in September.

An email sent to Brookfield did not elicit a response.

InvIT IPOs

Brookfield’s push to take its Energy Infrastructure Trust public comes at a time when many other sponsors of such infrastructure trusts  are working towards a public market debut, hoping to tap strong domestic investor demand for long term, stable yield generating assets.

Moneycontrol reported on November 11 that Edelweiss Alternatives is planning to soon file draft papers for the initial share sale of its roads InvIT.

Moneycontrol previously reported that private equity firms KKR and I Squared Capital are planning to take their InvITs public, along with the National Highways Authority of India (NHAI)I, contributing to a pipeline of InvIT IPOs that are likely to raise over Rs 20,000 crore from the public markets.

Energy Infra Trust

The gas pipeline owned by Brookfield’s energy infra trust is the country’s first bi-directional pipeline, interconnected to major pipeline networks such as HaziraVijaipur-Jagdishpur/Dahej Vijaipur gas pipeline in Gujarat and Dahej -Uran-Panvel pipeline in Maharashtra, the Krishna Godavari Basin network in Andhra Pradesh owned and operated by GAIL (India) Limited, a pipeline owned by  Gujarat State Petronet Limited (GSPL)  in Gujarat, as well as the GSPL India Transco Pipeline in Andhra Pradesh. In addition, the Pipeline is connected to 21 direct customers, including city gas distribution customers, fertilizer, iron and steel, power, and petrochemicals.

The pipeline is connected to various domestic gas sources such as KG-D6 gas block operated by Reliance Industries Limited (RIL) and British Petroleum as well as ONGC’s gas fields on the east coast and to a LNG terminal operated by SHELL Energy India Private Limited in the state of Gujarat, on the west coast. The Pipeline also transports gas from LNG terminals at Dahej and Dabhol through interconnected pipelines of GAIL and GSPL.

The trust has a ‘pipeline usage agreement’ with RIL, whereby the latter has contracted a certain capacity of the pipeline for 20 years. The arrangement ensures steady cash flows for the trust.

The 48-inch pipeline, with a capacity of 85 million metric standard cubic meters per day, accounts for nearly 18 percent of India’s gas volumes transported.

For FY 2024-25, the Trust reported a total consolidated income of Rs 4,036 crore and a total distribution of Rs 1,141 crore, translating into a distribution yield of 19.26 percent, the highest among Indian InvITs.