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Petronet LNG Ltd
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Ladies and gentlemen, good day, and welcome to the Petronet LNG Limited Q1 FY '22 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Gagan Dixit from Elara Securities Private Limited. Thank you, and over to you, sir.
Yes. Thank you. Very warm welcome to everyone for Petronet LNG Limited Q1 FY '22 Earnings Conference Call. It is our pleasure to be able to bring to you the management of Petronet LNG headed by Mr. V.K. Mishra, Director of Finance; Mr. Rakesh Chawla, GGM and President, F&A; Mr. G.K. Sharma, CGM and VP, Marketing; Mr. Vivek Mittal, GM, Marketing; Mr. Debabrata Satpathy, GM, F&A; and Mr. Ashwani Agarwal, Manager, F&A. So with these words, I will now hand over the conference to the Petronet LNG management. Over to you, sir.
A very good afternoon to all of you. This is V.K. Mishra, Director of Finance, Petronet LNG Limited. For the quarter Q1 2022, the result has been, of course, good in the sense that the pandemic again has emerged and has shown that it might disrupt the business. Still, we are able to at least match the results, which have been there in the [ corresponding ] quarter, even better than that. So now if you look at the results of the Dahej throughput has been to the extent of 194 TBTU as against 181 TBTU in the corresponding quarter and 204 TBTU in the previous quarter. And total throughput has been to the extent of 209 TBTU in this quarter as against 190 TBTU in the corresponding quarter and 218 TBTU in the previous quarter. If you look at the throughput increase, it has been to the extent of 10% as compared to the corresponding quarters. And the result has been like this, and the reported PBT has been INR 851 crores as against INR 697 crores the corresponding quarters and INR 856 crores in the previous quarter as has been to the extent of INR 636 crores as compared to INR 520 crore in the corresponding quarter and this INR 623 crores in the previous quarter. So this has been -- the PAT and PBT has increased by 22% as compared to the corresponding quarter. This is all from my side as far as the Q1 results are concerned at Petronet. Now house is open for the questions.
[Operator Instructions] We will take our first question from the line of Kunal Sharma from SMC Private Limited.
I have a couple of questions. So first, as we are importing the natural gas, so could you please share some like the percentage, how much percentage are we importing and even we're also increasing the capacity to the fleet. So what are the opportunities are you seeing going forward?
You are asking the percentage of import of LNG as [indiscernible]
Yes, yes, yes. And the opportunity going forward. What are the opportunities are we seeing on the same?
It has been to the extent of 55% as far as the import is concerned and 45% natural gas requirement is matched through domestic production. So it has been the case in the previous year and similar trend is going on. And in future, it may increase further. But right now, this is a percentage. And as far as the prospects concerned, I'm just ensuring that the consumption will continue to increase because the requirement is much more than what's happening now. And perhaps the estimate is as high as almost -- it could lead to 70 to 90 MMTPA by 2030. So it will gradually improve. Every year, it is increasing. Last year, it was 24 MMTPA of import. This year, it has increased to almost 27 MMTPA. So it is increasing. But as far as the consumption growth is concerned in future years, perhaps it will be more led by city gas distribution projects, which are coming up in a big way, that in the next 5 years they will be there in place. And perhaps, then it will further increase. So we find that growth is immense, and it will continue in future. And there is absolutely a bright future for Petronet LNG in future.
Okay. Okay. And the second, as we have nearly like 41 billion CapEx planned from Dahej plant and another additional [ 120 billion ] investment in LNG refilling compressed bio gas, so which would be like a huge CapEx as of now? So is it for the internal accrual or these effects?
We are talking about 41 billion in?
CapEx was Dahej plant, right?
For Dahej plant expansion as well as tanks, which are coming up, total CapEx is around INR 1,240 crores in tanks and perhaps INR 1,700 crores in jetty, [indiscernible] jetty this year [indiscernible]. Then more and more this expansion will be there from 17.5 to almost 22 MMTPA, 22.5 MMTPA. So another, say, INR 1,000 crores of EBITDA. So likewise, it's a future CapEx plan.
Okay, okay, okay. So like what would be the total CapEx [indiscernible] 1,200 and?
[ INR 1,270 crores ], and [ INR 2,900 crores ]. Then you can add up to that almost INR 1,000 -- it will be INR 3,900 -- INR 4,000 crores refill. As well as shipping 41 billion.
Sorry to interrupt. Please join back the queue. [Operator Instructions] The next question is from the line of Puneet from HSBC.
Can you dwell a bit upon what led to Q-on-Q fall in long-term gas volumes? And how do you see both long and spot in the current quarter of high LNG prices?
You are asking about Q1 long-term volume? Just repeat your question, please?
So I'm asking in the current Q1, it was -- the Q-on-Q -- there was a Q-on-Q drop in long-term volumes. Can you shed light on what result -- what drove that? And secondly, what are you experiencing in terms of spot volumes in the current high-priced LNG market?
Yes. If you look at the kind of quarter it has been, April and May has been marred by this pandemic. So April, there was a little bit less consumption. But after that, lifting of this, I think, lockdown and everything, it has come up again. It has revived. And now if you look at overall volume as compared with Q1 versus Q1, it has increased volume. But if you compare with the previous quarter, then certainly it has gone down, maybe 2, 3 [ cargo are left ]. So that is the only impact it has been there. But has the pandemic not been there, we would have performed even better.
And on the spot side?
The spot side, actually, spot rate is very high. It's at $16.45 today. So at this rate, the consumption is very less in India. Perhaps that's the reason not many spot cargos are being bought by India. And perhaps, we are hopeful that in future, it will come down because long-term volume is now cheaper as compared to spot gas. So people are more attracted to long-term gas than spot gas. So additional volumes which used to come because of low price of LNG, that is not coming in a big way. But perhaps in the future, we hope that whenever the price will come down, then certainly this will further increase. But this will not remain at this level for a long time. This is our perception and our confidence that this will not happen for a long time, it will come down because this is not sustainable size.
Understood, understood. My second is on the CapEx part, if you can comment on how much you spent in quarter 1? And what is the progress on CBG and other transportation linked plants? That's all from my side.
On CBG plant, CapEx Q1 is not much because we have started the work and that job is being awarded so it has been tendered and now it is in the process of being awarded. Perhaps it will come in this year, but not right now in Q1, that is not very big CapEx hasn't made. But CBG plant, as you are asking, that is basically -- still, we are looking for land. And perhaps, initially, we'll go for 4, 5 [ base ] only, see the visibility, how the availability of material is there and whether would be sustainable or not. So all these things are to be seen before putting up the CBG plant. And it will not come in one go. It's -- as I'm saying, there is a lot of factors which are basically deciding whether to put up a plant at a place or not because the availability of present staff, which is very important. Likewise, it is available in Haryana and Punjab, so we are looking forward to have some plants in Haryana and also in Punjab because a lot of staff and [indiscernible] cases are there. So perhaps that can be utilized with CBG plants. So we have to see the feasibility of trade stock also and also the availability of pipeline nearby because, ultimately, it has to be evacuated through the pipeline, which is nearby, of local GAs whoever is owning it. So it is like that. And only thing which is guaranteed by the government is INR 46 per [ KVV ] assured by government that will be bought by CBG companies overseas. So it's a new area. So we are also going not in a big way. But initially, we're putting up 4, 5 plants. And if something is good and if we find that this is really profitable, we'll go ahead. So it's not something which is happening in a day. All the plants will come in a day. We have to put feasibility at each and every place.
And on the transportation fuel side, where you talk about LNG as a transportation fuel?
This is also similar because, you see, our ambition is very high. And the only thing initially, we'll go for 5 stations. We are going -- we'll go another 5. We are going 4 station with IOC and perhaps 3, 4 stations with another CBG company. So likewise, it's in a phased manner. It cannot happen in a day. It's not possible because, first, we have to see what is the impact of first 5, 10 or 20 stations. Because it will be coming on a highway, we have to see the conversion of trucks and buses, whether it happens in a fashion which we want. And if it happens, then we can replicate in another highways. So it will be happening slowly. It's a single unit. We have to see profitability of each station. And perhaps when the IRR is okay, then only we go ahead. So it's a cautious call that will be taken at appropriate time as and when required. And as I have said, it will be in a phased manner. Likewise, we are doing it in some Southern India highways. So it's on the highway. It can be only, say, 5, 10 stations. And then we see the visibility, whether it is profitable or not, and thereafter only we'll commit the CapEx. And that will not be in 1 [indiscernible], 10, again 10, 20, 30, like that. So it cannot happen that 1,000 stations we'll put up in a day. 1,000 stations are [indiscernible] saved by government of India totally in the draft energy policy. So is it all bargaining companies are also coming in a big way? So they will be putting up. So we have to see whether it is profitable or not. We'll not put up the plant just for the sake of putting a bit. We have also to see profitability out of it. If there is no IRR in any investment, we'll not put up any LNG station. So it's a very conscious call. And we have seen the model is very good. And perhaps, if it happens and if there is a conversion of vehicles into this LNG fuel trucks and buses, then certainly it will be good but it will be in a phased manner. We will be putting up, but I don't think it will be in a go -- we'll go for 100 to 200.
This is very helpful. Quickly, if I may, any update on Kochi tariff?
Kochi tariff is INR 87 except [indiscernible]. 87 point...
15.
INR 87.15 per MMBtu. So this is, as it was said earlier, 83 [indiscernible].
So no relocation so far?
So far, there's no relocation. Although we have already disclosed in our results that offtakers are asking for it. At the same time, it is still very clear that as and when in future, if volume will be committed, then only we can reconsider this tariff.
The next question is from the line of Probal Sen from Centrum Broking.
So again, probably staying on the CapEx part. So the INR 4,000 crore, Dahej CapEx, this is going to be spread over FY '22/'23 or...
'25, '24, you can take it. Up to '24, it may happen because maybe '25, may run into. But '24, we are planning at least 3 years to 4 years' time, it will be there. The tank order will be placed right now. But jetty, again, we have to take a similar call. Then it will be placed -- orders in place in the next year, and certainly 3 years' time will be required to complete this project. And then expansion will be in 2 phases. One is from 17.5 to 20 MMTPA, it's a low-hanging fruit because not much is required, hardly INR 200 crores, INR 230 crores will be required to be spent. Perhaps thereafter, 20 to 22.5, that will be another phase. So it may again take 3 years' time. So maybe '25, you can consider for the entire INR 4,000 crores.
Got it. And so is it possible to give an overall CapEx guidance for '22 and '23, sir, given the approval stage and the kind of environment? So including whatever little CapEx you may do on CBG, LNG transport as well as Dahej expansion, roughly what sort of CapEx...
You're asking for '22, '23 or '21, '22?
Both years, sir, '22 and '23.
See, this year, it may -- we have CapEx, maybe INR 500 crore to INR 700 crore. But next year, we hope that once the jetty part is also awarded and tax are also awarded, then it may go up to INR 1,000-or-so crore. But this is all, I think, right now, there is no order as such. And any project, once it is approved, again, it takes time. So I don't think we have very high capacity there. As far as LNG station is concerned, I have just taken approval of only, say, 20 to 24 stations from [indiscernible]. So slowly it is coming up. We have placed the order with one of the [indiscernible] for achieving the 5 LNG dispensing stations. And we are putting out of that [indiscernible] in Southern India. So likewise, it takes time because once you order it, it takes 6 to 8 months, 10 months' time to get those with the [indiscernible] station. And that too, we have to see feasibility first. If it is feasible, then only we'll go. We'll have partner wherever it is possible, like we are going with the [indiscernible] and CBG company. And we'll see if it is really profitable at any highway, then we will only put up. But as I have already said that oil marketing companies will be losing the business because then ultimately, it will curtail the consumption of diesel. So they will also be going aggressively in this direction. So we hope that we will be doing with that and also our own also, but it will not be in a one go. Eventually, we'll do -- we have taken approval only for 2024. So maybe then we'll see the visibility in a year's time, 2 years, then we'll see further investment. It will not be in a one go that the entire investment will be done because we have to see the conversion of vehicles also. Because what is happening, people are not interested, we will not invest in that.
Yes. No, I got that. Just trying to look for the range. Sorry, one more question, if I may. With respect to the volumes, as you obviously mentioned that COVID had an impact on April, May long-term gas volume offtake this quarter. So looking ahead for the next 3 quarters, even if we assume normalized run rate, getting back to that maybe 110 TBTU, is it fair to assume that whatever loss has happened in Q1 may sort of remain in place, may not be made up completely within the rest of the year, given the environment that's working?
Hard to say, but we may -- will try to make up for this loss of volume in this quarter. And perhaps second quarter should be good because it is going good and we are having good throughput in the plants. But we will try to make up all those losses. But still, if you look at the comparison of the Q1 of previous year, it is still better. But we could have done even better had this pandemic not been there. But anyway, we are still better than in Q1 of the previous year. So we'll try to make up in the subsequent part of the year to make up all the loss of volumes. The only thing is the drive of this LNG is a [ spoiler ].
Yes. For the spot, you mean?
That should mean at a moderate level [ $67 ]. We could have expected more spot cargoes also, which is not happening. It is an additional [ KP ] actually through the long-term volume.
The next question is from the line of [ Abdul Sabre ] from InCred Capital.
Am I audible?
Yes, you are.
Quick question, sir. First is in relation to the Kochi regas sale. As you mentioned, it is related to volumes. If that's the case, I presume the fair conclusion to draw is at some stage, whenever the volumes are going to go up, let's say, the current run rate is 1 million to 1.5 million tonnes. At some stage, the Bangalore pipeline is coming in, that's an additional 1 million tonnes comes up. Then it's certain that even if your stance proved right and your current negotiating position is proved right, at that stage, whenever the volumes go up, at least at that point of time, the tariff will go down. And under no circumstances can I assume an additional 1 million tonne volume at, let's say, Kochi at the same tariff that you're having right now?
Our marketing will apply to your query.
Right. Once the volume grows substantially, we may again will do the tariff, but it is not likely to happen over the next 1 or 2 years because 1 or 2 year, whatever [indiscernible] there will be the [indiscernible] to the completion of network pipeline. So we don't expect any impact except for [indiscernible] for this year and it's still in [ second year ]. But other than that, it's not every 1 year or 2 years based on the volume pricing in effect. That's one. But when connected to Bangalore, then [indiscernible] depending on the volume [indiscernible]
Perfect. Sir, the second question was in relation to dividend. Now that basically, you're saying that the CapEx plan that you outlined in the last quarter will be far more perhaps a little more gradual and depending upon how the viability, may be still more sort of spaced out. Any plans to revisit to your dividend payout ratio? When we had cut it last year from 70% to 50%, stating the high CapEx spend that you had outlined. Are you looking to revise the dividend payout ratio back to 70%? Is there a possibility?
Okay. As already told, that CapEx plan in this year or next year will not be that high. And even if we continue the existing dividend payout, it will continue to be so because, in any case, we have a lot of internal generation and we can meet this dividend requirement easily even after the CapEx, which we are proposing to do in the next 2 years. So I think dividend policy is still there, that it will be there not less than 30% of PBT and PAT and then 5% of network. But of course, we will try to match with the previous year dividend this year also. So this is our endeavor that because not much CapEx will happen this year, so perhaps we'll continue to give more dividend as we are giving in the previous year.
[Operator Instructions] The next question is from the line of Sabri Hazarika from Emkay Global.
So I have got a few bookkeeping questions. Firstly, the regasification side, this income for this quarter, how much is it?
Regas [ essentially ]?
Yes.
Yes. Gross margin level, we has just maintained 130 [indiscernible] quality.
Just one second. We are talking about India part?
India part, yes, the overall impact is INR 53 crore negative at profit before tax level.
INR 39 crores.
Yes. INR 39 crores. INR 53 crore at the PBT level negative, and INR 39 crores at that level negative. And the breakup of -- breakup is INR 138 crores positive at gross margin level. INR 84 crores is the depreciation. INR 78 crores is the finance cost. INR 33 crores is the ForEx loss and another INR 8 crores positive in the other expenses.
[ INR 38 crores ].
Okay. And you said the depreciation is around INR 80 crore?
INR 84 crore. Depreciation is INR 84 crores and interest and finance cost is INR 78 crores.
Okay. Okay. Got it, got it. And secondly, regas service income?
Regas service income is 5...
INR 552 crores.
INR 552 crores.
INR 552 crore. And Gorgon volumes [ and the rate ]?
Gorgon volumes [indiscernible].
The next question is from the line of Pinakin from JPMorgan.
Sir, my first question is just your company -- your views and your company's views on if spot prices do not materially pull back from where they are at least for the next 6 months or so until the peak demand is there, is it fair to say that the spot demand for LNG in India would collapse from what we have seen in the last 2 to 3 years? And would that impact Petronet LNG more? Or should that impact some of the other terminals in the region given that they are more spot dependent?
No, we will not be much impacted. But as I have already said, that the icing on the cake, as more and more volume come, then our profitability increases. That's a lot happened. The only thing is that long-term volume, which are coming up, is already assured. We have a booked capacity to the extent of almost 16.5 MMTPA. So that is assured to the extent that whatever volumes we are importing from RasGas or from Gorgon, apart from capacity booking, that will continue. And perhaps the only thing that we could have done more as the price has been lower, that may not come in that business. But of course, it will continue. We will not be much impacted as others will be.
Understood, sir. And sir, my second question is going back to the CapEx front. You said that next year, you -- the company expects to place more orders related to Dahej expansion. Do you see the company placing orders next year for the projects other than Dahej, the East Coast terminal or the LNG/LPG stations? Would the order placements start next year on those projects as well?
See, it's like that. That project is already there. The East Coast terminal, we have plans. But so far, it has not reached a stage where we can start in the activities. Perhaps by next year, it will be more clear. We are in the process of signing the agreement. And perhaps, thereafter only, we'll be able to comment on this. But we see at least no CapEx is likely in the East Coast terminal. But next year, maybe if it happens, everything materializes, and we may take up some staff for the -- perfect for that particular project. But right now, as of now, there is no plan. We are only looking forward to sign an agreement for East Coast terminal. We have to see that the [indiscernible] is owning it as we sign an agreement. And thereafter, only we can take a call. And we are already -- announced doing the process of assessment -- demand assessment. We have seen it. Demand is there. So perhaps by next year, we'll be doing the orders for that particular terminal.
The next question is from the line of Amit Rustagi from UBS.
Sir, could you just give us some industry breakup, that which industries are likely to take volumes in the current environment? Obviously, we have 18.5 million tonne in RasGas and 1.5 million tonne kind of Gorgon. Over and above, what sort of volume is coming in India right now from our terminal and which industries are the offtakers currently?
See, as far as consumption is concerned, I already told that it is increasing at a very steady pace. Last year, it was 154. Then again, it was driven after pandemic. So that's what I can say, that demand is there. Fertilizer sector, especially is taking more gas than previous year, almost 48 mmscmd was taken as against 44 or 43 mmscmd the previous year. So this sector is promising. And another sector I already said is the vehicle [indiscernible] projects will come up, then they will be taking more gas. But otherwise, power sector has been static. It has been at the same level. And perhaps these 2 sectors I see promising, this vehicles and fertilizer sector.
Only the [indiscernible] power has been a price-sensitive sector. So last year, when the prices [indiscernible] a lot of gas. This year, [indiscernible] gas distributed [indiscernible]. That can be translated as we renew power demand [indiscernible]. Other than that, I think power sector has been [indiscernible] and will continue to grow.
Okay. Sir, even refineries are taking as much gas as they used to take?
Yes, absolutely.
The next question is from the line of Vidyadhar from ICICI Securities.
My first question was regarding also currently in July, August, while the pandemic has eased, spot LNG prices have gone up. So how are volumes doing? You seem to suggest that they have improved compared to the previous quarter and maybe compared to even June. And you -- in this context, you did mention a number of 16.5 million tonnes but your confirmed volumes are only 15.75 million. Is this balanced on short-term contract, which is a confirmed one?
Yes, short-term contract is there. So that is to the extent of 0.75 MMTPA. That's why we are saying 16.5 million. For the 2 years, at least this volume is committed. So that is there. But apart from that, what you are asking that from Q1, how it would be in Q2. Q2 has been very promising so far because we have long-term contracts and people are now more interested in long-term contracts. The pricing there is very low as compared to -- for gas. So it is in high demand, almost $9 per MMBtu compared to $16.45 per MMBtu. So what I'm saying that our long-term demand and this capacity continue to be used as desired and perhaps the throughput has been to the extent of almost 100% in the month of July, maybe 90% to 95% if you take the average. But in some other day, it is even more than 100%. What I want to say is that long-term volume is in high demand. We are now supplying that gas, which is already committed to long-term contract. And whatever capacity is built by other offtakers and if they have some long-term contracts, they're also bringing their volumes to India. GAIL has got a good opportunity to bring new volumes to India. So because that is cheaper than spot LNG as of now. So what I'm saying that this is good for us, that this long-term volume will continue to come. And our utilization will continue to be high in the second quarter.
LNG station, you said that you take...
LNG station, I have said that it is not in one go. It's a very...
So my question was that you said that you've taken a Board approval for 20 to 24 LNG stations.
Yes, yes.
So is it confirmed that you'll put all of these or these also may not depending on...
We have taken approval, but we will see whether these can be put up or not. Certainly, we are going 4 stations [indiscernible] that is for sure. We have raised order for 5 LNG [ regas ] station. So these will be in association with the OMC company, and maybe a few more will be there. Initially, we are the CBG company of OMC. But if opportunity is good and if we find that it's a good profitable business, certainly, we'll go for other areas also. But we have to see the reaction of the people, the conversion of the vehicle, whether they feel it should be done or not because we have to take a feeler, first of all. This is often an investment which will be done in a day. You have to see highway by highway that this highway is successful against second highway. So likewise, we may have some stations, 10, 15, like that only. So it will not be in one go.
So what is the cost per station roughly?
Cost is around INR 8 crore to INR 10 crore.
The next question is from the line of S. Ramesh from Nirmal Bang.
The first question is, can you give us some breakup of the uptick of LNG from the Kochi terminal? [indiscernible] roundabout [ 1.2 million tonnes ] [indiscernible] breakup. Question one.
Can you repeat? We are not able to hear you properly. Repeat your question.
Can you hear me now?
Yes, yes. Now it is clear.
Yes. Sir, can you give us a breakup because we heard that Mangalore terminal has already started taking. In the first quarter, whatever run rate you are doing at 15 TBTU, can you give us a breakup of Mangalore fertilizer, MRPL, OPaL or other customers in Kerala? Can you give us a broad breakup in terms of customer?
This is not actually required because we have given 15 TBTU as it's processed through that pipeline. And perhaps it is further increasing in the future but we have already planned it. It will be in the range of almost 1.5 [ MMTPA ]. So it is like that only. And perhaps in the future, it may increase. But right now, it is in this range only.
No, sir. We are just trying to understand in terms of whether OPaL and MRPL also has started drawing the gas.
All 3 are taking.
All 3 of them, MRPL has asked [indiscernible] 1.5, 1.6 [indiscernible]. It's likely to go up as more and more [indiscernible] as they get towards it. Of course, the current high prices have become deterrent. But in the long run, the price will also streamline [indiscernible].
Okay. Now coming back to the gas demand and supply, you're saying that you're unlikely to be impacted by the spot prices going up. How does the increase in the domestic gas supply from KG gas impact -- no substitutes of imported gas? And thereby, what is the impact on your LNG import business?
No, I have already reiterated time and again that it is a long-term contract. So it has to be there because the clauses are there, take or pay, [ move ] or pay. So we are assured of the business. Only thing is that whatever additional volume could have come through for gas, that may not come. But otherwise, our business will continue to grow like it is there. And I don't think there is any [ cut short ] in terms of the volume of the long-term gas coming to India.
And as far as domestic [indiscernible].
And domestic will affect the city, too, in the short term the spot LNG. Perhaps that may be the case. But long-term LNG is already in high demand. It is going on, and perhaps, this will not be reduced. The only thing that it may impact the short-term and export volume to some extent. But it is all in the short run because hardly 17 MMTPA has been -- it should come up in the domestic sector additionally.
We didn't see what DSM has sold. PLL is assured of long term as well as the capacity agreement. Meanwhile, the other terminals, without naming them, I would say, they may get affected because they may be working on [indiscernible] kind of thing, but PLL will not be affected, number one. I don't think that. Number two, and I think I am reiterating the same thing. Demand in power sector is extremely price-sensitive and that is getting affected. The price has been at the last year level of [ $3, $4 ]. This would have been icing on the cake and additional demand, okay? So that demand is only [indiscernible] refinery, fertilizer, [indiscernible] everything has bounced back. And I think [indiscernible] I would say better than the normal level. It would mean people are replenishing their inventory and all that. So everything has bounced back. As such going forward, P&L and business is getting better and better.
The next question is from the line of [ Watraj ] from [ Mentic ] Stockbroking.
Sir, I wanted to understand this loading base. Essentially, it's not as if we are [indiscernible] 4 or 5 stations initially. There will be others who will be putting up similarly looking at testing the waters, 4, 5 stations in each. So how many more do you see coming in the next 1 or 2 years? And how many are you preparing yourself for in terms of servicing LNG stations?
We are talking about LNG stations, right?
Right. That's correct.
Yes. Actually, I told you that...
You might end up servicing the...
I'm not getting your voice. You come closer to the mic. Your voice is not heard.
Yes. Is it better now, sir?
Yes, it's better.
Yes. I'm just asking, like you, there will be other guys who will be picking up [indiscernible] right now, testing the waters. So you will be servicing those volumes also ultimately, depending [indiscernible]. So how much are you preparing yourself for servicing? I'm asking from the point of view of loading base essentially at Dahej and [ Kochi ].
Okay. Okay. Fine. Fine. I got your question. So it is very true that whosoever put up the LNG station, it will be whether PLL or OMC or CBG company. Ultimately, they have to take energy from the terminal, our terminal. So that is true. We have 4 loading base right now in [indiscernible] and 1 at Kochi. But we have a huge plan to expand it more than 10, 15 and 40 loading base, included in Dahej. Because activity goes over, opposed to an LNG station, it will be PLM-only or maybe the nearest LNG terminal which will supply energy to the station. So I think...
Maybe 1 year or maybe 2 years, how much are you preparing yourself for it? Like how many loading base are you putting up?
Loading base, we have solely moving to almost 4 or 5 more loading base in 1-year time next. This is our plan. But subsequently, we'll put up as and when required and as of the requirement of the LNG station, we'll put up more. But right now, at least we want to expand to some 4 to almost 10.
So can we -- when do we expect this 20 million tonne capacity expansion to be completed?
This we plan to be around in 2023.
Okay. Because I mean the way you mentioned the CapEx plans, I thought like the low-hanging fruit could happen earlier.
Very, very low CapEx this time, however, because INR 200 crore, INR 220 crores will be required.
There is still a decrease?
Yes. A decrease over a plant at its completion.
The next question is from the line of Maulik from Equirus Securities.
Sir, I think referred to the earlier question, you mentioned that your volume was already tied up on the long-term side. So you don't have any risk compared to the newer terminal, which has come up in the last couple of years where they have not tied up on volume and running on the spot. Given the dynamics and we are seeing more LNG capacities, which are going to come up in the next 2 to 3 years outside of HPCL, Chhara or double expansion, do you think that we'll continue to increase our escalation of 5% in a long-term regas tariff? Will there be a challenge to that? That's certainly a little too early to ask...
If that is happening, this is a full contract, it will continue. But again, if you look at other contracts also, it is 5% hike in all the regas tariff contracts. Otherwise, it's other than PLL. So if there is anything, I think we have to be in-sync with the market in future. But right now, it will continue because this is as for the quarter.
So when you say, sir, we'll be seeing sync the market, so assuming that -- and I'm just giving in a scenario where we have another 10 mmscmd of Reliance domestic gas to be coming to the market and what we are already witnessing despite the pandemic and pandemic had an impact on LNG consumption along with the high spot LNG prices. But many of these, the newer terminals are running in a very low utilization with -- in the last couple of -- I mean, which we have not seen in the last 1 year or so. Do you think that this flexibility -- or will you provide any -- as I said, that will there be any price wars? We aren't seeing in LNG space because there was only one terminal largely, which was functional. But can there be price wars in the regas piece?
No, no, it's not likely to be there because, in fact, if you look at our terminal, it is the oldest terminal in India and we have recovered the entire effect out of it. So I think we are in a better position to compete with anybody. In fact, others are trying to match the prices with us. So there's no likelihood of any price war in the future among the terminal. This is not possible. But at the same time, we have to be competitive. We cannot stay alone in the market who is charging higher. So that has to be seen and we have to be in sync with the market.
The next question is from the line of Mayank Maheshwari from Morgan Stanley.
Sir, I had a bit more long-term question in terms of your gas sourcing and LNG sourcing. Can you just help us understand from a Board-level perspective, now considering all the spikes that we are seeing in LNG prices for a few times now the last 6 to 9 months, is there a change of opinion of how you're kind of thinking about long-term sourcing of LNG going forward? Is there any changes that you're thinking about now?
The long-term sourcing has proved to be the most prudent decision as of now. If you look at the prices which are there right now in the spot market, it seems that we have done a good thing by having long-term contracts. Because right now, the prices is almost half the spot prices. So -- and in any case, if you want to run a plant like a power plant, fertilizer plant, you need to have a long-term contract. There's no second alternative way. So spot volume can be a top-up volumes after consuming certain long-term volume. If you say that it is the only thing which can be reliable and which can be only used in any plant, it's not possible. Power plant, fertilizer plant, big industries, which is continuously running, need continuous supply of gas. So it is long-term gas. It's the only solution. The only thing is sometimes there is a mismatch between long-term prices and spot pricing. So that is a matter of concern. Otherwise, long-term contract is always a need, is a requirement and has to be there for industry, which we are supplying gas.
Sir, just an additional point to that as well. I think considering some of your contracts are expiring a few years and also I suppose your expansion of the terminal, are you kind of thinking about kind of tying up some long-term volumes now? Or do you think, obviously, spot is high? But in the market, how are you seeing the market evolve on sourcing long-term volumes?
No, it's true that long-term contract would be expiring by 2028 of that contract. But at the same time, this can be renewed also. This is actually to be decided by 2023 for further extension of the contracts. And then we will see that how long this will be extended. Perhaps our ambition is to increase it further after 2028. Only thing, the terms and condition may differ because it will be after the -- today's market circumstances and situations. And accordingly, we'll decide what should be the price and what should be a slope for this particular brand. That should be adding to right now, we see improve of 10% also had come to China, [ another 10%, 10.2% ]. So this kind of thing is there. So the intention is to increase this contract further after 2028. And perhaps, price is a major consideration, which will be discussed and that perhaps will drive future contracts.
The next question is from the line of Manikantha from Axis Capital.
So just on the LNG stations again, you have mentioned that you'll be doing 4 first stations with OMC. How does the model work there, sir, with OMC? Will you be still doing the CapEx and there will be OpEx [indiscernible] this year? Or how does [indiscernible] work there, sir?
Okay. Although it's a very [indiscernible] something which is within the business, we should not disclose it. But we can say that we have assured our margin. Our only intention is that we should have at least 16% IRR on our investment. And perhaps, initially, we would like to have CapEx on LNG restarting and perhaps other parts like land and other things that were provided by OMC. The only thing is that we are ensuring that we get the adequate return on the investment and perhaps that will not be like a 16% IRR.
And if I understand it correctly -- my next question is, if I understood it correctly, you mentioned that you're still assessing the demand for East Coast terminal. Is that what you are saying?
I have already got it assessed 2 years back, but we are reaffirming the same thing because it has been done by one of the company. And again, we are reaffirming before going ahead. And perhaps after that, it is already in the process. And maybe demand is there, absolutely [indiscernible]. Only thing was that there was no pipeline connectivity in that region. So now this pipeline is [indiscernible], pipeline is coming, that which we have their pipeline. So I think that will be nearby. And from there, we can evacuate our gas through the terminal. So basically, pipeline connectivity was an issue earlier. So now it is likely that it will be there in this year. It is already laid up to that place. So I think evacuation issues were there -- are there. But now it has been resolved because the pipeline has already come up there.
So because the pipeline has come now, you are assessing how much could be the demand is?
Yes, yes. That's the reason. Actually, pipeline connectivity was not there earlier. So even if we put up a terminal, it will not be feasible to our mix. But our pipeline is assured, so now we can think of it.
Right, sir. So my last question is about other expenses. I think someone has quoted one-offs there. Can you please repeat that? Like what are these one-offs for and how much is that?
Yes. Can you repeat?
Can you repeat? Other expenses, you are asking?
Yes, sir. The one-offs in other expenses, can you please repeat what are these for?
ForEx loss of INR 36 crore [indiscernible].
The next question is from the line of Nitin Tiwari from Yes Bank Securities.
Sir, my question is related to #4 in your results release where you have mentioned that you have placed for certain [indiscernible] charges on 3 customers over a period of 4 years. So maybe you know which are these key customers? And what [indiscernible] are we exactly talking about? That's the one question I have and then I'll ask again.
Yes. Actually, we have given a note to this result. But just note #4 is there, I think. You are asking about what happened?
Yes. So you mentioned that 3 customers on 4-year schemes. So exactly which key customers are they and what time period we are looking at for here?
It is not appropriate to disclose the name because -- but the only thing I can say is we have limited customers. Out of that only we have mentioned it. It is not appropriate to give the name.
And sir, time period in terms of which financial years are these?
Time period is always '19, '20, could be the period, 2019 and '20.
2019 and 2020. Great, sir. So my next question is again related to this [indiscernible] volume. So if we read the note, almost 75% of the amount -- on the very small amount of just about INR 200 crores, but 75% of that amount is disputed and rebuild. And the amount which is paid is paid under protest. So when we say that like we have over 16.5 million tonne of capacity, which is like under tooling and [indiscernible], so how confident and comfortable we are [indiscernible] we'll be able to pass on with user pay charges and we'll be able to realize them?
Okay. It's signed contracts. So we are confident that legally, we are capable of realizing this money. If somebody is not honoring the contract, this is against the spirit of the law. So we can take action against them. So it is not that they are not paying, that they have decided not paying it. Legally, they are going to pay. And legally, this is [indiscernible] contract. So sometimes it happens that they have some other kind of notion that they should pay or we should not pay. But as per contract, there is no option. They have to pay it. Otherwise, we can legally demand it. And this is payable as per the signed contracts.
Staying on that point, we'll be comfortable [indiscernible] user pay [indiscernible] if there need be?
[indiscernible], there's no doubt. But that's why we are saying that we are in due course of solving the issue. We are trying to avoid any litigation or legal action because our thought process is that we should resolve this issue mutually. That's why we are writing it should be resolved in a due course of time. So let us hope for the best. We should not be negative about everything.
Right, right. That answers my questions. And sir, one more, if I may. So again, pertaining to this topic only. So we have basically a [ pulling ] capacity of 16.5 million but the 8.5 million that we are getting from RasGas that is contracted will be an integral of this 16.5 million [indiscernible] assured business that we have. So would that mean that [indiscernible] contract starting in 2028, so it is imperative upon us to most surely renew that contract, otherwise our assure business will go on? So which, in fact, means that we have very little removal there. So is that right to understand?
No, no, we are -- I just already said that it will be reviewed in 2023, and our endeavor is to renew the contract for further at least for 10, 20 years, 10, 15 years. It is our ambition and I'm fully confident that this will happen because this is a good contract, and perhaps we'll be able to negotiate with them. And we'll continue to deliver capacity as we are doing right now.
We will take our last question. That is from the line of Mr. Vikash Jain from CLSA.
[indiscernible]
I'm not able to listen, Vikash.
The line got cut. I would now like to hand the conference over to Mr. Gagan Dixit for closing comments. Over to you, sir.
Yes, yes. Thanks for all the participants and special thanks to V.K. Mishra for sharing views on the company's first quarter performance. Any closing comments, sir?
Only thing is that you should maintain the confidence with us and perhaps our company business model is very robust. You will not find a company where the business is too assured even at the time of this pandemic. So I just want to convey to my analysts and investors that you just continue to report confidence on us. We'll continue to grow in future and perhaps it will be better than whatever it is today. That's all from my side.
Yes. Thanks, sir. Thanks. Yes, you can disconnect the call.
Thank you. Thank you very much. Thanks to all.
On behalf of the Elara Securities Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.