RIL sells gas pipeline to Canada’s Brookfield
Canadian asset manager Brookfield will buy the loss-making East West Pipeline from Reliance Industries (RIL) for an enterprise value of Rs 13,000 crore, marking its first purchase in the energy sector.
The 1,400-km pipeline from Kakinada in Andhra Pradesh to Bharuch in Gujarat transports natural gas discovered in a Krishna Godavari (KG) basin block operated by RIL.
Brookfield has routed the acquisition through India Infrastructure Trust, an InvIT registered under Sebi rules.
In a statement, RIL said that its investment in East West Pipeline in the form of preference shares worth Rs 4,000 crore will continue and will be converted into equity at the end of 20 years.
The company, controlled by India’s richest man Mukesh Ambani, also added that after 20 years, it has the right to acquire the entire equity of the pipeline held by Brookfield at an equity value of Rs 50 crore.
The East West Pipeline posted a loss of Rs 715 crore on an operating revenue of Rs 884 crore in fiscal 2018. The loss was mainly because the pipeline was operating below its capacity. The East West Pipeline has a capacity to transport 80 million standard cubic metres a day of natural gas. But, it is currently operating at less than 5% of its capacity as output from the KG basin block has reduced.
Transporting gas on the East West Pipeline will cost Rs 71.66 per million British thermal unit effective from April 1, if the average volume of gas transported is 22 million standard cubic meters a day. RIL said that considering the new investments in the upstream sector in the KG basin, and the growing LNG imports, ability to swap gas, the average volume expected to be transported through the pipeline is expected to be significantly higher compared to the current levels.