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Edited Transcript of PETRONET.NSE earnings conference call or presentation 16-May-19 5:30am GMT

Q4 2019 Petronet LNG Ltd Earnings Call

New Delhi Aug 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Petronet LNG Ltd earnings conference call or presentation Thursday, May 16, 2019 at 5:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* V. K. Mishra

Petronet LNG Limited - Director of Finance

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Conference Call Participants

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* Pinakin Parekh

JPMorgan - Analyst

* Ahmed Restoki

UBS - Analyst

* Manikantha Garre

Axis Capital Ltd - Analyst

* Sabri Hazarika

Emkay Global Financial Services Ltd - Analyst

* Probal Sen

Centrum Broking - Analyst

* Vivekanand Subramaniam

Ambit Capital - Analyst

* Amit Shah

BNP Paribas - Analyst

* Vishnu Kumar

Spark Capital Advisors - Analyst

* Vijayant Gupta

Edelweiss Group - Analyst

* Vinit Joshi

Goldman Sachs - Analyst

* Maulik Patel

Equirus Securities - Analyst

* Rohit Ahuja

Bank of Baroda Capital Markets Limited - Analyst

* Bhavin Gandhi

B&K Securities - Analyst

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Presentation

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Operator [1]

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Thank you all for dialing in. So we have with us, Petronet LNG's senior management team, represented by Mr. Vinod Kumar Mishra, Director, Finance. We have Mr. Mukesh Kumar Gupta, Vice President, Finance and Accounts. We also have Mr. Vivek Mittal, General Manager, Marketing; Mr. Debabrata Satpathy, Chief Manager, Finance and Accounts; and Mr. Ashwani Agarwal, Senior Officer, Finance and Accounts.

So with this, I would like to hand over the call to the management. Over to you, sir.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [2]

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Very good morning to all of you. This is V.K. Mishra from Petronet LNG. This is my pleasure to inform you that this has been a very significant year; and we have processed the highest-ever throughput in Dahej, which has been 820 TBTU against 816 the previous quarter, if you see it.

And if you look at the PBT, it has been highest this time, year-on-year basis. It has been INR3,234 crores as against INR3,055 crores in the previous year. And the PAT has been INR2,155 crores against INR2,078 crores the previous year. This is also the highest-ever PAT. So these are the highlights.

Now if you look at utilization of the plant overall, this is throughput and this is 844 TBTU as against 848 TBTU in the previous year. So the Dahej utilization has been at the rate of 107%, which is almost similar as it was in the previous year. And if we go at a quarter-on-quarter basis, then it is 199 TBTU in this fourth quarter, as against 197 TBTU in the previous quarter, and 207 TBTU in the corresponding quarter.

Utilization has been 104%. And if you look at the throughput on overall basis, Dahej and Kochi, it has been 205 TBTU as against 202 TBTU in the previous quarter and 213 TBTU in the corresponding quarter.

And if you look at the quarterly reserves, it's -- PBT has been INR655 crores as against INR811 crores in the previous quarter, and INR791 crores in the corresponding quarter. And if you look at the PAT in this quarter, it has been INR440 crores in this quarter as against INR565 crores in the previous quarter and INR523 crores in the corresponding quarter.

And if you look at the PAT, it has been significantly lower; but, performance-wise, there's not much significant downward trend. Because if you look at the total throughput, it has been almost 844 TBTU as against 848 TBTU. But profit has been down. This is basically because of the reduction in the price from previous quarter, if you compare, it has been around [$8.25] per MMBtu as against [$4.3] per MMBtu in this quarter ending March 31.

Apart from that, we have declared a dividend of INR4.5 per share. So if you look at the total dividend which has been distributed during the year, it has been 100% on the beta value of the shares. So this is the highlights which I have just presented to you.

Now [how do you] open for the questions?

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Questions and Answers

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Operator [1]

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(Operator Instructions). Pinakin Parekh, JPMorgan.

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Pinakin Parekh, JPMorgan - Analyst [2]

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Three quick questions. So my first question is on this inventory loss that you saw in this quarter. Now, sir, when this inventory is sold to the consumer, will it be sold at the current price; and, hence, this notional loss will crystallize into an actual cash loss? Or will it be sold at the price at which it was purchased; and, hence, this inventory loss reverses into a gain in the next quarter?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [3]

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Yes, first of all, let me tell you, this is notional loss which has been basically due to the valuation of inventory as per Ind AS 2. Two, this is a requirement. So we cannot say that this is an actual loss in future as well. Now if you see the price, it is always on the rising trend. And if we see -- trading only it was more than $5: $5.15, it's $5.137 per MMBtu. So if you look at the -- like a week from March 31, it is almost -- INR25 crores has been recovered in terms of this notional loss.

So we have not, so far, sold any inventory. We have in a [partiality] to realize a higher price in future. Whenever it is a good opportunity for us to do so, we will do it. But as for the accounting standard, we have to value inventory cost or net realizable early, whichever is less (multiple speakers).

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Pinakin Parekh, JPMorgan - Analyst [4]

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So this basically pertains to the inventory that you are carrying on your books for yourself, not for the -- your take-or-pay contracts?

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Unidentified Company Representative [5]

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No, it doesn't pertain to any contracts.

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Pinakin Parekh, JPMorgan - Analyst [6]

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Understood. So my second question relates to the balance sheet, that if I look at the net worth change in this year, vis-a-vis what is the retained earnings, it is sharply lower, sir. Any particular reason in terms of what happened to the equity base?

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Unidentified Company Representative [7]

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Yes, Pinakin. Actually we have paid dividend of the last year, 45%; and the interim dividend of [55%], the total was INR1,500 crores. And on that, the dividend distribution tax is INR308 crores. So that reduction has given the impact. Actually that's INR1,803 crores is the impact; so that is the impact, yes.

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Pinakin Parekh, JPMorgan - Analyst [8]

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Okay, understood. And sir, my last question is on the volume growth outlook that you have for this year, F20 -- I mean F19, actually. The total volumes declined by 40 BTUs. So, sir, given what visibility you have and what is right now the business environment, do you think, sir, we can see volume growth this year? And if so, broadly from where -- which sectors and in what quantum?

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Unidentified Company Representative [9]

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Yes, I can say a couple of things. So one is the volatile seasonal variation which we have seen. So, quarter also; and typically we have seen in history -- historically. Also we have seen in last quarter, there was some fertilizer plant shutdown. So that was one of the major reasons why we saw decline in volumes, vis-a-vis the corresponding quarter. So last year, it should have also happened is the question you may have, but sometimes it's this two-year cycle which we have seen that's happening.

Interestingly, the IOLC's Panipat refinery was also now shut down, and so did Koyali/Vadodara shut down. So these are some of the major reasons. And typically as you know that this -- during in this period, the [Karwar] terminal closes. That -- some of its volume also ships to [the head]. So we definitely are hopeful that this -- going forward, the quarters will be a bit better in terms of volume vis-a-vis what it was in the March quarter.

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Pinakin Parekh, JPMorgan - Analyst [10]

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Understood. And sir, lastly, just a bookkeeping question: what's the net cash on the books right now?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [11]

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INR 45.75 billion.

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Pinakin Parekh, JPMorgan - Analyst [12]

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45.75. Understood. Thanks.

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Operator [13]

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(Operator Instructions). [Ahmed Restoki], UBS Securities.

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Ahmed Restoki, UBS - Analyst [14]

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Sir, one question related to the Kochi pipeline. So as we understand it, there is further delays to the pipeline. So could you give us an outlook for Kochi terminal with or without pipeline in this (inaudible)?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [15]

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Yes. Actually if you look at Kochi pipeline, Kochi Mangalore pipeline, yesterday we had the Board meeting, and it was informed by none other than the [CMD] of GAIL. It will be completed most likely by June, so this is the kind of commitment they have given.

And as far as utilization of this terminal is concerned, so far it is being utilized at the rate of 10% only. But we hope that after the pipeline is laid, our utilization will further enhance to 25% to 30%. So this is our estimate. And let us see when this will be finally commissioned, this pipeline. So we are awaiting eagerly, and then of course the utilization will further enhance.

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Unidentified Company Representative [16]

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Ahmed, just to add on to this, so as he mentioned, that we have 20-year [tempo]. But we have also seen one more interesting development which is (inaudible) which was not there in the last financial year. They have come up -- come back and they have tied up LNG for the next 300 days. Because the current spot price is (inaudible) makes no sense for them to commit and years, but made a commitment for 300 days now going forward. So to that extent, we -- and they are just on the process of starting the plant -- so to that extent, we might see a small increase in the volume going forward.

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Ahmed Restoki, UBS - Analyst [17]

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Okay. And sir, what is the (multiple speakers)? 0.7 --

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Unidentified Company Representative [18]

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(multiple speakers) what we are doing currently.

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Ahmed Restoki, UBS - Analyst [19]

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Okay, thank you. And sir, what is the outlook for commissioning 2.5 million tonnes at Dahej?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [20]

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It is likely to be completed by June this year. So we are hopeful, and we have already on the verge of completion of the plant. And very shortly we will give you the news that it has been commissioned, maybe by the end of June, or anytime in June also. So this is (multiple speakers) vigorously being followed by our management. And even today, we are holding a meeting at Dahej tomorrow. We are holding a meeting at Dahej where we are finalizing all the details how to commission it as of (inaudible).

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Ahmed Restoki, UBS - Analyst [21]

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Sure, sir. Thanks a lot, sir. Thank you.

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Operator [22]

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Manikantha Garre, Axis Secure -- Axis Capital.

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Manikantha Garre, Axis Capital Ltd - Analyst [23]

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So if you can please give us some update on the international projects that you are trying to get into?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [24]

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So actually if you look at the international project we are looking forward is Sri Lanka, the FSRU terminal this year which we are trying to get, maybe; we are in discussion with them. And we have submitted many draft agreements and documents for them. And further JV agreements have also been drafted and submitted. So many things are there. So we are likely to get this FSRU terminal in Sri Lanka with a capacity of around 2.5 MMTPA. And in the sprint of around $300 million which would be about at least INR2,000 crores, almost. So this is over one of the plants.

Then Bangladesh terminal, of course there is some issue because initially it was proposed that it will be awarded to us on [G2G] basis. And we were hopeful that it will not be through tendering process. But of late, we have seen that it has been through some tendering war. And the expression of interest, of course, we are submitting -- we have submitted.

But we are not that eager if it is on a G2G basis, because we need a lot of solemn guarantees in terms of our investment in terms of returns on the investment. So those things, unless until are assured to us through government of Bangladesh, we will not venture into such kind of project. So this is the second project.

Then third one is our international project is having some stake in (inaudible) terminal in US or some other country, which we are in talks with several stakeholders who are trying to put up a terminal over there. So we are in talks with the -- several persons there, but so far it has not been finalized. And if it is finalized, then we will certainly disclose it to you, and we'll let you know that the kind of thing we are doing.

But only objective which I will tell you, going forward this kind of project, is to have the LNG at a very reasonable price, at a very attractive price, and fixed price. This is our objective. And our other objective is to bring LNG to India at less than $6. So if these kind of objectives are met, then we may go forward with such a project where we'll have stake and the equity in such terminals. And then we will ensure supply at a cheaper rate to India.

These are our international projects. Apart from that, even and particularly also we are thinking of putting up two tanks. Earlier, we were planning to have only one tank, but now we are going for two tanks. So it has been approved by our Board, [ending] for two tanks at Dahej. And this is one of the major project which is likely to have --. And one other project which is likely to be getting commissioned is over 2.5 MMTPA (inaudible) capacity enhancement; which will be, of course, returned by June 2019. So these are our perspective on international and national investments.

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Manikantha Garre, Axis Capital Ltd - Analyst [25]

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And if I just take follow-up on that, sir. Sir, the international LNG terminal stake acquisition (inaudible). Given the weak spot LNG prices, I was just wondering, how is the discussions going on? Are they ready to discuss now other companies, or are they saying we'll wait for a few quarters and then we'll discuss? How is (multiple speakers)?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [26]

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Well, it's not a question of current pricing of spot. It's a long-term agreement will be there. So if you look at the kind of gas available in the US, as of now -- if you look at -- it is of a level at minus $0.25 at wellhead. So the kind of gas which is there in US is in the minus, pricing-wise. So even if we get that gas at $1, $1.50, $2 maximum, then also there is a possibility of bringing that gas less than $6 to India. So we are in talks on those lines.

So if you are just looking at current spot price, we are not looking at that. It's the pricing which is there in US. And if you compare the Henry Hub price over there which is around $2.7, $2.8 as of now, maximum $3 (inaudible). So even below that, if we get some pricing for the long-term for LNG, then we are going to strike a deal over there. This is the kind of perception we have: that we should go whenever we get at a very low price for a longer period, maybe 15 to 20 years.

So we are looking forward to (inaudible) over there. We are looking forward to even the wellhead, it is (inaudible). It's upstream companies over there who are holding the kind of gas which is of a level at cheap price. So those kind of things are happening. It's not related to any spot price which is prevailing right now.

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Manikantha Garre, Axis Capital Ltd - Analyst [27]

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Okay. Just bookkeeping questions from my side. What is the CapEx for 2019?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [28]

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FY19 CapEx will be INR443 crores, which is as for then. But if you look at [two times] at Dahej, it will further enhance IRN200 crores more. It will go up to INR600 crores this year.

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Manikantha Garre, Axis Capital Ltd - Analyst [29]

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Thank you, sir.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [30]

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But if those projects come up like Sri Lanka and international terminal, then it will further enhance, but that cannot be predicted right now.

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Manikantha Garre, Axis Capital Ltd - Analyst [31]

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Understood. Thank you so much.

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Operator [32]

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(Operator Instructions). Sabri Hazarika, Emkay Global.

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Sabri Hazarika, Emkay Global Financial Services Ltd - Analyst [33]

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Just to understand more on this inventory loss, so you said that some cargo that you had remain unsold during the quarter, due to which you have basically postponed -- due to which it has been booked under the inventory. So once you sell it off, then there will be no further -- I mean, there's a chance of markup, but no mark down on this, right?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [34]

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Yes (inaudible). Actually if you look at the prices as it will be first (inaudible), it is INR5.375. Okay.

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Sabri Hazarika, Emkay Global Financial Services Ltd - Analyst [35]

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Right.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [36]

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So and as (inaudible) understands and we also understand that the prices have been bottomed out in the last quarter only. (inaudible) will hover around $6 soon. At the same time, I mean -- so if this is your question, (inaudible) exactly your question, I mean basically it should not be below 4.3.

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Sabri Hazarika, Emkay Global Financial Services Ltd - Analyst [37]

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Right, right.

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Unidentified Company Representative [38]

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[So glad], so to that it is (multiple speakers)

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V. K. Mishra, Petronet LNG Limited - Director of Finance [39]

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(multiple speakers) it has bottomed out, so we don't think there would be any further decline. And as we mentioned that the prices have already increased since March 31.

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Sabri Hazarika, Emkay Global Financial Services Ltd - Analyst [40]

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And has there been similar situation in the past? Because (multiple speakers)

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Unidentified Company Representative [41]

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There has been --

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V. K. Mishra, Petronet LNG Limited - Director of Finance [42]

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Not so much volatility has not been there. So that's the reason you will not have seen impact on the books since there was a huge devaluation in the LNG prices since December, so we had to specifically make a comment on the price.

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Sabri Hazarika, Emkay Global Financial Services Ltd - Analyst [43]

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Okay. And sir, a few bookkeeping question. What was the regas service income for the quarter?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [44]

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Yes, service income, just a minute. INR437 crores.

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Sabri Hazarika, Emkay Global Financial Services Ltd - Analyst [45]

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INR437 crores for Q4. And what would be the gross debt?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [46]

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Gross debt (multiple speakers).

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Sabri Hazarika, Emkay Global Financial Services Ltd - Analyst [47]

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Less than INR700 crores.

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Unidentified Company Representative [48]

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Of which almost INR600 crores is (multiple speakers)

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V. K. Mishra, Petronet LNG Limited - Director of Finance [49]

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INR700 crores.

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Sabri Hazarika, Emkay Global Financial Services Ltd - Analyst [50]

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INR700 crores. And sir, and just one thing, sir, about this OPAL deal that you have, and OPAL makes your payment. So can you just explain it? Is this because of like the [intensor], [the ten] extraction, something of that sort?

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Unidentified Company Representative [51]

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So there are two parts to the OPAL deal. One is there is an ONGC C2, C3 extraction plant, so wherein ONGC does extraction of C2, C3 and they make payment towards per MMBtu component of their (inaudible). And secondly is we do supply to OPAL also the conduction in gas turbines. So these are two components for it and around 1.2, 1.3 (technical difficulty) to the C2, C3 and (inaudible) goes into OPAL.

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Sabri Hazarika, Emkay Global Financial Services Ltd - Analyst [52]

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Okay. Okay sir, fair enough, thank you so much.

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Operator [53]

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Probal Sen, Centrum Broking.

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Probal Sen, Centrum Broking - Analyst [54]

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I just had a follow-up on the Kochi pipeline that you mentioned about the expectation that once the pipeline comes through, the ramp up will happen to about 25%. So as you mean, let's say, that the June 2019 timeline is actually met, is there any timeline that then we can put on an [exit rate] of 25%? By when can we expect that?

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Unidentified Company Representative [55]

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Yes, obviously there will be ramp up in the customer requirement also (multiple speakers) are still working on conversion of the facility. So I would not say that it will be immediately in June (multiple speakers). So I would say there would be a gradual ramp up and the next financial year probably you will see 25% kind of throughput from the [top].

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Probal Sen, Centrum Broking - Analyst [56]

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Sir, is it fair to look at it, sir, that let's say that June 2019 the pipeline is complete and ready to be used; then March 2020 exactly, can we sort of build that around 20%, 25%, is that a fair way to look at it?

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Unidentified Company Representative [57]

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That's it.

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Probal Sen, Centrum Broking - Analyst [58]

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Okay. And sir, the other question was: from what I can gather, any investment number that we have set aside for this whole US project (multiple speakers) any amount that we have in mind of what we look to invest?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [59]

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We are still on the drawing Board stage, I would say. Because obviously unless until we have a Board approval, the management approval to certify which project; so we will not be able to (inaudible) them on, because obviously each project is a different -- of different nature. Thusly, at this point in time, it's too early to put a number to what would be the size of investment over what time frame. Because obviously each -- every investment will not happen with the money. And it could be over three, four, five years over the (multiple speakers). But it's a bit early for us to give any numbers.

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Probal Sen, Centrum Broking - Analyst [60]

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And sir, one last question if I may. You spoke about the -- I mean the management spoke about the impact of some fertilizer plant shutdowns, and the Koyali and Panipat refinery shutdown as well. Is it possible to quantify the gas demand that would have gone off-line due to all these plants not being there?

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Unidentified Company Representative [61]

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Obviously -- I would say around [two cargoes] is what we have seen of all the accumulation. But give you exact number would be very, very difficult.

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Probal Sen, Centrum Broking - Analyst [62]

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No, no, about two cargoes actually answers. That's fine. Thank you so much. I'll come back if I --

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Unidentified Company Representative [63]

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Not telling directly, as you know (inaudible).

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Probal Sen, Centrum Broking - Analyst [64]

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No, no, I got that. I got that. Thanks, thanks.

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Operator [65]

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Vivekanand Subramaniam, Ambit Capital.

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Vivekanand Subramaniam, Ambit Capital - Analyst [66]

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Can you give us an update on the competitive scenario, particularly given that you are planning a further expansion of Dahej? Can you give us an update on the competitive scenario from Mundra and others? And thoughts on the long-run competitive scenario in India's LNG imports? Thanks.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [67]

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Actually if you look at the competitive scenario which we have just discussed, it's true that Mundra has already been commissioned, almost commissioned, and like it will start very shortly. As well as (inaudible) is also ready. It's true that they are there. But if you talk of us, we are here for the last almost 17 years, or almost 16 years. So it's not that there is any competition. We have already long-term contracts back-to-back.

So there is no competition, of course. But, of course, they are there, and they will also survive, so we look at it as increasing the consumption of LNG in India. And if you look at the city gas distribution project, which are likely to come up in the next 5 to 8 years. So there's a likely consumption of from 25 CMD to almost 100 CMD. If you look at that kind of scenario, then it will lead to that level, almost from today's 6.5 MMBtu to almost 27, 28 MMBtu in future.

So I foresee a huge (inaudible) consumption of LNG in future, that 5 to 8 years. And if you look at the power sector, of course that is not using LNG too much. And that is a gray area because almost 25 gigawatts power plants are there. And there are almost stranded on a very -- operating at a very low [BLF].

So we need to look at those. And we are of course investing over the government to think of some policy measures so that we can supply gas to power plants and they can utilize. Like one you must have seen past years (technical difficulty) scheme was there, and which are -- there was huge increase in the consumption of natural gas in gas-based power plants.

So that kind of thing can be brought in. So that will help us in increasing the consumption of LNG further, which is not there; which should happen there even more. And if you look at these power plants, as I've already told you, that 25 gigawatt power plants have not been utilized. So government has to take note of it, and we expect a policy measure in this respect.

So these things can certainly increase the consumption of LNG in future.

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Vivekanand Subramaniam, Ambit Capital - Analyst [68]

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Thanks. All the best.

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Operator [69]

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[Sajeet Luta], (technical difficulty) Life Insurance.

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Unidentified Analyst [70]

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Just two questions. First: so sir, regarding the US investments, I know you cannot disclose much details. But won't the investment you need multiple (inaudible)? And second question is (inaudible). Thank you.

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Unidentified Company Representative [71]

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So sir, the US project is something, as we shared, but each of the projects is very different. So there are three or four potential (inaudible) which we are [posing]. So one of them is a megaproject wherein we will take apart (inaudible) which is all integrated project, which include the pipelines and the liquefaction.

Another project is we are broadly looking at mine molecules delivered to the liquefaction plant and we'll invest purely in liquefaction terms (inaudible). it's not still very clear which one we're going for and how we would go in for, what percentage of equity we'll be holding. A broad level, we can share with you. And your second question was on the tariff hike: yes, we have seen a tariff hike.

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Unidentified Analyst [72]

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Thank you so much.

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Operator [73]

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Amit Shah, BNP Paribas.

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Amit Shah, BNP Paribas - Analyst [74]

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Just one question. So based on the current spot LNG prices, right, and the fact that usually customers would take a time to kind of -- you already have the contract at cargo which was the case therefore in Q4. But by that logic, should you see Q1 being stronger even from a spot perspective? And from here on, because you will -- as long as LNG price -- spot LNG prices do not move up or -- and also, are you seeing any pushbacks from the long-term customers with regard to the pricing? That's all.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [75]

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We're not seeing any pushback, firstly, on the long-term side. Because obviously they are long-term contractual commitments.

And secondly, you must also see what most of the consumers are replacing is the liquid fuels. So there's a reason even the long-term prices are higher compared to the spot prices. And liquid fuel replacement is still happening, which was not the case in 2015. So it's very different while the differences is there between the spot and long-term prices. In 2015 our prices are there with the liquid fuels, which is not the case now.

And secondly, yes sir, the current spot prices we do see some traction; and as we mentioned that some of these are now ongoing. We do see power sector at least to start picking up some volumes, so that should then help us in increasing utilization (inaudible) terminal.

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Amit Shah, BNP Paribas - Analyst [76]

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Thank you.

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Operator [77]

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Vishnu Kumar, Spark Capital.

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Vishnu Kumar, Spark Capital Advisors - Analyst [78]

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Is there any take-or-pay that we have booked because of [under lift] from any customers for the entire year?

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Unidentified Company Representative [79]

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No, there is no take-or-pay booked.

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Vishnu Kumar, Spark Capital Advisors - Analyst [80]

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Got it, sir. And just one more question. We did have some conversations about Qatar, also possibly looking at Qatar. Any update on that or nothing is [focused] at this point in time?

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Unidentified Company Representative [81]

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You mean certain extension?

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Vishnu Kumar, Spark Capital Advisors - Analyst [82]

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Sorry, I meant Qatar (inaudible) investing, and we probably are well looking at some LNG liquefaction there.

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Unidentified Company Representative [83]

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In Qatar I think -- I don't think so, there is any discussion ongoing.

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Vishnu Kumar, Spark Capital Advisors - Analyst [84]

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Got it, sir. And finally just on this trading volumes, the (inaudible) inventory loss that we have taken: in the entire year, is it fair to assume that the 24 or 25 TBTUs which we have reported, that is only volume that we have traded? Or is there any component above or below, out of the 844 for the entire year?

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Unidentified Company Representative [85]

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This is the spot volumes of 23 TBTU?

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Vishnu Kumar, Spark Capital Advisors - Analyst [86]

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Yes, sir.

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Unidentified Company Representative [87]

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Yes, actually. So what is your question?

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Vishnu Kumar, Spark Capital Advisors - Analyst [88]

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So my question is that --

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Unidentified Company Representative [89]

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(multiple speakers) there is nothing (multiple speakers). I cannot do more than that.

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Vishnu Kumar, Spark Capital Advisors - Analyst [90]

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So my question is actually that, when we take an open exposure without any back-to-back arrangement, is this just limited to the spot and short-term? This is about the 20-odd units.

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Unidentified Company Representative [91]

--------------------------------------------------------------------------------

It's not typically open exposure. There's always a trade inventory also sometimes in tanks which we have to maintain.

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Vishnu Kumar, Spark Capital Advisors - Analyst [92]

--------------------------------------------------------------------------------

Okay.

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Unidentified Company Representative [93]

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[It is what it is].

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Vishnu Kumar, Spark Capital Advisors - Analyst [94]

--------------------------------------------------------------------------------

Okay. Sir, just on the re-inventory, how many TBTUs does it pertain to?

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Unidentified Company Representative [95]

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(multiple speakers) That we cannot do (multiple speakers). You can do the mathematics, it is little more than (inaudible).

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Vishnu Kumar, Spark Capital Advisors - Analyst [96]

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Fair enough, sir. Thanks a lot.

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Operator [97]

--------------------------------------------------------------------------------

Vijayant Gupta, Edelweiss.

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Vijayant Gupta, Edelweiss Group - Analyst [98]

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A couple of questions. Firstly, out of the [Gutal] gas which we are sourcing, what percentage would be spot?

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Unidentified Company Representative [99]

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Of our own sourcing?

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Vijayant Gupta, Edelweiss Group - Analyst [100]

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Both. I mean, from (multiple speakers)

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Unidentified Company Representative [101]

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(multiple speakers) long-term is 437 and [INR 20, INR 30] is a spot. So (inaudible).

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Vijayant Gupta, Edelweiss Group - Analyst [102]

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Okay. So sir, secondly, with spot prices at $5 and our (inaudible) LNG price at close to $9, even if say Mundra and [North] are charged double our tariffs, would LNG imported there not be cheaper than, say, what we are importing at Dahej?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [103]

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If that was the game, then we are the cheapest on the port side. But customers have also seen that there have been times when the spot prices have been significantly higher than the long-term. But obviously one has to take a balanced view on it. I would not say that (multiple speakers)

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Unidentified Company Representative [104]

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One cannot depend on the spot volumes alone for the longer period. Long-term contract are necessary advantage, see. It cannot be for a time being you have $5. But if it goes up, the long-term pricing, then they will have to suffer heavy loss. So this can be a sort of opportunity utilize it, but for the longer term it's always natural for the industry to have (technical difficulty) gas.

Maybe that is sometimes higher than the spot gas, but that doesn't mean that it will always remain like that. It's only for [time being] is lower, the spot price is lower than long-term prices, but sometimes they are higher also. So it can be said in long-term contracts are there, they will remain, and [util] of course may tend to use some of the port cargo also. It is any edition requirement. But at the same time, long-term commitment is there, and that will remain there.

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Vijayant Gupta, Edelweiss Group - Analyst [105]

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So from the off-takers, are we seeing any pushback? Are they planning to say a shift to spot volumes? Is there some hesitance in continuing to maintain long-term contracts?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [106]

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We are not seeing any such resistance. As you also know, probably most of the -- firstly as (technical difficulty) we are not selling directly to (technical difficulty). So it is (inaudible) in themselves. And they also have long-term contracts, primarily from the fertilizer sectors, some of it from steel, and some from the -- they have one [connection] in the refineries and petrochemicals. So I don't think there is any resistance from this side.

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Vijayant Gupta, Edelweiss Group - Analyst [107]

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And last question, sir. So when is the contract with RasGas and Gazprom expiring?

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Unidentified Company Representative [108]

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We don't have any contract with Gazprom. We have with ExxonMobil, which is through 2035. And RasGas is out to (multiple speakers) 2027. 27, 28 -- FY28.

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Vijayant Gupta, Edelweiss Group - Analyst [109]

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Okay, okay. Thanks a lot, sir.

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Operator [110]

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Vinit Joshi, Goldman Sachs.

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Vinit Joshi, Goldman Sachs - Analyst [111]

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Sir, in the last call, I think you mentioned that if this second tank will be built, then you are looking at a capacity of around 19 million tonnes over the next three to four years. So is that understanding still there? Or can you just update on that?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [112]

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Yes, that understanding is there. And we are only one time was proposed to be built. But yesterday we proposed for two tanks. And of course one tank we are seeking for the flexibility in operation. So basically I still hope that this will be there, and we shortly will start the tendering. But two tanks now. And hopefully in a period of 2.5 and 3 years, it will be completed. Then it will further enhance our capacity from 17.5 to almost 19.5 MMTPA.

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Vinit Joshi, Goldman Sachs - Analyst [113]

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Okay. Yes. Thank you, sir. So basically it means that you have -- if we assume that this is going to happen over the next 2 to 3 years -- then you have at least a sizable portion of uncontracted capacity with US compared to your history. So any update in terms of whether you have looked at getting some new long-term contracts, especially in current scenario, where the markets are looking quite oversupplied and you could be able to sign better deals?

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Unidentified Company Representative [114]

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We are working all the options. And we are discussing with some of existing capacity holders to see if they can -- they want more. And there is some traction which we are seeing from some of the existing capacity holders, given the kind of tariffs we charge (inaudible).

And secondly, yes, [as per track] we have our own plans to bring LNG and sell it through trucks on the small-scale LNG side. So for that also, we need some capacity. So on both options, we are working.

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Vinit Joshi, Goldman Sachs - Analyst [115]

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Okay. And in terms of [flavor] whatever projects which are currently approved, and if we forget about the other projects, international markets and you know -- so what is the CapEx for FY20 and FY21, as well, in terms of your firm plans?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [116]

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Right now if you look at -- we have already disclosed you that Sri Lanka project is there, which is costing around INR2,000 crores. And then Bangladesh, if it comes up, then it will be around -- almost INR6,000, INR7,000 --

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Vinit Joshi, Goldman Sachs - Analyst [117]

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I wanted to understand, ex- all these projects, I mean just steady-state FY20 and FY21, if we don't include these projects, what -- yes, yes.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [118]

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It is -- it's -- tank is there and [INR443 crores] CapEx. And after the second tank also (multiple speakers)

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Unidentified Company Representative [119]

--------------------------------------------------------------------------------

Third jetty is also there.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [120]

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Third jetty is there, so INR600 crore to be expected in 2019-20. And if third jetty also comes up again, INR1,300 crores almost.

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Vinit Joshi, Goldman Sachs - Analyst [121]

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INR1,300 crores in FY21?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [122]

--------------------------------------------------------------------------------

2020-21, we expect some third jetty also may [pick up] because that we expect we need for the kind of cargoes we are getting, and we want more flexibility in operations.

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Vinit Joshi, Goldman Sachs - Analyst [123]

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Okay. And if in future, you basically are looking to have more spot volumes, then this settlement of inventory gains and losses, even to a lesser extent. Because I understand that [the] inventory couldn't be as it was in last quarter. That is something which we should expect on an ongoing basis both in terms of gains and losses on your inventory?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [124]

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Not that kind of number. (multiple speakers)

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Unidentified Company Representative [125]

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Actually, the kind of inventory we're holding right now, it has never been that much high. Of course, it has now been expected, and we don't see as a phenomenon for future as well. We --

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Vinit Joshi, Goldman Sachs - Analyst [126]

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Okay.

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Unidentified Company Representative [127]

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In that, this is a one-off case. It has (inaudible). It is not always that always we'll have so much of inventory with us. So if you look at the last year result also, it was not there. The quantity was so insignificant that even the price variation did not have much impact on the profitability.

But this time, of course, it is the one-off case that it has been there, but so on. Because had it been on the price has been on the higher side, it would have given us a gain.

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Vinit Joshi, Goldman Sachs - Analyst [128]

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Yes, yes.

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Unidentified Company Representative [129]

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So either way. So that's not our objective, of course. But this time, we have high inventory. And as and when there is a right time and right opportunity, we'll sell this volume. And certainly this is a notional so it can be recorded in future.

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Vinit Joshi, Goldman Sachs - Analyst [130]

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Yes. Fair to say that we shouldn't be worrying about calculating inventory gains and losses for Petronet LNG going forward because the inventory (multiple speakers) quite minimal as compared to the current situation?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [131]

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Not (inaudible). If you look at the total quantum which we have had handled [at service] port, it's only 23 TBTU. So it will be around five cargo, six cargo only. So it's not much, if you look at the total cargoes we are handling of around 270, 280 cargoes.

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Vinit Joshi, Goldman Sachs - Analyst [132]

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But that's an increase in future, sir, right? Because you expect capacity expanding and the context are not there. So like previously you mentioned that you will try to do more spot.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [133]

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(multiple speakers) think of a [boarding wall]. Because if there is an opportunity we can think of it.

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Vinit Joshi, Goldman Sachs - Analyst [134]

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All right. Thanks a lot for your time, sir.

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Operator [135]

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Maulik Patel, Equirus Securities.

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Maulik Patel, Equirus Securities - Analyst [136]

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A couple of question. If we quantify the inventory loss already booked in this quarter of Q4 --

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V. K. Mishra, Petronet LNG Limited - Director of Finance [137]

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Yes, Maulik, can you be a little louder?

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Maulik Patel, Equirus Securities - Analyst [138]

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Sir, what is the inventory loss already booked, actual realized loss and not the unrealized loss, booked in the Q4? Because the spot that is closed [and reporting] from the February or March [move] onwards.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [139]

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So Maulik, we -- what (inaudible) -- I mean, in the quarter we have booked it. As for the accounting practices, the loss has been booked. So (multiple speakers) -- I mean, there is no actual loss basically (inaudible). And on the (inaudible) that we have done, we might have done some trading profit as well.

And to clarify further, and it has been already clarified, as on that -- the inventory, if you see the plans laid, it is [about 527]. So a notional gain of INR130 crores is already there.

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Maulik Patel, Equirus Securities - Analyst [140]

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Okay, got it.

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Unidentified Company Representative [141]

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And when this inventory will be sold, so actual gain -- I mean part of loss whatever will be booked in the (inaudible).

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Maulik Patel, Equirus Securities - Analyst [142]

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Okay. The second question is on this capacity. You mentioned that we are planning for another second additional tank in Dahej. So as of now, we have six tank, and two are -- more are under construction.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [143]

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Right (multiple speakers)

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Maulik Patel, Equirus Securities - Analyst [144]

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Yes. So let's say when the tendering is about to complete, any timeline for that?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [145]

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It's done very shortly, maybe within a month or so. (multiple speakers)

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Maulik Patel, Equirus Securities - Analyst [146]

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Yes. So we would expect, given another 36-month window to the company still entire tank, so we can expect these two tanks to commission some time in 2022, second half?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [147]

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Maybe, maybe. Something like that.

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Maulik Patel, Equirus Securities - Analyst [148]

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Okay. And by the time we have an eight tanks, third jetty you said that you are planning to commission sometime in the next one or two year. And the regas capacity which we are having that, we are expanding to 17.5 million ton.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [149]

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Right. Which we are aiming to deliver more with -- after all these flexibilities which we have, like what we have said in the past.

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Maulik Patel, Equirus Securities - Analyst [150]

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Okay, got it. That's all. Thank you.

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Operator [151]

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Rohit Ahuja, BoB Capital.

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Rohit Ahuja, Bank of Baroda Capital Markets Limited - Analyst [152]

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Sir, specifically on Kochi, can you clarify? You mentioned you've taken 5% at its height. Sir, what is the current (inaudible) at Kochi?

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Unidentified Company Representative [153]

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It's around 104.5.

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Rohit Ahuja, Bank of Baroda Capital Markets Limited - Analyst [154]

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And Dahej would be around 50, right?

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Unidentified Company Representative [155]

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Yes, around 49.6.

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Rohit Ahuja, Bank of Baroda Capital Markets Limited - Analyst [156]

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So secondly on the strategy for utilization of the immediate capacity coming up at Dahej you mentioned in June, we haven't yet signed any use of the contracts for that. So do we expect most of --

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V. K. Mishra, Petronet LNG Limited - Director of Finance [157]

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Rohit, we have capacity coming (inaudible) already in excess of over 15 million tons (inaudible) capacity. So yes, you're right; we have technically not signed any additional contracts, over and above what we have. But we were calculating this year including more than one, so our commitment is to the extent of 16.5 million tons already there.

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Rohit Ahuja, Bank of Baroda Capital Markets Limited - Analyst [158]

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Right, right, right. So more or less the spare capacity, even after expansion and which is not contracted, you are saying would be just about 1.5 or something?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [159]

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That's right, around 1 million tons.

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Rohit Ahuja, Bank of Baroda Capital Markets Limited - Analyst [160]

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That's for the [max port] you can do?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [161]

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Yes.

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Unidentified Company Representative [162]

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And let's see whether we reduce port or we will enter into some contract because [decretions] are going on.

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Rohit Ahuja, Bank of Baroda Capital Markets Limited - Analyst [163]

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But won't this change if -- once the Kochi Mangalore pipeline is ready in the second half?

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Unidentified Company Representative [164]

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So some of the Gorgon volumes may shift over there, yes.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [165]

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You're right.

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Rohit Ahuja, Bank of Baroda Capital Markets Limited - Analyst [166]

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So you might have more spare capacity in the second half?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [167]

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Might be.

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Rohit Ahuja, Bank of Baroda Capital Markets Limited - Analyst [168]

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So I mean, the strategy would be to keep this spare capacity as it is? Or you might be looking for more contracts?

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Unidentified Company Representative [169]

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We mentioned that we are working on final capacity both on long-term basis and [spot] on a short-term basis.

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Rohit Ahuja, Bank of Baroda Capital Markets Limited - Analyst [170]

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Right. And sir, lastly, on dividend payouts. You had an amazing 70% payout after profits this year. Now you mentioned a certain investment. But in the scenario where any of the international investments don't fructify in FY20, can we expect a similar dividend payout to continue this year?

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Unidentified Company Representative [171]

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[The call] which will be taken by the Board. So depending on what commitments we have on the investment side, [Petro] would be taken by the Board; and, accordingly, the decision will be taken.

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Unidentified Company Representative [172]

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But then the dividend payout -- for the dividend payout what is already tentative. And then once any of these projects will come down actually, then only will the outlook be different.

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Rohit Ahuja, Bank of Baroda Capital Markets Limited - Analyst [173]

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Right, so what if we can assume a similar stand to be maintained subject to any major (multiple speakers)?

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Unidentified Company Representative [174]

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Depending on our commitments on the investment side, the decision will be taken.

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Rohit Ahuja, Bank of Baroda Capital Markets Limited - Analyst [175]

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Okay. All right. Thank you, sir.

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Operator [176]

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Bhavin Gandhi, B&K Securities.

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Bhavin Gandhi, B&K Securities - Analyst [177]

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Just a bookkeeping question, sir. Can you share with us the last and the concall volumes versus during the quarter separately?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [178]

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That actually -- we reported as the long-term volumes.

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Unidentified Company Representative [179]

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We are not (multiple speakers)

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Unidentified Company Representative [180]

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But you know that (inaudible).

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Bhavin Gandhi, B&K Securities - Analyst [181]

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So I'm just -- they've been fully drawn out and (multiple speakers)?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [182]

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Obviously there is certain flexibility. So next to that --

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Unidentified Company Representative [183]

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They will not (inaudible) as we already pointed out.

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Bhavin Gandhi, B&K Securities - Analyst [184]

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Sure. And sir, also just wanted to understand on the regas part, the adjustments are made on the calendar year basis, or on a financial year-end --?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [185]

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Calendar year.

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Bhavin Gandhi, B&K Securities - Analyst [186]

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Calendar year? All right, sir. Thank you. That's it from my side.

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Operator [187]

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(inaudible), HSBC Securities.

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Unidentified Analyst [188]

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Yes, my question is on other expenses. Sir, for this quarter, that expenses is about 1.8 billion, so compared to 1.2 billion in 3Q FY19. So why significant jump in that?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [189]

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These other expenses should now -- should be looked at along with the other income also. Like if we see the Q4 2019, the other income is INR151 crore and the other expenses is INR183 crore. So there is the -- basically the -- these are the ForEx loans and the derivatives. The impact in both [those items], about INR60 crores. So if you take out that, then you would have actually -- I mean get the other income and the other expenses in line.

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Unidentified Analyst [190]

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So INR60 crores are on both side?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [191]

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Yes, in the (multiple speakers). It can change from quarter to quarter, basically.

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Unidentified Analyst [192]

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Yes.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [193]

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Depending on how the (inaudible) ForEx rates move.

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Unidentified Analyst [194]

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Okay, yes. Thanks. Thanks a lot.

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Operator [195]

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Pinakin Parekh, JPMorgan.

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Pinakin Parekh, JPMorgan - Analyst [196]

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Sir, on two questions. First is that, given what has happened with on the tariff situation between US and China, and there is an increasing expectations that going forward in the second half -- from the second half of the year, many of the US cargoes destined for China will have to find another home. And that could drive spot prices even lower from here.

So, A, what you -- as a company, what are your views on this? Should we expect spot prices to fall further from here?

And second, sir, and while spot prices have fallen very sharply now for the last 2 to 3 months, we have not seen a pickup in demand in India. So to that extent, should we assume that unless we see policy support explicitly coming out for the power sector, a step function increase in India, the port volumes like we saw in 2014-15 is unlikely to happen?

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Unidentified Company Representative [197]

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Two things. One is you mentioned about the -- China. So it is not that Chinese consumption is going down. Chinese consumption continues to increase. In fact, last year, it increased by 30%. This year, the expectation is it will be by another 10% or so.

So it does not mean that the US volume not going to China would mean that China is not buying LNG. They were obviously buying from other countries. There will be swaps which will take place, which is very normal in this industry. So it does not mean that the spot -- we don't expect the spot prices will go down further because of China not buying US volumes.

And as we mentioned, there is -- obviously there is a limit to how much a bottom it can go down. Because otherwise the capacity holders would just end up paying $3 in the US projects [other than] winning if they are not able to recover even their variable cost.

And secondly, your question was on the demand at the current spot price. So obviously there is a time adjustment [restrictive] because it's -- the prices have declined in the recent one or two months, since there is a time lag between by the time the cargoes come into India. And yes, you're right; we do expect some quality support for the power sector to come up, which would kick -- which should help us in increasing the [continuum] on the power side.

But other than that, as for the other sectors continues to consume what there -- they were consuming. And it might be coming in slightly higher than what they used to consume previously at higher spot prices.

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Pinakin Parekh, JPMorgan - Analyst [198]

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Understand. Thank you very much, sir.

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Operator [199]

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[Yokay Spartan, Reliance Securities].

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Unidentified Analyst [200]

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Sir, my question is related to more division [based ceramic] industry. This region is now consuming additional 2 to 2.5 MMCMD of LNG. Is this LNG flowing through your current LNG (inaudible) terminal?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [201]

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We don't know actually from where it flows. But we know that [DSPP] obviously is a major supplier in the [Mobri] region. And there we're taking the normal volumes, whatever they have capacity, which is [2 to 2.5] million tonnes.

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Unidentified Analyst [202]

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Okay. Thanks a lot, sir.

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Operator [203]

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Vishnu Kumar, Spark Capital.

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Vishnu Kumar, Spark Capital Advisors - Analyst [204]

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So we add one more tank which you have just mentioned, how much does it increase our flexibility to operate let's say 2019, 2020; or how much increase does it give us once we have (multiple speakers)?

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V. K. Mishra, Petronet LNG Limited - Director of Finance [205]

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The tank we are building, we have already informed you that likely increase in capacity will be to -- from 17.5 to 19.5. So that kind of thing will be there in terms of the expansion. But if you look at the flexibility, we need some flexibility because there is always a tank up situation, and we are finding it difficult to handle the cargoes coming up. So this will give us ample opportunity for -- to obtain cargoes in there, and we will not have a kind of tank up situation in future if we have that kind of flexibility. So that is our objective.

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Vishnu Kumar, Spark Capital Advisors - Analyst [206]

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Understood, thank you.

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Operator [207]

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Thank you. Well, ladies and gentlemen, that seems to be the last question for today. I would now like to hand the floor back to the management for their closing comments.

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V. K. Mishra, Petronet LNG Limited - Director of Finance [208]

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Okay. Thank you very much to all of you. And it has been our pleasure to share our views on the Company with you. And it's all the good wishes of you people that we are doing better. We could have been better this time; also, we have done better, no doubt. But it's still better. We -- more better we could have done. And because of this downfall in the energy prices, there has been some loss in the inventory. Otherwise, our performance would have been even higher than what we have done.

But it's still -- it's year-on-year basis you look at, is a growth of 6% in terms of PBT, and it's a growth of 4% in terms of PAT. So this kind of scenario is still there. And we hope that in future, the growth will continue at the rate of at least 10%, we hope even more. Like last year, it has been almost 20% in MMTPA because of (inaudible) LNG out of the total 40 MMTPA of (inaudible) in India.

But this year, if you look at it, you will find that it's almost 22 MMTPA of LNG which has been consumed in India this year as compared to almost 90 MMTPA for domestic gas which has been utilized. So there's a surge [import] of gas, year-on-year basis. And we hope to further increase in future. And as you know, our terminal is running at more than 100% capacity, Dahej terminal. We hope to utilize our Kochi terminal also to [take share] of at least 30%.

So if these things will continue, we ensure that our growth will continue. And more projects if we take up, then certainly the growth of little bit even higher than what we have right now. So with this all, I just close my remarks and thank you to all of you for coming to listen to us. Thank you.

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Operator [209]

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Thank you very much (technical difficulty).