Hiranandanis looking to sell stake in LNG terminal project

Hiranandanis looking to sell stake in LNG terminal project

Deal to sell 26% in east coast terminal already signed; talks on similar stake sale in west coast terminal are under way

Mumbai: H-Energy Pvt. Ltd, a subsidiary of the real estate firm Hiranandani Group, which has diversified into building liquefied natural gas (LNG) regasification terminals, is selling a stake to strategic investors to raise funds and bring in expertise for the construction of the terminals.

A deal to sell a 26% stake in the LNG terminal on the east coast of India has already been signed and talks to sell a similar stake in the terminal on the west coast are under way.

“We have partnered with Houston-based Excelerate Energy in our east coast project who has taken up 26%. The project is being built at a cost of $600 million,” said Darshan Hiranandani, director at H-Energy.

The floating storage regasification unit (FSRU) on the east coast has a capacity to convert 6 million tonnes per annum (mtpa) of imported LNG to natural gas in the offshore region of Digha, West Bengal. This is the first “tolling” LNG terminal, which allows any third party to import LNG for conversion to natural gas for a fee paid to the operator.

An email sent to Excelerate Energy last Wednesday went unanswered. Mint could not independently verify the amount raised through the stake sale.

Hiranandani said the company is in negotiations with a few international oil and gas companies for a similar partnership for the west coast LNG terminal project.

H-Energy is looking to raise funds through a stake sale since construction on the west coast terminal is due to begin in the next few months, said a banker familiar with the company’s plans. The terminal on the west coast has a capacity of 8 mtpa and is being built at an approximate cost of $1 billion.

“We are starting construction on our west coast project from August and we are closing our tie up with the lenders,” said Hiranandani.

LNG is a form of natural gas which is turned into liquid for ease of transportation through vessels. Once the liquefied gas reaches the destination, it is converted back into natural gas before transportation through pipelines to demand centres such as fertilizer and power plants.

With the company’s entry into regasification of LNG, H-Energy joins a raft of companies that are already running regasification terminals on the west coast, including Petronet LNG Ltd with its projects at Dahej in Gujarat and Kochi in Kerala, Gail India Ltd with its project at Dabhol in Maharashtra, and Shell India with its regasification project at Hazira in Gujarat.

H-Energy, however, is the first company to offer services to third-party importers for a fee. “While the demand for LNG in India is expected to grow at a rapid pace, it is important to note that the west coast is already crowded with several LNG terminals, many of which are operating at very low utilization levels due to several impediments,” said Rahool Panandiker, director and partner, Boston Consulting Group.

He said that while on paper it looks like India’s requirement for imported LNG will increase over time, other factors, such as evacuation infrastructure, pricing of spot LNG and the proximity to demand centres, will impact the success of the planned terminals.

India’s demand for natural gas has been rapidly growing while growth in domestic production has been sluggish. Production in the last fiscal year (2014-15) fell to 3.365 billion cubic metres (bcm), down 5% from the 3.54 bcm produced in 2013-14 and 8.1% lower than the target production of 3.66 bcm, according to a note released by the ministry of petroleum and natural gas in April.

Over the past 10 years, while domestic gas production has grown only by 10%, imports of LNG have grown by 335%. Demand for natural gas has risen almost 46% in the period.


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