Ladies and gentlemen, good day and welcome to the Petronet LNG Q1 FY 2021 Earnings Conference Call hosted by Systematix Institutional Equities. As a reminder, all participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during a conference call, please signal an operator while pressing star and zero on your telephone. Just note this conference is being recorded. I now hand the conference over to Mr. Varatharajan Sivasankaran from Systematix Institutional Equities. Thank you, and over to you, sir.
Thank you, Vikram. Good morning, everyone. On behalf of Systematix, I would like to extend a very warm welcome to all the participants and the management of Petronet to this 1Q FY 2021 results conference call. The management is being represented by Mr. V.K. Mishra, Director of Finance, Mr. Rakesh Chawla, CGM and President F&A, Mr. G.K. Sharma, CGM and VP Marketing, Mr. D.V. Satpathy, CGM F&A, Mr. Vivek Mittal, GM Marketing, and Mr. Ashwin Yadav, Manager F&A. I would like to hand over the call to the management of Petronet now, and after the briefing, we can move to Q&A. Over to you, sir.
So this has been a very depressed period. As you all know that, COVID-19 has marred all the business equally, and we are not an exception to it. Are you getting my voice, sir? It's okay?
We can hear you.
Yeah. So it has been marred by this COVID-19 pandemic, and of course, still we are able to recover the way we could have done within this quarter. And if you look at the kind of throughput which has been there in Dahej, it was at the level of 181 TBTU against 206 TBTU in the previous quarter and 217 TBTU in the corresponding quarter of the previous year. And if you look at the total throughput of Kochi and Dahej, it has been in the range of 190 TBTU in this quarter, current quarter and 219 TBTU in the previous quarter and 226 in the corresponding quarter. So there has been somewhat depressed performance this time because of the pandemic and because demand was not there. It was very tepid as compared to the previous quarter, so it has been down.
But of course, we are still able to utilize the Dahej terminal at the level of 81% as compared to 92% in the previous quarter and 112% in the corresponding quarter. So throughput has been quite good as compared to the kind of pandemic which has almost brought down the demand to a very low level. So this is the physical performance. If you look at the financial performance for this quarter, it has been INR 696 crores PBT for the period Q1 as compared to INR 486 crores in the previous quarter and INR 838 crores in the corresponding quarter of the previous year. And PAT has been INR 520 crores as compared to INR 359 crores in the previous quarter and INR 560 crores in the corresponding quarter of the previous year.
So if you look at the growth from the previous quarter, it has been to the extent of 43% in PBT and 45% in PAT. Of course, this growth is not because of any volume, but this is on account of IND AS 116, which is there. And as you all know, there was a significant downward profit because of this IND AS 116 in Q4 to the extent of INR 500 crore. So that is not there. So there has been a INR 170-crore benefit in this quarter. So this is basically because of that accounting standard that we have been able to show a performance better than the previous quarter. And if you look at other reasons which have been there, it is because of the CSR expenses because we had given INR 100 crore of donation to PM CARES Fund.
So that was the basic reason why it has been a good performance as compared to the previous quarter. But otherwise, volume-wise, it is less than the previous quarter and also less than the corresponding quarter. So this is the entire thing because we are able to maintain our performance even against such a pandemic. This is commendable because if you look at other businesses, they are drastically down in this quarter. But we are still able to utilize our terminal 81%. If you look at the overall utilization of both the terminals, it is almost 66%. So we are still at a better position as compared to other businesses.
A nd we are improving slowly, s o I want to assure you that in the next quarter, it will be a far, far better performance because at present, we are utilizing our plant at 104%, the Dahej plant, and Kochi is also being utilized at the level of almost 17%-18%, maybe 20% sometimes. So this quarter will be better than this first quarter because our throughput is very good as of now. So that's all from my side. Now I open the house for the questions. So you may ask now.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the attached phone 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. To ask a question, please press star and one on the attached phone now. We have a first question from the line of Rohit Ahuja from BOB Capital Markets. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, I just want to know, on Kochi, we were looking to revise our regas tariff lowers. So any agreement on that, sir?
Yeah. Actually, we have also disclosed in our notes also last time that we are now charging Kochi tariff at the level of $79.14 per MMBTU. And earlier, it was $104.54, so it has come down to $79.14 in the previous quarter itself, means Q4. And similar tariff is being charged now. But we are in discussion with those companies, offtakers, BPCL, GAIL, and IOCL. And as soon as there is any agreement reached, we may revise it. But of course, we would like to retain it at this level, only $79.14, because this is the right level, and at this level, there is no impairment of the asset also.
Right. And would it follow a similar model like Dahej with a 5% escalation every year?
Yeah, that is being followed. This is as per contract. We are following 5% hike every year, we are doing it.
So we can take $79 as a new base and from which there would be a revision of 5% every year?
Yeah. Yeah. It's now $83.10 per MMBTU. So this is now current year. $79.14 was from 1/4/2019. 1/4/2020, it will be $83.10 per MMBTU.
Right, Sir. Secondly, sir, any any update on the Driftwood deal? You know, we have heard a lot of media reports, and apparently, they quoted you extended the MOU.
Something I would not like to discuss right now. So just excuse me for not replying to this question because it's a very something which cannot be disclosed in the press as such. There are certain issues we cannot discuss this issue openly.
Okay. Fine, sir. That should be it. Thanks a lot, sir.
Thank you. We have the next question from the line of Probal Sen from Centrum Broking. Please go ahead.
Good morning, sir. Thank you for the opportunity. Sir, you mentioned about the IND AS impact as well as the CSR expense. So the CSR expense was probably sitting in the other expenditure line, if I'm correct. So that impact is easy to see. The IND AS impact would have reflected in which line items, sir, in the P&L?
IND AS, IND AS impact, like the forex losses, will come in the other expenses. And if there's any forex gain, that will come in the other income. and this is as far as the forex is concerned. And as far as the core IND AS impact is there, basically, the impact will be there will be less expenditure in the COGS, taxes, and that expenditure will come to the depreciation and interest finance service.
Sir, this INR 170 crore benefit, is it possible to break it down in terms of each line item?
See, there was an INR 178 crore loss in the last quarter. That is not there in this quarter. Basically, that was there in the other expenses. And in the other expenses, there were another thing was this INR 100 crore of CSR. That is not there this quarter. And there was an INR 31 crore of inventory loss that was in the COGS, basically. These are the three major factors that are not there in this quarter, basically.
Okay. So there’s a INR 310 million inventory loss also instead of it’s negligible or there’s a gain in this quarter. Is it fair to assume that?
Yes. And the volume impact is around INR 130 crores at the COGS level, basically. Download. Downward impact. So, so these are the major highlights, basically, in the P&L.
Okay. And the second question was, sir, it was mentioned that the current utilization of Dahej is at 104% and Kochi 17%-19%. You know, is that current number, or is that something that is an average number for Q2 till date that we can assume?
No, this is the existing throughput which is going on. What I am telling you, that based on this, we can assume that this will continue up to this end of the quarter till September. So even today, it was 66 MMS CMD throughput. What I am saying, that it is in the range of sometimes 64, 65, 66. This is the range. It's more than 100%, maybe 104%, 103%, 102%, like that.
Got it. So yeah, I mean, for Q2, therefore, sir, we can on an average assume close to 100% even if on the front end is a gradual buildup.
100%.
Right?
Right. Right. Right. Absolutely.
And sir, last question. I'm sorry to again repeat. On Driftwood, I understand you can't comment. Can you at least comment whether the deal has been canceled, or is it still alive or not, or you can't comment on that also?
Excuse me. Basically, there is an MOU which is valid till December end.
Got it, sir. Got it.
We cannot sell this much. So I think that's enough.
Yeah. Yeah. That's fine. I just wanted to understand that the deal is not I mean, the MOU is still alive, and negotiations are ongoing. That's my interpretation. Right?
[audio distortion] So it's not to be because we are not supposed to speak on this matter, I'm telling you, because this is something very confidential. So please just excuse us for not replying to this question.
Got it, sir. Sorry to bother you. That is good enough.
G.K. Sharma, G.K. Sharma ji has told.
This is unofficial. It is not.
Unofficial is there, not to be quoted anywhere in the press. So we are not supposed to speak on this matter. So this is.
No, sir. I appreciate, I appreciate that.
Whatever will be there, anything which is really concrete and really going for any fruitful business scenario discussion, disclose. There is nothing like that. That's what I want to say. It's all just talking. We are just in discussion with them. So this is all going on. It's a general business scenario that we are talking to so many people. We are also talking to NextDecade. We are also talking to other suppliers. So it doesn't mean there is any fruitful deal coming in the scenario. So I don't any substantial thing happening over there. So if there is anything which will impact the investors, we will definitely come to you. Absolutely. There will not be hush-hush deal like that.
Got it, sir. Thank you so much.
Anticipating and just guessing and doing something. So that is not good for us. And rest be assured that we will not enter into any deal which is not beneficial to investors of PLL.
Great, sir. Good to hear that, sir. Congratulations, and thank you for your time.
Thank you.
Thank you, sir. We have the next question from the line of Hrishit Sitawala from Matsya Capital. Please go ahead.
Hi. Thanks for taking my question. Could you all please elaborate the impact of IND AS on COGS as well as depreciation and fixed costs? So can you break it down for us, please?
Yeah. This quarter, due to the IND AS , the COGS has gone down by INR 101 crores. And the net impact ON THE, at the PBT level, after taking into account the depreciation and finance charges, it is INR 68 crores down.
Okay. Thank you. And could you all please break up the impact on depreciation as well as finance charges?
Depreciation is INR 194 crore. Out of that, INR 84 crore was there and it's the IND AS impact. INR 87 crore is the IND AS impact. Finance cost is INR 88 crore. Out of that, INR 84 crore is the IND AS impact.
Okay. Thank you. And my next question would be around the employee costs. So they are at, they are significantly higher than last year. So is there any one-off item over there?
These are one of, There is one. There are one-off items like INR 5 crores of one-off items was there because in the first quarter, generally, claims like LTA and leave encashment, those come generally as a trend. And the other INR 2 crores are attributable to the salary increase and all.
Okay. Thank you.
Thank you, sir. We have the next question from the line of Bhavin Gandhi from B&K Securities. Please go ahead.
Thank you for taking my question. Sir, just wanted to again you know, the gross margin per unit as per my calculation seems like $55.1. If I look at it again from 3Q to now, there seems to be no change there despite 5% escalation in Dahej from January and 5% for Kochi. So if you can explain that part.
At the gross margin level?
Per unit gross margin.
Yeah. So you were saying that from Q3, basically, there is no change in the gross margin?
Yeah. It seems lower, in fact.
Okay. Okay, just let us, I mean, we'll answer this question. Just let us pass this question for now. During this call, we'll answer that.
Yeah. And sir, the second question is relating to the Kochi tariff itself. We mentioned $79.14 at which there will be no impairment for the asset. So is it possible to know what is the utilization over life that you are assuming where you are saying there will be no impairment? Are you assuming a 40% utilization or a higher utilization there in your calculations?
See, the impairment model is basically tested over a period of time of the life of asset. So what we are doing, that whatever volumes we have contracted for a long term, 20 years, we are taking the volumes. And as you all know, that Gorgon volumes, of course, are proposed to be brought to that place only, Kochi terminal only. It's only for the time being that some of the cargos we are taking at Dahej because of pipeline constraints. But as soon as the pipelines are laid, like Kochi-Mangalore is coming up by the end of August, it should have come by July. But because of some issues in Chandragiri River, HDD issues are there. And yesterday, I was in a board meeting where GAIL CMD has said that there are issues in HDD because some rocky terrain is there.
So it's not very easy to just do some HDD through that. So there are issues. Because of that, it is being delayed. But we are still hoping by the end of August, it should come up. And then certainly, the utilization will enhance to the level of 30%-35%. So this is our anticipation. And we hope that gradually, this utilization will increase. And we will be having profit even from that terminal like we are having in Dahej. And right now, we have operating profit but not profit as such in terminal, Kochi terminal.
Sure. Sure, sir. And just one last thing from my end, sir. On the, on the Kochi tariff, as far as the reporting in the gross margins are concerned, sir, are we booked in the last year? It was booked at $79 or $104 number, and then the provisions were created in other expenses. How was it booked in last year, sir?
Last year, it was $79 only because whatever adjustment was to be made was made in the last quarter. Even in the, before that quarter also, we had made the provision for that.
Sure.
We had not reduced as such the tariff and the revenue.
Your call has been put on hold. Please stay on the line. आपकी कॉल होल्ड पर है। कृपया प्रतीक्षा कीजिए। Your call has been put.
Sorry, sir. Please go ahead.
Yeah. It's only $79.14 throughout the year. So there is no issue.
Okay. All right. Thank you so much.
Thank you. We have the next question from the line of Pinakin Parekh from J.P. Morgan. Please go ahead.
Thank you very much, sir. So three quick questions. My first is, sir, the other expenditure has been a volatile line item over the last few quarters. If we take INR 101 crores versus if we keep 4Q out, but the average of the preceding 6-7 quarters has been between INR 120 crore-INR 140 crore. So is the INR 101 crore the new steady-state other expenditure, or do we should revert back to that INR 120 crore-INR 130-crore quarterly run rate that we used to see in FY 2019 and FY 2020?
Again, you are asking about this, the IND AS adjustment? Other expenditure.
No, so the total other expenditure of INR 101 crores that is there, how should we take this as a steady-state? Once this IND AS 116 adjustment and everything is out, is INR 100 crores a normal run rate, or can it go up to INR 130 crore-INR 140 crore?
You see, basically. Engineering? Okay. Just we are giving you the details, INR 101 crore, what's there.
[audio distortion]
See, the other expenses, basically, there are certain expenses which are directly proportional to the plant utilization. Okay? So expenses like the power and fuel, dredging, repairs and maintenance, all these things are there.
Okay.
What we have seen there is due to this one-off COVID impact this time around, this quarter, the other expenses have gone down by a few notches due to the power and fuel were expenses were going down. And there is nothing disproportional about that. Everything as per the operational standard. So what you can, what we can say is the other expenses have gone down by around INR 50 crore-INR 60 crore, basically.
Okay. Okay. Understood. Understood very much. So my second question is, when I look at the volume breakup in Dahej, the long-term volumes are down 18% Q on Q, but the service volumes are down only 5%. And given that Spot LNG prices, while having recovered, still remain stubbornly below $3/MMBTU, while Brent-linked contracts are near $6/MMBTU, how should we look at the RasGas volumes over the next two quarters? Because I would assume there will be a certain volume which would need to be fixed for this year. And should we then expect that the long-term volumes will sharply surge over the remainder of the year?
Basically, if you see, as such, we don't see any impact on the long-term volumes. And there is a full consumption. There is no impact seen or likely to be seen in the near future.
So just I would like to add to it that if you look at the cargoes which we have received in the month of July, it has been whatever we have planned, 23 cargoes, they have already come here. So what I'm saying is that there is no impact as such while uplifting all those volumes in this quarter. But there has been a downward, this trend in the previous quarter, in the current quarter, means Q1, because we have also invoked the force majeure clause for nine of the cargoes, eight out of which belong to RasGas and one belong to ExxonMobil. So this is the kind of scenario. But in this quarter, we have not seen any invoking of force majeure clause for any cargo. So we assume that whatever we have planned, we will bring all the cargoes to our terminal.
Understood, sir. Thank you very much. And sir, just last question. There were some media reports that Petronet is exploring tenders to import a million tons of LNG at different price points. And then the tender was canceled or reissued. So what's the thought process of that in terms of diversifying its sourcing, and where do we stand in terms of the process of locking in new supplies?
Yeah. Actually, this was a RFI process, request for information process. This was not exactly a tender. So what we were doing, we were exploring the market for availability of natural gas at a reasonable price, affordable price. So this was a process whereby we have appointed a consultant who just did the work on our behalf. And we found that in the market, people are ready to place the volumes, and they are not worried about the price in the sense that they are ready to contract for a long-term period at a price which is as good as spot price. So what I want to say is that scenario is changing now. It's not like that long-term contract which will be based on some Brent-based index.
So now, people are ready to place the volume for long-term, and they are ready to get the price, whatever is applicable in the daily market, every day. So what I'm saying is that this was a complete R&D activity, you can say, research and development. We are trying to explore. And in the future, we may process this kind of thing, and we may go for some volume for procuring this LNG on a long-term basis at a spot price. This is our thought process. That's why we have just awarded a contract to a consultant. And it has come to our knowledge that people are ready to place the volumes. They are not bothered with what is the price because now what's happening, the availability of gas is there. Plenty of gas is available. And customers are not there for long-term contract.
So most of the volume which is not contracted is going in the spot market. So what I'm saying is that whatever long-term contract they get, at least they are assured of placing their volume to the period, say, 10 years, 15 years, so that they are assured that that volume is sold. So people are worried about placing the volumes. That's why they are ready to get the price, whatever is available, on a spot basis, daily basis. So that was just an activity we have undertaken. And we have not so far decided how to go forward. But this is the outcome of the process.
Understood, sir. But just to clarify, when Petronet historically works on a back-to-back model, so if there is any progress on this, will Petronet start taking price risk on its books, or will it enter this kind of contracts only when there is a back-to-back offtake agreement with customers in India?
See, it's not an issue. When I'm getting a gas on a spot price, anybody would contract with us back-to-back. Whatever price is there, of course, in this case, we will also earn some trading margin, marketing margin. But certainly, anybody will be happy to get gas at the spot prices. If you look at the spot price, which is ranging from $2 to now, it is $3.5, almost $3.65. So this is the scenario because people are worried about higher-priced gas. But once anybody is offering at a spot prices, they are ready to take it. So we are pretty confident that whatever volume we procure, if it is at the spot price or daily marker, then we will be able to place it in the market. And anybody will take it because it is based on the daily pricing of the LNG.
No sir, it won't have any implications for the RasGas contract, which is high-priced, as you said, in terms of that. That will be separate. Those volumes will not be separate.
Gas is already back-to-back. And we are telling it it is done long back. So we cannot compare a thing which is done almost 17 years back. Now, it is almost on the verge of completion. Also, we'll think of it. But we are trying to bridge the gap between these long-term prices and the spot prices.
Thank you very much, sir, for this detailed explanation. Thank you.
Thank you, sir. We have the next question from the line of Yogesh Patil from Reliance Securities. Please go ahead.
Thanks for taking my question, sir. My question is related to RasGas LNG price negotiation. Negotiations are still on. And if yes, then any timeline when we can expect output or result on these negotiations? This is my first question.
This is not, actually, this is at a very premature stage. We cannot comment on these things because this impacts our discussions. So we are not going to comment on this question because whenever there is anything material happening, we will disclose you.
Okay, sir. Okay, sir.
All is not good to talk about.
Okay, sir. Thanks for clarity. The second question is related to your LNG dispensing station expansion program. As per our understanding, you would be able to benefit only from the charging marketing margins on LNG fuel. So any ballpark number you have backcalculated for charging a minimum marketing margins on this fuel?
See, I can just a little bit amend your question as well as answer also. It's not only marketing margin. When the LNG is being consumed, we earn truck-loading charges also. So as and when this market takes up, then Petronet LNG truck-loading charges also earn additional revenue and profit for the company and asset utilization. And marketing margin, because it's a commercially sensitive thing, we are still in multiple discussions and all that. This is not something that at this stage, we can disclose those numbers or something. But we can promise you this is going to be the next big leap business segment for Petronet LNG.
Okay. And sir, sir last question from my side. Sir, can you give us guidance on how many stations you have planned for the next two to three quarters?
See, we are in talk. We are facilitating. You must have seen our advertisement. What we are doing, we are facilitating these stations to come up by authorized CGD entities and OMCs. And you know, permission and land and everything, it takes some time. If I say in the next 2-3 quarters, something will come up and start dispensing, it is unrealistic. But things are progressing in a very fast pace. Even we are happy to say that it is a focus area of now PSUs as well as CGD entities. And we are facilitating them very fast.
Thanks. Thanks a lot, sir.
Thank you, sir. We have the next question from the line of Maulik Patel from Equirus Securities. Please go ahead.
Yeah. Thanks for the opportunity. Sir, can you explain how the supply demand on Spot LNG and what's the outlook on the price? And how do you see that, where the demand is, incremental demand is coming up in the Indian market?
So as far as demand is concerned, I'm sure you would have had a look at PPAC numbers. So you would have seen that the low LNG prices and spot prices were $2 or so. A lot of consumption was going into the power sector. Going forward, also, the spot prices are expected to remain low. And there is a coal displacement, which we mentioned in the previous call also, which is happening. Other than that, there is a regular growth in the other industries and the CGD sector, which is taking place. Of course, fertilizer refinery sectors continue to be at the pace, which they were there in the last year also.
Do you expect this in coming winter, where the price of the Spot LNG generally goes to around 10%-12% of the oil price in the last 2-3 years? Will it reach that level, or it will probably continue to?
Very difficult to give any number on what the prices would be. But yes, there is a lot of supply in the market. Right now, a number of U.S. plants are not producing because it was not viable for them to produce at $2 level. But since the LNG prices are inching upwards and are touching $3.5-$4, they will also start producing. So on an overall basis, it is not expected that the prices will go to the $8-$9 level. It should remain in the $5 level. And that is what is being projected in the plans also.
Great. Thanks.
Thank you, sir. We have the next question from the line of Vinit Joshi from Goldman Sachs. Please go ahead.
Hi. Thanks a lot for taking my question, sir. My first question is on the CapEx side. So it's a two-part question. First, can you give us the guidance for FY 2021 and FY 2022? And second, can you tell us a bit more generality with respect to you know, what is the CapEx requirement for the tanks and for the jetties? And finally, you know, any update on the, you know, new projects that you're looking at, whether it be Sri Lanka or the third LNG terminal in India?
As far as the CapEx is concerned for 2021, it should be in the range of INR 348 crores. So this is how we are planning this year. But in the future, we have a lot of CapEx plans. We are also envisaging to have two more tanks in Dahej, seventh and eighth tanks. So it will be in the range of INR 1,200 crores, INR 600 crores each tank. And if you look at the jetty, which we are proposing to have at Dahej, third jetty, it will be having CapEx of around INR 1,300 crores. So this is a future plan for CapEx. Apart from that, we are also looking forward, as you rightly said, we are looking forward to our Sri Lanka project also. And we are in discussion with them. And let us see what happens.
But if that materializes, then the project is of around EUR 300 million. So that will be the kind of CapEx which will be there in the future. But right now, as of now, I've told you, this is all CapEx plan we have: two tanks, one jetty, and CapEx plan for the year INR 348 crores.
So this INR 348 crore, it would probably not include anything with respect to the tanks and jetties. So should we assume that tank and jetty expenditure will happen over the next two, three years gradually?
I think some part of CapEx is there because we have already invited a tender and opened a tender yesterday only.
Okay.
We're likely to award this. So maybe some INR 50 crore-INR 100 crore may be paid this year also. But this is a project for three years. It takes around three years, 39 months. So it will be taking three years to spend all that amount. But this year also, there's certainly some expenditure initially.
All right. And just one last question, sir. Can you just give us the service fee or the regas income for the quarter and last year?
The regas income? Yeah. The regas income was INR 500 crore for this quarter. The last quarter, it was, last quarter it was INR 523 crore. And corresponding, it was INR 550 crore.
Okay. Thanks a lot, sir.
Thank you, sir. We have the next question from the line of Manikantha Garre from Axis Capital. Please go ahead.
Yeah. Hi. Thanks for providing me an opportunity, sir. I just wanted to check, what is the CapEx done in Q1 out of the INR 348 crore?
This is actually very Q1 is already acquired. So I don't think any major expenditure has been incurred. But normally, CapEx is not seen on quarterly basis. Normally, we see on annual basis how much CapEx is there. So it may vary because the project, as you very well know, that in the first quarter, there was a lot of shortage of labor, material. Everything was difficult. So maybe that much CapEx may not have been done. But in the second quarter, third quarter, of course, we will pick up it. And certainly, some more expenditure will be there in the second quarter. So it's not specified for the first quarter.
Oh, sure, sir. The second question would be, sir, if you can please provide an update on the Gorgon LNG, what's happening there with respect to the train 2, which was under maintenance? And of course, it is now deferred to September, I guess, for the startup, which is one of the main reasons for the surge in Spot LNG prices. Can you provide any update or any color with respect to that?
We also read media, as you do. But nonetheless, in the contract, there is a provision that the supplier can supply from elsewhere. So that's what will likely happen. In fact, currently, also, we get a lot of cargoes from Abu Dhabi or Oman under the, under the Exxon SPA. So that may continue in the future also because it has a right to supply from alternate sources. So that should not impact our contract per se. But yes, you are right. Right now, train 2 was under maintenance because there was some issue with the propane kettles. And now, the Australian government has also issued a mandate that they will be checking train 1 and 3 also. So the plant may be out till September end. That's what the media report says. And you are absolutely right. That's one of the reasons why the spot prices are moving upward.
In fact, when I'm seeing today, JKM is being around 418 for October. That's all I would say.
Sir, just one related question here. The sense that I'm getting here is that there is a possibility of train 1 and train 3 also you know, probably facing similar design issues. Are you hearing or you know sensing something of that sort, or no?
Operator of the facility is Chevron. Exxon has told us we are in touch with Exxon on this subject. And what they have told is, as of now, there is no impact on the scheduled cargoes of Petronet.
Sure, sir. And if I can squeeze in one last question here, last quarter, you mentioned that the force majeure that you have raised on nine cargos, the operators are yet to agree on them. If you can please provide an update on those things.
The discussions are continuing on that. That's all at this point of time. Nothing has been concluded as yet.
If I can like, kind of check on that, what is dragging the discussions here? What is the moot point here, mainly, if you can?
We would not like to detail. We can just give you an update. As of now, it has not reached the conclusion.
Understood, sir. Thank you.
Thank you, sir. We have the next question from the line of Sagar Sanghvi from J.P. Morgan. Please go ahead.
Thank you for taking my question. I have two questions first. If you could just provide an update on the Bangladesh project. In the annual report, you mentioned that you submitted an expression of interest. So is this through the bidding process? Because I was under the impression we were more interested in a one-on-one discussion. So any update here first?
Yeah. You have very rightly, y ou have very rightly said that this was in the tendering stage only. We had given an expression of interest. But so far, nothing has happened. And because they are inviting tenders, so it could be anybody's game. Earlier we, and we said that this will be a G2G contract and we'll be awarded that contract. That's not happening. So we are keeping our fingers crossed. We don't know whether we'll get that or not. There are so many contenders for the bid. So at this stage, nothing more can be said.
Understood. Okay. And the other question is on Kochi. You mentioned that after August, once the pipeline is done, maybe we'll reach our utilization to 30%-35%. How long does that generally take? Will it happen within a few quarters?
By end of this financial year, it should happen.
By end of this financial year. And just to confirm, we are already since this April, we are already booking at INR 83, right?
Right. That's what it is.
Okay. All right. Thank you for confirming. That's all from my end.
Thank you, sir. We have the next question from the line of S. Ramesh from Nirmal Bang. Please go ahead.
Good morning and t hank you very much. See, if you look at the current run rate, will you be able to deliver the same volume as the second quarter last year? Last year, we did 258 trillion BTU. So, or it will be slightly lower than that.
It's very difficult to give an exact number. But as we mentioned, we are running at 100% rate or more than 100% many a time. So hopefully, on that trend, it should be closer to the last quarter, last year's same quarter.
Okay. In terms of the Kochi you know, economics know, is it possible to share the updated capital cost? And out of your total employee and other expenses, what proportion goes to the Kochi terminal?
See, we do not publish the Kochi results as a segment, different segment. So it is not possible to disclose that figure.
Yeah. But is it possible to give, you know, what is the proportion of capital employed in Kochi as a percentage of the total?
No, we can't.
Okay. So if you're looking at the current demand outlook, we saw some increase in refining segment and some increase in the city gas segment. But is there a similar trend of growth in the power sector because of the low gas cost? And would you expect that to continue?
It is much more than that. It is much more than that. If you see the recovery, a major part of that has come from the power sector. Apart from, other sectors have also started consuming at full.
Okay. Okay.
Last quarter, the gas consumption was probably the last month, June-
Yeah.
...probably the highest ever in the country. That's what I would say. Power sector. Total also.
Total. Okay. So if you go back to the Kochi tariffs, if you're on the way to do a long-term cash flow model on this INR 83 for this year, is it possible to assume a 5% annual escalation every year as for the next 10, 15 years to take the life of the asset?
This is as per the contract. So what we are calling is given in the contract itself.
Yeah. So there's a 5% annual escalation. Okay. Thank you very much.
Total escalation.
Thank you, sir. We have the next question from the line of Amit Rustagi from UBS Securities. Please go ahead.
Thank you, sir, for taking my question. Sir, could you elaborate on our East Coast LNG terminal in India? And what will be the model we'll be looking at for it? Are we going to pre-book the capacity like our earlier terminals? Or even if we don't get the customers or long-term contracts, we will still go ahead with the terminal?
This question is very difficult. We are going for the terminal. And we will try to tie up even before that. But apacity, 100%, it will be booked. We cannot assure you. But certainly, some benchmarking will be there. 30%, 20% capacity shall be booked so that at least there is a minimum load over there. So we are trying for that. Nothing can be said at this stage. And we would like to have at least 30% capacity to be booked beforehand so that there is an assurance in the future there will be utilization of that plant.
And sir, what will be the status of pipelines around that terminal?
That is there because if you look at, there is a pipeline, Angul-Srikakulam pipeline, which is there. From there, the tap-off will be around 20 kms only to this Gopalpur terminal. So we are awaiting that that pipeline is laid because work is already going on. Work has been awarded by GAIL. So once that pipeline is laid, then the distance will be hardly 20 kms from that place. So the pipeline, we may have to lay.
And so we would be another terminal on this Urja Ganga project because the Urja Ganga project already has the.
Our intention is to have one terminal at least on the East Coast because the East Coast is a region which is deprived of utilization of gas. But now, the Urja Ganga pipeline is coming up. So certainly, terminals are there. One or two are already there. But we can also have one more terminal. And it can also be utilized over there because if you look at on the West Coast, we have so many terminals. But on the East Coast, we have only one, this Dhamra, and one is Ennore. But Ennore is extreme south. So we are hopeful that it will be a good investment there.
Okay. Thank you, sir. Thanks for taking my question. Thank you.
Thank you. We have the next question from the line of Avadhoot Sabnis from CGS-CIMB Securities. Please go ahead.
Am I audible?
You are, sir.
Yes, Avadhoot.
Yeah. Yeah. Can I, what would be the Gorgon volumes at Dahej this quarter?
Eight, nine cargos. eight cargos and nine [audio distortion]. Around 8 TBTUs?
8 TBTUs.
Yes.
Okay. Okay.
And would I be right to assume that if we off-takers, if we—
sorry, if the producers, RasGas or Gorgon, do not accept the force majeure, then the worst case is that you may have to off-take those nine cargos sometime later during the year?
No, no, no. This is not the case. Actually, this is as per contract. If you look at the force majeure clause, it is very clearly written. It's only a matter of discussion. We are doing it. Otherwise, very clearly, this clause is defined. That any epidemic is happening over there, then we can invoke this clause. So we are quite sure that we have done the right thing. The only thing is that there is another clause where there is a mitigation of the force majeure clause. So we are discussing in future w e may take it and the mitigation clause. And we may take the cargoes in the future. But there is no time frame for that when we'll be taking it. But at this point of time, what we have done is rightly done and as per the contract.
Okay. So even the worst case is that even if you have to take the nine cargos, it may be anytime during the sort of validity period.
During the rest of the contract period.
Yeah. Okay. Thank you, sir.
Thank you. We have the next question from the line of Vikash Jain from CLSA. Please go ahead.
Hi. Thanks for taking my question. Can you just a bookkeeping one, can you just give me a bridge of OpEx from 1Q last year to 1Q now? It's down about INR 40 crore. So what really is causing that? You know, I know you've tried to discussed a lot, but I'm a little mixed up on this. So what really is causing the OpEx decline from 1Q to 1Q?
See, mostly, the impact is the volume impact. There is, in the 1Q to 1Q, if you see, last quarter, we did about 226 TBTUs. As against that, we have done 119 TBTUs. So it comes to around, around 36 TBTU difference, which is about 11 cargos. So there are multiple things like there are certain cargo receiving expenses, cargo handling expenses, and the power and fuel because of the low utilization of the plant. And repair and maintenance have also gone down because of this pandemic. Whatever minimum repair and maintenance that was required in the plant that was done. And dredging expenses are there for handling.
Sure. Sure. So it's largely because of lower volume. Basically, a large part of it is variable. And some are higher in maintenance.
Additionally, answer the previous question of the gross margin level, basically, the only difference that happens at the gross margin level is because of the handling of the spot cargoes and the trading margin level And we do not disclose those numbers. But then the only differential at the gross margin level is that.
Similarly, there is also a reasonable change in QOQ in, I think, if I were to look at interest expenses as well as you know, this QOQ I'm talking about as well as this sorry, other income. Other income is down significantly, and interest expenses are also down. Is that, is this more to do with IND AS ?
Oh, other income, you see, it is because of, basically, the investment income, whatever investment income that we earn, the rate.
Yeah. Because your other income is at some your 10th quarter low or something like that, if I were to look at that.
Because you have seen, because in that the repo rates have gone down.
Okay. Okay. So it's simply because of that. Yeah.
Although the base of cash base is the same, but the investment income has gone down accordingly. And to answer your question regarding the interest and other expenses, we have already answered. And the finance charges and depreciation, as you know, this is a IND AS impact. If you see the current quarter number, then you have to knock off INR 87 crore from the depreciation and INR 84 crore from the finance cost as IND AS impact.
Okay. Understood. Thank you so much.
Thank you, sir. We have the next question from the line of Vidyadhar Ginde from ICICI Securities. Please go ahead, thank you.
[audio distortion] Hello? Hello?
Yes, sir. Please go ahead.
Yeah. So my question was that are you likely to go ahead with a new contract for sourcing LNG only if it is linked to spot LNG? Or you might be open to contracts which are even linked to oil or Henry Hub?
See, we are thinking of.
आपण कॉल करत असलेल्या एअरटेल नंबरवर आपला कॉल होल्डवर ठेवा.
Hello?
Please go ahead, sir.
Yeah, actually, whatever we have started, the process of RFI, this is basically intended to procure the volumes for future. And we are also looking forward to have some contract after 2028. So, this is a step towards that. So, what we are envisaging, that in future, if we get a contract which is reasonably priced and is sensitive to the local index spot prices on day to day basis, then that should be a good one for the Indian market. Because, if you look at the kind of price now, is a big gap between spot and long term price. So, that can be bridged now with this kind of contract. So, this is our thought process. And let us see, but we have not started so far doing that.
So are you basically saying that you may do multiple more than one contract, one which is spot LNG and one which is under this RFI? Or it's just going on one contract?
Whatever contracts are going on, they are already there. RasGas is there. ExxonMobil is there.
Sir, you mean talking new contract?
Yeah, new contract will be there. Then we will have on this basis only, whereby we can match those prices with the spot prices.
कृपया लाईनवर.
Okay.
It will never be more than spot price. It can always be less than that. Or maximum spot price. This is the kind of model we are working on.
Okay. And what kind of demand do you see for spot price kind of LNG contract?
Small.
Understandable basis ?
As we have already invoked this sector, and we are trying to instigate all the OMCs as well as CGDs. And we have advertisement, as our VP Marketing told. So, this is the thought process, that this is a new segment which is coming up. And it has a potential of 7-8 MMTPA in future, if it is successful.
Okay. What kind of fuel?
[audio distortion] fuel by LNG, this is going to be a big sector in itself, a big segment. So, what we are envisaging, that this can be utilized over there. Moreover, just CGDs are coming up. A lot of pipelines will be laid in next next years. So, we hope that the consumption will substantially increase in CGDs also. Volume will be coming in that sector also. So, I think there is ample scope for future for growth of LNG. And we are doing it in that direction only. So, are you basically saying that you will go with the supplier who is going to supply at close to similar to spot LNG? What I'm saying, we will be doing. it is part of the answer to the Tellurian question. The supplier who is offering the price at a formula, which is never more than spot price on West India basis or JKM basis.
So, which in a way is your answer to the Tellurian question also, or any other supplier? This is the benchmark they have to meet.
This is not what I have said. This is your.
No, I am asking you.
Guess which you are doing.
No, no, no. What I am only saying is that this will give a lot of comfort to investors if you say that any contract you enter into with anyone will be similar to spot.
So I'll be [audio distortion] because there is no meaning of any long term contract which is not matching with the spot prices now, at least.
Second question is on this Kochi regas charge change decision. When do we expect finally this issue to be completely either way, whatever decision is taken? Because you had said it was referred to a committee of independent directors. When do you expect the final decision on this?
This quarter, second quarter, it should be over. Whatever is there.
Okay. And lastly, this East Coast terminal, what is the kind of timeline you are looking for?
Timeline for ?
East Coast terminal.
East Coast terminal. It is actually, we are still in planning stage, and we have to take the proposal to our board. And once that proposal is approved, then only we will do it. But, of course, we have lot of hopes. We should be taking some decision. Maybe in the next six months, it should be there. Whatever you want.
Okay. Thanks a lot.
Thank you, sir. Gentlemen, that was the last question. I would now like to hand the conference over to Mr. Varatharajan. [audio distortion]
Thank you, Vikram. Thanks to all the participants for taking time out to attend the call. Thank you to management for giving us an opportunity to hold this call. Thanks again. Have a nice day.
Thank you very much.
Thank you very much, sir. This gentleman, on behalf of Systematix Institutional Equities, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.
Thank you.