‘Clean Data Room’ with sensitive info on BPCL to open for bidders signing additional pact
Bidders vying to buy government stake in Bharat Petroleum Corporation Ltd (BPCL) will be given access to a ‘Clean Data Room’ containing commercially sensitive information on the firm subject to their signing an additional confidentiality agreement, sources said. A virtual data room, mostly containing financial information on BPCL, was opened in the second week of April and qualified bidders signing Confidentiality Undertaking (CU) have been given access, three sources with direct knowledge of the matter said. Bidders which include mining-to-oil conglomerate Vedanta and private equity firms Apollo Global and I Squared Capital’s arm Think Gas will also be allowed physical inspection of assets such as refineries and depots in the coming weeks as part of the due diligence process. The government will seek financial bids once bidders complete due diligence and terms and conditions of the share purchase agreement (SPA) are negotiated. Sources said certain data which is commercially sensitive will be uploaded in a separate section of the data room referred to as ‘Clean Data Room’ and access shall be extended only to the designated team of lawyers of the qualified bidders in the interest of confidentiality and prevention of misuse of data. A separate agreement restricting use of the data and maintaining confidentiality will have to be signed by the bidders for accessing the ‘Clean Data Room’, they said. The data room access for due diligence is likely to be available for a period of around 8 weeks. As part of the due diligence process, the bidders want to undertake a physical visit to some of the major sites like refineries and depots/plants. While BPCL will facilitate such visits, an approval from the Ministry of External Affairs (MEA) is required in case any foreign passport holder wants to visit sensitive locations like refineries, sources said. Also, representatives of bidders would be allowed to hold virtual meetings with management of BPCL once the silence period till the announcement of annual financial results of the company for 2020-21 are announced. All queries raised by the bidders during the due diligence are being collated by the transaction advisor, Deloitte and they will be answered by the company management or the concerned government department depending on the nature of the issue, sources said. The government’s 52.98 per cent stake in BPCL is valued at about Rs 530 billion based on Friday’s closing price of company shares on BPCL. The stake sale in India’s second-largest fuel retailer is crucial to plans to raise a record Rs 1750 billion from disinvestment proceeds in fiscal 2021-22 (April 2021 to March 2022). Sources said the recent Covid-19 outbreak could still slow down the sale process as physical visits may be hindered. A special purpose vehicle floated by the BSE-listed Vedanta Ltd and its London-based parent Vedanta Resources Plc submitted an expression of interest (EoI) for buying government stake in BPCL before the close of the deadline on November 16, 2020. While I Squared Capital is a private equity firm focusing on global infrastructure investments, New York-based Apollo Global Management, Inc is a global alternative investment manager firm. I Squared Capital invests in energy, utilities, transport and telecom projects in North America, Europe and select high growth economies such as India and China. Vedanta’s interest in BPCL stems from its USD 8.67 billion acquisition of oil producer Cairn India nearly a decade back. The company produces oil from oilfields in Rajasthan which are used in refineries such as those operated by BPCL to turn them into petrol, diesel and other fuels. BPCL will give the buyer ownership of around 15.33 per cent of India’s oil refining capacity and 22 per cent of the fuel marketing share. The buyer of the company will get 35.3 million tonnes of refining capacity — 12 million tonne Mumbai unit, 15.5 million tonne Kochi refinery and 7.8 million tonne Bina unit. BPCL also owns 18,639 petrol pumps, 6,166 LPG distributor agencies and 61 out of 260 aviation fuel stations in the country. The firm also has upstream presence with 26 assets in nine countries such as Russia, Brazil, Mozambique, the UAE, Indonesia, Australia, East Timor, Israel and India. It is also making a foray into city gas distribution and has licences for 37 geographical areas (GAs).
Government Bullish On Asset Monetisation Programme?
In the Union Budget 2021-22, the Centre had proposed to launch a National Monetisation Pipeline to assess potential value of underutilised assets. In its Union Budget for 2021-22, the Centre had announced that several of its core assets will be rolled out for financial fruition under the Asset Monetisation Programme. While the Government has earmarked several blue-chip sectors under this programme, in the energy sector, oil and gas pipelines of Gas Authority of India Ltd, Indian Oil Corporation Ltd and Hindustan Petroleum Corporation Ltd are to be monetised. The Government plans to generate ₹ 17,000 crore through monetising the abovementioned assets in the current fiscal (2021-22). To achieve this aim, Gas Authority of India Ltd has identified two pipelines and is in the process of setting up an infrastructure investment trusts or InvITs for the purpose. Indian Oil has identified two hydrogen plants and a pipeline for monetising while Hindustan Petroleum too has initiated action to identify assets for monetisation. What is Asset Monetisation Programme? In the Union Budget for 2021-22, the Government had proposed to launch a ‘National Monetisation Pipeline’ to assess the potential value of underutilised and unused government assets. To keep the whole process transparent, an asset monetisation dashboard was proposed to be created to track the progress and provide visibility to investors. Soon after the Budget, the Prime Minister had said that the plan is to monetise 100 government and PSU-owned assets worth ₹ 2.5 lakh crore for ‘investment opportunity’. The plan is to continue for the next five years. As part of this ambitious plan, the Ministry of Road Transport and Highways has been set a target to raise ₹ 30,000 crore through asset monetisation over the next three years, while other key economic ministries including the Petroleum Ministry too have been given such ambitious targets. What are InvITs? To achieve success under the Asset Monetisation Programme, the Government is looking at the Infrastructure Investment Trusts or InvITs route. Under InvITs, the land assets are transferred to a trust providing investment opportunity for institutional investors. InvITs are collective investment vehicles, similar to a mutual fund, which enables direct investment of money from individual and institutional investors in infrastructure projects to earn a small portion of the income as return. InvITs enable developers of infrastructure assets to monetise their assets by pooling multiple assets under a single entity (trust structure). In India, InvITs are governed by SEBI (Infrastructure Investment Trusts) (Amendment) Regulations, 2016.
Goldman sees oil hitting $80/bbl despite likely return of Iran supply
Goldman Sachs said it expects oil prices to climb to $80 per barrel in the fourth quarter of this year, arguing that the market has underestimated a rebound in demand even with a possible resumption in Iranian supply. “The case for higher oil prices therefore remains intact given the large vaccine-driven increase in demand in the face of inelastic supply,” the bank said in a note dated Sunday. Even “aggressively assuming” a restart of Iranian exports in July, Brent prices would still reach the $80 mark by the fourth quarter, it said. Oil prices fell last week after Iran’s president, Hassan Rouhani, said the United States was ready to lift sanctions on Tehran’s oil, banking and shipping sectors. Crude recouped some of those losses on Monday as a potential snag emerged in reviving the 2015 Iran nuclear deal that could add more oil supply, with indirect talks between Washington and Tehran due to resume this week. Goldman Sachs said a demand recovery in developed markets would offset a recent coronavirus-led hit to consumption and likely slower recovery in South Asia and Latin America. Global demand could increase by 4.6 million barrels per day through year-end, with most of the gains likely in the next 3 months, it said. “Mobility is rapidly increasing in the U.S. and Europe, as vaccinations accelerate and lockdowns are lifted, with freight and industrial activity also surging,” the note said. The bank also expects the Organization of the Oil Producing Countries (OPEC) and allies including Russia, a grouping known as OPEC+, to offset any ramp-up in Iran production by halting for two months an increase in its output in the second half of 2021. This would help offset the perceived bearish impact in the physical market of the release of Iranian floating storage, it said.