Ladies and gentlemen, good day, and welcome to the Q4 FY22 earnings conference call of Petronet LNG Limited, hosted by Antique Stock Broking. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Varadarajan Sivasankaran from Antique Stock Broking. Thank you, and over to you, sir.
Thank you, Margaret. Good afternoon, everyone. It's my pleasure to welcome all the participants and the management to this call to discuss the fourth quarter results of Petronet LNG. I'd like to hand over the floor to Mr. Mitra to take the proceedings forward from the management side.
Yeah, good afternoon. First, we would request our Director of Finance to give the opening notes.
Very good afternoon to all of you. This is Vinod Kumar Mishra, Director of Finance, Petronet LNG Limited. First of all, I would like to give brief snapshot of the financial results for this particular quarter and the year, financial year 2020 and 2022. The first highlight is that we have generated first ever highest EBT of INR 4,270 crore... INR 4,274 crore, and highest ever PAT of INR 2,352 crore, as against EBT of INR 3,968 crore and PAT of INR 2,949 crore. The growth in EBT and PAT has been 13%, 14% respectively.
Again, if you look at the throughput in Dahej Terminal as well as overall throughput in Dahej and Kochi, I would like to mention here that because of the higher LNG prices, the effect of our volume has not been as high as we anticipated in the beginning of the year. But still, we are able to maintain our profitability growth patterns. If you see, the throughput in Dahej Terminal has been to the extent of 178 TBtu, as against 196 TBtu in the previous quarter and 204 TBtu in the corresponding quarter. Total throughput has been 190 TBtu in the current quarter, as against 208 TBtu in the previous quarter and 218 TBtu in the corresponding quarter.
Overall throughput for the financial year 2021-22 has been 847 TBtu, as against 896 TBtu in the previous financial year. If you go to the financial results of the quarter, it has been encouraging, not as good as last quarter, but far, far better than the corresponding quarter of previous year. PBT has been INR 984 crore, as against INR 1,533 crore in the previous quarter and INR 856 crore in the corresponding quarter. PAT has been, in the current quarter, to the extent of INR 275 crore, as against INR 1,144 crore in the previous quarter and INR 623 crore in the corresponding quarter.
So this has been the highlight, and the growth of PBT has been 15%, whereas PAT has grown by 20% compared to the corresponding quarter. So this has been the financial highlights, and apart from that, company has declared a dividend of INR 4.50 to INR 4.50 per share, making a total of almost 150% as it was in the last year. So that's all from my side. Now, I have to listen to 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 the 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. Anyone who would like to ask a question, please press star and one at this time. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhishek Nigam from B&K Securities. Please go ahead.
Yeah. Hi, just two questions from me. So on the tariff for Kochi, if you could just give us a sense of, how much decline has happened in this, year going forward? And, second, in terms of the additional committed volumes, so when do these additional volumes start coming in, and how do we, you know, build in the ramp-up for this? Thank you.
Okay, so first question is regarding how much impact it has been. So as, I just wanted to intimate you that it has been reduced from $79.14 per MMBtu to INR 70. So this is the reduction which has taken place from 1/4/2019. And total impact, if you look at, it has been in the range of INR 214 crore. So that has been the hit which we have taken in the last quarter, Q4 this year. And now all the issues have been settled. And, going forward, it will be charged at the rate of INR 70 per MMBtu. And, I think, 5%? 5% increment will be there every year. So 70 from 1/4/2019, if you charge 70, then that's 5% every year.
That 5% has become now how much?
Eighty-one point.
81 point something is there for MMBtu, which is,
The person you are speaking with has put your call on hold. Please stay on the line.
You may have a moment while I check this. Sorry about the interruption. You may proceed now.
Yeah. So total, I was just mentioning that tariff is INR 17 with effect from 1/4/2019, and the growth is there 5% each year, so it has risen to INR 81 rupees-
Zero three.
INR 0.03 in this year.
Okay. Sir, on the volumes, if you could just give us some, you know, roadmap as to how we should build them, and how much are the volumes, the existing volumes?
Volume, actually, if you must be knowing the history of this contract of Exxon project, you must be knowing that we had negotiated the contract way back in 2017. It has been arrived at that for negotiation whereby we got the price reduced to some extent. We had taken some additional volume to the extent of 1.20 MMTPA. So it has been committed by our off-taker that they will be committing 50% of that, means 0.6 MMTPA, they'll be committing to our terminal. And I think this will be starting from 2026 onward. So from that point of view, from that time till the end of the contract, that will be the volume which will be flowing into our terminal.
Okay. Thank you so much.
Thank you. The next question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah, thank you for this clarification. Just a bit more here. So now there are no more receivables on account of Kochi, right? Is my understanding correct?
No more receivable on account of?
On account of Kochi.
No, no, it has been settled.
Okay.
It has been completely settled, and all have arrived at an agreement. And we have, in fact, a recent agreement, a written agreement, and now it will be the tariff which will be charged at the rate of INR 70 from 1/4/2019. So it is settled now.
Yeah. So, and INR 178 crore credit note has been given, which is basically-
Yes, yes.
Yeah. So if I were to look at actual revenue, I should be adding this number to the top line, right, on a normative basis?
If you need to see the actual revenue, you need to add INR 214 crore.
214, you must add, because this 170 is till December, I think. Okay.
January to March, it is becoming 214. The total year is 214.
Understood. Understood. All right. And secondly, on your use and pay charges, so first of all, can you share what is the service income for the quarter?
Service income for the quarter has been... Regas revenue, it has been to the extent of INR 2,000. For this quarter, you are asking?
Yeah, for the quarter and full year as well.
For the quarter, it's INR 463 crore.
Four sixty-three.
On annual basis, this is INR 2,389 crore.
2,003,389. Okay. The number of INR 83 crore is in closes, in over and above INR 463 crore, right? That's how one should read that.
The 460 crore is the after reducing that, because we have already taken the... We have included it. Yes. 83 we have included because we have charged as income.
Correct. Correct. So, so 83 is a part of 463?
Absolutely. Absolutely.
Understood. And, any progress on... If you can give a bit more detail on what's happening on the CapEx programs?
What? CapEx?
Yes, CapEx.
You're asking about CapEx?
Yes.
Okay, okay. So CapEx, we have been reiterating time and again that, we are already constructing two tanks at Dahej.
Yeah.
With a cost of almost INR 1,200 crore. And, another project which is coming in, expansion of the Dahej. We are expanding by 5 MMTPA more, so capacity will increase from 17.5 to 22.5.
Yeah.
It will be completed in next three years, maximum by 2024, and/or maybe beginning of 2025. So 5 MMTPA, and perhaps we are doing in two phases. The phase I will be complete in 2024 itself, and the next phase, 2.5 MMTPA, will be complete in next six months. So basically, it's a debottlenecking of the existing plant, which we are carrying out, and through that, we are increasing the capacity. Total CapEx will be to the extent of maximum INR 600 crore. And, you can see that it's a brownfield expansion. If you go for a greenfield expansion of such a 5 MMTPA terminal, you'll have to spend not less than INR 5,000-INR 6,000 crore. But we have been able to expand 5 MMTPA only with the CapEx of INR 600 crore....
So that's why it's a low-hanging fruit. We have taken that, and the next CapEx target is jetty, third jetty, which we are going to construct-
Yes.
-with a CapEx of around INR 1,700 crores. So this is what is the, CapEx for the east terminal we are looking at. Apart from that, we have ambitious plan of having one terminal on the east coast, which we are planning, and, if it materializes, then it will be costing only, say, INR 1,500-INR 1,600 crores initially, and it will be an FSRU terminal.
Okay.
Apart from that, other things we are looking at are SS LNG, small-scale LNG. Things are also going on. We have already got some LNG dispensing units for four places in near Tamil Nadu, Karnataka. Accordingly, we are establishing those four LNG stations with the IOCL.
Okay.
So CapEx is not much, but it's a milestone because there is huge emphasis given to this LNG usage in transportation sector. So if it succeeds, then we can further expand it in other areas also. So this is not a very big CapEx item.
Yes.
Apart from that, as soon as all other things will be cleared by the board, we will come to you with CapEx.
Okay. But, the petrochemical plant is still on the table?
It is still on, because we have not taken board approval. So we are still doing some studies and detailed feasibility is to be conducted. All those things are going on, so we still have to get the seal of board. But that is on. It's again our necessity, right? It's a very—it's an opportunity for us that right now, there's huge demand for that petrochemical. And basically, it will be not a very big plant. It will be PDH-PP only. So what we are doing is propane dehydrogenation plant, you can say.
Okay.
So propane dehydrogenated plant. It's a PP plant. So basically, there's huge demand for that particular item. And if you look at the margins there, it's very high. So its synergy is there with our business, so we are looking at that. But only thing after DFR is prepared and it is approved by the board, then only we'll come to you and say that we are undertaking this.
Okay. But how much have you spent on CapEx for the 2 tanks out of INR 400 crore?
We have spent, I think INR 106. How much we have spent so far? Thanks. Thanks for your interest. I'll just tell you, because the exact number I don't have right now. Yeah.
Rough number and timeline for completion for that?
A range of INR 200 crore maximum.
Okay.
For the time.
Timeline for completion?
INR 150 crore-INR 200 crore, you can take the estimate.
Okay. And what is the timelines for completion for the tanks?
Timeline is only, I think 36 months, from the date of beginning. So it must be completed by 2024.
Okay. Would you do parallelly the extension of the hedge?
Yes, yes. It's parallel. It's not correlated with time.
Okay. Okay. And that timeline is also similar, 2024, 2025?
More similar.
Yeah.
Only it may be exceeding beyond, I think, 2024, maybe by June or-
Okay
May 2025.
And jetty will be after that?
First half will be... Actually, it's in two phases. That's what I was telling you.
Okay.
Phase I will be complete by September-October 2024, and the next phase will be complete by 2025, March or April, maybe May maximum.
The jetty? Last one, sir.
Jetty will be there because we have to award the contract. So approval has been given by board, so we are undertaking that. It will take three years, I think.
From now. Three years from now.
From now, whenever we start on the due date.
Okay. Okay, that's all for me. Thank you so much, and all the best.
Thank you. The next question is from the line of Probal Sen, from ICICI Securities. Please go ahead.
Thank you for the opportunity, sir. Am I clearly audible?
Sir, I would request you to come closer to the phone.
Hello?
Yes, sir. Please go ahead.
Yeah, thank you for the opportunity, sir. Good afternoon. I have two questions. One was with respect to the volumes decline, even in terms of long-term cargos for this quarter. I apologize if you covered it earlier. Just wanted to understand that the long-term cargos pricing still remains fairly favorable. So, what has sort of driven the kind of 20 TBtu, you know, QOQ decline in terms of, you know, even long-term offtake? If you can just give us some sense of that.
Yeah, actually, it's as per ADP. If you look at the annual delivery plan, so accordingly, there has not been any default. In third quarter, it is on the higher side, but this is as per the annual delivery plan. So it's not that at each quarter it is equally distributed. So as per the delivery plan with our suppliers, so it is coming only as per that schedule. So it may be less than that, but there is no significant reason that we have not taken any cargo. We are taking all the long-term cargos, whichever are scheduled there.... So accordingly, we have taken?
It's more of a normal contractual fulfillment rather than any slowdown in demand, is what you're saying?
No, there's no slowdown. It's a normal fulfillment of the contract as per the agreed annual delivery plan.
Sure. Okay. And the second question was, sir, if I aggregate the kind of CapEx plan, you did mention multiple plans, INR 1,200 crore for the two tank, INR 1,700-odd crore for the jetty, and about INR 600-odd crore for the brownfield expansion, which aggregates to about INR 3,500 crore, if I'm not mistaken.
Right.
Now, if we look at the financial performance and the, you know, balance sheet of our company, we are comfortably generating, you know, somewhere around INR 4,000 crore of operating cash flows on an annualized basis.
Right.
Now, so, you know, just to understand that, how do we sort of then look at capital allocation in the slightly more medium term? You did mention the polypropylene dehydrogenated plant. I'm sorry, I don't know much about, you know, how much CapEx that would entail. But is there anything else on the anvil, or is there a capital return or, you know, plan that we should look forward to from the company? Just wanted to understand how you're looking at the whole capital allocation picture at this point of time.
Initially, CapEx will be low, but it will be picking up in the subsequent year, maybe two, three years, two years later. So what I can say that it depends upon the progress of the plant, because once you start a plant, a lot of materials which have to be imported, and there's a lead time for all the materials. So only in the subsequent period that most of the CapEx come, but initially it will start in a modest manner, but later on it will pick up. The exact plan I cannot give you, because too early to give anything premature. But I can only say that it is a wholesome program which we have drawn up and PDH-PP plant, which comes up, then perhaps that will have a huge effect.
For that also, we will be securing some debt also for that particular plan, maybe 70% will be debt. So that is our whole idea. So whatever cash we have, we will utilize it only to the extent of 30% in our future projects. So I just wanted to ensure that dividend continue to be paid at least at the rate of 100%, even if we go for major CapEx. This is our endeavor, and perhaps this is our plan also, that we should continue to pay the dividend. And whatever financing is to be done, we should to the extent of 70%, we should do from the market, from the bankers, and 30% equity we can take from outside.
Right. And any other international plans that are there, even in the planning stage at this point of time, sir? Obviously, the existing earlier ones-
We can think of any plans right now, because there's no opportunity also. But it is always our endeavor, if you find an opportunity, we will think of it in terms of its merit. But right now, there is no plan.
Got it, sir. That is very useful. I'll come back if I have more questions. Thank you for your time. Bye-bye.
Thank you.
Thank you. The next question is from the line of Sabri Hazarika from Emkay Global Financial Services. Please go ahead.
Yes, good afternoon, sir. So,
Good afternoon.
I have got a few questions. So first one is, so what is the current run rate like? I mean, I think spot LNG has been cooled off also a bit, from more than $30 to around $20-$25 now.
It is $18.35 today.
Yeah. So have you seen any uptick vis-à-vis Q4 average utilization, which was like, say, 80%-81%, or is it the same right now?
For Q4, I have just mentioned that it is now that prices have come down, but in March, it has been in the range of $25-$30.
Right.
Our utilization in Q4 was not to that extent. March, it was, if you look at it, around 79% on the base level. So that way we can say because of high LNG prices, spot LNG is not coming to India in the same fashion it was coming earlier here. So but, as you see, I am seeing on the optimistic side, that prices today are $18.25. It comes to $15-$16, then perhaps it will suddenly start coming. So I'm hopeful that prices will come down drastically in the next 3-4 months, and then perhaps more cargoes will come.
Anything on, I mean, the coal shortage leading to higher LNG imports for power generation or anything on Russian imports also going up? Anything else, any comment on those fronts?
In fact, it is always very difficult to answer because coal import, in any case, is there, no doubt about it. Gas is so costly that it's not possible to use gas for power generation. But I think when it comes to $15-$16, then perhaps it, even power sector will pick up and they will take gas. In fact, I have just seen a circular just two days back. There was a circular also where, MoPNG has directed GAIL to import our LNG, to import LNG, to compensate the city gas distribution company, because domestic gas allocation is falling short and they are not having so much of domestic gas.
So GAIL has been directed to not only bid for HPHT gas, but also they have been directed to import more LNG and blend it with the domestic gas and work out a rate which can be supplied to CGD companies. So it's an encouraging news for us also, because more cargoes are likely to come now... And, hopefully those cargoes will come, and GAIL has been directed. Perhaps we are hoping that, those cargoes will come to our terminal only, and, that will further enhance our revenue in future.
All right, sir. And sir, you mentioned about this INR 204 crore impact from that Kochi terminal reset, Kochi tariff reset.
Right.
So this is like in the numbers. I mean, one can adjust it if you want to come up with an adjusted number, right?
It has been adjusted, INR 214 crore it is, not INR 204 crore.
Yeah.
INR 214 crore for settlement of the Kochi tariff issues.
So your profit is lesser by that amount. This is one kind of-
Had this been to our plan, we would have been even better. What are we at that?
All right.
You just said, and you see in third quarter, we have taken a hit of INR 65 crore BPCL settlement. So we take both these together, almost, 275 or more than that. We have adjusted, even then we have been able to generate so much of profit.
I can just bookkeeping relating to that indirect impact. I think Jaiprakash would be able to tell what-
Yes.
Yeah. Sorry, at the gross margin level, positive INR 144 crores.
Yeah.
-INR 50 crore as forex loss.
Yeah.
INR 83 crores depreciation, finance cost INR 78 crores.
83 crore depreciation and finance cost INR 78 crore. What would be the trading margins, for this, for this quarter, which was like around INR 314 crore in Q3?
It's INR 396 crore.
Okay, this is INR 396 crore for Q4.
Yeah.
Okay, and last question, Gorgon volumes in Dahej?
Gorgon volumes in Dahej, 21, 21 TBtu, sorry, 21 TBtu whole year.
Okay, fine. I can calculate it then.
Yeah, 21 TBtu YTD.
YTD. Okay, thank you so much, and all the best. I'll come back in the queue. Yeah.
Thank you. The next question is from the line of Kirtan Mehta from BOB Capital Markets. Please go ahead.
Thank you, sir, for giving this opportunity. In terms of the FY 2023, would you be able to share more color on the volumes? Do you have the annual delivery plans available, which can sort of give us an indication about the volumes?
For next year, you are asking for?
Yes, sir.
23, 22. So I think it's a very... I think we should not discuss this issue right now. This is something which we have to keep with us, disclose it later on, but now it is too early to say anything. But I am saying whatever contracts are there, there's a flexibility to the extent of 80% they can exercise. So that part is there. So maybe that 100% they have not done in ADP, then perhaps up to 80% they have to do. Otherwise, they will use the pay clause. So I think, and perhaps because, long-term contract, in any case, nobody is leaving. Everybody is very, very eager to take on long-term contracts. The only issue may be in the capacity booking utilization. So that they are doing because prices will come down, so perhaps consumption will increase.
So whatever may be the annual delivery plan, it doesn't mean that that is the only cargo we will have. It depends upon the price. If prices are reasonable, $15-$60, then more spot cargoes will come. So we are, in fact, very much hashing on those cargoes also, which will come in future. So in any case, we will discuss it later on, how much is the ADP. I don't have a ready-made things here. For next year.
So in terms of the sort of long-term cargoes cover roughly around 80% of the Dahej volumes. Is that a right understanding?
Yeah, if you look at 17.5, I can tell you that is a workout. 8.5, seven point five NTPC is raw gas, and 1.4-5 NNPPA is the Gorgon volume. So 8.5 is there. So it's almost, somewhat less than 50%. You can say 17 and half, 18.5 divided by 17.5. Almost 48%. 50% you can take, because, some, Gorgon volume, volume is also coming to this place. So if you take that also, then it will be more than 50%, which is through long-term volumes.
Right. In terms of the user pay contract currently exist on about how much percentage of the volumes?
It's almost 8.25 is there. That's I think more or so, almost, you can say, 8.25 you can take. It is almost how much percentage? I'll work it out, but you can work it out.
8.25 out of 17.5, that's what you are saying?
It's 47%.
Right, sir. And in terms of the INR 400-odd crore of charges that has been levied as use-or-pay charges, are there any initial sort of indications from the customer in terms of what sort of level would be expected-accepted?
It's as per contract, and we are fully confident that we'll recover it. It is as per the contract. So if they have not utilized, then perhaps, we have to recover it from them.
You had previously commented that you would be open to sort of look at the time compensation, particularly for the cases which might be genuine or due to the COVID-related impact. So how much proportion of this revenue could fall under that?
It's early to talk about. Right now we can say that it is there, and nobody has approached it, saying that we will not pay. So let us see what happens in future. It's too early to speak on these matters, what they will do and what we will do. So far, nothing is going on on that aspect.
Right. So for this year, basically, while there was sort of a INR 270 crore of odd and lower impact because of the reversal, there was also INR 415 crore of the use and pay charges, which has been built in the contract, which is probably related to the contracts. But-
Right.
Is that the right address? Yeah, fine, sir. Thanks. I have a few more questions, but I'll come back in the queue.
Thank you.
Thank you. The next question is from the line of Anubhav Agarwal from Credit Suisse. Please go ahead.
Yeah, thank you. Just checking, am I audible?
You are audible, but there's some disturbance on your line, sir.
Okay. So the question is on the use-or-pay contracts. So this contract on the service volume, how long is this contract? Let's say, if the customer want to change it, when he gets the opportunity to change it?
No, it's not a contract which can be changed by the capacity, because they have to honor the contract. So it's not like that, they can change as per the contract. It's a firm contract, and it is valid, I think up to 2035.
For everybody?
For everybody. It's a very firm contract. It's not as if there is an escape to it, because nobody can think of that.
What's your sense, the guys who are, let's say, the service volumes which are lower right now, or the cooling volumes are low, low right now, are they not using gas as a fuel, or they're using any alternative fuel right now?
It's not like that. What's happening that the customers or off-takers who are having a long-term contract, they have no hesitation in bringing the cargoes and use the capacity. It's only those cases, only off-takers who have not tied up a long-term contract sourcing, so they are not able to bring so much of cargoes, but that doesn't mean that they will not honor the contract. It's only for the time being that they could not bring, but as and when the price softens, perhaps, they will also bring and utilize the capacity. So. And one more thing, as you are rightly saying, that some of the customers have started using other fuel because of high LNG prices. So that is true, because in Kochi, we have found that some of the customers are not using natural gas.
So prices are too high for LNG. But those who are using long-term gas, they are utilizing as usual. So my only clarification in this regard is that it's only very few quarters that those who are not utilizing the natural gas, but of course, some of the customers are not using gas and using alternate fuels. But, it's not in all the cases. But perhaps the kind of sentiment, kind of enthusiasm which should have been there, had the prices been low, that is not there. People are not able to import gas, this spot gas. So that is a challenge.
Okay, just one more question. What was the CapEx for you, sir?
Your voice is not clear.
Yes, sir.
The CapEx, sir.
Not clear.
The CapEx in this financial year, last financial year.
What is?
The CapEx. CapEx incurred in, fiscal year March 22.
CapEx incurred in fiscal 2022, INR 370 crores almost.
INR 370 crore. Thank you.
Three seventy.
Thank you. The next question is from the line of Niharika Jain from Aequitas Investments Consultancy . Please go ahead.
Hello, good afternoon. So my question is regarding the Kochi capacity. So how are you going about it now that even the tariff has been revised, and I think we were waiting for some rail pipeline to get completed. So just wanted to get some clarity on this Kochi terminal.
Yeah, Kochi terminal, as I already mentioned, that after this Bangalore-Kochi pipeline, consumption has increased. If you look at the capacity utilization, this year, we have utilized almost 31% capacity of Kochi terminal as compared to 18% last year, but it should have been more than 30%, I agree. But because prices are so high, so people are not able to import spot LNG. So that is a big constraint which has been there in the current year, in the last year, financial year 2021-22. Otherwise, there's no issue. And as far as the pipeline connectivity to Bangalore is concerned, that is already going on.
As I have mentioned in my earlier conferences also, that pipeline is already made up to Coimbatore, and it's only a stretch of 250 km from Coimbatore to Bengaluru that is to be completed, but that is a big challenge. Now, farmers have again disrupted the pipeline construction activity in Tamil Nadu region, as again has informed us. And perhaps we are some working out plans how we can complete it, and they have suggested to go build the pipeline along the road instead of taking the pipeline to feed to the farmers... So big challenges are there. As although it's only 250 km, but it's a big challenge, but it will be done. GAIL has assured us that they will be doing it.
After getting the nod from state government of Tamil Nadu, we are going ahead, and we are hopeful that it should be completed in the next one or two years.
Okay, okay. Thank you. And I also have one more question on the long-term contracts we have for LNG. So I understand there are, I think, three running contracts. Two are with RasGas for 7.5 and 1, so basically 8.5 from RasGas, and 1.43 around from Mobil, Australia. So have we entered into any other long-term contracts in this Q4, or are we in talks with anyone for long-term contracts? Because I think the new circular also had come where GAIL would be, I think, needing LNG to for blending for CGD companies. So just wanted to have a-
That's what I was carrying just now, that there is a circular from the Ministry of Petroleum, where they have clarified that for this, shortage in CGD sector, domestic gas shortage, GAIL has been asked to import more LNG. So it is specified to GAIL that they have asked to import more LNG and blend it with the domestic gas, and then work out a rate and sell it to CGD entities. So that is going on. That is an optimistic step, that GAIL has taken. So now we hope that more LNG will come. So the blending could be 70% domestic, 30% LNG, could be 40, 60, 50% domestic gas, 40% LNG, and rate can be worked out like that.
So I think, this is going on, and, that is giving, hope to us also that more cargoes will be coming to us, and perhaps that will further, add to our revenues. So that is-
Yeah, that is actually positive. Now I was trying to understand,
Long-term contract you are asking. Long-term contract-
Yes.
We are already going to extend this, the Dahej, for this RasGas contract for the Dahej. So that we are already doing, and the process is going on. We have started negotiations with the RasGas. Task force has been constituted, and we are working on that. Because we have to ultimately finalize by December 2023 for extension of the contract, and we have already taken a step right now, and perhaps that will be finalized. So at least that will be extended. And maybe that more volume may ask for if there is a good price given to them, to us for this purpose. So maybe we may extend some volume also, but right now we want to extend the existing one.
Perhaps, as we are saying that more contracts are to be lined up, it's not a very perfect environment for negotiating for a long-term contract. Because the demand is so high, and after this Russian-Ukraine crisis, European countries are after all these suppliers, including QatarGas and others, to have a contract. So that is, in fact, spoiling the market.
Uh, yes.
So long-term contract also, it's not the right environment to initiate. But whatever contracts we have, that definitely will be extended, and whatever additional volume we can take under that contract, we will try to negotiate that.
Just a clarification, for RasGas we mean the December 20, 2031, so the quantity would be for the RasGas one, which we are negotiating?
There is a provision in the contract that, five years before expiry of contract, we have to finalize that it has to be extended or not.
Okay, okay, fine.
Accordingly, that time is till December 2023.
Okay.
By 2023, we'll freeze it, what is the price, what should be the terms, and all those things will be finalized. So five year before, we are going to finalize all those things.
Okay. Thank you so much, sir. That was my ...
Thank you.
Thank you. The next question is from the line of S. Ramesh from Nirmal Bang. Please go ahead.
Hello, can you hear me?
Yeah, yeah.
Yeah. Good evening, sir. Thank you very much. The first thought is, you know, if LNG prices stabilize at $18-$20, what kind of growth we can expect in terms of your regasification volumes, say, in FY 2023, 2024? What kind of growth we can expect?
After this price today, I have seen, I am very optimistic that more cargoes will come now. And if it comes to the level of almost $15, then perhaps it will be good for the gas industry also and people who are using natural gas. So I am hopeful that with this kind of pricing, certainly there is a good hope that we can expect more LNG cargoes coming to India. And it's a good sign for all of us, and perhaps we can further enhance our revenue.
If you look at your FY 2020 volume, you have done 928 TBtu, you know. Is that kind of volume possible in the next one year?
What kind of volume you are asking?
This year, you have done 847 TBtu.
8:45, we have done, yeah.
Is it possible to achieve about 8%-10% growth in the next one year?
Even more than that we will expect. But, whatever it happens, it's good, but we will do whatever we can do to increase it to the maximum possible, maybe 5%-10% we will increase it.
The second part is now, based on this, the whole gas pool has come to be managed by GAIL. Is there any data available in terms of what the additional volume of LNG that they might import and that will come to your terminals, say, over the next 4-5 years. Because most of that incremental growth will firstly come from the new CGD entities. So is there actually, is it possible to give some sense in terms of what the kind of additional cargoes you can expect to handle once this whole mechanism is in full swing?
You are asking about additional consumption going forward?
Yeah. So based on this new arrangement to ensure that the allotment of gas for the preferential segment, CNG and domestic PNG, is arranged by GAIL, by making up the domestic gas shortage through LNG imports. Is there any, you know, data available in terms of what the kind of additional volumes you can expect to do upon the imported LNG cargoes for the preferential allotment say, over the next four to five years? Because whatever is being imported by the existing CGD entities to make up the shortfall is already in the system. So when you are talking about future growth potential, it must be based on the growth in existing entities as well as the expansion of the new CGD entities.
So, is there any data you can share in terms of what the kind of incremental growth you can expect once that full mechanism starts operating in full swing?
I have holistic data, you can say, but it's not that year-on-year basis. I can give you an estimate what we anticipated earlier that, and what has been the government desire to increase the consumption of gas by 2030. And if you look at the government estimate, it's very much on the higher side. And we expect that by 2030, it should be in the range of almost 600 MMSCMD. And if you look at the current consumption, it's around 162 MMSCMD, so almost 4 times. So what I am saying that growth is primarily because of CGD project coming up, and also other factors will be utilizing as well. Network will be spreading to a very places where a pipeline is not there.
So I think, that part, if it is covered by, government, and the gas pipeline is made in all the remote places, then perhaps consumption will increase. The only thing is that pipeline, connectivity is not there to some of the remote areas where the demand may be there. So latent demand is there, but there is no, supply network. So I think this is giving a good hope that, CGD entities will be laying pipelines, and then, small, small consumers, including industrial and commercial consumers, will be there. So that part will be there. I am telling you that city gas distribution companies will be the biggest consumer of, natural gas in future. Right now, fertilizer sector is consuming only 49 MMSCMD, but in future...
If you look at second place, CGD is coming in the next place, utilizing almost 33 MMSCMD gas, whereas power sector is utilizing only 24 MMSCMD. As per the data available from PPAC, from April to February, almost March. It is, like that, that CGD entities are using, 33 MMSCMD of gas. So I think, as and when the CGD entities are completing their projects and they start taking gas, they will be spearheading among all next 4-5 years. So that is giving a good hope to us that consumption will definitely increase. The only part that prices which are looking at very high level right now, this is because of various geopolitical issues which are going on. You know very well, Russia, Ukraine war has been there, and there has been shortage in, Europe of gas in the winter season.
So all those have contributed to this kind of unanticipated rise in LNG prices. But otherwise, it is not likely to remain at that level always. It will come down, and then perhaps, consumption will further grow.
Just one last thought. If you're looking at the CGD business driving the growth in natural gas,
Right.
Isn't there a risk to that growth from the penetration of electric vehicles in the transportation sector for CNG? And what is your assessment of that risk, and how do you see that play out say over the next few years?
Yeah, repeat your question. CNG and PNG, you are talking about?
Yeah. So if you're looking at the CGD sector driving the growth for demand for gas in India over the next two years, and you take the demand from the transportation sector for CNG, isn't there an element of risk to that growth from the penetration of electric vehicles, particularly in the taxi segment and buses as we go forward? So what is your assessment of that risk for the growth in natural gas?
No, I don't see that this is a threat to this CNG transport sector. And whatever e-impact will come, it will not automatically replace. Even if we—Even today, CNG is there, but petrol and diesel vehicles are also there. They can stay side by side, and it's not necessary that one fuel coming up means driving out the entire chain. CNG vehicles are still forming very low percentage of the total vehicle segment. So petrol, which is to be replaced by other diesel and petrol vehicles, petrol, e-vehicles and e-cars are coming up. So I think CNG can still stay. It's not going to be a threat that once the e-vehicles will be coming, then there will not be any demand of CNG. CNG will continue to be in demand…
Thank you very much.
I wish you all the best.
Thank you.
Thank you. The next question is from the line of Iqbal Khan from Edelweiss. Before we take the next question, we would like to request participants to please limit your question to one at a time. Thank you. The next question is from the line of Iqbal Khan from Edelweiss. Please go ahead.
Yeah. Yeah, yeah, thank you. So, like, you know, you mentioned that when the prices go down, we have the model practically ramp up. I'm not sure whether you are-
Mr. Khan, your audio is not very clear.
Audio is not clear. I'm not getting your question.
May I request you to speak on the handset?
Yeah, yeah. One second. Is it clear now? Is it clear now?
No, sir, it is muffled, your audio.
Come closer to the speaker.
Okay, then, I mean, it is not very clear.
Thank you, sir. We request you to check your phone line and rejoin the queue. Thank you. The next question is from the line of Amit Mishra from Axis Capital. Please go ahead. Amit Mishra, your line has been unmuted. Please go ahead with your question.
Yes, sir. I wanted to know the decrease in the profitability from INR 1,114 crore to close to some INR 50 crore this quarter. So what are the major factors driving it?
Major factors, I have just give you one or two items which can perhaps have given in the slide, why it has grown as compared to previous quarter you are asking, no? The previous quarter, Q3 of 21-2 2. If you look at that, then the trading margin has increased at INR 68 crores as compared to previous quarter. As compared to corresponding quarter, there has been growth of INR 69 crores. The major factor is, of course, this has been the trading margin. We have sold some gas, which we were having, and, that has increased our profitability to some extent. This is a major reason, and, if you look at other small factors, there are so many things. Inventory valuation is also by INR 60 crores. Another major reason could be that.
Then, perhaps as compared to previous quarter, if you see that the higher charges are the hedge into higher rates. So all those factors are contributing the 5% hike is also there from first of January. So it is like that, that it has increased. As compared to corresponding quarter, definitely it is increased, but from the corresponding quarter, it has not increased because downside is also there. We have put many new charges, Kochi tariff charges, and the lower volume impact has been there. So that way, it has not contributed in fact it has reduced. But, if you compare the corresponding quarter of previous year and current quarter, you'll find that there has been substantial increase in the trading margin, INR 369 crore.
So that is a major factor, and investment income has also increased to the extent of INR 17 crore, and then many other factors are there, small, small factors. Inventory valuation is one of them, it's INR 30 crore.
Thank you. The next question is from the line of Ankur Agarwal from PhillipCapital. Please go ahead.
Yeah, good afternoon, sir. Am I audible? Yeah, yeah. Please, go ahead. Thanks, sir. Can you please provide a breakdown of the volume in terms of the long-term spot and the volume tied to your trading margin? And just to understand further, how should we, one, look at your trading margin, going forward? If you can provide some over comments on that, that would be helpful. So you are talking about whatever trading we have done, you are asking about that, or overall you are asking? Whatever trading margin that you have generated, what are the volumes tied to that? I mean, how should one look at that? Volume, I think, the volume has been talking for... Yeah. See, the trading margins that have been generated have been during the...
As you know, during the financial year, the spot prices have been at a very high level. Right. So, with about 9-10 TBtu of spot volume that we have given the volume numbers to you, these kind of trading margins have been on in the year. And, as far as your question regarding the projections of trading margin, see, it depends on how the market is. Right now, the prices have fallen down to about $20. So it will depend largely on the market. But the point is that if the difference between the long-term and the spot prices are not too high, then in any case, the terminal utilization will go up, because people will start tying up the spot volumes.
I mean, our optimization only will start bringing the spot volumes, and the regasification, I mean, the contracts will see more volumes. So, it is either way due to the higher spot prices, there might be some volume disruption, but the trading margins are there. If the prices come down and the difference is not very high between these long-term and the spot prices, in any case, the volume growth will be there at that time. So this is what we can tell regarding the trading margin and the volume scenario.
Okay. So for this quarter, for Q4, 9-10 TBtu is what the volume is?
No, this is not 9. Q4, we have said that only 3 TBtu is there. But overall, in the year, I told-
Okay.
The major Trading Margin came from about 10 TBtu.
Just some clarification, trading margin for the current quarter, INR 396 crore, right?
396, yes.
What is the inventory valuation gain for the quarter?
Sixty-eight crores.
Okay, fine.
Actually, actually.
Okay. Okay. Okay, thank you.
Thank you. Ladies and gentlemen, that concludes our time . That was the last question for today. I now hand the conference over to Mr. Varadarajan Sivasankaran for closing comments.
Thank you, Margaret. So I just had a couple of follow-up questions before we can close. One, if you can provide some perspective, somebody where to go, and hunt for a long-term contract today, what is kind of rates which are available? And second question is on Kochi. Earlier, you said in the price negotiation, we'll ask for additional commitment of volume from the off-takers. Have you committed any incremental volume?
First question is regarding? I mean-
Long-term contract. If long-term contract, is somebody were to today hunt for a long-term contract, what, what kind of terms are available as of now?
The terms of the long-term contract, we are still banking on the contract which has been finalized by QatarEnergy with the countries like China and Bangladesh and others. But at that point of time, they have contracted with 10, 20% of the load. I don't know if this is the right environment or not, but we still are hoping that it should be around that. And that happens, then it will be a favorable contract for future. And I think we have already started negotiation, but the environment is not like that, that people may agree to it because there's a lot of turbulence in the market. But still we hope that we'll be able to settle this issue, and we have enough time, more than one year, to finalize all those things.
Perhaps, the ramp-up you are asking for, a revision in Kochi areas, it will be starting in 2036. And as I have said, that, it will be, 0.6 MMTPA, which, in any case, means roughly, 9 cargos or so. So I think, that is how we are planning to do. And, perhaps it will start from 9, almost 10 cargos will be coming from 2036. That's what, off-takers have committed so far.
Sure. Thanks a lot. I wish to thank all the participants and the management for taking time out to attend this call. Thank you, everyone, and have a nice day.
Thank you very much. Thank you.
Thank you. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.