Infrastructure fund GIP puts Freeport LNG stake up for sale
Global Infrastructure Partners has put up for sale its 26% stake in the limited partnership behind Freeport LNG, the second-largest export facility for liquefied natural gas (LNG) in the United States, sources familiar with the matter said on Friday. The infrastructure investor is working with an investment bank to solicit buyer interest, according to the sources. The price which GIP is seeking for its stake could not be learned. It paid $850 million for the stake in 2014, before the Freeport LNG site began exporting gas and generating revenue. There is no guarantee that a sale will happen, and GIP could ultimately keep hold of the stake, cautioned the sources, who spoke on condition of anonymity as the information is private. GIP declined to comment when contacted by Reuters and Freeport LNG did not respond to a comment request. Stakes in large energy projects often change hands once operational, as early-stage investors who backed the scheme – often when there is still considerable risk as to whether the project will be completed – book profits and other investors drawn by steady returns step in. Last year, Brookfield Asset Management bought a stake in Cheniere Energy Inc’s limited partnership from Blackstone Group Inc. This came after a unit of the Canadian investment firm paid north of $2 billion in 2019 for a 25% stake in Cove Point, an LNG terminal in Maryland predominantly owned by Dominion Energy Inc. Originally envisioned as an import terminal, Freeport LNG was converted into an export facility once the U.S. shale gas boom took off. Situated on Quintana Island off the Texas coast, exports began in 2019, with its three production units providing 15 million metric tonnes per year of liquefaction capacity. A fourth unit is planned, according to Freeport LNG’s website. Freeport LNG Development LP is majority owned by founder Michael Smith. Osaka Gas Co is also an investor.
Make GAIL lay its pipeline along the highways: Panneerselvam
Former Chief Minister of Tamil Nadu and AIADMK Coordinator, O. Panneerselvam, on Saturday, urged Chief Minister M.K.Stalin to prevent GAIL (India) Ltd from laying gas pipelines through farm lands. In a statement issued here, Panneerselvam said GAIL is laying its gas pipeline on farm lands in Krishnagiri district, much against the wishes of the farmers there. He added that projects are for people and not people for projects. Panneerselvam asked Stalin to stop GAIL from laying its gas pipelines in farm lands and lay the same along the highway. GAIL is laying a pipeline to carry gas from Kochi in Kerala to Bengaluru via several western districts in Tamil Nadu (Coimbatore, Tirupur, Erode, Namakkal, Salem, Dharmapuri and Krishnagiri). While the pipelines are laid along the highways in Kerala, the company wants to lay the pipes through the farm lands in Tamil Nadu. The company has refused to lay the pipes along the highways.
Reliance’s O2C, new energy business may be valued over $100 billion: Report
Billionaire Mukesh Ambani-led Reliance Industries Ltd’s plans for investing Rs 75,000 crore in solar, batteries, fuel cells and hydrogen could create valuation of USD 36 billion (Rs 2.6 lakh crore) for the new energy business, Wall Street brokerage Bernstein Research said in a report. Reliance currently has three verticals — oil-to-chemical (O2C) business that houses its oil refineries, petrochemical plants and fuel retailing business; digital services that comprises telecom arm Jio; and retail including e-commerce. New Energy will be the fourth vertical. At the company’s annual general meeting of shareholders last month, Ambani announced a plan to invest Rs 75,000 crore in a new energy business over the next 3 years in the next stage in its transformation. Under plans announced, the company will invest across solar, batteries and hydrogen to create an integrated clean energy ecosystem. Other big announcements at the AGM were the launch of the new smartphone JioPhone Next and induction of Aramco chairman to the RIL Board, which is positive for the spin-off in O2C business. “Clean energy has the potential to be value accretive if Reliance can pull it off,” it said. “Based on capex for clean energy, we see a route to Reliance building a clean energy business, which could be worth USD 36 billion.” It put a valuation of over USD 69 billion for the O2C business, USD 66 billion for digital services and USD 81.2 billion for retail. Upstream oil and gas operations are worth another USD 4.1 billion. Other investments such as in the media and hospitality space are valued at USD 3.7 billion. The entire conglomerate is worth over USD 261 billion. “Many oil companies have tried and failed to become clean energy manufacturing companies and instead focus on clean energy production. Reliance’s focus on manufacturing is distinctive and potentially offers higher margins but is also higher risk given their limited capabilities in clean energy,” Bernstein said. Reliance will need to find partners to work with them given the technology requirements needed for fuel cells and batteries. “While companies will be reluctant to share their technology with a potential competitor, the market opportunity in India may be enough to persuade some,” it said. “Korean battery makers could be potential partners in energy storage, while companies like Plug and Ballard could be partners in fuel cell manufacturing.” Funding is not an issue for Reliance given the current balance sheet. Reliance is almost debt free and will generate cash flow of Rs 65,600 crore in FY22 and grow to Rs 1.5 lakh crore by FY26, it said. The logic of investing in clean energy is compelling. USD 70 trillion will be spent globally on the energy transition over the next 30 years. While India has yet to declare a net zero target, the direction towards low carbon is clear, it said adding with solar becoming cheaper than coal and hydrogen reaching cost parity with diesel, there are clear economic and energy security reasons to believe that India will transition towards clean energy. In this context it is also logical to assume that India will seek to develop technologies in manufacturing capacity given the huge investments which are needed. Bernstein said O2C margins continue to improve, raising hopes for Aramco investing in buying 20 per cent stake in the business. “For FY22, we expect Reliance will deliver O2C EBITDA of Rs 52,200 crore (+90% y-o-y),” it said. “We remain optimistic that a deal will come together with Aramco albeit at a slightly lower valuation.” At the time of announcing talks to sell stake to Aramco in 2019, Ambani had put USD 75 billion as the valuation of O2C business. Reliance will spend Rs 60,000 crore to construct four ‘giga factories’ to make integrated solar PV modules, electrolyzers, fuel cells and batteries to store energy from the grid. The site of these plants will be located at the new 5,000 acres Green Energy Giga Complex in Jamnagar, Gujarat. An additional Rs 15,000 crore will be used for investments across the value chain, technology, and partnerships for the new energy business. Ultimately, Reliance plans to offer a fully integrated end-to-end renewables energy ecosystem to customers through solar, batteries and hydrogen.
Govt’s excise collections on petrol, diesel jumps 88% to Rs 3.35 lakh cr
The union government’s tax collections on petrol and diesel jumped by 88 per cent to Rs 3.35 lakh crore in the year to March 31, after excise duty was raised to a record high, the Lok Sabha was informed on Monday. Excise duty on petrol was hiked from Rs 19.98 per litre to Rs 32.9 last year to recoup gain arising from international oil prices plunging to multi-year low as pandemic gulped demand. The same on diesel was raised to Rs 31.8 from Rs 15.83 a litre, according to a written reply to a question given by the Minister of State for Petroleum and Natural Gas Rameswar Teli in the Lok Sabha. This led to excise collections on petrol and diesel jumping to Rs 3.35 lakh crore in 2020-21 (April 2020 to March 2021), from Rs 1.78 lakh crore a year back, he said. Collections would have been higher but for fuel sales falling due to lockdown and other restrictions imposed to curb the spread of the coronavirus pandemic, which muted economic activity and stalled mobility. In 2018-19, excise collections on petrol and diesel were Rs 2.13 lakh crore. To a separate question, the Minister of State for Finance Pankaj Chaudhary said excise collections in April-June this year totalled Rs 1.01 lakh crore. This number includes excise on not just petrol and diesel but also ATF, natural gas and crude oil. The total excise collection in FY21 was Rs 3.89 lakh crore. “Prices of petrol and diesel are market-determined with effect from June 26, 2010 and October 19, 2014 respectively,” Teli said. Since then, the Public Sector Oil Marketing Companies (OMCs) have been taking appropriate decisions on the pricing of petrol and diesel on the basis of international product prices and other market conditions. “The OMCs have increased and decreased the prices of petrol and diesel according to changes in international prices and rupee-dollar exchange rate,” he said adding “effective June 16, 2017, daily pricing of petrol and diesel has been implemented in the entire country.” The hike in taxes last year did not result in any revision in retail prices as they got adjusted against the reduction that was warranted because of fall in international oil prices. But with the demand returning, international oil prices have soared, which have translated to record high petrol and diesel prices across the country. More than one-and-a-half dozen states and union territories have petrol at over Rs 100-a-litre mark and diesel is above that level in Rajasthan, Madhya Pradesh and Odisha. Teli said prices vary from state to state due to freight rates and VAT/local levies. “The impact of the increase in prices of petrol and diesel can be seen in their impact on inflationary trend measured by Wholesale Price Index (WPI),” he said. “The weightage of petrol, diesel and LPG in the WPI index is 1.60 per cent, 3.10 per cent and 0.64 per cent respectively.” He said during the current fiscal 2021-22, petrol price has been increased on 39 occasions and diesel on 36. The price of petrol has been cut on one occasion during this period and that of diesel on two occasions. There was no change in the remaining days. In the previous 2020-21, petrol price was hiked on 76 occasions and cut on 10 while diesel rates went up 73 times and were reduced on 24 occasions, his reply showed.
Fuel prices set to slide soon as OPEC+ agrees to boost supply
Fuel prices are expected to come down shortly as the OPEC+ grouping on Sunday agreed to add more barrels to the market, averting a supply squeeze and reducing the risk of an inflationary oil price spike. The grouping, which includes Russia, decided to raise production by 400,000 barrels per day (bpd) from August till December to restore 2 million bpd of production, or about 44% of India’s daily requirement. It also agreed on a higher production quota for United Arab Emirates, Iraq and Kuwait – all India’s major suppliers. UAE’s demand for a higher quota had caused a rift with the OPEC lynchpin Saudi Arabia and threatened a supply squeeze amid recovering demand in India, China, the US and Europe. The OPEC+ deal comes within days of India’s new oil minister Hardeep Singh Puri reaching out to his UAE and Saudi counterparts Ahmed Al Jaber and Abdulaziz bin Salman, respectively. Leveraging New Delhi’s close ties with Abu Dhabi and Riyadh, Puri had offered to work with them to “calm the market” and conveyed concerns over the recessionary impact of high oil prices on demand recovery. More barrels will ease pump prices and inflation, both of which have risen to record levels and drawn Opposition flak. So politically, the deal will help the government blunt some of the criticism in Parliament, which begins its monsoon session on Monday, once fuel prices start declining. Lower oil prices will also give the government financial breathing space. India’s crude cost has already come down to $73 per barrel from a high of $77-78 as benchmark Brent has been edging lower from its 30-month high on news of a possible Saudi-UAE deal and resurgence in Covid-19 cases in some regions. Petrol and diesel prices are set according to a 15-day rolling average of their international quotes and the dollar exchange rate. Crude price is an intermediary factor. This is expected to reflect at the consumer level in a matter of days and consumers can expect pump prices to slide once additional barrels start flowing. Petrol price is ruling over Rs 100 per litre and diesel above Rs 90 in most states as high Central and state taxes amp up the impact of rising crude. The rupee too had recently weakened against the Greenback, putting upward pressure on pump prices. The OPEC+ grouping had last year cut production by a record 10 million bpd, or roughly 10% of daily global supply, amid a pandemic-induced slump in demand and collapsing prices. It has gradually reinstated some supply to leave it with a reduction of about 5.8 million bpd.