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Petronet LNG Ltd
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Ladies and gentlemen, good day, and welcome to the Petronet LNG Limited Q2 FY '21 Earnings Conference Call hosted by YES Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nitin Tiwari from YES Securities.Thank you, and over to you, sir.
Good day ladies and gentlemen. On behalf of YES Securities, I welcome everyone to Petronet LNG Second Quarter Earnings Call. From Petronet LNG, we have the pleasure of having with us today Sri V.K. Mishra, Director of Finance; Sri Rakesh Sharma, GGM and President Finance; Sri G. K. Sharma, CGM Marketing; Sri Debabrata Satpathy, GM Finance; Sri Vivek Mittal, GM Marketing; and Sri Ashwani Agarwal, Manager Finance. I will now hand over the floor to Petronet LNG's management for their opening remarks, which shall be followed by a Q&A session. Over to you, sir.
Good afternoon. I'm V.K. Mishra, Director Finance. So basically, during the quarter ended 30th September 2021, Dahej terminal has processed almost 225 TBTU as against 194 TBTU in the previous quarter and 243 TBTU in the corresponding quarter. And the overall performance has been 240 TBTU, including the Dahej and Kochi terminal as against 209 in the previous quarter and 254 in the corresponding quarter. As far as the first half is concerned, if you look at the performance has been very good.And we have been able to process 449 TBTU in all the plants as against 444 TBTU in the previous year's first half. So this is how we have performed volume-wise. And if you look at the financial performance, it has been -- PBT has been INR 1,105 crores as against INR 851 crores in the previous quarter, and INR 1,243 crores in the corresponding quarter. And PAT has been INR 823 crores in the current quarter as against INR 636 crores in the previous quarter and INR 927 crores in the corresponding quarter. If you look at the half yearly financial performance also, so this first half PBT has been INR 1,957 crores as against INR 1,939 crores in the corresponding first half of previous year. And PAT has been INR 1,459 crores in the current first half, and last year, it has been INR 1,448 crores. So this is how we have performed. And apart from that, Board of Directors has also declared financial interim dividend of INR 7 per share. If you look at the performance-wise, the profit for the first half PBT has the highest ever in current half as compared to H1 of 2021, '22. And the growth in volume in the current quarter over the previous quarter is 15%. And PBT in the current quarter over previous quarter has been higher by 30% and PAT by 39%. So this is all financial and physical highlights. And now floor is open for the questions.
[Operator Instructions] The first question is from the line of Probal Sen from Centrum Broking.
I have 2 questions. One was given the kind of price movement one has seen in October and especially in November, any outlook you can give for H2 volume outlook or capacity utilization? I understand that you have firm contracts for about a majority of the capacity. But do you see a situation where at least for the third party gas contracts, some of the offtakers might defer the volumes to the extent allowed by their take-or-pay limits at least to the next financial year. That was my first question.
Right. So first question is regarding the market scenario where prices are exorbitantly high. Absolutely correct, I fully agree with you. This has, in fact, discouraged the people to bring spot cargoes to India. But at the same time, if you look at our performance, we have been able to perform almost 99% at Dahej. So if you compare the previous quarter, it was only 86%, capacity utilization. So it is less than corresponding quarter, no doubt. But still we are able to execute our performance on the strength of the long-term contract we are having. And perhaps that is a major reason that we are able to do this kind of performance in this quarter.But if you look at the future outlook, it's definitely not very good in the sense that prices are still very high, and winter has already settled and now perhaps demand will further increase in Europe, Japan and China. So they are also just trying to store the inventory and taking more cargoes. So they are taking post winter, but after winter season, I hope that size will further come down. And it's not the normal level. It's a very unsustainable price. Because, at this size, LNG consumption cannot be enhanced. So this is 1 of the factors, I think, that -- which is more optimistic for me that it is not going to stay for a long time because this price is not sustainable, at least in India and people will start out to go for alternate fuels in [indiscernible] if the price scenario will continue.Perhaps the only solace we have is the long-term contract India has. So that part is good. That gas is costing at around $10 to $50 per MMBtu. So that is a good part that we are not impacted by this spot prices. But then it is also to that more cargoes, which would have come and the pricing in the range of $5, $6, $8, $9, $10 that's more cargoes would have come to India. But that is not possible. Only a very minimal number of cargoes are coming as far as the spot cargoes are concerned. But the long-term contracts are definitely a great rescue, you can say, in this scenario. So I think it's a matter of this winter season only that it will continue. But after that, prices will definitely be tepid and can come down and perhaps then we can say that the market will be normalized.Because what I told you is that there is plenty of LNG available in the market. But only thing there are certain factors, which has contributed to this kind of price rise. So one of the factor is very clear that European countries have not been able to store more inventory for the winter season, and perhaps China and Japan are also trying to store more LNG for the winter season for heating purposes. So that is one of the factor.And another factor is very restricted supplies from Russia to European region. So that is forcing the European nations to bring the LNG based of piped natural gas, which we were getting from Russia. So these are some of the factors which have contributed to this kind of price rise. But we hope that these all things will normalize after winter season and perhaps then price will be more stable in the range of maybe $6 to $10. So then we will have more spot cargoes in India.
So, sir, if I can try and sum up my understanding, basically, we are looking at a slightly tougher Q3 given the winter season and the constraints. But hopefully, by the second half of Q4, things should start to look up? Is that a fair way to look at it?
I think we will try to do our level best. We are trying to adopt all kinds of strategies to just enhance the profitability. And perhaps because of very significant rise in this energy prices, this was never anticipated. We have always witnessed the price rise up to, say, $18 to $20 in the last 5 to 10 years. It was never ever imagined that this kind of price rise, which will go up to $56 per MMBtu. And now in 2020 this is around $28 to $30 if you look at the West India market and JKM. So this is a kind of -- this is not sustainable. If you look at the flow with this kind of crude, which is normally gas is based on. You find that the $30 means that almost $18 is a good price. Then it is almost, I think, 40%, 45% the flow. So this is very high.Normally, the flow remains in the range of $10 to $14. But if you look at the rise in the energy prices disproportionate as compared to the rise in crude prices causing a major concern because the growth is going to 40% then it's better the others will switch over to a different fuel. So this is how -- why I'm saying that this is not a sustainable trend. Normally, it should be priced less than 18% of flow whenever we compare with crude. It should be in that range only, not more than that. And it is going up to 40% for the current crude oil prices. So that's what is more worrying, but I -- as I have already indicated that there are certain reasons geopolitical issues, which are causing this kind of price rise in LNG prices. So I think this will be stabilized by end of March. So by that time, I think we should hope that it will be more stable and it will be affordable for India.
Got it, sir. That's very helpful. And the second question I had was with respect to the CapEx plans. Obviously, for the last few quarters, you have been highlighting a couple of things, the Dahej expansion that is there on track, the LNG retail plants as well as some of the other plants. So if you can just give us a small update, whatever you can share on the capital allocation plans for the next couple of years, sir.
Right. So basically first of all, I would like to inform that we have already placed an order for construction of 2 LNG tanks at Dahej. And the kickoff meeting has also been concluded and now it is almost about to start project-wise. So this INR 1,200 crores CapEx will be there. And perhaps the time period for completion of these tanks is 40 months from now. And another project, which is coming up very quickly is the construction of jetty, whereby we expect total CapEx of around INR 1,700 crores. And that is also underway. It is under process of approval. We have already got the consultant to highlight -- discussing the cost of that jetty and we will be going very shortly to the Board for approval.So these are 2 projects, which are being expedited and perhaps, thereafter, we have plans to expand our terminal from 17.5 to 20 MMTPA and in the second phase from 20% to 22.5% MMTPA. So first phase will be costing very well because it will be only requiring some debottlenecking, and, perhaps, we'll be able to get 2.5 MMTPA additional by spending hardly INR 200 crores to INR 250 crores. And thereafter, if you look at second expansion plan, that would be costing us around INR 700 or INR 800 crores. So that is how we are planning to do. And for us these all 2 expansions will be taking almost 3 years period from now. So these are our Dahej expansion plan.And then if you look at our other projects, one we have very ambitious project at East Coast terminal, see that part is also taking place. We are in discussion with the authorities and perhaps that is an ambitious plan that we want to have -- want initially and that's [indiscernible] based as well for 3 to 4 MMTPA. And the CapEx will be almost INR 1,500 crores to INR 2,000 crores in between. I think INR 1,900 crores is the total CapEx on that. So this is how we are doing for this terminal.And apart from that, we are also having certain plan to have some LNG stations in association with various offtakers OMCs as well as CGD companies. So we plan to have that. And perhaps we have already placed an order for 5 LNG stations, which we are putting up in [indiscernible] and more will come in future, but it will be increased and perhaps it will not come in a single day. But of course, we have planned to have more stations. And perhaps it may go up to maybe 100, 200 also.But it will be only in a phased manner and for the requirement and as well as the availability of the opportunity on the highways. So this is how we are planning in that particular section. And 1 LNG efficient costs us around INR 8 crores to INR 10 crores. So it's not a very high intensive capital expenditure project. But of course, it will be done in a phased manner, so slowly, slowly we will be moving in this direction. So this is how we are going in LNG station plan. And apart from that, we have -- in future, we have planned that Kochi terminal utilization should also increase. So perhaps, for that, we are asking GAIL to expedite their pipeline up to Bangalore so that we can perhaps supply more gas and utilize our plant in a better manner, which is being utilized at present at 22% capacity.And perhaps we hope that it should reach to 30%, 35% very shortly, but only problem has been the prices of gas. So people are a little bit hesitant to take gas at this price which is currently going in the spot market. That's why capacity is little bit at 22%. But of course, as the prices will be stabilizing in the future, perhaps it will go up to 30%, 35% of the capital utilization. So this is how our CapEx plan is there.
The next question is from the line of Pinakin Parekh from JPMorgan.
Sir, I have 2 questions. First is, just to talk more on the demand outlook and especially just on Q3 and Q4 basis. Historically, 2Q seasonally is a strong volume quarter and the second half volumes fall from the 2Q level. So do you expect a similar trend in the second half that we see volumes falling sharply from 240 TBTUs, or in your view, this is at least the base level volumes that Petronet should be able to do in the December and March quarters?
See, it's like I already told you that if spot cargoes will be very little, but 1 light of hope is there that we have requested RasGas to deliver 46 cargoes additionally. But let us see what happens in that case. We will request RasGas to enhance the supply in the long-term contract, if possible, so that we can have more cargoes under long-term contracts.
Sure, sir. So just to probe that further. Is there any progress from RasGas in terms of them delivering on those volumes, especially the deferred volume of the previous years? Do you expect them to and are they committed to delivering in this financial year?
It's not possible. I think marketing, Mr. Vivek is there, he will explain.
So as some mentioned, [indiscernible] but at this point of time, linking contracts [indiscernible]. Let's see how the discussion progress. And also [indiscernible] from July to September, the whole term is for growth. That is the reason every year Q2 is higher compared to the rest of the quarter. We cannot be doing going forward. But in terms of capacity holders also [indiscernible] capacity holders like, GAIL and some quality [indiscernible] long term contracts is continue to flow under the retail contract. And of course, there are certain flexibility in the retail contracts. So this of course [indiscernible].
And lastly, just to understand how much of your volumes -- the flexibility was availed in the September quarter basically, which -- where they don't have to pay take or pay and that can be deferred? What percentage of your contracts was the customers availed that in the September quarter?
Quarter-on-quarter, it's on annual basis. So at the end of year, we'll be able to [indiscernible].
The next question is from the line of S. Ramesh from Nirmal Bang.
Hello. Can you hear me?
Yes, sir, we can hear you.
So you have given some details on the spot cargoes you're handling 6 cargoes. Sir, can you share with us what is the average price of the spot cargoes and which are the end-use segments which use the spot cargo?
Just we couldn't understand what you are talking 6 cargoes is what?
You have handled 6 TBTU of spot cargoes in Dahej as per the volume retail share.
This is basically we are procuring some cargoes for ONGC, and for that purpose, we have secured some cargoes. So only that thing is there. So normally, [indiscernible] asking us to procure these cargoes. So of course, this number, I think is hardly it is 2 cargoes are there. The 2 cargoes we have procured for ONGC. So it is on back-to-back basis they require it for their petrochemical plant. So that's the only thing we have been able to procure. But at this kind of pricing, it has been a very difficult decision to even buy these 2 cargoes, but there was a requirement that we had to buy. But we have bought it [indiscernible] TBTU need 2 cargo almost we have got it.
So the second thought is, can you share with us the number of cargoes or TBTU diverted from Kochi on the Gorgon contract? The diversion from Kochi to Dahej?
[indiscernible]
[indiscernible]. And this trend will continue in the second half also, given that Kochi utilization is still about 22%?
[indiscernible] for the quarter, it was [ 4.92 ] or 5 PBT. And that's when [indiscernible]
Okay. So can you share with us the contribution from RasGas margins included in these growth contribution first quarter?
[indiscernible] other services revenue is INR 619 crores.
INR 619 crores?
INR 619 crores.
Okay. So finally, a broader question. Now if you're looking at the current constraints in LNG capacity in global demand. Is there a reason to revisit the kind of discussions you are having with Tellurian to tie up equity LNG? I mean is there any discussion at the board level to look at additional tie-up of LNG through investing in a liquefaction plant. Any thoughts on that?
No, no. There is no plan to go right now for this kind of investment and perhaps nothing is on card. Tellurian part is already disclosed earlier. That when you have already [indiscernible] can you go further top from that. And you are talking about investment in liquefaction terminal nothing is there right now. So there is no comment and because LNG, otherwise, is in a free market, there is no additional benefit after investment. So -- and this is not the right time to go for the investment in these terminals. Right now, there is no plan, but in future, if there is any, we will certainly discuss.
[Operator Instructions] The next question is from the line of Amit Rustagi from UBS.
Sir, could you give us any update on the Kochi terminal I know you have mentioned in the most accounts, but any progress on that?
Kochi terminal tariffs?
tariffs, yes. Renegotiation and...
Yes, yes. It is there because we have disclosed in account also that we are in talks with the offtakers to increase the utilization of Kochi terminal. So we have asked them to commit more volumes to that terminal. And based on that only, we will revise the tariff on the lower side. But this is under discussion. It has not been confirmed by them, how much they will do. So if they do it, then certainly in long run, we can be benefited. And then we can think of reducing the tariff also. So that is under discussion. So right now, we cannot disclose more about that. But that is true that we are in discussion with them to commit more volume in Kochi.
Okay. And sir, my second question relates to -- could you explain this lease accounting impact in this quarter? And I believe the most 2 accounts, again [ 0.4 ] the company has invoiced INR 198 crores. So can you explain that what is the real impact of this in the current quarter?
Second part, I can explain. First part, my colleague will explain on that. So basically, there has been an agreement with 1 of the customers, and we have said that we'll adjust INR [ 65 ] crores because they have committed volume in Dahej terminal -- Kochi terminal in face of Dahej. So we have a period that somehow we have got the revenue. So there is no loss as such because as those cargo being brought to Dahej terminal, we would not have levied any user pay charges. So we have considered their cargoes at Kochi as it has come to Dahej. So basically, this is over and above the committed volume for Gorgon because Gorgon commitment is already there. Apart from that, if -- because they have got some spot cargoes there, so we have considered that as part of utilization of the Dahej capacity because ultimately, our Kochi terminal is already underutilized. So somehow, we have got the revenue, whether at Dahej or Kochi. So that part we have considered, and that's why we have adjusted that by INR 65 crores from the total outstanding because they have given us the revenue at Kochi in place of Dahej.
So INR 65 crores has been booked additionally in this quarter?
Pardon?
INR 65 crores has been booked in this quarter as revenue?
This quarter, we have booked, yes. So this is additionally we have booked.
Okay, sir. And the lease accounting impact?
As far as the lease accounting is concerned, there is INR 137 crores gross margin level for the [indiscernible] then there is [indiscernible] growth at the level of operational expenses. Then depreciation, INR [ 85 ] crores negative, and [indiscernible]. The net impact is INR 14 crores negative as the profit [indiscernible]
The next question is from the line of Varatharajan Sivasankaran from Antique Limited.
So I want to understand if you had any inventory gain last quarter?
Please repeat your question. We couldn't here you.
Any inventory gain last quarter?
Inventory gain is INR 28 crores for this...
INR 28 crores. Secondly, on the CapEx program, you are mentioning about the details. So you mentioned the first phase is going to cost only INR 200 crores, INR 250 crores. And the second expansion of around INR 700 crores to INR 800 crores. On the other hand, you mentioned INR 1,200 crores of 2x plus INR 1,700 crores of jetty. So I just wanted to understand kind of how these numbers based on between Phase 1 and Phase 2.
See, it's not a Phase I or Phase II means that still we can process [indiscernible] only 6 tanks being in place. But still we want to move [indiscernible] because we will require it when we do the expansion from 20% to 22.5%. For that part we need some flexibility. But otherwise, there are certain debottlenecking issues are there, which can be done. And that's why the CapEx is very low, while expanding from 17.5 to 20 MMBtu. But for that part, then we will do for 20 and 20.5, 22 5, there we will have some higher CapEx. They have been from expansion from 15 to 17.5 MMBtu. We have spent almost INR 420 crores. So that part is there, of course, certain modifications are required. We have estimated those sites. So that's what we are doing. The total CapEx will be in this expansion, INR 1,000 crores almost. You can say, 2.5, INR 500 crores each.
The next question is from the line of Kirtan Mehta from BOB Capital Markets.
Would you able to give us some color on what is the mix of the long term versus spot cargoes in case, the volumes that you book call for the regas services?
You want the ratio?
Yes.
In this quarter, you want, then we have actually got it here. And perhaps it's 116 btu versus spot is only 70 btu. But the long-term cargoes which have come and the service cargo, which had come almost 233 TBTU and again 7 TBTU of the spot and short-term cargo. So ratio-wise, it is very less, not very significant. And reason is very obvious that prices are significantly high. At this price, the consumption is very low for spot and short-term gas. So long-term volume, of course, is higher in this quarter.
I'm sorry, actually, I was asking that you bring the -- you basically break the cargoes in 3 long-term, spot and the third party, which brings in only for the regas factor.
Service cargo, yes.
Within the third category of third-party regas tariff what would be sort of the breakup between the long-term volumes and the spot volumes?
We don't do that because it's up to third party and how they source their revenue. So we don't get into whether they are closing on long-term [indiscernible]
Is there any rough estimate very broad estimate?
Capacity booking is already there. We know it very well at around GAIL has been 2.5 MMTPA in our terminal Dahej and...
[indiscernible]
No, no. I'm just saying there's a commitment from their side, which is a long-term contract for services also that they will bring 2.5 MMTPA for cargoes. And that cargo will constitute only 40 cargoes you can see around GAIL in a year and 1 MMTPA BPCL 16 cargo, IOCL maybe 24 cargoes. So this is how they have to bring as per the contractual obligation. But how much they're doing actual is up to them that they bring it through a spot, they bring it to their long-term portfolio. So this is up to them. They have booked the capacity in our terminal, so they are utilizing that capacity in whatever manner they bring the cargo.
Understood, sir. Just 1 more clarification on 1 of the -- previously about -- you have said that you have booked additional revenue of INR 65 crores this quarter as you recognize the revenue on the Kochi terminal. So this is the additional revenue booked, and it's not really a reversal of the previously booked revenue, correct?Are you able to hear me?
This is the operator. We are not able to the management.
You're asking of INR 65 crores.
Yes, sir.
Yes. So basically, I will give you the detail here that it has been outstanding amount since the last year, actually. So it has been there. And perhaps there was a request from their side, that you consider that because ultimately, they have brought the cargo. So we consider that request this year. It's pertaining to almost INR 220 crores.
This amount you can see in the other expenses, the other expenses of INR [ 200 ] crores includes INR 65 crores. It is actually in the cost side not in the revenue side if you are asking same.
Yes. It's not a -- revenue was already booked in earlier years.
Right. So the earlier book revenue has been reversed this quarter as you have waived off this revenue.
We have got the revenue ultimately from Kochi terminal in place of Dahej. We have considered their request. And that's why we have adjusted these years. There is no addition to any book on this account this year.
The next question is from the line of Vidyadhar Ginde from ICICI Securities.
In the last earnings call when I had asked, you had stated that you were expecting about 16.5 million tonnes of volumes on -- in Dahej. So after first half is over, do you still expect that number to be 16.5 million? Or could it be lower or higher where hope -- some hope of higher was coming is that Q2 annualized number looks like more like 18 million tonnes. So was it because of the offtakers than spot delivery was relatively cheaper? They have picked up more cargoes, was it the reason? And are you still expecting 16.5 million tonnes in FY '22?
Yes, we are always hopeful because if you look at the first half, I've just [indiscernible] you, we have already processed 449 TBTU in the first half. If you look at the performance, if we continue in this range, we will reach almost 900 TBTU. So it's always going to be there, not less than 16.5 million, I think, if it goes in the same manner. Maybe slightly, it will be less, but we expect that it should reach that level because the long-term contracts are very much in demand. So all the cargoes are coming in time and all are taking it. So there is no default in that. There is no postponement of spot cargoes. So that part is going on. So that is a good thing. And perhaps, because on the strength of that long-term contract, we shall be able because we have -- in the first quarter itself, we have done a good job, and perhaps we have processed almost 190 TBTU, [ 192 ] TBTU though there was a lot of impact of lockdown and other things. So we hope that this decision remains normal like it is now. Perhaps consumption will continue to increase only [indiscernible] part is a price rise in this spot LNG. So that is not hunting and bringing more spot cargoes in India. But long-term contract will continue. So perhaps we hope that we have already done 449 TBTU in the first half. Perhaps we would be able to do it in second half also almost similar performance.
Okay. So are you basically saying 16.5 million or slightly lower?
You see you look at 16.5 million, I'm telling you the exact total amount, which is going to be there because if you look at [ 17.5 ]. So it means that almost -- it will be in the range of, I think, [ 51 ] is there, it should be [ 17.5 ] means we should process almost 892.5 TBTU. And now I'm telling you 449 TBTU we are already done. So it may -- if we do 400, even 450 we do, it will reach 900. So that means it will be almost 17.5, you leave apart 16.5. 16.5 means we think 16.5 that means it should be in the range of 841 TBTU, which we certainly will achieve because we need to process only 400 more, less than 400.
My other question was regarding this backlog of volumes, which you are trying to get from [indiscernible]. Just wanted to find out is it -- if this volume comes in, is it more likely in calendar '22 or FY '23 and not really in the current calendar or financial year?
This is a question we cannot answer now and [indiscernible]. We -- let us see what happens. But one thing which has already been in the [indiscernible] that we are trying that. And perhaps as and when there will be any development on that, we will let you know. There -- nothing can be predicted right now because all will hamper the process so we will not disclose anything which is what is going on and what is the process, how it will happen? It's all premature. It is only a request. They may or may not agree.
Okay. Lastly, on the INR 65 crores, which I was somewhat confused, is it actually just a prior period expenditure in this quarter and not really an income?
What's that?
The INR 65 crore, which you recognize my initial understanding that it was because of prior period income. Now you [indiscernible] suggest that in capacity income?
It's basically to see. It's -- in fact, book will use fee charges, which is in income in the previous year. So it is already booked there. Accordingly, that has been considered this year. So you can say that earlier income has been reversed.
Okay. So you are actually reverse in this quarter?
[indiscernible] reversal. Actually provision has been created presently in prior period year. Present income booked in the prior period.
Okay. Okay. So actually, if you are to focus on the current quarter, your expenditure actually about bloated by INR 65 crores?
[indiscernible].
[indiscernible] the profit is higher?
Yes, yes. [indiscernible] profit would have been even higher.
The next question is from the line of Avadhoot Sabnis at InCred Capital.
Yes. So going a bit more again on the [indiscernible] issue, okay? What I'm trying to understand [indiscernible] you're saying it's related to committing additional volumes. It is additional volumes only at Kochi, right? So if somebody comes back saying I'll give you additional volumes of Dahej, that is not sort of is acceptable to you?
No, no, that is not acceptable. And that will be also used to pay type of contracts. It's not that you should [indiscernible]. It will be a contract you have to pay. So either they have to commit that mean in case they are not able to bring it, and they have to pay it.
Secondly, sir, on the -- I suppose whatever we will come back and say, okay, we'll take additional sort of 1 million tonnes or use of PA. And accordingly, the tariff has to be revised down, okay? Whatever may be the release that is 10%, 20%. Will it be with retrospective effect from 1st of April 2019?
Regarding the [indiscernible] charges you are asking [indiscernible]
Yes.
Yes. The understanding is that, that when the volumes are committed, our objective is to get the volume permitted and the price. And the price is taken with [indiscernible] pricing model over the period of simply [indiscernible]. So over that period of time, the tariff [indiscernible] reduction [indiscernible] 1st of April 2019. So that is not a [indiscernible] as a company. Our obviously is to [indiscernible] volumes booked in [indiscernible].
And any broad guidance on what would be the level of the drop in the tariffs?
No, we cannot predict that now because it is all -- unless until something happens, we're cannot disclose all those things. But certainly, if it happens we will bring something out to your knowledge also, but if they don't commit then there is no reason why they will not be paying at whatever level we are now at INR 79 [indiscernible], which has gone up to INR 87 now. It was -- in 2019, it was INR 79, but now it is INR 87.
[indiscernible] we see no risk at all. I mean, if there is -- if they don't come additional volumes, you don't see.
Yes, yes. They have to pay as a contract.
Okay. So there's no risk on the existing tariffs?
No, there is no risk, unless there is a commitment.
Second, sir, second question was in relation to the take-or-pay, okay? There was INR 198 crores, as I said, which you invoice. And I assume out of that INR 198 crores, INR 65 crores has been reversed? So our of 3 customers, you [indiscernible] that means you got with 1 customer. Am I understanding right?
Right, right.
So what happens to the other 2 customers? In the earlier quarter, I think there was an assurance given in terms of the most that you don't see any negative impact at all on the financials as a result of the dispute, whereas we already seen 1 negative impact in this particular quarter. You see a further negative impact potential going forward? I mean there's no -- can you give us some clarity on that?
See without getting into more details on this because this [indiscernible] going on. This is only a provision created, so [indiscernible] it will be done. This means that this is the [indiscernible]
No, no, it's all will be recovered. I'm telling you there is no chance that it will not be recovered. All will be recovered apart from this. Because if you look at INR 210 crore was there of INR [ 198 ] crores. So out of that, some amount has already been paid, almost INR 54 crores has been paid. So balance, if you look at, it remains only to the extent of INR 71 crores. So that will be paid. This is only just because of this that we have agreed to it that unless usual balance amount is paid, [indiscernible], in fact, agreed to this kind of adjustment. So I think there is nothing on risk out of that INR 198 crores. So perhaps we are hopeful that, that will be paid because INR 54 crores has already been paid out of that.
If I may ask the people who have paid INR 54 crores, they are the customers who have not -- there are 3 customers, right? So the person who has agreed for the INR 54 crore settlement, is it the same party who has already paid part of INR 54 crores?
Yes. Same party.
The next question is from the line of Puneet from HSBC.
My first question is again on Kochi. While you said that tariff is INR 87, how much are the customers actually paying currently?Hello? Can you hear me?
Yes, we can hear you.
So I think that you are asking how much customers are paying?
Yes. So you're billing them INR 87. What...
This part, we would not like to disclose, but this is correct they are not paying what we are demanding. Perhaps because things are under discussion. So they will pay it better, right? Because all our customers are with Maharatna company. So they have no problem in paying it. The only thing is that they have to take the approval from their Board for committing more volume because we are interested in committing more volume. So they want that they should commit some volume to [indiscernible] and get some benefit from price reduction in tariffs. So that's why they are not saying, but of course, they will pay whatever outstanding.
So in your almost INR 2,000 crores of trade receivables, how much amount would that be attributable to the difference?
How much you're saying INR 2,000 crores?
It's INR 2,000 crores of receivables.
[indiscernible].
Yes, yes. Right now, basically, it has been good that since discussions are going on and are on the [indiscernible], all these numbers we will not be able to disclose right now. I think there is any disclosure to be done, we will do that in the next [indiscernible].
Okay. Understood. My second question is on the Regas volume from the service part. So this time from Dahej you did 117 TBTU. Same quarter last year, you did 135, and in Q2 FY '20, you did 126. So the loss of volume, do you expect to be made up in the subsequent quarters?
We should hope, but because of the current scenario, it is becoming very challenging. But still, we hope that they will not bring the charges, we will [indiscernible] use a charges on that as per the contract.
Okay. So they will have to still pay attributable?
That is the contract and they have to pay if they don't need it.
The next question is from the line of Vikash Jain from CLSA.
Can I understand this adjustment a little bit better? So you had -- you have already built this revenue, this one-off that we are talking about in the earlier quarters or years later this amount of INR 198 crores or so. And -- so essentially then the INR 65 crore adjustment that we're making, this INR 65 crores has been written back -- in terms of provision has been made, and it has also been added to revenue, right?
It has been added in the past period, not in the current quarters.
If it has been added in the past 2 years, why will you, [indiscernible] I'll go to the recovery that you are -- [indiscernible].
[indiscernible] we have booked revenue in earlier periods means 2020, I think, has been done. But now we have adjusted that part here. So it's only the provision we have made in this part. There is no corresponding revenue in this quarter.
No, sir. But I think there will be any impact on the income statement as because the impact would only be on the balance sheet, right? Because now the current receivables will go on, right?
I think you have correctly understood. The only thing I want to convey you that this has been adjusted out of the total dues from the debtors you can say we have [indiscernible]. Because we have booked that in the earlier period. So that part we are saying that we have done because we wanted to settle this issue. Ultimately, we have thought...
No, no I am not getting into that bit, sir, you have explained pretty well. So I'm just trying to understand we keep in the [indiscernible]. So that's a bit that I wanted to check that in terms of would because I'm a little uncertain why it would have any impact in the income statement because it has already been booked. So it must [indiscernible] part of receivable. Now that receivable has simply been converted into cash, right? So why would it have any impact on the income statement at all? Why there will be provision on it?
Vikash, what has been done is, there was an income and receivable book in the past period, say calendar year '19 and calendar year '20. Now what has happened is that one of the customers, he said that I have got no cargo [indiscernible] over and above my contractual commitment. But since my [indiscernible]. That's why I could not bring those cargoes in [indiscernible]. So [indiscernible] with that customer basically now that whatever over and above cargoes he has brought in [indiscernible], he has actually [indiscernible] revenue. And that revenue should be adjusted against this -- that relative to the adjusted against the revenue that we have booked at Dahej in terms of [indiscernible] target. So the revenue was booked in 2019 and '20, and against that, the provision has been created. It is the prospect. And you can find that the other expenses will be impacted this time around INR 200 crores. This INR 65 crores of provision is in the other expenses only. So it actually hampers the income statement. And if you add INR 65 crores one-off, then actually the related [indiscernible]
And as I understand, your -- of the total volume that you bought to Dahej, you explained that, that substitute is actually not really true sense of spot written volume, right? I mean, because although it has shown as spot, it is where you have a [indiscernible] arrangement with ONGC. So there would not have been any big margin on that. Is that the correct understanding or there would be reasonable trading in market [indiscernible]?
These things actually we do not discuss because of our relationship with our customers. Generally, we don't discuss it in the [indiscernible]
We have bought 2 cargos this time. We are showing here a [indiscernible]. So we have, in fact, brought actual cargos from outside this time.
[indiscernible].
[indiscernible], that's why I was asking.
Of course there is margin, some margin is there not only the gas because we are preferring it, we are having some trading margin also.
The next question is from the line of Vishnu Kumar from Spark Capital.
Just a repeat of the last question. Any non-Regas income that is booked apart from the inventory gain of INR 28 crores. Do you have any storage and offloading or any user pay that you can stand?
Other than regas charges you are asking?
Correct, sir.
Other than regas charges, if you look at, we have some regas impact is there as compared to previous quarter. So when inventory valuation is there, INR 28 crores, INR 39 crores is towards [indiscernible] contract. So these are some gains other than the 3-year charges. And also, we have some trading margins INR 123 crores.
INR 123 crores. Sir, anything that you have as a storage and offloading earlier, you used to mention some cargoes used to be held at Kochi and again, you offload it back.
Now it's [indiscernible] reloading cargoes was there earlier, but now this is not a case. So we are not doing that part. But only revenue which has been there in this quarter, I told you, it's an impact, inventory valuation and also trading margins.
[indiscernible] a dividend at a [indiscernible].
Investment income is INR 13 crore is there. Investment income is there of course.
And INR 30 crores is facility charge [indiscernible].
Understood. Sir, any additional cargoes you source from your long-term contracts, which is -- when you get those if you get this, would it go to your back-to-back long term? Or will you have the flexibility to send some of them under spot?
No, it will be back-to-back. It cannot be a long term. If that term it happens in the long-term contract, it will be back-to-back.
Understood. And one final question. Any thoughts on Qatar expansion when you're considering all the way to make an investment -- at least you're considering to invest in the U.S. or [indiscernible] around. Any thoughts on the Qatar expansion is from 77 to 100, we will participate or -- I mean in return, would we get some longer-term contracts at a much cheaper rate?
No. It's an investment part perhaps is not there because there is no requirement for that project there -- doing on their own. Only thing we are trying that we want to extend the contract beyond 2028. So we are making all efforts to renegotiate and, perhaps, extend that contract. And that contract should be expanded based on the current international contract, which has been entered by Qatar Gas like they have a contract with Sinopec, they have done with Bangladesh and Pakistan at around 10.2% of slope on [indiscernible] basis. So that kind of target may be there. So I think this is the reason that we are trying to negotiate with Qatar Gas to extend the existing contract.And it is, of course, as we have witnessed, a difficult time has been there that we could not -- we are not getting long-term volume. Now it is the right time that we should have long-term contracts because you cannot rely on the spot or short-term gas. If you need a gas on a regular basis, permanent basis, you cannot rely on a spot or short-term cargo. Because if you rely on a spot only, then you will face this kind of situation, where you are paying $30, $32.So we will try to have more gas on Qatar or anybody else so that we can increase our portfolio also. And at least, we will -- definitely will be making our effort to enhance the contract of 7.5 MMBtu. Would likely to source more gas because the demand in India is likely to increase by 2030. So I think there will be more gas required from outside India. And perhaps we want that this contract will be expanded. And perhaps that will be done, and that will be in terms of the current waning international contract, which have been entered right. [indiscernible]
Got it, sir. And one final one, sir, on the East Coast terminal, let's say, there are 4 things you need to pick up before you go for [indiscernible]. Where would you be now? And what are the things that you need to get a better comfort or some understanding [indiscernible] government or entities before you actually go at a [indiscernible] products?
We are making all demand assessment. We have already [indiscernible] the demand assessment, but demand will be there. And we are hopeful that, perhaps, some [indiscernible] will also be booked if possible, maybe not 200%, maybe 20%, 30%, 30%, 40%. So that will be helpful as balance you can mark it. Plus demand will be coming up in that eastern India because so far there has not been any pipeline in that part of India. So that's why presumption could not take off there. But now it will not happen and, perhaps, more industry will be coming for that particular reason and, perhaps, more gas as we assumed in that sector. And we are hopeful that, while putting up the terminal, we will try to open the customer also so that at least 30%, 40% capacity can be earmarked for that customer. And perhaps we can mark it on our own. So this is our endeavor. But let's see what happens. But there is a need for terminal on the East coast, that is we would go for.
Any indicative time line, sir, in this particular bid that you think that you may come up with a final FID plant, let's say, 18 months, 24 months? Do you think that you can close something, or it's still [indiscernible]?
The discussions are going on, but we have a plan to have a terminal by 2025. So the time line in between we have to highlight everything.
[indiscernible] even if it required 3 years this will somewhere next year, will have to probably around [indiscernible].
We will have to. Because it will take 1 or 2 years because this will be [indiscernible]. So it will not take much time. Not in line [indiscernible] this terminal, which takes on normally 36 or 41. [indiscernible].
Indicative CapEx, if you want to get this done?
Indicative?
CapEx if you want to get this done?
Indicative CapEx, I have told around INR 1,800 crores and INR 1,900 crores will be there.
The next question is from the line of Amit Murarka from Axis Capital.
Just sorry to hop back on the question of the customer commitment. [Technical Difficulty].
Mr. Murarka, we are not able to hear your audio. We are not able to hear your audio clearly. Please use the handset mode. Mr. Murarka, please go ahead with your questions.
Hello?
Yes, sir, please go ahead.
Sorry, I was saying that like the from the results, really, if that looks like the notes, which has given does seem that your customer is already off taking some additional volumes at Kochi and you are, therefore, now looking not to pursue the takeout thing [indiscernible]. So is that understanding correct?
In Kochi, you are talking about?
Yes, I would say same discussion...
[indiscernible] Kochi terminal is not having a capacity booking at all. It's only that the volume of these contracts from [indiscernible] that we are taking cargoes to Kochi, but some of them are coming to even Dahej also. So Kochi, I couldn't understand your question.
No. So the wording -- just going by what is written in the notes to accounts of the reset [indiscernible]?
Right, right. I will see the notes now. Yes, yes. Please now tell me what you are saying?
Yes, I think notes to account says the note #4, it says that pending settlement on issue of take-or-pay based on negotiation, the customer is already like on the basis of higher volume achieved by the customer in the other contracts with locations. So it says that the customer has already achieved higher volume in that location. So how is this getting -- so I just wanted some clarity. So does that mean that the volume is already getting done at Kochi by the customer? Or like will it be done in the future? And if it will be done in the future, is there any time line for the take-or-pay commitment?
No, it has already been brought by them and that particular reason, Kochi. We have brought 2 cargos there.
Okay. So then it is already done and settled then?
Yes. This has been already done by them. There is no commitment for Kochi. And there is no other customers who have done like this. So it is only 1 customer who has brought all the cargoes in terms of Dahej to Kochi. There is no other customer that has brought any cargo anywhere in either of those areas. So it is only in 1 case, which has happened so we have considered that.
Sure. And just 1 more question is on the system gas loss, which happens as part of the regasification process. So like where are we right now on that? I mean I remember, earlier, the number used to be less than 1% or something like that.
You are talking about boil-off.
Yes, boil-off, yes.
Boil-off is that per contract? I think there is...
You're talking about in respect of Kochi?
No Dahej.
It is as per the contract.
Okay. But would you still be able to -- because for, let's say, the spot cargoes and all that, it could make a difference. So what would be that number be as of now?
That part is enough is something, which is consumed in a process of integration. So basically, that part is not disclosed anywhere. And also it is utilized in the system itself. It's a boil off, it would be the cost for using the system, using the regas plant. So I think that part is consumed, we can say.
No, no, I understand, but I just wanted to understand the percentage range of the boil-off. Like is it like 0.7%.8% or lesser than that?
I think that part...
That is the operational issue, and we really don't disclose that. But what we can disclose is as per the contract whatever [indiscernible], and we are within that range. And the consumption is within that range.
Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.
Thank you very much. And perhaps, we are happy that you have asked all your questions, which you seen verified. And we have always sought corporation. We have always sought your assistance in any metal because after all, it's the feedback from you people only, which, in fact, encourages us to do even more so that we can increase the profitability. So perhaps we will continue to get the kind of cooperation you are giving. And any time, even after not only this quarter, you see that you have some doubts, you want some clarification you are free to talk to myself, my team members, and will clarify. And we'll also seek your assistance in doing something which can help us in increasing our performance, increasing the bottom line and also increasing the efficiency of the operations. So perhaps those things [indiscernible] usable in fact, it is from outside. So it's more important for us to look at your suggestions also. Thank you very much.
Ladies and gentlemen, on behalf of YES Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.