Ladies and gentlemen, good day, and welcome to the Q1 FY 2023 Results Conference Call of Petronet LNG Limited, hosted by Emkay Global Financial Services Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Should you need assistance during the conference, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded.
I would now like to hand the conference over to Mr. Sabri Hazarika from Emkay Global Financial Services. Thank you, and over to you.
Yeah, good evening, everyone. On behalf of Emkay Global, I'm pleased to welcome you all to the Q1 FY 2023 post-earnings conference call of Petronet LNG Limited. We have with us the senior management of Petronet LNG, led by Mr. Vinod Mishra, Director Finance, Mr. Rakesh Chawla, Group General Manager and President, Finance, Mr. Gyanendra Kumar Sharma, Chief General Manager and Vice President, Marketing, Mr. Debabrata Satpathy, General Manager, Finance and Accounts, Mr. Vivek Mittal, General Manager, Marketing, and Mr. Ashwani Agarwal, Manager Finance. Today's session will be a brief on the results by the management, followed by the question and answer round.
Without any further delay, now I would request Mr. Mishra to come up with the opening remarks. Over to you, sir.
Thank you, Sabri. Very good afternoon to all of you. I will start the major highlights. It has been that our turnover has increased to INR 14,264 crore in this quarter, as compared to INR 11,160 crore in the previous quarter, and INR 8,598 crore in the corresponding quarter. There is a growth of around 66% in turnover as compared to corresponding quarter, and almost 28% as compared to the previous quarter. Apart from that, I will just give the highlight, how has been the performance over Dahej and Kochi terminal.
During the quarter, we have been able to achieve 196 TBTU in Dahej terminal, as compared to 194 TBTU in the corresponding quarter of the previous year, and 178 TBTU in the previous quarter. If you look at, there has been a better performance as compared to previous quarter and also as compared to corresponding quarter. Total throughput in both the terminal has been taken together, has been 280 TBTU as against 209 TBTU in the corresponding quarter and 190 TBTU in the previous quarter. If you look at the profitability, PBT has been INR 937 crore in the current quarter, as compared to INR 851 crore in the corresponding quarter, and INR 984 crore in the previous quarter.
PAT has been reported at INR 701 crore in this quarter as compared to INR 636 crore in the corresponding quarter and INR 750 crore in the previous quarter. If you compare with the corresponding quarter, there has been growth of 10% in both PBT and PAT. Further, if you look at the performance, operational performance has been excellent as compared to previous quarter. Due to foreign exchange variation loss of INR 124 crore, it has been little bit less than previous quarter. As compared to corresponding quarter, it is far, far better.
Basically, you know that exchange rate was around INR 75.81 on the 31st of March 2022, as compared to INR 78.91 in around this 30th June 2022. There is a gap of INR 3.1 . Because of that, there is a foreign exchange fluctuation loss of INR 124 crore, which is a notional loss. Basically this is the reason it is little bit down, but otherwise performance has been excellent. This excellent performance has been possible despite high LNG prices owing to optimization in our operation.
Thank you very much. Now, house is open for the questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have our first question from the line of Probal Sen from ICICI Securities. Please go ahead.
Thank you for the opportunity, sir. Two questions. One was, we have, you know, in GAIL, in their concall mentioned that Gazprom is unable to actually deliver on their commitment of volumes, from the 2.8 MT contract that they have for import of LNG. Now, obviously some portion of that was obviously flowing through our terminals. What mitigation options would we have if GAIL is unable to bring those volumes in? In terms of contractually, how are we placed with respect to this, you know, if these volumes don't actually come through or GAIL is unable to sort of source any alternative sources?
You're right that there has been some trouble in the Gazprom contract of GAIL. As far as we are concerned, there is a contract for use or pay, and they have booked the capacity to the extent of 2.5 MMTPA. That is based on use or pay basis. Whatever volumes are there after agreeing in ADP, they will have to bring to that extent, otherwise there is a use or pay clause. That way we are secure to that extent. It's overall, if you see, it's not a very good scenario that if somebody is defaulting, it's impacting the ultimate consumers because leave apart our terminal, it's the customer who is suffering.
Because long-term gas, which is priced at $14-$15, and if you go to the spot market, it's $43-$44. It's a big difference. Definitely, it's not good for the country. As far as we are concerned, there is a commitment of use or pay charges. So far, GAIL has been bringing cargo there in time. There is not much of default. I think they have enough resources available apart from Gazprom. Maybe from U.S. portfolio they may bring in cargoes. We are secure because of our position as per contract, of use or pay charges. That way we are secure.
Right. The second question was, sir, after two quarters of softness, we have seen third-party regas volumes have picked up, back to sort of normalized or near normalized levels of 94-95 TBTUs.
Sorry, what is your question?
Sir, regasification services or third-party regas volumes.
Right.
Are 94 TBTUs for this quarter, if I'm--
Yeah, yeah.
Previous two quarters they were at levels of 76, 78 or so. Any color you would like to draw on what has driven this improvement?
In last quarter it was little bit less, but now I think it has come. If you compare with the corresponding quarter, it is 99%. It is still not to that level, but it's a normal level. It should have come, but in last quarter definitely it was less. Could be the reason for that.
Okay.
Okay. Now, because if you look at the terminal of GAIL, Dabhol terminal, it was in operation fourth quarter. Right now it is not working, so till October it will be our terminal which will be busy. Maybe that will be the reason that--
It is every year like that.
It's every year. Fourth quarter versus Q1 is always a difference.
Got it. Q1 and Q2 would be better for us than.
Q1 and Q2 will be better because Dabhol is closed for this period.
Got it. One last question, sir. You know, last couple of quarters we haven't heard much in terms of the LNG retail opportunity which you sort of were developing. Any further developments you had in terms of the pilots you were running with IOCL, or you know, anything you can share with us?
Retail, you are talking about LNG stations in terms of?
LNG. Yeah .
Yeah. We are going on as per the schedule, and perhaps we are already associated with IOCL for four LNG dispensing station. We are going ahead, and it is very likely to be installed shortly. Maybe in next six months you'll see that it will be there. One more station we have in fact placed the order for. It's likely to be commissioned with somebody else or maybe on our own. Four stations are definitely coming up. This year it will be there. Maybe in next six months you will see these are in operation.
Perfect, sir. If I have any more questions, I'll come back. Thank you so much for your time.
Thank you.
Thank you. We have our next question from the line of Maulik Patel from Equirus. Please go ahead.
Thanks for the opportunity. A couple of questions. One is that the RasGas volume, which we are sourcing 8.5 million tons. If you look at the last three years on a calendar year basis, it's consistently below that number. So is that--
Sir, your voice is not, Mr. Patel?
Hello?
Yes. Your voice was breaking. You may go ahead now.
Okay. Yeah. RasGas is now supplying a full 8.5 million tons of volume and probably supplying less.
No, no. It's not 8.5 million tons. It is 7.5 million tons. 1 million tons has been assigned to offtakers. Of course, that was part of the deal when we renegotiated the price with RasGas in 2015. In that deal it was agreed that we will take additional volume of 1 MMTPA, and that was to be assigned to offtakers subsequently. Accordingly, as per the deal, we have assigned those that 1 MMTPA to offtakers. We have in our portfolio 7.5 MMTPA now.
Okay.
That is the reason.
Actually 1 million is. Okay, got it. My second question is--
I see your voice is breaking again. Mr. Patel?
Yeah. Aman? Hello?
Yeah, yeah. Please continue.
Yeah, yeah. Another thing, question is on that, so you talked about the petchem project and the biogas. Can you throw some light on what stage we are right now on these two projects?
Yeah. First is petchem project. Petchem is, we are in fact envisaging to have a plant which is called PDH-PP plant. That plant, we are going to put up at Dahej. For that we are still doing some feasibility because we have already done PFR and now we are in the process of getting DFR. All these things will be analyzed and if there is a return of at least 16%-17% IRR, then only we will go in for this kind of project. Because there has been huge crack in this particular product, polypropylene. I think, unless until we secure that we will be having some good IRR, we will not undertake it. DFR is still under process.
Perhaps we have to go in for some license and selection process also while making DFR. All those things are continuing, but right now it is with a consultant for DFR completion. Second one is CBG. CBG, of course, there has been a challenge. Because CBG we thought will come in a big way, but right now there has been certain handicaps which are preventing us from putting up those plants. Because when we tried to initiate the process to put up some three-four plants, CBG plants in Haryana, we found that it is not possible for Haryana government to allocate the land to us as per their policy. They told us that they cannot give like this any land to us.
They have gone to the assembly again, they have to pass a bill to amend those, that policy, then only they can allot us some land for CBG. In fact, that is a big problem that we are facing, so we could not proceed much. Unless until we have land, we cannot put up any CBG plant. That is not progressing well unless this Haryana government takes some decision on policy matters.
Okay.
Mr. Patel?
Yeah.
Does that answer your question?
Yeah. I have just one last question, small question, if you allow me to. Sir, how do you assess the situation of LNG demand in the country with respect to the upcoming Reliance KG auction, which will be approximately 3 million -4 million tons of LNG demand that can be replaced. Your comments.
Okay. I think, if you look at the demand in the country, it's huge demand. One thing is very clear that this demand is price sensitive. It's not possible to consume that gas at $40 or $50. This is true that if some gas is coming domestically, it's good, but even beyond that there is a huge appetite for consumption. The price is a major problem because price once it is down, there's enough scope for that gas which is Reliance is going to bid or supply gas from or through LNG route. Everything is possible. All LNG and this domestic gas can be consumed. Since LNG, spot LNG is very high, so that is causing a major problem for us.
Otherwise, as of now it is not going to impact because long-term volumes are already there. It will continue like that. In fact, we are also emphasizing to have some long-term contract in future if we get at a good price. At the same time we are focusing on increasing this already RasGas contract, which is expiring in 2028, to extend it beyond that. All things are good. I think Reliance gas which you're talking about, as of now it will not have any impact. Because if at all anything it will do, it could have replaced only this spot volume production, which is already less. Right now if you see, there's a dearth of gas in the country.
The people whosoever get it, they are lucky enough, they will get it because nobody can afford to buy LNG at the current spot prices. Anything else you want to ask?
No, sir. Thank you.
Thank you. Participants are requested to press star and one on their phone to ask a question. We have our next question from the line of S. Ramesh from Nirmal Bang Equities. Please go ahead.
Good evening, and thank you very much. Can you share the regasification margin you earned in this quarter?
Regas margins?
Regas revenue.
Revenue. Regas revenue this quarter has been INR 537 crore. As compared to INR 463 crore in the previous quarter. As compared to INR 552 crore in the corresponding quarter.
Okay. Is there any inventory gain or trading gain in this quarter?
Yes. There has been inventory gain of INR 35 crores and trading gain of INR 104 crores.
Okay. Can you explain why the other expenditure has gone up so much, other than the FX loss which I presume would have accounted there. Are there other, you know, comprehensive--
Sorry, this inventory gain, if you look at, I just told you it's, as compared to, corresponding quarter it is higher by INR 35 crores. Otherwise, if you look at standalone this quarter, it is INR 110 crores.
INR 110 crores for--
As compared to INR 75 crore in the corresponding quarter of previous years. I just told you INR 35 crore. It is higher as compared to corresponding quarter by INR 35 crores. But it is INR 110 crores .
Can you explain why the other expenditure has gone up other than the impact of the FX loss?
This is the INR 124 crore. I have just told you that foreign exchange loss is there. In there, if you look at, it has been in total including foreign exchange loss, INR 127 crore this quarter.
Okay. If you look at the, you know, philosophical question about gas supply and what GAIL has, you know, mentioned in terms of, you know, reducing supplies to their contracted customers to the take-or-pay. When you say you are having use-or-pay obligations, can't we have a situation where the offtakers, you know, ask you to restrict your volume to the, you know, brim of the use-or-pay? Wouldn't that imply some, you know, risk of reduction in volumes for you even under the current, you know, use-or-pay agreement?
No. Don't compare with take-or-pay what they have. We have use or pay contract for tolling services. It is not concerned with their supply take-or-pay, which GAIL is not able to supply. It's their commitment to their customer. Our commitment is to our offtakers to the extent they have booked the capacity. It is very well, I mean, conceptualized in the contract itself that, if there is a shortfall in the committed quantity, then they will pay use or pay charges. We have to see both the contracts in isolation. We cannot correlate all these two things.
Okay. Understood. In terms of the utilization of Kochi and the linked pipelines to Mangalore and the Kochi, Bangalore pipeline, when do you see the linked pipeline infrastructure getting completed, and what is the timeline now for increasing the capacity utilization in Kochi?
This is true that Bangalore line has to be in place very shortly. Again, there is an issue that around 250 km stretch from Coimbatore to Bangalore is remaining. There has been, in fact, problems with the farmers in the state. Now we have come to know that the government has reached some agreement with the farmers, that whatever line is to be laid is to be laid along the highway. It is not passing through the fields of farmers. Perhaps that will resolve the issue. As far as the timeline is concerned, it may take at least one year. GAIL is already in the process and they are trying to complete it.
Today board meeting was held. CMD of GAIL has assured that they are doing it, and they are hopeful that they will complete in time.
Okay. Thank you very much and wish you all the best. I'll join the queue.
Thank you.
Thank you. We have our next question from the line of Vivekanand Subbaraman from Ambit Capital. Please go ahead.
Yeah. Hi. Thank you very much for the opportunity. My first question is on the LNG trading subsidiary that you have set up. Can you help us understand the plan that you have here and any update that you can provide on the spot gas sourcing that you are planning, given that you may have to sign a new contract before the RasGas contract expires? That's one. Secondly, you know, you were conducting studies, you know, pre-feasibility studies on the FSRU terminal in Gopalpur. Can you give us an update on that and also help us understand how much CapEx you are budgeting for the current and next year? Thank you.
Okay. First question is regarding this RasGas contract, which is expiring in 2028. One thing is that already a task force has been formed, and this particular task force is assigned with the work of extending the contract beyond 2028. This task force is led by none other than MD & CEO of Petronet LNG Limited. This task force consists of a director level person from IOCL, GAIL, BPCL. In fact, it's a high level task force which is already in talks with the RasGas management. We have to conclude this agreement by December 2023. We have time till December 2023 to conclude the negotiation for extension of the contract with RasGas.
We are undertaking because we have already formed a task force. First thing. Secondly, we are also envisaging to have a contract for at least 1 million ton on our own for various requirement, including small scale LNG and our other customers who are there, like one of them is OPaL. We are thinking of having either with RasGas additional 1 MMTPA, 0.75 MMTPA, or with some other supplier, 1 MMTPA contract apart from this 7.5 MMTPA contract of RasGas. That is all we are thinking of. First priority is to get the RasGas contract extended beyond 2028. That is already in process.
Second thing you have talked about is the Gopalpur. Of course, we are looking at FSRU terminal at Gopalpur. We in fact have proceeded ahead, and negotiations with Gopalpur Port Trust have almost been concluded. In fact, we have got some assurance from Government of Odisha also for that terminal, because Gopalpur Port Trust has some lease for that port till 2036. Beyond that, also our terminal will continue. We have got some assurance letter from Government of Odisha that our terminal will continue even after the Gopalpur Port Trust may or may not be extended the lease for Gopalpur Port. That kind of things are happening. We in fact have negotiated many of the parts with many of contractual issues with the Gopalpur Port Trust.
In fact, we are now looking forward to have some kind of, agreement, a definitive agreement, firm agreement, so that we can bind each other and, go ahead in this direction. Overall, CapEx, which is likely to happen in this, will be around INR 1,500 crore -INR 2,000 crore in between. Maybe INR 1,700 crore, I think. That is the CapEx. But OpEx will be very high because, again, we have to arrange some ship for this FSRU purpose. That is again a challenge. We have to see, where from we can get that, ship so that we can have some facility for regasification on that. This is all what is going on, but we are very serious about this project.
Perhaps, in next few months you will see some progress that we are already undertaking the project activities. But that part is going on. After entering into some this definitive agreement, we will seek approval of board for the CapEx, for the commissioning of this FSRU terminal.
Okay. Just a couple of follow-ups. You didn't touch upon the Singapore subsidiary for LNG trading and the plan there.
Oh, yeah.
Lastly on the CapEx side, you know, the two tanks that you are constructing in Dahej and the third jetty. Apart from that, is there any other project that you're working on for FY 2023 and 2024?
The Singapore entity first I would like to discuss. That entity, as you know, has already been formed on 7 March 2022, and we are now in process of looking for opportunities. Right now, the LNG price is so high, export LNG, that trading through that arm is also a challenge. We had objective of having some export trading of cargos through that entity. Right now, the cost here is not so good to have some export energy in our portfolio, the supply, because demand is less. Price is of course high, but demand is not there in India. We hope that as soon as these prices also stabilizes, they come down and these are affordable, then perhaps we can think of trading through that arm.
Right now, we cannot think of any opportunity and not even any opportunities coming up to us through that entity that we can do. In future we will do. Some export cargos trading will be through this entity. This is all just I want. The CapEx you have just asked for. First is our tanks. That is already in process, and we have a target of INR 1,250 crores. Next is jetty also. Yeah, obviously, we are going for seeking board approval. Board approval is there. We have to now go for awarding of the work. All that. Board approval, administrative approval is there, but we have to process this EPC selection and other things for that purpose. That is already going on.
Third one is, in fact, expansion of Dahej regasification terminal from 17.5 million to 22.5 million TPA. That is also in process, and the CapEx will be around INR 570 crore in total. These are the projects which are being undertaken at Dahej apart from this that can in future, which will come up after DFR and other things are finalized. This is what we have our plans for Dahej. Gopalpur, I have already discussed. Broadly, these are our CapEx plans.
Okay, thank you.
Thank you.
Thank you. We have our next question from the line of Mayank Maheshwari from Morgan Stanley. Please go ahead.
Sir, thank you for doing the call. Just one question I had was on this LNG sourcing on the long term. You talked about RasGas and a high-level committee that has been formed. Can you just talk a bit about what you are seeing apart from Qatar in terms of gas sourcing? Because a lot of your Asian peers in China, Thailand, et cetera, have already signed long-term contracts with the likes of Cheniere, et cetera. What has been India's strategy around it, if you can just give us some color around that.
Yes. Actually, this particular time is not good for long-term sourcing also, because right now price being so higher in the spot market, if you go for any long-term contract, it comes at a very high slope. We are waiting for some time because if prices come down, then we can think of having a good long-term contract. Right now everybody will ask a slope which is very high, because everybody is seeing that price, energy spot price is at $43, $44. At this price, if you go in the market even for the long-term contract, you'll find that, slope will be very high. We are looking forward to some opportunities, but, of course, that is preventing us from talking too much to the dealers because it is in huge demand.
You know, European countries are after LNG now. They are ready to buy at any price. That is, in fact, vitiating the market. We are finding it difficult to even search for the good supplier. We are hoping that once this Ukraine-Russia war is over and the market stabilizes and it becomes a reasonable price in the range of $15-$18, then we can think of, in fact, going for this too much. Right now we are focusing on gas. This is how we are proceeding. If you ask me whether we are looking for, it's not prudent to go at this stage at very high slope, because in future prices will definitely come down.
At this point of time, if you go for a long-term contract, you will in fact enter into a contract which is very high priced. In future it will be difficult to, in fact, sell that LNG. We are waiting for right environment. When the prices of LNG, spot LNG come down, then perhaps that will be the right atmosphere. We are hopeful that next year it will be there, and hopefully we will then negotiate a good contract.
I've got it, sir. The thinking is still about linking to oil, not linking to Henry Hub, which you have recently seen as contracts with fixed, rolling fee and all those things. That's not something that you are kind of thinking about right now as well.
Everything is open. We are not saying we are against any indices. Whatever, it could be, because part of negotiation, we may fix some 50% on, say, gas indices or 50% on crude-based. Like that it might be a hybrid of, that kind of indices. Of course, anything we cannot say right now because nothing is there on table. We have to see how it shapes in future. Right now it is difficult to comment, but, it could be either way, because, if you look crude-linked contract, Indian consumers are habitual to this crude-linked contract. Even if GAIL is buying in Henry Hub, nobody's interested in Henry Hub contract.
That is all again a question mark, because we are habitual to having this crude-based this crude link indexes rather than gas-based. Of course, in future customers may also change and then they may agree to Henry Hub-based contract also. We are open to it. It's not a big question, but the right kind of pricing is a big issue. That we have to look at.
Very clear, sir. Thank you.
Thank you.
Thank you. We have our next question from the line of Kishan Mundhra from Antique Research. Please go ahead. Mr. Kishan Mundhra, can you please check if your audio is mute? We'll move on to the next question from Mr. Nitin Tiwari from Yes Securities. Please go ahead.
Good evening, sir. Thanks for the opportunity and thanks for having this call. My first question is actually about pipeline. How much of the Gorgon volume did we bring to Dahej in this quarter?
How much is that? Okay. Dahej volume is that.
5.2 TBTUs.
Pardon me, sir. 0.5?
5.2 TBTU.
Got it. Sir, the next question is actually related to this only. We had guided some time back that utilization at Kochi terminal would start picking up, but it remains, like, you know, in between about 15%-20%, hasn't increased up, and we continue to get basically Gorgon volume back up at Dahej. If you can maybe help us understand why the utilization at Kochi remains stagnant and what is the road forward for Kochi? Also let me know if you can confirm the Kochi regas tariff that we are charging at this moment.
The first question is why utilization level has not increased. It's very, right question you have asked. I will explain it. If you look at last year when it was, Kochi, Mangalore pipeline was commissioned, we were hopeful that, utilization level will be at least 30%-35%. In fact, we have reached up to the level of 28%-29%. At one point of time. After that, this LNG price surge has created a havoc, and we are not able to sell LNG because spot market has gone so high that our major consumers, like MRPL, CPCL, OPaL. They are not able to afford this price. Major reason is, price that we are not able to utilize, or whatever.
When the prices will come down, definitely all these consumers, including MRPL, OMPL and CSL, they will consume more gas. At this price, they have switched to some alternate fuel. They are not interested in using gas. This is a major reason why utilization level is low. Once prices will stabilize, it will come down and affordable, then certainly these consumers will start taking gas, and then it will increase. First part is. Next part is the Kochi-Bangalore connectivity. That I have just explained that, there's a section from Coimbatore to Mangalore, which is still to be commissioned, around 250 km pipeline.
Once that is commissioned, then it will be connected to national gas grid, and then perhaps consumption may pick up because then we can swap the volume from Kochi terminal to anywhere in India. Unless until this is connected to this national gas grid, it is not possible to swap the volumes.
Understood, sir. Also, the Kochi tariffs for that, we are charging as per.
Tariff is INR 81.03. This is tariff per MMBtu.
Understood. Lastly, if I may put in one more. We discussed LNG prices that, you know, appear a bit in the call today. Would it be fair to assume that if the current LNG price environment continues and with our ONGC gas coming up in third quarter this year, we might like to know the perhaps we are at a lower utilization level than we had in March this year, in the next, I mean, in fourth quarter of FY 2023. Any thoughts on that?
It's not like that. We are utilizing. You know what is the current utilization level of Dahej? It is 87% is still running. LNG price, spot LNG price is very high. Still we are able to utilize 87% of our capacity, which is not less in such a difficult and turbulent market. If you compare with Q1 of the corresponding quarter, it is 1% higher, 86% versus 87%. Fourth quarter has been a little bit low in the previous quarter. Of course, we are hopeful that this level of utilization will continue throughout the year. Even today it is 87%.
Right. No, why I mentioned that is because in the March quarter we saw, like, you know, LNG prices touching the highs and that impacted utilization plus that is the time when Dabhol terminal is actually also operational. If we put all these factors together, I mean, the high LNG spot LNG prices which reduces the demand and then our RasGas coming in and Dabhol being operational. If all these things come together, is there a possibility of a lower utilization? That was what I wanted to understand. How do you see it?
No, it is not likely to be, because if you look at the last quarter also, it was utilized only to the extent of 78%, 79 TBTU. Still we have this use or pay clause. We have in fact invoiced them this use or pay charges, whosoever was not able to meet the commitment. It is not that our bottom line is affected, but also utilization was less, no doubt. That of course, we hope that will not be there this year because whatever consumption is there is committed by all the offtakers in the beginning in the form of ADP. That they have to meet, otherwise there is a use or pay charges kind of thing.
We are hopeful that this level of utilization of 87% will continue throughout the year.
Understood. Thanks for taking my question. That's all from my end.
Thank you.
Thank you. We have our next question from the line of Hemal, an individual investor. Please go ahead.
Thank you for the opportunity. I'm sorry, I just have one basic question. When we look at the gross margin for this quarter versus last quarter, and I'm sure there are multiple things, the margins have declined, right? What would be the reason for that?
Just a minute. Gross margin? How much is the margin last year and this year? Last year gross margins you are asking? Can you repeat your question, please?
Yes, sir. If you compare quarter-on-quarter or even last year quarter to this year year-on-year, gross margins have come down by maybe two. Quarter-on-quarter I was seeing was odd 250 bps, and from last year also it's down. I just wanted to know what is the reason for that.
Last quarter the trading margin was.
Trading margin was higher in the last quarter, so that was a major reason. Of course, this quarter there is not that much of trading margin.
Going forward for the rest of the year, given the conditions that we are in at the gas prices, if you consider the market conditions to be same, do we consider the same gross margin rate for next quarters going forward?
Yes, yes.
The--
I think this will continue, and we will not be lagging behind. If you look at overall performance, we are able to give a good result. You see, last year also there was lot of less cargos coming in, but still we are able to maintain the profitability even go at least 10%-20% higher, 10%-15%. This year also that trend will continue because when we see that there is a condition which is not conducive to our business, then certainly we make more efforts towards something else to optimize and then to have more LNG through optimization and sell it in the market and earn the trading margin as we have done last year.
We have done a trading of almost INR 1,700 crore last year, and that too, and we had a trading margin of almost INR 858 crores. Those optimization come in time, but, of course, we have to see how opportunity come to us and then we do accordingly. Of course, we will not be lagging behind the margins in the next quarters and maybe throughout the year.
Okay, sir. Thank you. That's the only question I had.
Company is performing very well in spite of the adverse circumstances.
Okay. Thank you.
Thank you. We have our next question from the line of Ankur Agrawal from PhillipCapital . Please go ahead.
Hello, sir. Thank you for the opportunity. Just two questions from my side. One being a follow-up from previous participant's question. You mentioned that the Kochi terminal utilization levels are low because of high gas prices, particularly spot gas prices. Wouldn't the Gorgon volumes be coming under the long-term contract? They would probably be still available at a reasonable price. If you could provide some clarity on that.
The Gorgon contract is already committed to the off-takers. It is in fact taken by off-takers either at Dahej or at Kochi. We are not having too much of customers in Kochi, so most of the off-takers, in fact two of them, are bringing their volume to Dahej also. I think in future when there'll be high regas cost here, prices will be reasonable and affordable, then this entire Kochi volume, this Gorgon volume will go to Kochi only. Right now, because of pipeline connectivity to Bengaluru and other things, it is not possible to ship that volume there. One thing is very clear that customers in that region do not have that long-term contract, so that's a big difficulty.
They are dependent on the port volumes only. Yeah. This long-term volume cannot be given to customers who have not tied up with the off-takers. That's why I'm saying that whatever customers are available in that region, they will start taking gas when the prices will be reasonable and affordable. We are hopeful that this will come because these prices cannot continue at such level all the time. They have to come down. It's only the time that maybe not this year, next year, definitely they will come down. It cannot remain at this level because if you look at the trading at this level, and not much of trading is happening, but because of panicking in Europe, it is causing such price rise.
We are hopeful that this will normalize and next year hopefully prices will be down. Then Kochi terminal will be utilized because then customers may start taking gas.
Okay. Thank you. Sir, just one another question was that you mentioned right now slopes being negotiated are on the higher side. If you could provide some color, if you have some insight into what kind of slopes are we talking about, through these negotiations that probably some Asian buyers have tied into contracts. Any color on that, what we are looking at in terms of the percentage slopes linked to Brent contracts?
Let's see. These things are not to be discussed, but only thing is what this is very high as compared to our existing slopes. Once any contract which is having a slope of more than 18% of crude, that is not affordable. That much I can say. You can say that, if you compare crude and gas, it should not be more than 18% of the crude price. If it is higher than that, then there is no, in fact, logic of taking gas. Right. That's what I want to explain, that more than 18% we can equate gas to oil at 18% slope, maximum. That is also on the higher side. Beyond that, it is unaffordable.
Right. Makes sense, sir. Just one last bookkeeping question, sir. You mentioned that there was a forex loss of INR 124 crore during the quarter, which was booked in the other expenses. Excluding that, sequentially, there's a drop in the other expenses. Is there any particular reason for that? Other expenses were lower if I were to exclude this forex loss.
Gajraj will reply to that question.
Yeah, if you see the last quarter and the corresponding quarter, in the corresponding quarter also there was a loss of INR 35 crores in the other expenses. In the last quarter, it's around INR 60 crores. If you take out these from the other expenses, I think it could be more or less, more or less in line.
Okay. Oh, thank you, sir. That's it from my side.
Thank you. We have our last question from the line of Somaiah V from Spark Capital. Please go ahead.
Yeah, thanks for the opportunity, sir. I mean, you did mention about the projects, you know, that you anticipate for the next few years. What would be the annual CapEx run rate maybe this year and next year, if you could say a few percent of that?
CapEx this year and next year?
Yeah.
Yeah. If you look at the projects we are undertaking, this tank work is already going on, and this is likely to be completed by 2024, beginning almost. Maybe next two years we have to spend INR 1,250 crore. INR 600 crore each year you can take roughly.
This would be--
INR 1,250 crore this year.
I mean, what at a company level for the other projects also taking, I mean, the jetty expansion or, the Dahej expansion. In total, at a company level, what will be the annual CapEx?
CapEx, if you look at, we have planned almost INR 500 crores. This year how much? INR 1,200 crores, CapEx we have planned this year as per budget. This year, INR 1,200 crore. Maybe same, at least you can consider next year, maybe more, because jetty will come next year after tank. Dahej expansion, which is, costing around INR 657 crores, that will come up by 2024 end maximum. You look at it spread over two, three years. These are the expenditures. Apart from that, if petrochemical comes, then it will again take, also will be there. That we cannot anticipate right now how much it will be year-on-year basis.
Got it. One on the FSRU, what is the expected, you know, timeline for the project in terms of completion? What would be the capacity? Also one thing with respect to FSRU, generally you do a feasibility study in terms of demand, and what is the kind of back-to-back contracts or, you know, minimum offtake that you're looking for before you know, start on this?
The FSRU terminal we are proposing of 3-4 MMTPA. In fact, CapEx I have already discussed is INR 1,500 crores -INR 1,700 crores. Only thing you are saying back-to-back contract. Of course, we will try to have some at least to whatever possible, 30%-40% backup for back-to-back. We cannot say that it should be 100% tie-up. It is not possible nowadays. We will take that if at all 30%-40% is secured, that is good enough. We'll go ahead with this proposition because demand in any case will be very high. If price is good, demand is likely to remain high.
For our own projects of special LNG, small scale LNG, we can have some kind of this consumption. Apart from that, industries are likely to come once this entire pipeline, Dahej, this, Jagdishpur-Haldia & Bokaro-Dhamra Pipeline is commissioned then we will have more opportunity for our terminal. We are hopeful that this will be a good opportunity. Initially if 30%-40% is also used, that is good enough.
Understood. One last question, if I may. The current tariff at Dahej and this 5% annual escalation clause that we have, so has this been implemented every year so far? In terms of, you know, continuing to implement this, do we see at some point in time the prices, you know, at a certain level from a competition intensity standpoint, we might have to, you know, think about this 5% escalation clause? Thanks.
Escalation is there as per contract, 5%. We are already doing it. Right now it is INR 57.05 per MMBtu . I think this is as per the contract and uniformly it will continue to be so. I don't think there is any challenge coming from anybody. This is a tariff which is being charged by all the terminals which are there. In fact, Dahej has become the benchmark for others. I don't see any challenge as such of this 5% hike every year. That's all I think. Anything specific you are asking, I don't know. This will continue to be so.
Got it, sir. Thank you.
Thank you. I now hand over the call to the management team for closing comments. Over to you.
Thank you. Thank you very much, all of you. In fact, I would like to thank all of you for reposing faith in us. In fact, our management will continue to strive to increase the bottom line from quarter to quarter, year on year basis. We'll do all efforts that the company grows like anything. In fact, you have seen last year also that we have shown our commitment towards high profits. It has been difficult time, no doubt, for the entire energy industry, but we are able to maintain our profitability in all the situations so far we have faced. This quarter also we have performed very well. If you compare with last quarter also, it is better.
Only thing you see that India's loss, foreign exchange loss of INR 124 crore has caused some losses compared to previous quarter. If you add that, which is a notional kind of loss, you'll find that it is in the range of INR 825 crore, INR 800 crore almost. If you look at INR 124 crore of Forex loss. Truly speaking, we are doing the best to maintain and increase the profitability and bottom line and to just increase the faith of the investors on us. We are very confident that all of you will repose faith in company.
We are 100% sure that kind of business model we are having, there should not be any concern for any investor, because we are protected in such a way that it is very difficult to, in fact, go in loss, because we are not taking too much of risk. Again, I will thank all of you for being here, and we hope we'll continue to grow like this in future as well. Thank you very much.
Thank you. On behalf of Emkay Global Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you.