Berkshire Hathaway to not invest C$4 bln in Saguenay LNG project
Warren Buffett’s Berkshire Hathaway Inc has decided not to invest C$4 billion in a liquefied natural gas (LNG) plant by the Saguenay port, CBC News reported on Thursday, citing Radio-Canada. The marine terminal to ship LNG to overseas markets is expected to be built roughly 230 km northeast of Quebec City, at a cost of C$9.5 billion ($7.08 billion), according to the report. GNL Quebec, the company behind the project, confirmed it had lost a significant potential investor, but did not say who it was, CBC News reported.
RIL is India’s Exxon, AT&T, Amazon rolled into one: Bernstein
Reliance Industries Limited (RIL) is India’s answer to Exxon, AT&T, and Amazon rolled into one, according to a research report by brokerage, Bernstein. According to the report, RIL is a unique company with activities spanning oil and gas, telecoms, retail, media and fintech, and one of the most diversified conglomerates in India, if not the world. There is simply no other company like it, it said. In India, Reliance dominates energy, telco, and retail in the same way that Exxon, AT&T, and Amazon do in the US. Over the past decade, Reliance has been able to achieve market leadership positions in business segments that incumbent players and investors would never have thought possible. This is a testament to Reliance’s management skills and its ability to navigate some of the complexities that come with being a large operator in India, the report said. Despite some failures along the way, what has impressed most is the strategic vision and execution capability of Reliance management to enter and “win” in new business areas, analysts at Bernstein said. Energy remains the cash cow of the business, but in the near term, it is likely to face margin pressure. Although Reliance plans to sell down a stake to Aramco, this does not mark a retreat from energy, with India likely to be the fastest-growing market for refined fuel products and petrochemicals over the next 20 years. “In telecoms, we expect Reliance will increase its market share to 44 per cent by the end of FY22 as it consolidates its leadership position in the market,” the report said. Perhaps the greatest growth opportunity is in organised retail. “We expect India’s retail market, which is currently 90 per cent unorganised and ready for digital disruption, to reach $1.2 trillion by 2025,” the report by Bernstein added. Reliance is the offline leader with $18.5 billion in revenues and 11,000 plus stores. The company is best positioned in new commerce, digitizing neighbourhood stores (30 million), and eCommerce apps (JioMart and AJIO). “Beyond retail, we see opportunities in fintech and media, where there are clear opportunities for synergies with telecoms. Reliance is at the start of a secular growth phase driven by telco, retail and new economy related businesses. It is a quality compounder that every Indian portfolio should own,” the report added. Reliance Industries (RIL) has disrupted the energy and telecoms industries in India and i s on the cusp of doing the same to retail, fintech, and media. With its enviable track record of innovation and execution, we believe the best is yet to come. Energy remains core to the business and we expect further expansion in this sector. India is forecast to be the fastest-growing market for refined and chemical products over the next decade. Reliance partnerships with BP and Aramco should support this growth. Reliance has achieved market leadership in telecoms. In just under three years, Reliance reached 34 per cent share of market revenue in India, higher than expectation. Based on current net add run-rates, it will likely reach 44 per cent share by the end of the next financial year. The report has posed a question on could Reliance become India’s Amazon? Retail is a large market in India (estimated to reach $1.2 trillion by 2025), currently unorganised (90 per cent) and ready for digital disruption. Reliance is the offline leader ($18.5 billion revenues, 11,000+ stores). The company is best positioned in New Commerce – digitizing neighbourhood stores (30 million) – and in eCommerce (Grocery/Fashion and Lifestyle categories).
Ruias-led Essar committed to India’s growth story
The Ruias-led Essar is committed to the India growth story after an aggressive debt reduction of Rs 1400 billion over last three years. This is the message Ravi Ruia and Prashant Ruia have conveyed to banks and fund houses just before Essar’s 50th anniversary celebrations. The Ruias’ Essar Group has said that after completing its aggressive deleveraging exercise over the last three years, which saw its debt reduce by a staggering Rs 1400 billion, its quality of earnings is now much more healthy and sustainable. “Our existing portfolio of companies are firmly rooted in the India growth story and we remain committed to growing the business,” Ravi Ruia and Prashant Ruia said in a letter to bankers and domestic fund houses. The letter is part of the Group’s efforts to update its stakeholders as it kickstarts its 50th anniversary celebrations. The Essar Group has indicated that it is “poised to embark on a new phase of growth, while driving growth in its existing portfolio.” Essar has hinted that its confidence in the future growth prospects comes out of the twin developments of a substantial deleveraging in the balance sheet and strong prospects in the remaining portfolio of businesses. Essar will continue to use its entrepreneurial skills, vast pool of human resources, and decades of experience and innovation in pursuing fresh opportunities and creating value for all its stakeholders, said the letter jointly signed by Ravi Ruia and Prashant Ruia. In infrastructure, Essar has said it operates ports and terminals in India, UK and Africa, and has commercial interests in turnkey project construction in India and middle east. In the metals and mining sectors, the Essar Group has exposures in iron ore mining, pelletisation and coal mining in USA and Indonesia. In new age services, Essar said it has business interests in digital solutions and customer experience platforms in India, Europe and USA. In the energy sector, Essar has noted it has commercial interests in oil, gas and coal bed methane exploration and production in India, Vietnam and Nigeria; oil refining and retailing in UK and power generation in India and Canada. Essar said that despite major business and regulatory challenges, it has successfully and consistently created world-class assets. The Greenfield assets built by Essar have attracted significant Foreign Direct Investment (FDI) of US $40 billion, which is reflective of the superior and world-class quality of those assets. The Essar Oil-Rosneft deal alone saw over Rs 860 billion (US $13 billion) of FDI, the country’s largest until date, it claimed. The Ruias noted Essar had played a vital role in the country’s development, with capital investments of over Rs 2000 billion ($28 billion) in the vital sectors of ports, steel plants, oil refining & retail, oil & gas exploration & production, power generation & transmission, mining, shipping and telecom, with substantial equity from the Essar Group. Essar claimed to have “built some of the finest assets in these sectors, creating thousands of jobs, and contributing several billions of rupees to the Indian exchequer by way of taxes and royalties.” “We have fulfilled our Corporate Social Responsibility with focused community uplift programmes in the areas of livelihoods & entrepreneurship, women’s empowerment, health, education, infrastructure and environment. The positive impact of these initiatives makes a difference in the lives of 500,000 people from 500 villages across 8 Indian states,” the Ruias said in the letter.
Indonesia to cap gas prices for PLN at $6/mmBtu to cut subsidies
Indonesia’s government plans to reduce the price of natural gas sold to power plants to reduce subsidies it has to pay to the state-owned utility, the energy minister said on Friday. The government wants natural gas sold to power plants to be kept at a maximum of $6 per million British thermal units (mmBtu), Minister Arifin Tasrif told reporters. Power plants managed by state utility Perusahaan Listrik Negara (PLN) currently pay an average $8.4 per mmBtu this year. The government is already working on a new gas pricing policy for industrial customers to bring down their prices to around $6 per mmBtu, from $8-$9 per mmBtu, to lower the energy costs of manufacturers. Tasrif did not say when the price cap for PLN would take effect, but the policy for industrial manufacturers should be covered in a regulation to be implemented this month. Under the pricing policy for industry, to compensate gas sellers when market prices for natural gas are higher than the cap, the government will slash the revenue it receives from the gas producers’ contracts. The energy ministry’s director general of electricity, Rida Mulyana, separately told reporters that capping gas prices for PLN will reduce the utility’s costs significantly, as 38 per cent of the company’s fuel expenditures are for natural gas. PLN’s total fuel cost for this year is estimated to reach 146.67 trillion rupiah ($10.28 billion). The government will lose some revenue from the share it receives from natural gas sales, but subsidies and compensations it must pay to PLN will also be reduced, Mulyana said, forecasting a net savings of 4.51 trillion rupiah. The government had previously budgeted 54.8 trillion rupiah in subsidies for PLN in 2020, assuming the utility will begin charging some customers market prices in January. The energy ministry, however, has recently decided not to raise electricity tariffs until June 2020, extending its policy of freezing rates since 2017. Indonesia, Southeast Asia’s largest economy, grew 5.02 per cent last year, the weakest in three years. Growth may slow further this year as the spread of coronavirus globally hit its tourism and trade, as well as its financial markets.