Driving growth

Alternative business models in CGD

March 2022
CGD business in India targets industrial, commercial, domestic and transport segments

Gas transmission

CGS ▪ Gas distribution – Gas distribution is referred when gas is

supplied to the customers having requirement of up to 50,000
scmd. It is supplied through CGD network.
▪ Gas transmission – Gas transmission is referred when gas is
DRS supplied to customers having requirement of natural gas more
Gas distribution network

CPRS CGS: City gas station than 100,000 scmd. It is supplied through transmission network.
4 Bar ▪ The CGD sector includes Piped natural gas (PNG) customers
CNG CPRS: Common
Pressure Regulating and Compressed natural gas (CNG) customers.
4 Bar SR
Station ‒ PNG segment - Domestic, commercial and industrial; gas is
MRS DRS: District supplied to these segments at ~21 mBar to 4 Bar pressure.
100
regulating system ‒ CNG segment - the automobile sector; gas is dispensed at
mBar 200 Bar
4.15 SR: Service regulators 200 Bar pressure.
Bar Riser
MRS: Metering and ▪ Cumulative capex - ~INR 500-3000 Cr depending on the
regulating station number of districts covered in the GA and network expansion
21 mBar required to cover all major demand clusters

Industrial segment Domestic segment CNG segment

PwC December 2020 2

Strictly private and confidential

Currently margin attractiveness prompts CGD companies to focus on CNG and commercial
customers. Domestic connections are limited to the commitment made to PNGRB

Impact on
Affordability of the
Segment Alternative fuel profitability for the
consumers
CGD companies
• CNG and commercial segments are the
CNG Petrol/ Diesel High High high margin demand segments.
• Domestic segment is a regulatory
requirement.
Commercial Commercial LPG High High • Margins in industrial segment are
uncertain owing to wide fluctuations in
R-LNG prices and constraints in
transferring price risk to customers.
• While the PNG (domestic) segment is the
Domestic Domestic LPG High Negative/ Marginal least profitable segment, the industrial
and large commercial segments offer the
benefits of greater pricing flexibility,
lower customer management efforts,
and larger volumes.
Industrial Industrial LPG / FO High / Marginal Marginal

Source: PwC analysis, Secondary research

PwC December 2020 3

Strictly private and confidential

There are several trends and disruptors that are shaping the consumer gas market business
Energy market trends are
changing the landscape
• Regulatory changes such as
open access
• Volatile gas prices
Only the fittest, most efficient
will survive the new low margin
‘normal’
Source: PwC Analysis
PwC
Customers are becoming
increasingly engaged
• Better informed customers -
looking for bundled services
• Gas prices remain critical
• Better access to operational
data
• Standardized customer
experience across the GA
Must be responsive to
customer needs and deliver a
‘best in class’ service
Strictly private and confidential
New business models are
emerging
• Backward integration for
access to cheaper gas
• Forward integration to create
gas markets
• Suppliers offering broader
range of gas services
Operating models must deliver
an efficient service today and
be fit for growth & innovation
ROI in the sector is challenging
• Low margins due to volatile
prices
• Optimizing infrastructure and
early monetization of gas
• Investors are increasingly
cautious given the level of
capital investment required for
setting up infrastructure
More suppliers are chasing
money, than money is chasing
suppliers
December 2020 4
LNG stations are expected to be viable; However, significant marketing activities would be
required to convert existing trucks to LNG via market seeding

Virtual pipelines are a viable business model… New gas applications enabled…
All LNG terminals now are either Demand Drivers
equipped with truck loading facilities
or in the process of building it
Target end-users

• Large LCNG to cater to • Many CGD players are actively considering

Demand potential in medium term

Regasification
Standalone major demand LNG supply via virtual pipelines to accelerate
Industries centres market development

Liquefaction/ LNG via

LNG Trucks
Receiving • Industrial
Stations Clusters • Over 7 mn HDVs by 2030
LNG Trucking
LNG or
• Auto LNG • Attractive payback period
LCNG
station

• Aggressive growth plans in coal and iron ore

LNG for Mining
Capital mining
Opex Equipment
Cost IRR • Extremely attractive payback periods (<1 year)
Total Cost
14 %
INR 1219
INR 1192 Payback
INR 11 Cr /MMBtu LNG for Inland • 106 newly declared inland waterways and
/MMBtu Period
Waterways/ Marine large coastline; lower cost of cargo transport
8 years Bunkering • IMO regulations

PwC December 2020 5

Strictly private and confidential

Additionally, DODO model is being adopted by CGD entities to create CNG infrastructure
Salient features of DODO model
• Installation and
commissioning of CNG
station while adhering to
PESO
• Provision of gas to dealer
• Creating the gas
ecosystem by taking up
marketing activities for
conversion and bringing in
retrofitters to the GAs
Key proposition
Source: PwC analysis, Secondary research
PwC
Operating Elements
▪ Stability - clear obligations are established
within a multi-year agreement including land
being leased to company for 15 years
• Provides land of its own or
borrows land from a third ▪ Territoriality - franchisees are protected from
Commission is party each other based on definitions of geography
based on the • Manages statutory ▪ Consistency - common service standards are
investment borne requirements followed across franchisees (e.g., detailed
by the dealer manuals with clear do’s and don’ts)
• Looks after day-to-day
operations ▪ Scalability - franchising normally creates new
advantages of co-investment scale for rapid
deployments
▪ Predictability - franchisees are ‘illustratively
promised’ some level of return based on a
This is expected to reduce the cost of setting up CNG filling stations for proven approach
CGD entities but will also provide private players and investors to become
partners in the gas based economy
December 2020 6
Strictly private and confidential
Thank you

pwc.in

This presentation has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this presentation w ithout obtaining
specific professional advice. No representation or w arranty (express or implied) is given as to the accuracy or completeness of the information contained in this presentation, and, to the extent permitted by law , Pw C, its
members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this presentation or for
any decision based on it. Without prior permission of Pw C , the contents of this presentation may not be quoted in w hole or ni part or otherw ise referred to in any documents.

© 2022 Pricew aterhouseCoopers Private Limited. All rights reserved.

Each member firm is a separate legal entity.

Please see w ww.pwc.com/structure for further details.