The latest Petroleum and Natural Gas Regulatory Board (PNGRB) order on state-owned Gujarat State Petronet Ltd (GSPL) has come as a breather for the investors, which is visible from the company's share price movement on Wednesday.
In its order on Tuesday, PNGRB cut the current average tariff for GSPL's high pressure pipelines by 12.5% from Rs 27.41 per million metric British thermal unit (mmBtu) to Rs 23.99 per mmbtu with retrospective effect from November 20, 2008.
However, analysts believed that the tariff cut was less than the market expectations, hence the share prices soared on the bourses on Wednesday. "The tariff cut is in line with our estimates. We are neutral on this development as the one-time impact on profits will be negated by higher valuation multiples due to removal of overhang of tariff cuts," said Kishor Ostwal, CMD, CNI Research Ltd.
GSPL shares traded positive on the Bombay Stock Exchange (BSE) with gains of over 4.5% at Rs 78.35 during afternoon trades on Wednesday.
In its 30-page order, PNGRB maintained that GSPL was charging 'discriminatory' rate from different customers of its 2,239-km Gujarat gas grid. Against Rs 39.6 per mmBtu rate submitted by GSPL, the regulator fixed the rate at Rs 23.9 per mmBtu. The company management could not be contacted for the comments on the order.
Analysts see one time impact on company's profits. "Assuming same level of cuts for low pressure pipelines at 12.48%, we estimate one time hit on profits would be around Rs 297 crore, this would mean one time negative EPS impact of Rs 5.3 per share," said Ostwal. GSPL reported transportation revenues of around Rs 3570 crore during December 2008-June 2012.
According to industry insiders, GSPL has fixed new tariff at Rs 0.895 per standard cubic meters (scm), against the previous Rs 1.02 per scm for high pressure pipelines of 2,890 kms, which forms major share of GSPL’s total pipeline.
However, the tariff for for the low-pressure pipeline of 660 kms is yet to be out.
"The industry continues to reel under the challenges of lower volumes from KG D6. The tariff impact on the industry would be neutral. However, GSPL would continue to perform well as there are expansion projects happening on the coast of Gujarat at Hazira, Dahej and Mundra LNG terminals," said an analyst with Prabhudas Lilladher Pvt Ltd.
PNGRB has also directed GSPL to refund the excess cost of entire system use gas (SUG), including unaccounted gas to the shippers or consumers since November 20, 2008 onwards and withdraw separate recovery either in cash or in kind with immediate effect.
The company was granted authorisation in June this year for 2,239 km of Gujarat Gas Grid with a capacity to carry 30.46 mmscmd gas.
"Based on the details submitted by GSPL on the tariff during the pre-regulatory regime, it was found that currently GSPL is charging discriminatory tariffs from different customers which range from Rs 2.54 per mmbtu to Rs 43.93 per mmbtu.
