India Ratings & Research (Ind-Ra) has affirmed Petronet LNG's (PLL) long-term issuer rating at 'AA+' with a positive outlook and short-term issuer rating at 'A1+'. The agency has also affirmed PLL's Rs 3 billion non-convertible debentures at 'AA+'.
PLL has increased its long-term tolling arrangements with liquefied natural gas (LNG) customers by 2.5 million metric tons per annum (mmtpa) to 7.25mmtpa. Increased tolling arrangements will lead to utilisation of 14.75mmtpa of the capacity at the Dahej terminal which is being enhanced to 15mmtpa. Out of the above, tolling contracts for 1.25mmtpa of the capacity will become operational during 1QFYE15 (first quarter ending June 2014). Of the existing capacity of 10mmtpa at Dahej, 7.5mmpta remains tied up in long-term sales contracts.
The long-term sales and tolling contracts now cover about 98% of the expanded capacity of 15mmtpa at Dahej and just above 80% of PLL's overall capacity. This provides stable cash flows and reduces the company's exposure to volatility in LNG prices or demand. Also, due to the increased efficiency provided by the second jetty at Dahej, the company could still undertake some amount of spot sales earning marketing margins over and above regasification charges.
PLL's revenue grew 39% yoy to Rs 315 billion in FY13 with an operating EBIDTA of Rs 20 billion (FY12: Rs19 billion). This, along with total borrowing reducing to Rs 30 billion in FY13 from Rs 33 billion in FY12, led to an improvement in financial leverage to 0.9x from 1.2x. The gross debt levels at FYE14 are likely to be slightly higher. As the company's capex plans towards a second jetty at Dahej and a new terminal at Kochi have been completed in FY14, the net financial leverage is likely to improve from FY15.
PLL has LNG supply contracts with RasGas Company for 7.5mmtpa for its Dahej terminal. It also has a supply contract with Exxon Mobil from the Australia Gorgon project end-2015 onwards for the Kochi terminal for 1.44mmtpa. Moreover, PLL has also entered into long-term gas sale and tolling contracts with strong counterparties - Indian Oil Corporation (‘IND AAA'/Stable), Bharat Petroleum Corporation, GAIL (India) (‘IND AAA'/Stable), Gujarat State Petroleum Corporation and Gujarat State Petronet, mitigating counter-party risk.
Furthermore, all contracts are on a take-or-pay basis, transferring most of the risks including price risk and foreign currency risk to the counterparty.
PLL's 15mmtpa of regasification capacity accounts for around 75% of the installed capacity in India. It will continue to have the largest market share in regasified LNG over the medium to long term, given its plans to increase its total capacity to 20mmtpa by November 2016.
Shares of the company gained Rs 1, or 0.71%, to settle at Rs 141.75. The total volume of shares traded was 95,658 at the BSE (Tuesday).
