12 Sep 2010 10:18

Why is GAILs stock price lagging?

Posted by : vikas.kohli1234 Price when posted : BSE: Rs 461.60 ( -1.07 % ), NSE: Rs. 461.60 ( -1.14 % ) View full discussion The key reason is capped gas output of Reliance. But GAIL has a few options up its sleeves to get growth going Gas Authority of India Ltd (GAIL) is the only gas stock that has not been outperforming over the last month or so largely because Reliance Industries has capped its gas production. GAIL`s latest analyst meet provides some clues to its future performance. It has been said that gas stocks could outperform because Section 16 of the PNGRB Act of 2006 which was notified from 15th July gives PNGRB authority to issue distribution rights to companies retailing CNG for automobiles and piped cooking gas to households, speeding up this process all over India. Since then, Indraprastha Gas has moved from Rs293 to Rs305, Gujarat Gas from Rs302 to Rs320, and Gujarat State Petronet from around Rs100 to Rs110. Only GAIL has stayed at around Rs450. One obvious explanation of this performance is that it is already trading at premium valuations and that RIL unexpectedly capped its gas production for this year. However, in its analyst meet, GAIL laid out a strategy to get around this hurdle. It is now banking on higher gas pipeline throughput by importing 2-3 spot LNG cargoes/month. Besides this it also said its capex plans are on track - it is investing

huge amounts in pipelines over the next three years, doubling the capacity of its petrochemicals plant in Pata (Uttar Pradesh), is planning to enter city gas distribution (CGD), and has made investments in the power sector. Biggest driver: Gas transmission In the short- to medium-term, GAIL believes that global LNG markets will be oversupplied. Additionally, the Indian market is facing a shortage with RIL capping its KG DG gas production. GAIL plans to take advantage of this situation by buying 2-3 cargoes on the spot market and increasing its gas transmission volumes. It is confident that it will find buyers for LNG, even if it proves a little expensive. GAIL plans to route these extra volumes through PLNG, Shell Hazira, and later through the Dabhol terminal which is expected to start in Q4FY11. Petronet LNG will be a huge beneficiary of GAIL`s plans of importing ~25 spot cargoes in a year which could translate into ~1.5 MMTPA of re-gasification volumes for Petronet. Capacity expansion: Aggressive and on track GAIL plans to invest close to Rs300 billion between FY11 and FY13 of which 67% is on pipelines, 6% on exploration and production (E&P), and 9% on petrochemicals. To fund this, it has plans to borrow Rs154 billion over FY11-13 of which term loans could be 31%, bonds 31% and external commercial borrowings. The company has a low D/E ratio of 0.08:1, which may allow it to get cheaper loans.

A quick snapshot of its seven key pipeline projects * DVPL phase II, 610km, Rs52 billion (to be complete in April 2011) * Vijaipur Dadri, 505km, Rs57 billion, April 2011 (partially complete) * Dadri-Bawana-Nangal, 646km, Rs24 billion, April 2011 (partially complete) * Chainsa-Jhajjar-Hissar, 349km, Rs13 billion, April 2011 (partially complete) * Jagdishpur-Haldia, 2,050km, Rs76 billion, phase I - March 2012; phase II January 2013 * Dabhol-Bengaluru, 1,389km, Rs50 billion, phase I - March 2012, phase II December 2012 * Kochi-Mangalore-Bengaluru, 1,114km, Rs33 billion, phase I - March 2012, phase II - December 2012. GAIL is doubling the capacity of its petrochemical plant at Pata to 900 KTPA in 42 months (first phase of 500KTPA in Q4FY11 from 420KTPA currently). In the E&P segment, GAIL is commercially producing crude oil from the Cambay basin and expects its generating blocks to a total of three by FY14 (27 blocks of which eight are onshore, 18 offshore, and one is a coal-bed methane block). While GAIL is not a serious player in the power segment, it has made

a few exploratory investments. It has a stake in Reliance Gas Transportation Infrastructure Ltd for its 1,600MW power plant, a stake in Gujarat State Petroleum`s power plant, a wind energy plant at Bhuj, and has plans to set up small power plants along the DabholBengaluru pipeline. Among all of GAIL`s future plans, it is possible that the importing spot LNG cargoes will give the stock a fillip in the near term while the expansion of its gas pipeline network and its petrochemical expansion will a be good long-term driver... Click if offensive Rate Reply

03 Sep 2010 13:03

GAIL-Reliance Ind pact to market D6 gas inoperative

Posted by : WishfulThinking Price when posted : BSE: Rs 455.00 ( -0.94 % ), NSE: Rs. 455.50 ( -0.91 % ) View full discussion The marketing agreement between GAIL (India) Ltd and Reliance Industries Ltd (RIL) to sell D6 gas stands inoperative due to a Government policy that does not allow RIL to sell gas independently. Though GAIL continues to transport a little over 30 mscmd of D6 gas, it is not making revenues from marketing it. With the Government policy for gas utilisation clearly spelling out the priority sectors and the companies to which RIL can sell the gas, an industry source told Business Line that this has left no scope for RIL to sell gas to GAIL, unless there is some change in the Government policy. Besides, RIL has also informed the Government that it can currently sustain output of about 60 mscmd from D6 fields. Of this, about 14 mscmd is sold to fertiliser plants, 28 mscmd to power plants, and 10 mscmd to petrochemical plants and refineries, and the remaining to others such as sponge iron plants, LPG plants and city gas distribution companies. Currently, GAIL transports 116 mscmd of gas from various sources. Of this 31-33 mscmd is D6 gas. Leaving aside the D6 gas GAIL

markets the remaining gas to various customers. GAIL was looking at marketing 10 mscmd of D6 gas. GAIL`s revenues from natural gas transmission during the first quarter of the current fiscal was up 22 per cent at Rs 897 crore as against the same period last year. The net sales from natural gas trading during the quarter were up by 17 per cent to Rs 5,452 crore. In March 2007, GAIL and RIL had inked a memorandum of understanding (MoU) for cooperation in the gas sector in areas including natural gas pipeline transmission and marketing, CBM gas opportunities, city and local gas distribution, operation and maintenance services, exploration and production, and technology and knowledge-sharing. It is the marketing component of the agreement that has become inoperative. Under the MoU, the two companies were to work out the modalities for transportation of natural gas from various gas sources of RIL in the Krishna Godavari and Mahanadi basins on the East Coast through pipeline and long-term arrangements with regard to gas supply and distribution. Also, wherever there is capacity available in the existing pipeline of GAIL, the same shall be available on the principle of common carrier for better utilisation of pipeline capacity. The MoU also provides for cooperation between GAIL and RIL in the purchase, sale, swap and marketing of gas and import of gas (LNG)

through transnational pipelines. Further, the two companies shall share pipeline capacity in Andhra Pradesh, Maharashtra, and Gujarat on mutually agreed terms.........

27 Aug 2010 06:45

GAIL plans power units in four states

Posted by : ajaipodiyadi Price when posted : BSE: Rs 448.40 ( -0.07 % ), NSE: Rs. 446.55 ( -0.37 % ) View full discussion GAIL plans power units in four states Ajay Modi & Jyoti Mukul / New Delhi August 27, 2010, 1:35 IST

Taking advantage of its vast pipeline network, GAIL (India) is planning to put up a gas-based power plant each in Maharashtra, Gujarat, Madhya Pradesh and Uttar Pradesh. The countrys biggest gas marketing company already has land and other infrastructure available for these units. Chairman and Managing Director B C Tripathi said the company had undertaken a feasibility study for the proposed units and a plan would be finalised in three to four months. Wherever we have land, township and water availability, along with our gas pipeline, we will go for distributed power plants, he told Business Standard.

He said distributed gas-based power plants with smaller capacity would be more economical for the company. The move will help us leverage our existing infrastructure in terms of land, manpower, etc.

The companys investment in these plants would be in the range of Rs 3.5-4 crore for each megawatt. The four plants, generating about 250 Mw each, would require 2.5 million standard cubic metres of gas a day. Gas for these plants would either come from a domestic source or it could be imported as LNG (liquefied natural gas), he added. With GAIL already a promoter in the erstwhile Dabhol (Maharashtra) project, which is producing 1,800-1,900 Mw power, Tripathi said it had decided to enter the sector in a big way. GAIL is also a 12 per cent equity partner in Gujarat State Energy Generation Ltd. GAILs total investment in these two ventures is about Rs 1,100 crore. Alongside gas-based plants, the company is also working on a commercial foray into wind and solar power. We will participate in the bidding rounds of the Jawaharlal Nehru Solar Mission, said the CMD. The company planned to start with a plant of 10 Mw capacity but wanted to later scale it up to 50 Mw. The solar power generation would be through a combination of both geo-thermal energy and photo voltaic technology. The project is meant for Rajasthan. On the wind energy side, it is studying the possibility of setting up a 100 Mw project for commercial purposes in Gujarat. The company already has a 5 Mw captive wind power project in the state. ...

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