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Analyst Meet / AGM - Analyst Meet

Volumes will be lower for few more quarters

Gujarat Gas

10-Sep-2013, 11:24
The company held its Analyst meet on 6^th Sep'13 and was addressed by Mr. Sugata Sircar Managing Director

Key highlights

Gujarat Gas currently distributes about 2.8 mmscmd of gas to about 4 lakh industrial, commercial and domestic customers through its pipeline network and CNG to over 2 lakh vehicles through 56 retail outlets.

About 50% of gas is sourced domestically, PMT source being the major contributor and rests are imports in form of RLNG. Most of the domestic source of gas is being sourced at fixed price of gas of about US $ 6 and this will remain till 2019. Any revision of KG gas on April'14 will also not affect the company.

Currently, from PMT source, the company receives about 1.3-mmscmd gas. The volume is expected to be lower by 10% by the end of CY'13. BY 2019, the volume from PMT will be zero, this is what has been contracted and the PMT stream is also depleting.

Company averages out the price of gas i.e. domestic and the landed costs of PMT and thereby charges to all its customers a weighted average price of gas. The gas price due to increase in contribution from RLNG and Re depreciation, was increased by 4 times in CY'12 and also price revision was done in Q1 and Q1 CY'13 as well. In Q2 CY'13, due to sudden fall in RLNG prices on y.o.y basis, the margins got a spurt. Almost all the RLNG requirements, is sourced by the company on spot basis.

Of the total sales of gas volume, about 75% goes to industrial customers, 15% to CNG and rest are domestic, commercial and PNG customers. Within the industrial customers, about 50% belong to agro/chemicals/Pharma industry, 20% are from textile clothing industry, 12% from glass and ceramics, 11% from yarn and 6% from engineering and other industry.

Since the landed costs of RLNG overall is increasing, the weighted average costs of the gas at which the company sells, also increased. While this generally is not affecting the liquid fuel replacement (LFR) market, which constitutes nearly 60% of total industrial customers of the company, the others have cheaper source of grid power available to them.

As per the management, the share of these LFR market will increase within the overall industrial customers. Also as per the management, the worst in terms of lower off take of volumes from customers is behind them and after few quarters of consolidation and may be slight dip, volumes will come back.

Also the slowdown in economy and uncertainties related to it, affect the industrial customers output and thus the usage of volume of gas. If the economy recovers, the gas will be utilized irrespective of the price, given the uncertainty related to other source of power.

Going forward, in terms of gas availability, for few quarters, RLNG is the only source. Company also has signed an MOU with GSPC for gas, but more clarity will emerge only in Mar'14 after that. Also EGOM will determine the final status of GSPC gas.

On regulatory aspect, company's 8979 sq km of Surat-Bharuch-Ankleshwar pipeline has already received approval and exclusivity till Nov'15 from PNGRB and thereafter fresh tariff proposal will be required to be submitted. 73 km of Hazira-Ankleshwar pipeline also received the transmission rights approval from PNGRB however; tariff approval is yet to be received. The company already has applied for Bhavnagar pipeline distribution rights, and is yet to receive the approval from PNGRB.

In CY'12, the company did a capex of Rs 195 crore and for CY'13; capex target stands at Rs 160 crore.