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Petronet LNG Ltd
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Good morning, ladies and gentlemen. Thank you for joining us on the Petronet LNG second quarter and first Half FY '20 earnings call. Today, we have senior management team from PLNG, led by Mr. V.K. Mishra, Director of Finance; Mr. Chawla President Finance; Mr. Sharma, VP Marketing; Mr. Mittal, GM Marketing; Mr. Satpathy, DGM Finance; and Mr. Agarwal, Manager finance. We will begin with the opening remarks from the management, followed by interactive question-and-answer session.I will now hand over the floor to the Petronet LNG's management for their opening comments. Thank you, and over to you, sir.
Very good morning to all of you. This is V.K Mishra from Petronet LNG Limited. This second quarter has been very encouraging for all of us. And if you look at the kind of throughput, which has been in Dahej Terminal, it has been 243 TBTU, which is highest ever throughput from Dahej Terminal. And if you compare with the previous quarter, it was only 181 TBTU. And if you compare with the Q2 of the previous year, it was only 240 TBTU. So there's a change of around 34% from the previous quarter and around 2%, you can say, from the corresponding quarter. However, if overall throughput you see, the percentage has been 109% of the utilization level. So it is more than 108% in the corresponding quarter of the previous year and 81% in the previous quarter. So it has been very encouraging. If you look at our Kochi Terminal utilization, it has been utilized to the extent of 17%, and which is almost 11 TBTU as compared to 14% in the previous quarter, which was around 9 TBTU and 10 TBTU in the first corresponding quarter of the previous year, which was around 16%. So there has been overall improvement in terms of utilization level of our -- both the plants.And as we had commented earlier that Q1 was -- especially was not good for our company. It was all across the industry that it was not good for anyone because of that pandemic and the consequential lockdown period. So we have seen that downfall in the previous quarter, but now we have improved. And if you look at the margins in the PBT, our PBT has been highest ever PBT in this quarter, which is INR 1,242 crores as compared to INR 697 crores in the previous quarter and INR 885 crores in the corresponding quarter of the previous year. And if you look at that, it has been INR 927 crore, which is second highest PAT ever as compared to INR 520 crore in the previous quarter and INR 1,103 crore in the corresponding quarter of the previous year. So this improvement, if you see, there is a surge of around 78% in PBT from the previous quarter and same 78% rises there and PAT also from previous quarters. And PBT, if we compare with the corresponding quarter of the previous year, there is a surge of around 40%. But PAT is not higher because in previous year corresponding quarter, this tax rate was reduced substantially from 30% to 22%. Because of that, there are substantial reduction in tax liability in terms of deferred taxation. So that's why it has been very high in that quarter. But otherwise, this quarter is -- has given us the highest -- second highest PAT. So this is how we have performed. And if you look at the -- this kind of performance we have done in Q2, we had promised you earlier that we'll perform better in second quarter and we have done this. And if you look at how we have done it because there are 2, 3 reasons, which I would like to attribute. One reason is the resurgence of the demand to pre-COVID levels in second quarter. And second is that we had a robust operation efficiency. And also, we had effective commercial planning by our company.Apart from that, we have declared dividend of 80% on equity. So it is INR 8 per share we have declared an interim dividend this time, which is higher than 55% in the previous year's corresponding quarter. So this is how we have done. Now I will open for questions.
[Operator Instructions] The first question is from the line of Probal Sen from Centrum Broking Limited.
Sir, just one housekeeping question. First of all, is it possible to share the regasification service revenue, like you do every quarter?
Regasification, I think this regasification services revenue, if you look at, it has been INR 678 crore INR as compared to INR 500 crore in the previous quarter at INR 631 crore from the corresponding quarter of the previous year.
Right. And that's entirely due to the jump in the regasification volumes, correct?
Yes. So basically there are 2 reasons. One is that the volumes somewhat has increased, but there is a surge of 5% in tariff from [ BPCL ], which is where always -- there is a reason why it has increased.
Right. And the second question, if I may, was the margin performance has also -- sir, may I continue?
Yes.
Yes. I was saying that the margin performance has also improved quite substantially from -- if I look at, let's say, 2Q of FY '20, volumes from Dahej more or less are similar. But obviously, our EBITDA performance has been far superior. What has been the cause? Is it marketing? Margins have gone up just -- because just the 5% tariff increase can't quite explain that margin jump, sir, is all I was asking?
Yes, that is true. But if you look at the kind of surge, which has been there, if you compare with the previous quarter, it has been around INR 322 crore of the higher regas charges. But if you compare with the corresponding quarter, there is a surge of INR 59 crores only. So this is there. And apart from that, there is a -- also reason of this Ind AS 116 because of that, there has been a surge of around INR 86 crore as compared to previous quarters and INR 154 crore as compared to the corresponding quarter of the previous year. And apart from that, there has been some inventory valuation impact. So these are the major reasons to how we have done it. [ The volume on ] margins have improved. So this is a bigger reason that how we get charges in Ind AS impact.
Okay. And sir, last question, if you can just give a quick rundown of the CapEx done in H1, guidance for H2 and FY '22?
CapEx done in Q2?
In H1, sir? So for 6 months.
H1, Yes. Debabrata, can you explain?
Yes, sir. So Probal, the CapEx because of the lockdown and the -- this pandemic impact, CapEx done in the H1 was about INR 15 crores. And the planned CapEx for the H2 is about INR 105 crores.
Okay. And for -- and can I get a sense of the major projects ongoing, sir, for this year and the next?
Yes. Actually, project if you look at, it is basically 2, 3 projects, which I would like to mention here. One is these tanks we are undertaking 2 additional tanks we are building at Dahej with a cost of around INR 1,200 crores. Maybe this year, we may place the order maybe by end of the year. And second project, which we are taking up with the third jetty at Dahej, with a CapEx of around INR 1,300 crore, for which we have already completed the DFR. And maybe very shortly, we'll take the approval of both. In case of tanks, we have also done RFQ, and we are in the stage of RFP with the kind of package, receive packages being there to shortlisted bidders. And we have got all the [ ECNs ], we have that clearance from the authorities and also have clearance of [ dos paso ] for 7 times -- for 8 times, we have applied to [ paso ] for clearance. So this is how we are going forward. And another project we are ambitiously looking forward is Sri Lanka projects. And this project is basically related to FX [indiscernible] in Sri Lanka, where we are trying very hard. This is a project worth USD 300 million. And perhaps this will help us in going to have footprints in international arena. So I think this is a major project we are undertaking. Apart from that, we have a vision of having one terminal on the East Coast of India. And perhaps if everything goes in our way, then we will have in 3, 4 years, 5 years' time. So these are all -- and that will have a cost of INR 4,000 crores. So this is how we are going forward. And let us see how far it can go and how early we can go.
Thank you so much for the detailed explanation. Sir, appreciate the time. I'll come back if I have more questions.
The next question is from the line of Bhavin Gandhi from B&K.
Just one clarification on the response to Probal's question. This INR 86 crore Ind AS impact, sir, is it above the gross margin line item or it is below the gross margin line item?
Bhavin, the INR 86 crores is the below gross margin. At the gross margin level, as it has been clarified that the inventory impact because we -- if you have seen the spot prices have gone up by around more than $3 during this quarter. So the inventory valuation impact is around INR 60 crores and rest is the trading gains.
Got it. That explains it. And sir, if you can just comment now that we are already at 109% utilization as far as Dahej is concerned, how should one think about volume growth for next 2 to 3 years out, both for Dahej and for Kochi?
Yes. Actually, if you look at the kind of utilization, we are already utilizing more than 100%. So volume growth, if you look at, it is almost as good as the highest number. Because if you see the expansion plan because we are planning to have 2 more tanks in jetty and also to have some modification to increase the capacity to almost 19.5 mmBtu in next 3 years, 4 years. So I think that is our plan. But right now, we are utilizing almost 100% capacity more than that. So volume growth, we can say in terms of volume growth in Kochi Terminal because there, we are still underutilized. And this Kochi-Mangalore pipeline, which is expected to come up this month itself November. So we hope, by year-end, we should increase the volume throughput in that terminal. So this is our anticipation because gain is already, I think, has almost in the final stage of completion pipeline. They have committed that they will do it by mid-November. So let us see how long they will take in this November. But at least by end of November, it should be completed. Then we'll connect it to Mangalore, and there will be utilization to the extent of 30% to 35% by year-end or maybe beginning of the next year.
Got it. Sir, just one related thing. You've also mentioned about commissioning work on the terminal auto section. So any update on that part of the Kochi-Mangalore- Bangalore pipeline?
Kochi-Bangalore pipeline gain is already in the process of awarding some of the contracts. Some, they have awarded. Some, they are in the process awarding by year-end. And perhaps after awarding that, it will take another 2, 3 years, and then we can think that the Mangalore section will also be connected to our Kochi Terminal. And that is how it will be done.
Got it, sir. Sure, sir. That's it from my side.
The next question is from the line of Pinakin ...
There is an issue. If you can just help me out because there's a call coming from Secretary [indiscernible]. So Rakesh, Debabrata ...
Yes, sir, we will continue. We are there.
Then I'll join you back within 2, 3 minutes. So can you call me again, so that I can join.
Sure, sir.
Yes, yes, please arrange the call in 2, 3 minutes.
In 2, 3 minutes, I will just talk to him and then come back to the call. In the meantime, please continue. Sorry for the interruption, but there is 2, 3 calls which have come to me from Secretary [indiscernible]. So I have to take that call.
Sure, sir. I'll definitely give you the call. Thank you. The next question is from the line of Pinakin Parekh from JPMorgan.
I have 3 questions. The first is on the Sri Lanka FSRU project, where are we in terms of starting work? Have we finalized the project? Have -- when can we see the ordering start? Or are there still some hurdles that the company needs to cross before it will start the CapEx on the Sri Lanka FSRU? The second question is on the other expenditure line item, which tends to be volatile, but seems to have stabilized for the last 2 quarters. So can we expect this number to continue going forward? And my last question is that you just mentioned that demand is recovering back to pre-pandemic levels in the second quarter. And what is -- how is demand trending at this point of time?
I'm Rakesh Chawla. Thanks for your question, Mr. Parekh. First question is with reference to Sri Lanka. That project is -- there are certain hurdles up till now. The final approval is yet to be done. So CapEx, you can say, incurring CapEx on the project is not likely to happen in this financial year. So further detailing are being done and post-detailing this actual CapEx amount and other details will be available. Can you hear me?
Yes, sir, I can hear you.
Your second question is with reference to OpEx.
Yes, sir.
OpEx is -- during this first half, you can see there are certain maintenance activities that had to be shifted to second half because of the COVID impact. So more or less, this is likely to be in the same range, not much impact, but it may be slightly higher than the first half.
Understood, sir.
Because of that -- those activities, which spilled over to the next half.
Understood, sir. And lastly, on demand trends, sir?
Presently, it -- there is a good demand. But post the rain season that all other terminals are also operational. So it may be similarly -- slightly, you can say, may not be the same in the second quarter. It is as probably the previous trend as well. But it is going very well. It is ...
The next question is from the line of Avadhoot Sabnis from Ingrid Capital.
So firstly, on the [ bo bon ] tariff, your notes mentioned -- in the notes accounts, you mentioned that this is still in discussion. It's still not settled. You are expecting it to be settled by now. Could you give us any color, firstly, in terms of if we are sort of positioning for whatever, 79.14% tariff rate in FY '20, what is it that the off-takers are asking for? And what's the outcome? Basically, some committee was -- had been formed to look into this? Why is it still not been settled? If you could give any color?
See, this matter is in discussion. So exact number, what are the crux of discussion that we will not be able to inform you right now. But there is a high level committee, which is -- includes some independent directors as well. So they are looking into this. And we are likely to -- you can say, reach some conclusion within this month or, say, maximum in another 30 days or within this quarter, maximum. So as of now, the tariff is based on this number what you have told, which was for '20, it was 79%. And for the next year, it has increased by 5%.
So any color you can provide us at all in terms of what is the risk here in terms of -- if it is not 79%, what it would be? As I said, what is that off-takes are demanding? Can you give us anything at all?
That -- since this is part of the negotiation and discussions, that number, it will not be fair on my part to discuss the number because the off-taker can be mind anything that nobody can stop. But we will not be -- we may not be able to give -- you can say, a much lower number. So this number may be slightly lower here and there. But exact number, we would not like to discuss as of now.
Okay. And sir, in the prior calls, I think there was mention that you're reasonably optimistic that maybe even long-term deals could be possible as pricing, which are more linked to spot pricing? Any color you can provide on that? Any progress on the talks, how optimistic you are on that kind of being materializing going forward?
You are saying that this regasification tariff with reference to spot prices?
No, no, no. I think in the earlier calls, basically, all your historical long-term deals were at Brent-linked pricing, okay? Whereas I think there was some encouraging words in earlier product conference calls, you had mentioned that it may be possible to sign new long-term deals where the pricing, which have being linked to Brent, it could be linked to more whatever as a prevailing spot price in Asia.
As you are aware that as of now, spot price is even higher than this long term price. So it is a continuous process. And yes, you are right that we have -- had come out with a tender that where the price were linked with the current price instead of having this long-term price and that price linked with that prevailing price. So that is an ongoing trend now in the international market. A few other companies have also come out with some similar type of tenders. So in the long run, this is likely to happen, what you are talking. But as of now, that this existing -- our long-term contracts are there. For that, this may continue for some more time. But new long-term contracts in the international market are happening on this type of procedure. And Mr. G.K. Sharma can give some more light on this, and he's looking into marketing and source.
This is Gyanendra Sharma. Vivek, could you add some light on that?
Sure. Avadhoot, so you rightly mentioned that in previous calls, we had given some information that we are in discussions, having a long-term deal linked to JKM or DS West India kind of prices. Those discussions are still ongoing. And of course, we will need to go to board once the decisions -- these discussions are concluded. But at this point of time, the only thing we can say is that, yes, our intent is to have some deals linked to current or the prevailing prices linked to spot prices. So those discussions are ongoing.
Okay. And lastly, the elephant in the room. Any comments at all on the status of the Tellurian MOU?
Tellurian, actually, if you look at, there is no progress, as we have done earlier also that we have signed a nonbinding MOU. So it is there, but there is no progress because if you look at the market, now LNG is readily available without any investment at a very reasonable size. So we have done this deal long lag, but now since the market is very subdued as far as LNG is concerned. So I think there is no progress. If there is any progress in future, we'll tell you, but this is right now a nonbinding agreement, there is no commitment on that.
Ladies and gentlemen, we have Mr. Mishra connected in the conference. The next question is from the line of Amit Shah from BNP Paribas.
Just one question. What was -- what is the current -- what is the shortfall left from the long-term contracts' perspective over the next one half from the Qatar off-taking perspective that needs to be met because this will be the last quarter, right? Is there any shortfall, which can be made up in the fourth quarter because of the COVID?
Yes. As you know, that there were certain cargoes, which we have not lifted due to COVID. So those were classified as force majeure. Other than that, there is no shortfall during current year. And I think we'll be meeting all the targets whatever were there other than the 8 cargoes, which -- on which we had declared force majeure, which was also notified in the previous calls.
Okay. Perfect. That's all from my side and have a happy Diwali.
The next question is from the line of Amit Rustagi from UBS.
Sir, congratulations for a wonderful set of numbers, and I wish you happy Diwali in advance. Sir, my question relates to the current spot market of around $7. So do you see any impact on gas demand in India? And how do you think that the gas demand can shape up in the coming year as well?
This is spot market basically will be fair, which is because of the winter season setting in. So it is because of that. But maybe after December, January, this price will again come down. But of course, Indian market, if you look at, it has already recovered and it has now shown the resilience in terms of demand growth. And now if you look at the consumption, which is around 150 MMSCMD in the last month itself, this shows that at least we have reached to pre-COVID levels. But as far as the growth in consumption is concerned, they'll not -- may not be substantial growth. Certainly, during the year, by end of year, you'll see that there is a growth and maybe 4%, 3%, it might be there, but we expect that it should happen. But 2, 3 months have been lost due to this pandemic. And certainly, that is a loss to industry because there is a gap of presumption in that period. So we'll try to make it up so that at least we can reach to previous year level and maybe 2%, 3% growth is possible, it should be done. But at this current price level, if you look at, it is just because of the winter season, which is sitting in right now. So that's why the price is higher. But otherwise, this may range in between $4 to $6 in my view.
And sir, can you give us an update on the progress of East Coast terminals? Like are we going ahead, which mode we are going ahead? And how much time is to get?
Yes. We are still looking at opportunity because on the East Coast, we want to have a terminal. The only thing, there are certain issues which are to be sorted out first. And one of the major issue I find is that we have to see that demand growth over there in the next 10 years. So we are analyzing that [ pash ]. And moreover, there is an issue of pipeline connectivity. So now the pipeline is coming is Urja Ganga pipeline up there. And another pipeline will be there, which will be connecting to that place where we want. So I think this kind of logistics are there done, we will certainly do it. But right now, there is an issue of connectivity and also demand perspective over there. Because we are still analyzing whether there's a real demand over there. And at least we can have some percentage of capacity booking initially so that there is a minimum anchor load over the terminal, and at least we can assure ourselves that there will be a return on that. So these are the factors we have to first look into before connecting the terminals.
Okay, sir. And sir, any time line when do you think that we would be finalizing [indiscernible] ...
We are not giving time line. But of course, maybe within 1 year, we should decide that how we go forward. It should be within 1 year.
Okay. Great, sir. And wish you happy Diwali once again.
The next question is from the line of Vishnu from Spark Capital.
Wanted to understand the tariff post -- I mean, post-January, will you be taking a 5% hike?
Yes, Vivek and G.K. Sharma, please.
Yes, it will be -- This is Gyanendra Sharma. For the agreement, our [indiscernible] tariff will get an escalation of 5% with a [ circumference ] model.
Got it. Sir, and post-January, what will be the tariff at Dahej and Kochi, if you could just touch more?
Presently, it is 51.75%. And you can [ get to ] [ 10%. ]
So 54.34% is what it will work out. Okay. And for, Kochi, sir?
We mentioned that tariff is under discussion. So once it is finalized, we will, of course, let all the shareholders know about it and investors know about it.
The next question is from the line of Aditya Suresh from Macquarie.
Just one question for me. So you're still generating a lot of free cash flow. It seems like your incremental CapEx is not meaningful. So in that context, can you just share your thoughts on the dividend going forward? It's clearly kind of coming with a high dividend over the past 2 years. Any reason to assume that won't be the case over the next, say, 12, 24 months?
Yes. Actually, dividend, we have already declared, but whatever budgets are coming up in our way, we will undertake those projects. But right now, we cannot say anything about our future plans for dividend payout. But of course, as long as we have enough cash and enough money and have profit, we'll continue to give the dividend to the stakeholders. It has been substantial last year, also 125% we have given. This year, we have already given 80%. So I think I will seen no reason why we should not do a handsome dividend to the stakeholders.
The next question is from the line of Mayank Maheshwari from Morgan Stanley.
I had just one question regarding the progress on LNG transportation plans that you had. Can you just give us any details around that? Or what has been happening on that front?
I think G.K. Sharma, can you explain LNG transportation?
Pardon me, sir, sorry?
LNG ...
Could you repeat the question again?
Yes. Sir, I was just asking in terms of LNG, you were using for the transportation sector. You were talking about plans around that. So how has been the progress on that?
There has been a substantial progress. We have already signed agreements and agreement with Gujarat Gas and our -- a tender for setting up LNG infrastructure has already been done. It is in final stages of evaluation and awards. Further, we are in discussion with other OMCs and CGD companies to set up LNG station. And we are just working with these companies to develop the ecosystem, so that once the LNG infrastructure is there, and also, we are in discussion with fleet owners for conversion of their vehicles. So we are expecting this -- the ecosystem rolled out in the last 2 years, and the demand will pick up in the next few years by 8 million to 10 million tonne in transportation sector itself.
Okay. And sir, any committed CapEx around it yet in terms of your total CapEx plan for next year?
So I've already told you that we have CapEx plan of INR 1,200 crores for tanks and then [indiscernible] INR 1,300 crore in next 2 to 3 years. We have a CapEx plan. Otherwise, we are also looking at Sri Lanka Terminal having CapEx of around USD 300. And that is only after clearance given by Sri Lankan government. And the other part, I have told you, Gopalpur Terminal, which we are thinking on the East Coast maybe in the future. So these are our plans we are having.
I was more focusing on the LNG transportation side. Is there any committed CapEx ...
LNG transportation we have commitment of -- because if you look at this kind of business, what we are doing, we are not entering a retail business. So what we are trying to do is to associate with CGD entities and OMC, so that we can see the business and later on can sell our LNG directly to these particular entities. So we are associating with the various city gas distribution companies. And we have plan of setting up around 5 station maybe within very short time and maybe 19 station, we are taking approval, other places where we are tying up with various OMCs and CGD. So that we can see it and can improve this business because this is a segment, which is very profitable, and people can have the benefits from this sector, and it has never been tapped. So our objective is to promote the uses of LNG in transportation sector, especially in long-haul trucks and state and intercity buses so that, that sector can proliferate and people can earn pockets on that. So basic objective is not to go retail. Objective is to go to B2B business by selling LNG to CGD entities and OMC. Initially, we have to feed the business. For that purpose, we are seeking some -- this investment initially. But later on, maybe when the people will see that there is a lot of margin in this business. And they will automatically be attracted to it and they will set up it. And now anybody can set up LNG stations. There is no restriction that it should be only CGD entity when private entities can set up those LNG stations. So it's only initial period that we have to set up some LNG station along with some CGD entities and OMCs. And then it will take off and people will do that.
The next question is from the line of [ Chin Magrindhi ] from Bharti AXA Life.
Sir, just 2 [indiscernible] questions. Sir, above EBITDA, what is the Ind AS impact for the current quarter?
[ EBIT ]?
Yes, the Ind AS impact is, as you know that there is a INR 101 crores cost of -- at the cost of goods sold level, INR 101 crores has been knocked off as a cost. And then there is an income of -- I mean, ForEx -- income due to ForEx restatement, which is INR 77 crores gain. And other gains are INR 8 crores. So the total -- if you take the total gains at the PBT level, it comes to about INR 186 crores. And the depreciation is INR 87 crores, and the finance cost is INR 81 crores. So at the PBT level, the net impact is INR 18 crores positive because of this -- because of this time, this gain in ForEx coming.
No, ForEx restatement will be part of other income, right?
It is part of other income. That is why you will see a surge in the other income.
Okay. And inventory gain, you mentioned. I missed out the number, you said INR 50 crore or INR 60 crores?
Inventory?
Yes, and it's a revaluation.
Even -- actually, you see, inventory revaluation is somewhere around $3. So it is about INR 70 crores. That is over the -- at the gross margin level.
The next question is from the line of Sabri Hazarika from Emkay Global.
Congratulations for a good set of numbers. Most of my questions have been answered. I just have a clarification. You mentioned the H2 CapEx should be around INR 105 crore. That's right?
Yes, Sabri. That's right.
Okay. And secondly, what would be the volumes for Gorgon during the quarter in Dahej Terminal?
Volume is already there, more than 100%.
Yes. I mean, how much has been flowing to Dahej?
Dahej is around 63 and 64 MMSCMD average.
No, no. I'm talking about the Gorgon volumes, which is 7 to 8 TBTU [indiscernible] ...
I think, Vivek will tell, but I -- normally cargoes are coming there.
It would be around 7.5 TBTUs.
7.5. And secondly, you -- Mr. Sharma mentioned that around 8 to 10 million tonnes of LNG retail -- LNG for CVS, that kind of a potential is expected. So I mean, if I take a near-term maybe for the next 2, 3 years, then what kind of volume should be realistic for you to do in terms of LNG retail?
I'm Gyanendra Sharma. I mean it has potential of 8 to10 million tonnes. But the initial years of ecosystem development, it's a [indiscernible] so the infrastructure or the [ we are ] getting ready. So at this point of time, immediately saying, but we are expecting at least 1 million tonne volumes would come in the initial 3 years.
In 3 years, you're expecting 1 million tonne for your company to do?
Not only our company, I'm saying all over. And with the initial infrastructure development and doing everything, it will take some time. And there are still -- there are a few things to be ironed out.
Right. And these 5 stations you would be putting yourself as a testing. But later on, you believe that other players will see the benefit and then the retailing part will be done by themselves. That's right?
It is being done. And even -- I think everyone is realizing this and Government of India is also understanding that this is a crucial for India's dependence -- reducing the dependence on crude. So Government of India is also pursuing it and advising the whole industry to go for it.
The next question is from the line of Vinit Joshi from Goldman Sachs.
Happy Diwali to all of you. So my first question is on your Dahej hedge expansion, I think, right? So you're talking about new tanks as well as third jetty. So this expansion, would you be looking to utilize more for spot volumes? Or the idea is also to tie up volumes like your existing contracts?
Yes. Actually, we would like to book the volumes. But at the same time, if you look at the demand growth LNG, it is growing rapidly. So we hope that in future, how it will shape in, we cannot say. But we will prefer to have some capacity booking beforehand if possible. But even if it is not there due to this demand growth of LNG, I think it should be replied as we are doing it now because even now we are having capacity booking only up to [ 15.75 ] [ MMTPA ]. But still we are utilizing more than 100%, 17.5%. So 109% this time. So I think that should not be a big issue. Nowadays, having a commitment is not that easy because already people are committed somewhere. So whatever is possible, do. And of course, we'll try to book it beforehand, if possible.
Okay, okay. All right, sir. And sir, with respect to the Tellurian deal, right? So I mean, we have seen so many LNG projects getting deferred or canceled. So I mean, would it be possible to give at least some time line by when we can have like a final clarity whether you are interested in this deal or not? Because listening to you, I mean, it did feel like that you're saying that there's a lot of cargoes which are out there, and there's no need for fixed investment to get such volumes. So like if you can provide some clarity or some time line in which you can provide clarity, that would be quite useful.
It's like that, so you are anticipating too much from the -- between the lines that you look at. It's only nonbinding amount, which doesn't give any kind of commitment. We do such agreement across the globe but it's only for exploring the possibility. It's never with a firm intention to invest somewhere or to just do it because there are several aspects, which has to be taken care of. If we are making an investment, there should be some return on that. So these 2 assets are altogether different. First thing is, we should get the cheapest challenge. Second issue is that there should be sufficient return on investment. So those factors are to be seen. And looking at the kind of margins nowadays in LNG, it's not very lucrative to have investment done in liquefaction projects because the return is very low. So that will not suite our requirement. And moreover, investment is usually made when we get some additional benefit out of it. But right now, when we are having LNG available at a very throwaway prices, then there is no need to invest money for this liquefaction terminal because we are, in any case, getting a very cheaper LNG in the globe -- across the globe. So there is no need to go for investment as of now. Let us see in future because earlier it was first quarter that it will have investment in liquefaction terminal, it will ensure a lower price of LNG as well as ensure the security of supply. And right now, there is plenty of energy available in the market. Anybody can go and buy it. And that here at a very throwaway prices. So there is -- that's what I'm saying that we should be more concerned with LNG than investment. Because investment is, in any case, if there is cheaper LNG than available in the market, then we can think of. But that is not the case. We have to see that whether -- at all, this is a good proposition or not. Because right now, it is not that good.
All right. And sir, just lastly. Sir, I think it's been like a third year now that we have interim special dividend. So I mean, would you be looking to drop the word special because you've been paying fairly regularly and even increasing the dividend, right? So because that creates the impression that it's a one-off, right? So I mean, 3 years in a row interim special dividend, I mean, it's like that would be quite useful. If you can probably provide a clarity that it can continue in future as well because clearly, at least when we do the numbers, we see that there's a lot of free cash flow generation at Petronet. So maybe -- I mean, I don't know, like, what's your view on why are you using the word special dividend?
Special dividend is very much required because anytime we can withdraw it. But if we do it regularly, you will say every time you are already giving, why you're not giving this time. So this is as low as we are giving it is okay. But once we will have CapEx, we will have some M&A opportunities, something there, then we will not give this. So that's why we are using this word. It should not be taken that it's the kind of one-off thing. It is a one-off thing, of course, it started like that only. But at the same time, it is not guaranteed every year. So that's why you are using this special word.
All right, sir. And a very happy Diwali to you.
The next question is from the line of Vidyadhar Ginde from ICICI Securities Limited.
I trust you are hearing me, I am audible. So first question was on this Kochi Terminal regas charge, which I think on some answer was given earlier today. So just wondered clarity, you said that you might be fine with some small downside to current numbers. So when you refer to downside to current number, is it below 79, or below 83, one. And secondly, is it that you will not go below 75, which I think you've said is the benchmark? If you go below that, there has to be a provision for devaluation in the value of the asset. So is -- am I understanding correct on that?
Yes, actually, it's not decided so far, how far we will go. This is, again, the matter to be decided by our Board. So we will not comment on this. But of course, there is a discussion going on. And if there is any outcome, we will let you know. But we cannot comment beforehand, whether it will be this, whichever -- how much it will be. Because this is premature or rather we are preempting the right of our Board by commenting on this, it is not fair. It's not a decision which we can make right now.
But what is the resolution mechanism because you might -- both of you [indiscernible] ...
Resolution mechanism -- I agree, but resolution has to be worked out by Board only because in any case, off-takers are also members of the Board. So they can discuss across the board and work it out. But at the same time, we cannot say how much it will be and how far we can go. So this is not right thing to comment right now.
What I'm trying to just understand is that, let's say, if you say that you are not going below 75 and the off-taker says, let's say, the want 60. Then what is the resolution mechanism? What is the independent director saying? Is it binding on anyone?
This is all hypothetical question. I cannot answer all these.
No, no I'm only asking about -- not the numbers. Forget the numbers. What I'm only asking is that you were referring to independent directors. So what do they say? Is it binding or no, not really?
No, no. Whatever independent directors will see, they will be giving it to the Board. Then Board has to take a final call.
Okay. So that is not binding?
They are not the -- that is not binding. Independent directors can refer -- will refer to Board.
But how is your Board composition in terms of off-takers and what proportion of the board? Because if they -- and -- if the number is closer to what the independent directors and the off-takers if they have a majority or not?
This is -- again, you are talking with a different direction. This is not the right thing. You want the numbers ...
Okay, fair enough. I think let's -- we wait for the outcome.
You can see the Petronet LNG website. There, you'll find the details.
So basically, but we were told that by end of this quarter it should happen. When you were [indiscernible] ...
It could not be concluded, but we are still working on that. It's not that we are not. We are almost discussing almost every week or every -- every 3, 4 quarters, we are discussing the matter. So we are working [indiscernible] ....
No, no, when you were not there, we were told that by the end of the current quarter. By December, it will get done. So that is the current position isn't it?
We are trying to work it out as early as possible.
Okay ...
We aren't giving any time line, we are not giving.
Sure, sure.
And words used in the previous was that it is expected to be completed within this quarter. No, no. Otherwise, nobody can give any guarantee.
Yes, correct, correct.
So don't use -- please keep those words ...
Sure, sir.
And anything will be worked out, again, will come to the Board. I think, again, a question, so it may be even beyond third quarter.
So my second question was on the Bangalore -- the pipeline to Bangalore. So as and when this pipeline to Bangalore gets done, what kind of -- so overall over, let's say, a 4-, 5-year period in general and in light of this potentially this pipeline to Bangalore happening. What kind of road map can you give us on the ramp-up of the Kochi? And at what level does -- I think I'm sure what happens to the regas will also play a role. But at what the utilization level does it breakeven?
I think last question, I will answer that Bangalore pipeline will certainly add to our volumes. And that has not been factored so far. But once this pipeline is coming up in the next 3, 4 years, it will add to our volume. Maybe our utilization level will be in the range of 50% maybe or 60%. That could be the level which we can have. Another question you asked is?
Yes, is the -- what is the breakeven for Kochi? At what [indiscernible] ...
Kochi, Debabrata, can you tell breakeven for Kochi? Or anybody else who will ...
The operational breakeven happens somewhere around 25% [indiscernible] ...
Sir, cash profit?
Yes, at operational level, yes.
Okay. Last question on -- a little bit longer-term ...
Sorry to interrupt you, Mr. Ghinde, but may I request you to please join the queue again because there are participants waiting for [indiscernible] ...
Sure, sure.
One more request, I would like to kindly close it by 12 O'clock because there is another meeting schedule at 12:10. So I've arranged for that, if you don't mind, please.
Sure, sir. The next question is from the line of Varatharajan from Systematix.
I had 2 questions. One, on the LNG for transportation. CapEx for loading bays will be on your side. Is it a capital-intensive process? And what kind of numbers you can give us?
Loading bays, we are having already in Dahej and Kochi. So I think we have 4 loading bays in Dahej and 1 at Kochi for this tanker. And otherwise, we are trying to have 2 more loading bays in Kochi. And it's not very capital-intensive you can say. But of course, it still facilitate the uses of LNG in the industry. We have more learning gains because in time to come, if you look at, there were CGDs which have been awarded in various years. So even they have to find some solution by this tanker mode only initially because pipeline is not everywhere. So pipeline connectivity may take some time. In the meantime, they can use tanker for taking LNG to [ Najir ]. So this is helpful and particularly in southern areas. So I think that is a solution for the time being, we just have some more loading days and transport LNG through tankers to those places where it is not. So I think this is why we are going for this loading base. But otherwise, LNG as the transportation fuel, which we have already explained, our GM Marketing has explained -- GGM Marketing has already explained that we are taking up this project. And very shortly, you'll see that on a pilot basis, we are having some 5 to 8 LNG station. Thereby, we can see that trucks are moving on LNG. So this is how we are planning. And this is a segment even government is emphasizing that we should use more LNG transportation sector, and that's the environmental question. And also to reduce the cost of running these trucks. So these are the objectives, which are basically we -- given that the Government of India, and they have this objective, and we will fulfill it to installation of LNG stations.
Sure. My second question, sir, the variables which go into your tariff hike are being reviewed every 3 years, if I understand it right? It was due this year. Is the review done for anything you want to disclose from this?
Vivek and G.K. ?
Vari, could you repeat?
So the variables which go into your tariff part are being reviewed every 3 years, as I understand. The reviewed this year, has the process completed? Anything which you want to share from that?
It depends on the request from off-takers, and nevertheless, we do an ingenious internal review from time to time. And that process for this year is ongoing, but we do not expect any adverse outcomes.
Fair. And my understanding is right that the next review will be in 3 years or unless demanded by the off-takers?
Contractual is 3 years, but that one is very limited subject. So that review has already been carried out by Petronet, but not analyzed. But we don't expect [indiscernible].
Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Okay. Thank you very much. I, once again, thanks to all of you because it's you only who are just enhancing our image in the market. And you are the people who are, in fact, important for us. So from time-to-time, I would like to have feedback from your side, so that every suggestion you give, everything you tell us, we ponder it seriously within ourselves and discuss with our teams. And of course, in future also, we'll continue to give the best performance. The only thing I would like that we should not be too much worried about certain factors, which are very remote. Slide 1, I had explained Tellurian factors. It is not impacting our business immediately in the near-near future. So it is not a binding kind of thing. So we should not be too much worried about those things, and you should try to talk to us if there is any issue. And perhaps the kind of business model we are having is a robust business model, and it will continue to give best return to the shareholders. This is my commitment. And in future, we are taking up the projects and the -- only those projects which are profitable, we will be taking up. With this, I would like to close this conference. If anything else, you can please let us know.