The shares of Petronet LNG jumped more than 4 percent on December 4 after the company announced that it has entered into a 15-year ethane unloading, storage and handling (USH) services binding term sheet with ONGC.
The shares of the company were trading at Rs 279.80 apiece in the morning of Thursday, snapping a five-session losing streak.
Petronet LNG’s agreement with ONGC:
In an exchange filing released in the post market hours of December 3, the company said that Oil and Natural Gas Corporation (ONGC) and Petronet LNG have entered into the agreement which will be commence between October-December, 2028.
"PLL is developing ethane unloading, storage and handling (USH) facilities with ethane storage tank capacity of approx. 1,70,000 Cubic Meters at Dahej, Gujarat. PLL is also constructing a unique third jetty at Dahej which will be capable of handling Ethane and Propane in addition to LNG," the firm said.
As per the term sheet, ONGC will reserve capacity of approximately 600 KTPA at Petronet LNG's ethane storage and handling facilities at Dahej, Gujarat. PLL shall receive, store and handle ethane sourced and imported by ONGC or its subsidiary and affiliates at Dahej, Gujarat and redeliver Ethane to ONGC at the delivery point.
Petronet LNG is expected to earn a gross revenue of around Rs 5,000 crore over the total contract duration of 15 years, as part of the binding term sheet singed with ONGC. The transaction shall commence from FY 2028-2029. "It represents a significant milestone in PLL’s strategic vision to develop and offer ethane import infrastructure to third parties, thereby expanding its business portfolio beyond LNG and strengthening its position in India’s petrochemical and energy value chain," the firm said.
"PLL's under-construction unique third jetty will facilitate unloading, storage and handling ethane, propane and LNG at Dahej and will be first-of-its-kind in India which shall be made available for third-party imports. This step of PLL underscores its commitment for enabling growth of downstream industries such as Petrochemical sector through world-class import infrastructure for ethane and propane in addition to its existing LNG regasification infrastructure," it added.
Petronet LNG said that the agreement provides ONGC with assured capacity booking for the import of ethane to meet the feedstock requirements of ONGC Petro Additions Limited (OPaL), which operates one of India's largest petrochemical complexes located at Dahej, Gujarat, which includes a world-scale ethylene cracker unit using ethane as the primary feedstock.
The agreement between ONGC and Petronet LNG was signed at ONGC's corporate office in New Delhi in the presence of ONGC Chairman and MD Arun Kumar Singh and Petronet LNG MD and CEO Akshay Kumar Singh.
Normura on Petronet LNG:
Nomura kept a 'Buy' call on the shares of Petronet LNG, with a target price of Rs 360 per share. This implies an upside potential of nearly 34 percent from the stock’s previous closing price.
The international brokerage sees this announcement as a positive development and expects that the remaining 50 percent capacity may also be booked before the ethane USH facility comes online
Nomura estimates first-year EBITDA at Rs 140 crore, adding that 15th year EBITDA can hit Rs 275 crore without taking any margin improvement.
Petronet LNG share price history:
Petronet LNG shares have gained more than 2.5 percent in the past five days, but fell over 9 percent in the past six months. The stock is down around 20 percent from the stock’s previous closing price.
The stock fell over 17 percent in the past one year, and gained only 6.5 percent in the past five years.
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(With inputs from Reuters)
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