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Brookfield to buy RIL E-W Pipeline for Rs 13,000 cr
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SME Times News Bureau | 15 Mar, 2019
Canadian investor Brookfield has acquired the loss-making East-West
Pipeline Ltd from Mukesh Ambani's Reliance Industries Ltd (RIL) for Rs
13,000 crore.
The East-West Pipeline Ltd, earlier known as
Reliance Gas Transportation Infrastructure Ltd, runs a 1,400-km pipeline
which starts from Kakinada in Andhra Pradesh and ends at Bharuch in
Gujarat. The pipeline is used to transport natural gas discovered by
Reliance Industries Lts in KG basin block.
The company is
selling the pipeline infrastructure as it is operating at just 5 per
cent of its capacity, consequent to RIL's production from its KG D6
block sharply dropping over the years. The pipeline was constructed to
carry 80 million standard cubic metres of gas per day (MMSCMD).
India
Infrastructure Trust, an InvIT set up by Brookfield as sponsor and 90
per cent investor, will invest Rs 13,000 crore to acquire the East-West
Pipeline. As a part of the transaction, the InvIT will acquire 100 per
cent equity interest in Pipeline Infrastructure Private Ltd (PIPL),
which currently owns and operates the pipeline.
Pursuant to this
acquisition by Brookfield, the existing pipeline usage agreement has
also been reworked. Accordingly, the reserved capacity had been reduced
to 33 MMSCMD against 56 MMSCMD.
Also, any unutilized capacity
payment by RIL will be the difference between Rs 500 crore a quarter and
the actual revenue earned by PIPL.
RIL will continue to be
entitled to transport gas, either by itself or of any customers, free of
cost against any outstanding unutilized capacity payments.
"At
the current approved final tariff of Rs 71.66/MMBTU (million metric
British thermal units), if the average volume of gas transported is 22
MMSCMD, RIL will not be liable to make unutilised capacity payments," it
said.
The next review of tariff in April 2020 will also
consider upward revision to tariff arising from determination of lower
revised capacity of the pipeline.
Considering the new
investments in the upstream sector in the KG basin, and the growing LNG
imports and ability to swap gas, the average volume expected to be
transported through the pipeline is expected to be significantly higher
compared to the current levels.
RIL will be entitled to a
significant participation in the net earnings of PIPL under the
mechanism specified in the pipeline usage agreement. RIL's current
investment in preference shares valued at Rs 4,000 crore will continue
and will be converted into equity at the end of 20 years.
At
the end of the period, RIL has the right to acquire equity shares of
PIPL held by the InvIT at an equity value of Rs 50 crore.
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