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Edited Transcript of PETRONET.NSE earnings conference call or presentation 27-Jul-18 10:59am GMT

Q1 2019 Petronet LNG Ltd Earnings Call

New Delhi Aug 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Petronet LNG Ltd earnings conference call or presentation Friday, July 27, 2018 at 10:59:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Vinod Mishra

Petronet LNG Ltd. - Director of Finance

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Conference Call Participants

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* Sabri Hazarika

Emkay Global - Analyst

* Amizra Suki

UBS Securities - Analyst

* Vipin Zubati

Antique Stock Broking - Analyst

* Pawan Gandhi

B&K Securities - Analyst

* Rakesh Sethia

HSBC - Analyst

* Monic Kondif

Access Capital - Analyst

* Vishnu Kumar

Spark Capital - Analyst

* Probal Sen

IBFC - Analyst

* Farah Panda

Citigroup - Analyst

* Adir Dax

ICICI Securities - Analyst

* Ritesh Gupta

Ambit Capital - Analyst

* Vikash Jain

CLSA - Analyst

* Rohit Ahuja

BOB Capital Markets - Analyst

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Presentation

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Unidentified Company Representative [1]

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Hello, everyone. On behalf of [Iahu], I welcome you all for the first-quarter FY19 earnings call of Petronet LNG. To discuss the results in detail and share the outlook here on, today we have the entire senior management team of Petronet LNG represented by Mr. Vinod Mishra, Director of Finance; Pankaj Wadhwa, Senior Vice President, Marketing; Mr. Mukesh Gupta, Vice President Finance; Mr. Vivek Mittal, GM Marketing; Mr. Debabrata Satpathy, Senior Manager Finance; Mr. Ashwani Agarwal, Senior Office of Finance.

I first request the management to share the performance highlights for the quarter gone by, post which we can open the floor for the questions. Without much of a delay, I'll hand over the call to you, sir.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [2]

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Good morning, everybody. This is Vinod Mishra from Petronet LNG Limited and I'm delighted to share with you that this quarter has been very [excellent work] and our Dahej terminal has operated actively, had capacity of 111% as compared to 109% in the last quarter and as compared to the (inaudible) of 96%. So, is a high-growth around 2% as compared to the last quarter and 15% as compared to the (inaudible) quarter of the previous year.

And the fiscal volume, if you talk about then, we have (inaudible) around 240 TBTU as compared to 270 TBTU the last quarter, and as compared to 184 TBTU in the corresponding quarter of the previous year in the Dahej terminal. And taken together both the terminal with Kochi and Dahej terminal, we have been able to process LNG of around 220 TBTU as compared to 213 TBTU in the last quarter and 192 TBTU in the corresponding quarter of the previous year.

So, there is an increase by 3% as compared to the corresponding quarter last quarter and around 14% over corresponding quarter. So based on this we have been able to perform in a significant manner here and our (inaudible) has risen, the highest ever (inaudible) has been produced by Petronet LNG Limited of INR 901 crores as compared to INR791 crores in the last quarter as compared to INR666 crores in the corresponding quarter of the previous year.

And as far as growth is concerned, it is around 14% over the previous quarter and 35% over the corresponding quarter of the previous year. Similarly the PAT, profit after tax, has risen to INR587 crores as compared to INR523 crores in the last quarter and INR438 crores in the corresponding quarter the previous year, which has [internal] growth of around 12% for the last quarter and [24]% over the corresponding quarter of the previous year.

So, this has been the financial highlights of the Company in Q1. And (inaudible) update are good and that (inaudible) is good at [0.12], then return on capital employed is also very good, so 32% as compared to 29% last time. [VSCR] and EPS all are good. VSCR is at (inaudible) 4.44 as compared to 3.7 last quarter. And EPS has risen from 3.48 to 3.91.

So, this has been the highlights of the quarterly results. And now I just open the house for the queries from various analysts and investors.

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Questions and Answers

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Operator [1]

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(Operator Instructions). Sabri Hazarika, Emkay Global.

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Sabri Hazarika, Emkay Global - Analyst [2]

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Congratulations on a good set of numbers. I have two questions. The first one is relating to the sizable margin improvement that was recorded by the Company -- that was recorded by the Company during Q1 FY19. So, there has been some increase in Kochi (inaudible) also, but other than that also the margins have been quite strong for the Company. So, any particular reason behind that?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [3]

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Basically there are two reasons. One is that there is a hike from the last year. So, [every year] there is a hike. And also the volume has gone up. So, volume and (inaudible) gas tariff may have increased in (multiple speakers) and there are certain other reasons that efficiency in operations, lower internal assumptions -- so, all these have contributed.

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Sabri Hazarika, Emkay Global - Analyst [4]

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Okay, so this internal consumption, what are the dynamics behind internal consumption? Because the gas price seems to have gone up QoQ if I include the terminal in India. So, how has the internal consumption gone down during the quarter?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [5]

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Basically it's more of a technical question, still I would like to answer it. (Multiple speakers) changes, what you see are this fourth quarter, the winter season, it's -- (inaudible) means LNG is required for (inaudible) consumption. But as soon as the temperature rises our internal consumption also significantly goes up. So, maybe this is one of the reasons and --.

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Unidentified Company Representative [6]

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Obviously as you mentioned, the efficiency in operations by (inaudible) because we use (inaudible) presence in that [moss] field, which definitely adds to the efficiency of the terminal and probably that's one of the reasons (inaudible).

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Sabri Hazarika, Emkay Global - Analyst [7]

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Okay, so it is in some ways (inaudible) [zone], but at the same time there's been efficiency on a higher level of operations.

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Unidentified Company Representative [8]

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The higher the level of operations the per-unit cost goes down.

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Sabri Hazarika, Emkay Global - Analyst [9]

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All right. And second question is on the Kochi-Mangaluru pipeline. So, of course there's been no official stance as such, but there's been some reports that it could be delayed further. GAIL has continued to maintain Q4 to be the (inaudible) times. Has there been any change and are you still --?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [10]

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Actually, as far as we are concerned, we have been updated by GAIL only that it will be completing by December. But it was very many delays beyond our expectation. And we are hoping it will be completed by December 2018. So, after that we will likely (inaudible) there Kochi-Mangaluru pipeline, which is likely to resume (inaudible) shortly after this season -- (inaudible) season.

I think December should be the target. And we are still committed to it. GAIL has not withdrawn its commitment to completing (inaudible) December [2018].

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Sabri Hazarika, Emkay Global - Analyst [11]

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Okay, and anything about Bangalore portion of the pipeline?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [12]

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Bangalore portion is still (multiple speakers). We cannot say much on that. That is not a [specified] number. It will be done in the future but there is no timeline with that which we can tell you that it will be delivered (inaudible).

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Sabri Hazarika, Emkay Global - Analyst [13]

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Okay. Okay, sir, thank you so much.

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Operator [14]

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[Amizra Suki], UBS Securities.

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Amizra Suki, UBS Securities - Analyst [15]

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Sir, could you give us an update on the LNG to be used in transportation that -- where are we now and how many tie-ups you have done with a retail outlet? And if we can get us any volume guidance on that. And second, any update on the Bangladesh and Sri Lanka terminals?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [16]

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So, talking about trucks which will be using the LNG set of (inaudible). There has certainly been some progress since we spoke to the analysts last time. But this is a game of aggregation as we have been saying earlier. We need to wait for some more time to basically see the impact of it. Right now talking of any numbers will not be very fruitful. But right now we are talking of [shutting] up 20 LNG dispenser stations along (inaudible) highways of the country which we are (inaudible) [year on year].

Progress is being made, regulatory issues are being resolved. We are in discussions with the oil marketing companies whose (multiple speakers) will be used for setting up these stations. We are supposed to soon come out with a tender for buying the equipment for the stations on an [EPC] basis. Also the pre- (inaudible) activities are right now going on. And I believe perhaps when we assemble again for the next quarter (multiple speakers) have some more concrete things to share with you. As far as the (inaudible).

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Amizra Suki, UBS Securities - Analyst [17]

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So how big the size and opportunity you think potentially can be maybe in 5 to 10 years? Because I think when we are talking with respect to competitiveness of that field, I think it is going to remain highly competitive and other countries like China have been making very high progress on the same front. So, what do you think -- what is the size of the opportunity, because that could be a long-term volume driver for the sales (inaudible)?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [18]

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That is a correct assessment you have. Directionally I can tell you there are two data points which can help you to arrive at your own conclusions. (Inaudible) in terms of medium and heavy commercial vehicle segment, about 200,000-plus vehicles are added every year on Indian roads.

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Amizra Suki, UBS Securities - Analyst [19]

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Okay.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [20]

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And secondly, there's 40,000-plus (inaudible) [buses] required or will consume 1 million tons of LNG.

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Amizra Suki, UBS Securities - Analyst [21]

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40,000 buses or trucks consume 1 million tons, okay.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [22]

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1 million tons of LNG per annum. So, directionally if you were to convert one year (inaudible) vehicle addition to the Indian roads, then you are talking of almost 5 million tons equivalent of LNG consumption in the vehicles segment. But this is -- again, I would caution and say this is a game of aggregation because it requires a large network of dispensing stations to be set up.

Compare this to the petrol pumps and diesel pumps that we have in the country today, which is 50,000-plus in numbers. So yes, 5- to 10-year time is too distant in the future, but the potential is very large. And China today is consuming about 10 million tons of LNG into this segment.

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Amizra Suki, UBS Securities - Analyst [23]

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Yes, okay. And sir, what about (inaudible) on Bangladesh?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [24]

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[No], because first I would like to talk about Bangladesh project. We have, as you are aware, planning to set up (inaudible) land based (inaudible), with a capital CapEx of around $1 [billion]. And the status of that project is that we have submitted the [F5] commission proposal term sheet.

The (inaudible) proposal from the (inaudible) committee to (multiple speakers). But after the meeting the proposal (inaudible), they have indicated to us that they want an implementation agreement and terminal (inaudible) agreement so that they can negotiate on that. So, we are in the process of finalizing it and submitting it to the Bangladesh government.

Then there are other things that will start after that submission. So maybe very shortly we will be submitting (inaudible) and terminal (inaudible). These are two things which we have to do and we are -- very shortly will be doing it. So this is based on a Bangladesh project. As far as the Sri Lanka project is concerned, there we are planning to (inaudible) government. CapEx is around $200 million.

There also progress is not as much as in Bangladesh project, but still we are continuing with the pretreated study. And after completion of pretreated study we'll complete all the treated studies then and [simultaneously] implementation agreement (inaudible) is also being prepared so that we are ready by the time it is a profit. And as you know, it is a consortium of Japanese companies in there and (inaudible) port authority. So, the share of 47.5%, [37.5%] and around 15%.

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Amizra Suki, UBS Securities - Analyst [25]

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So what (multiple speakers)?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [26]

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47.5%.

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Amizra Suki, UBS Securities - Analyst [27]

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47.5%, okay.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [28]

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We are hoping that all the documents will be completed. Because [three treated] studies are still going on. So, after the completion of that (inaudible) we will move in this direction. Apart from that, we are also going to (inaudible) some financial advisors to look into the visibility and the business model for financing the project. But that part is going simultaneously. That's where we are focusing our (inaudible).

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Amizra Suki, UBS Securities - Analyst [29]

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Thanks for the update.

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Operator [30]

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The [Vipin Zubati], Antique Stock Broking.

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Vipin Zubati, Antique Stock Broking - Analyst [31]

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A couple of my questions were already answered. Just one of them is bookkeeping. So, is it possible for you to give the [falling] revenue separately for the quarter?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [32]

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Falling revenue separately? INR436 crores as compared to INR377 crores in the last quarter and INR350 crores in the corresponding quarter of the previous year. So, this has (multiple speakers).

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Vipin Zubati, Antique Stock Broking - Analyst [33]

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Thanks for that. And the second question is related to cash flows. So, of course the numbers have been very good, which implies that your cash flows are going to be very strong and [autos] are very strong.

So, besides the investment plans that we already have laid out and discussed, which is basically Bangladesh and Sri Lanka, so how else are we planning to utilize the high cash [flow] position that we have? Are we looking to offer more dividends or -- so just like to know your thoughts on that, if you can elaborate on that part?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [34]

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I will start with the very small things. This is regarding expansion of our (inaudible), which will be expanding (inaudible) to 17.5 MMBTU. (Inaudible) time is around June 2019. And there we have already spent around INR290 crores. Another INR100 crores will be invested in that project.

And apart from that we have also committed (inaudible) distribution project. We have committed (inaudible) geographical area which includes two in [Kerla], like (inaudible) in Kochi (inaudible), and then (inaudible) and Southern [Lardo] and then (inaudible) and [Chenai] and from there -- Chenai and one more is [Sicocula]. So, like that we have a [pipe] for all seven [years].

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Vipin Zubati, Antique Stock Broking - Analyst [35]

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Right.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [36]

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So, we are hoping if we get through this that (inaudible) the CapEx plan will return and we will be investing in that [CGT] business also. We are somehow trying to put in some (inaudible) and totally are where these are located. Because we have a plan to utilize our Kochi terminal in an extensive way through this (inaudible) distribution project.

So, this is our future planning. So, this year we are looking for the opportunity and investment of (inaudible) plus cash. And of course even, as you know, last time it was taken 45% dividend was distributed, which was a part of the dividend policy also where we have decided to pay around 30% to 40% of the dividend.

[Accordingly] we are doing, dividend of course is an important part. But at the same time, we are also looking for projects where we can invest which can (inaudible) the Company, our performance and this is how we are planning to do it.

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Vipin Zubati, Antique Stock Broking - Analyst [37]

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So, if I may ask what is the kind of investment we are looking at in these seven years if we win the (inaudible) all seven years? So, what is the kind of investment we are working in the first year, also -- or in a span of five years?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [38]

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Okay, just look at the conditions given under the (inaudible). So, we are supposed to lay the pipeline that (inaudible) by eighth year and they're the same targets we have already given. So, we expect around INR6,701 crores (inaudible) over a period of eight years. So, (multiple speakers) this is the plan.

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Vipin Zubati, Antique Stock Broking - Analyst [39]

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So, this is over eight years, next eight years?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [40]

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And then 25 years it is going up to INR11,280 crores. So, that is planning after eight years. But this is how we are planning up to eight years at INR6,701 crores (inaudible) CapEx for (inaudible).

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Vipin Zubati, Antique Stock Broking - Analyst [41]

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Right. That's okay, sir. Thank you so much for the update.

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Operator [42]

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[Pawan Gandhi], [B&K] Securities.

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Pawan Gandhi, B&K Securities - Analyst [43]

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Congratulations on a great set of numbers, sir. Firstly, can you share the (inaudible) volumes [versus in the] quarter?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [44]

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So, (inaudible) volume total is around 17 TBTU within in the quarter.

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Pawan Gandhi, B&K Securities - Analyst [45]

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17 TBTU. And sir, just wanted to get your thoughts on this Chinese demand. So, we have seen Chinese demand growing pretty strongly. So, what is your assessment -- where could they level out? Any thoughts on that part?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [46]

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China has had very strong demand that we have seen because of the usage of natural gas instead of coal in the power generation. And as currently assessed, they have risen to a number two LNG importer in (inaudible) keeping the -- for the year. That demand, as per our assessment, remains strong. And although it is (inaudible) number on that. But so far as India is concerned, we have seen that getting reflected in the prices of spot volume, which has remained high through the summer.

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Pawan Gandhi, B&K Securities - Analyst [47]

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We are hearing about some constraints on the regasification in China. Is that (inaudible) at the [month] or that's not the case?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [48]

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Not -- that our assessment shows their demand continues to (inaudible) work and they continue to even commission some of the new [regas] terminals. I think one is getting commissioned this month also. So, that way perhaps they will continue to grow at the rate as we said (inaudible) last year.

Yes, looking at the first quarter of Chinese import, it is around 12 [MMTPA] already there on that. So, if you see -- go by this (inaudible) go beyond (inaudible) MMTPA which was last year's assumption. So, we are thinking it will go up from that level. So, we have a policy of replacing coils, so it is bound to increase. It cannot be reduced.

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Pawan Gandhi, B&K Securities - Analyst [49]

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Sure. That's it from my side. Thank you so much.

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Operator [50]

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Rakesh Sethia, HSBC.

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Rakesh Sethia, HSBC - Analyst [51]

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Thank you for this opportunity and congratulations on a great set of numbers. Sir, just one question, if you can provide some color on how the demand for LNG or gas will likely to shape up after the Mangalore section is connected to the pipeline. And what are our expectations of let's say Kochi (inaudible) utilization once the pipeline gets commissioned over next one year to let's say three-year term?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [52]

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So, Mangalore section of the pipeline will connect majorly to three consumers. One is the Mangalore Chemicals & Fertilizers Ltd., which is a [Zuwati] Group company. They have, as our understanding, already converted to receive natural gas. And as soon as the pipeline gets commissioned they should be in a position to take that.

Then there are two ONGC group companies, one is a [MRPL], one is [OMPL]. Now between these three companies put together we believe there is a potential for about 0.75 million to 1 million tons per annum equivalent of LNG requirement.

Now so far [MCFL] we'll start taking the gas immediately. There might be some ramp up required for MRPL and OMPL to realize their full potential. But as you asked for two- to three-year horizon, we believe a 1 million ton equivalent will be low from (inaudible) to these three units.

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Rakesh Sethia, HSBC - Analyst [53]

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Apart from these three customers, any other (inaudible) Bangalore section? Is there any customer segment we are targeting or is there any potential demand which can possibly convert in the medium-term?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [54]

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If you had seen the period, we are building for the (inaudible), there are four (inaudible) areas which lie along the route of the pipeline which have been without. So, although, again, the (inaudible) aggregation, it will take some -- a few years to ramp up. But there are potential consumers so far as Kochi terminal utilization is concerned.

Besides that there are certain consumers who prefer to take LNG crude through their truck route, which for reasons that my [plant] cannot reach those areas. So, we are also focusing on such consumers. But again, consumption will be very, very small. But there are areas that potential consumers will be taking LNG from Kochi.

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Rakesh Sethia, HSBC - Analyst [55]

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And what about the Kochi section? Is [FSAD3] started taking any LNG? And what's the potential out in the BP selling (inaudible)? Is there any scope for of these volumes to ramp up further?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [56]

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[VVCL] finally have been taking most of the volume that are being processed today at Kochi. But a 32 [MMSCMB] equivalent of demand has been there. There is a potential for them also to increase after certain modifications which might take another year to come in.

Other than that, this (inaudible) has not been active, so they have been consuming liquid ammonia which has been imported [across] rather than using natural gas because of the price essentially. But as we have seen in the past when it was linked to gas, they were able to consume about 0.8 MMSCMB [equivalent].

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Rakesh Sethia, HSBC - Analyst [57]

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Understood, sir. Thank you very much for your answers.

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Operator [58]

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[Monic Kondif], Access Capital.

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Monic Kondif, Access Capital - Analyst [59]

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Congratulations on a strong set of numbers. I just have two questions. One is can you please confirm the type of volumes on a whole for Dahej and Kochi terminals and for as well the split for the take or pay and [value pay on the terminals]?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [60]

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We have, as you know, 7.5 million coming from (inaudible), the next is 1.5 million from [Gorgon], 9 million tons in our long-term business. In addition, we also have 1 million tons with (inaudible), that is also (inaudible) capacity. And as far as (inaudible) is concerned, we have agreements totaling to now 8.25 million tons. This (inaudible) and [GSPP]. So all in all, [15.75] is (inaudible).

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Monic Kondif, Access Capital - Analyst [61]

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Okay, and the next (inaudible) increase in this number (inaudible) 13.5%. I mean, are there any new tie-ups? That is where I am coming from?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [62]

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Not yet, but we are working on those firstly. And secondly, year-on-year we have renewed these kind of tie-ups. So without disclosing the name of (inaudible), so that's one of the reasons why you see high utilization because we have been doing year-on-year additional tie-ups maybe for step-up cargos or cargo-by-cargo business.

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Monic Kondif, Access Capital - Analyst [63]

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I understand.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [64]

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(Multiple speakers) is already 111%. As you see, last year is (inaudible) almost 16.6 (inaudible). (Inaudible) it is even beyond the capacity design. So, more tie-ups will be there after expansion of that because we are going to ramp up to 17.5 [RRMPPS] by June 2019. So, I think by that time there will be further ramping of it.

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Monic Kondif, Access Capital - Analyst [65]

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Understand. So, when will we start taking additional (inaudible) that has been a greater point than the price -- price was negotiated, sir?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [66]

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(Inaudible) improved since 2016.

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Monic Kondif, Access Capital - Analyst [67]

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Okay, and one last question from my side, sir. So, if in the projects in Bangladesh and Sri Lanka (inaudible) areas get conformed, or any of them get confirmed, how will their CapEx be (inaudible) for example, the $1 billion project in Bangladesh, how many years can be [delayed], sir?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [68]

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Actually we have not planned, but of course there are various options available for investing. We will look into all the possible options (inaudible). Whatever way we can do, which is (inaudible) for funding we will be netting that. So, right now because project has not been so far [provided] to us, so we are not in a position to disclose how we are funding it. As for this, we just know that there will be CapEx of around INR6,500 crores. So that is there, but how it is funded will be decided later on. Whatever is the (inaudible) for funding that will be adopted.

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Monic Kondif, Access Capital - Analyst [69]

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Thank you so much.

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Operator [70]

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Vishnu Kumar, Spark Capital.

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Vishnu Kumar, Spark Capital - Analyst [71]

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Just a few questions. Firstly, was there any reload income from Kochi this quarter?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [72]

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Yes, there has been a regular income which is around INR13 crores to INR14 crores every quarter (inaudible) this quarter accounts for.

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Vishnu Kumar, Spark Capital - Analyst [73]

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So nothing out of the usual? It's INR13 crores, INR 14 crores, somewhere?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [74]

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That's right.

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Vishnu Kumar, Spark Capital - Analyst [75]

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The second, was there any change in terms of the [Gorgon] volumes moving more towards [the base this quarter around]? I mean largely my question pertains to because the quarter-on-quarter jump in the margin has actually been quite steep. There is a reason why I'm asking this.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [76]

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As you know, we shared the Gorgon volumes. In Kochi the entire volume is almost Gorgon volume. So, can you also (inaudible) about how much of the Gorgon volume has gone to Kochi?

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Unidentified Company Representative [77]

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(Inaudible - microphone inaccessible).

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Vishnu Kumar, Spark Capital - Analyst [78]

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Okay. Because last quarter if I remember out of the 16, 17 you told that probably 6 or 7 had gone to Kochi and the rest is at Dahej. (Inaudible) is a similar number or I just (inaudible) up?

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Unidentified Company Representative [79]

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(Multiple speakers).

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [80]

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(Multiple speakers) is there. In Kochi 6 [BBTU] and then they will (inaudible), total around (inaudible).

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Vishnu Kumar, Spark Capital - Analyst [81]

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Okay. And just on the cash balance, if you could just give the number as of now?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [82]

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Yes, (multiple speakers) is around INR[5,030] crores, so it is there, it has increased from last year INR4,800 crores. So, cash balances are of course there. And the other side, that has reduced to INR1,175 crores.

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Vishnu Kumar, Spark Capital - Analyst [83]

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INR1,175 crores? Okay. (Inaudible).

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [84]

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Yes. There you can see this cash balance is high and that (inaudible) shows very excellent (inaudible).

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Vishnu Kumar, Spark Capital - Analyst [85]

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Okay, thank you, sir, on that. And just one thing on the current deal CapEx and we're not very likely to commission these 17 -- the new 2.5 million ton expansion that we are currently progressing [to date].

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [86]

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That certainly is. It is likely to be completed by March, but we have to do a time up to June 2019. But still we are looking at completing it by March. And if we do it then it will be relevant next financial year. And the total CapEx involved is around INR390 crores, out of which almost INR290 crores we have already spent, and another INR100 crores will be spent during the financial year.

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Vishnu Kumar, Spark Capital - Analyst [87]

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Okay. Thanks a lot, sir. My other questions have been answered. Thank you.

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Operator [88]

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Probal Sen, [IBFC].

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Probal Sen, IBFC - Analyst [89]

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Sir, just only one, [what is] your plan? I just wanted to ask that what we have heard is that Excelerate Energy has already set up an FSRU and there is a local company called Summit Energy which has also received permission to set up a terminal. So, in that background do you still see enough of demand potential to set up a third terminal in the country which is going to be 7.5 million tons, as you say?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [90]

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Well, I think we have been discussing this issue in successive investor calls. And you named two FSRUs, I can add that (inaudible) third FSRU also which Bangladesh is trying to finalize very soon. Also, we have to differentiate that a land based terminal provides us superior flexibility as compared to FSRUs which are seasonal in nature, and also given that it's a cyclone [prone] area where they are setting up these FSRUs.

From a demand potential, yes, Bangladesh economy has been a gas-based economy, so they (inaudible) supply development -- their own domestic supplies are going further down. So, we do believe that there is a requirement for terminals like ours to take care of their growing gas needs.

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Probal Sen, IBFC - Analyst [91]

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Okay. That's all I had, sir. Thank you so much.

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Operator [92]

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[Farah Panda], Citigroup.

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Farah Panda, Citigroup - Analyst [93]

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Thank you for the opportunity. I have a couple of questions. Firstly, given that you've already done 111% utilization at Dahej in the first year -- first quarter, can we assume that you should be able to comfortably cross the 16 million tons that you did last year at Dahej? Do you have any items or estimates?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [94]

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(Multiple speakers) utilization. It seems we'll be able to grow [16 basis].

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Unidentified Company Representative [95]

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But (inaudible) too. Adding caution here, as we have been saying, there are phenomenal (inaudible) temperatures and (inaudible) weather-related issues. And winter it becomes difficult to maintain the kind of flows that we have. But yes, as I would like to insert that looking at whatever we have been able to achieve. Directionally we are moving in that direction.

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Farah Panda, Citigroup - Analyst [96]

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Okay. And just in terms of the new terminals which are coming up from other parties, one at (inaudible), the other at [Jaeger]. Do you have any sense of the timelines they are looking at and what markets they are targeting or how that could impact timing? Any sort of color that you can give?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [97]

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You are talking about the competition from those terminals?

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Farah Panda, Citigroup - Analyst [98]

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Yes.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [99]

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Actually we have long-term tie-ups with other off-takers and we have presently loaded that on, because our entire capacity is booked. And as far as the new terminals are concerned, they have to look for the customers where they can tie-up with their customers for (inaudible) utilization.

So, that's where you can say we are more secure and whatever the tariff -- kind of tariff we are charging is the lowest. So, nobody can compete and beat us in terms of a Chinese tariff. So that we are [completing] and we think there is more or less (inaudible) terminal coming up. It's still a question of their survival instead of our survival.

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Unidentified Company Representative [100]

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Sort of just to supplement on this issue -- as we have been talking earlier that although we are conscious of the competition, we believe the Mundra terminal should be commissioned in the next couple of months. And the volumes it might target should be within the state of Mundra because of the connectivity issues.

And let us also look at the fact that LNG imports have been growing over the past few years at almost 8% to 10% per annum. So, they should be able to perhaps supply the market which is a growth market. On Jaeger we feel it will not be coming within this financial year, that is our assessment, because that FSRU which was brought in has gone for some repairs and modifications to (inaudible) conditions.

Thirdly, of course, the north terminal should be also getting commissioned in the next few months. But that, as you would appreciate, is in a market which is different from ours. So, this is our assessment of the LNG terminals coming up.

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Farah Panda, Citigroup - Analyst [101]

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Okay. Next year when you are full capacity, your 17.5 is online, you still think there should be enough room for you to grow even more than the 16-plus that you should be able to do this year? Is that a fair assessment?

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Unidentified Company Representative [102]

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Because of the growth in (inaudible) for imported gas and also a decline in the domestic gas, there has been imports. And most of these as [we are starting] to finance here, some took a hit because of the natural, one, the cost effectiveness; second, the kind of flexibility that (inaudible) are able to give because of its connectivity with high-pressure pipelines not only on the GAIL network but also the (inaudible) network. So, I believe it becomes a port of first call for any importer before he's out for other terminals.

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Farah Panda, Citigroup - Analyst [103]

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And just my last question, any update on your plans in Qatar? Is there anything concrete at all out there, because we keep hearing that there are plans but (multiple speakers)?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [104]

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We have been looking at the entire [spin] integration upward, downward, midstream. We have shared out plans with you just now about CGD and all. But they have been more on the discussion phase on the business development phase. There is nothing more concrete to add as of now to share with you. And it's not a question of only Qatar. It's maybe anybody else. There is a question that we are looking for some future tie-ups.

So, nothing is concrete as to (inaudible), but we don't want to name any QatarGas or anybody else. (Inaudible) also, because we are always looking for opportunities in a few sectors of (inaudible) section terminals having some say in that. But this is all really premature and (inaudible). We cannot command it, it is going on. So, it is not very concrete right now. As and when we are able to finalize it we will definitely disclose it to you.

(Inaudible) nothing is concrete as (inaudible) has told you. So, we cannot comment on that right now. Nothing is happening. We are always looking, we are open to any kind of tie-up, not only in Qatar. Against anybody else in (inaudible) also we can do, any (inaudible) Africa we can do. So it is all open. It's not as if we're in a very (inaudible) stage in QatarGas. It's not like that.

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Farah Panda, Citigroup - Analyst [105]

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Okay, thank you so much, sir.

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Operator [106]

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[Adir Dax], ICICI Securities.

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Adir Dax, ICICI Securities - Analyst [107]

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I just wanted to have some more clarity on the CGD which you have now bid for. So, do you expect that if you get some of these CGD areas that these CGD areas will lose money in the initial year?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [108]

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It's always difficult for any (multiple speakers).

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Adir Dax, ICICI Securities - Analyst [109]

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But it did lose money.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [110]

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No, did not lose money because (inaudible) the initial year. But of course it's something which is going to [rely on consumer] for natural gas. This is a segment which has to [rise] in the any case. As well as (inaudible) sector which will be consuming in the future the (inaudible) gas.

After then it is consuming almost 24 [MMSCMB] out of -- (inaudible) 144 [MMCMB] last year. So, we are hoping that (inaudible) will be -- our combined (inaudible) will be the most consuming sectors in the industry. We are hopeful that over the period of eight years it should begin (inaudible). And moreover we have done the visibility where we have already planned at least there should be 12% post (inaudible) on the PUDs. Then only we have (inaudible).

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Adir Dax, ICICI Securities - Analyst [111]

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That is over the life of the project, so initially it will hurt.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [112]

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Initially maybe then the (inaudible).

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Adir Dax, ICICI Securities - Analyst [113]

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What is the kind of volumes you are expecting in these (multiple speakers) potential of these markets?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [114]

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Yes, potential is not much that (inaudible). It's (inaudible) --.

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Adir Dax, ICICI Securities - Analyst [115]

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So, all those eight, seven markets you think are over the potential is about 1 million tons?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [116]

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Yes, 1 million tons we are expecting. And moreover this is a factor which is not really price sensitive. You see that in the case of [LPG] there's (inaudible) and people have responded to that. So, people are able to pay more (inaudible). They are likely to pay more because they are the customer who have already left the subsidiary (inaudible).

So, I think this is one of the [dominant] sectors for natural gas in the future. And [Total] has already indicated to you it will be around 150 over a period of eight years. This is the kind of assumption you can think about that.

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Adir Dax, ICICI Securities - Analyst [117]

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My second question was regarding once Kochi ramps up and this pipeline is done, then should we assume that a lot of this Gorgon volume will start moving to Kochi and more away from Dahej to Kochi?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [118]

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It should move, at least some portion of it for sure.

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Adir Dax, ICICI Securities - Analyst [119]

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Are the consumers in Bangalore likely to take that or they may not all take --- they might go for a combination of -- some may take spot? What is the likelihood there?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [120]

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From our perspective this volume is sold to the three off-takers as per our --.

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Adir Dax, ICICI Securities - Analyst [121]

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Yes, correct, correct, correct.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [122]

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So, they have to go to the consumers and (inaudible).

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Adir Dax, ICICI Securities - Analyst [123]

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So, how do you see the (inaudible) impact (inaudible)? Because I think even now probably at least some of these off-takers are using the LNG -- picking it up and they are using it themselves internally?

So, do you see the volumes for (inaudible) being used in picking up in Dahej? They will remain a fee where they are even after the Gorgon volumes and some other LNG will take place or will Dahej volumes go down somewhat?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [124]

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You see (inaudible) potentially book adjustment. It's a question of volume growth. So, when the initial demand comes after connectivity with Mangalore pipeline, no (inaudible) volume contract excludes (inaudible). It's an overall increment to the volume. So, I don't think that's a concern (multiple speakers).

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Adir Dax, ICICI Securities - Analyst [125]

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No, that is what I was trying to find out, whether I can just take today's volumes and (inaudible) 1 million tons. Should I just assume there the overall volumes because of that goes up by 1? Or it goes up by less than 1 because you lose something in the -- and entire volume is -- you will not be able to reach it? That's what I was trying to find out.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [126]

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Well, I think we have to wait for the Mangalore pipeline to get commissioned and to get connected before we can definitely (inaudible).

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Adir Dax, ICICI Securities - Analyst [127]

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But any [walk-off] that has been retained, something of that sort? Would coverage be retained or there will be some volume lost there? That's what I was trying to get. Just some color on that.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [128]

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With respect to figures to put a finger on any number before the consumers connect.

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Adir Dax, ICICI Securities - Analyst [129]

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So, as the Mangalore starts ramping up that is when you can give us more color?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [130]

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That's my method, yes.

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Adir Dax, ICICI Securities - Analyst [131]

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Okay, thank you very much.

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Operator [132]

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Ritesh Gupta, Ambit Capital.

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Ritesh Gupta, Ambit Capital - Analyst [133]

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Most of my questions have been answered. Just one, on the expenses side, is there any one-off which is there in the cost side? Because last reported you were accounting for ForEx losses and other expenses. So, is there any one-off this time as well?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [134]

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Factually I will -- (inaudible) that you (inaudible). They do a one-off actually.

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Ritesh Gupta, Ambit Capital - Analyst [135]

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And what is that?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [136]

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As we mentioned, there has been some (inaudible) because of the higher throughput. But from there there is no one-off [further].

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Ritesh Gupta, Ambit Capital - Analyst [137]

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Okay, so unlike last time where you had like closer to 200 crores of ForEx losses into your other expenses, this time there is nothing (inaudible).

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [138]

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Actually I think these numbers were contributing -- I mean I'm not sure. We have not also reported these numbers (inaudible) in the (inaudible). They all happen quarterly. Yes, in the last quarter what I can say is the ForEx -- I mean in this adjustment (inaudible), other income and the other is (inaudible). This is mostly (inaudible). So, there is no (inaudible) fluctuation from the last quarter.

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Ritesh Gupta, Ambit Capital - Analyst [139]

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Okay, okay. Thanks. That's all of my questions.

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Operator [140]

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Vikash Jain, CLSA.

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Vikash Jain, CLSA - Analyst [141]

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So, just on Kochi, you said that MRPL and OMPL will take time for ramp up. Roughly I mean what kind of timelines are we looking at? The ramp-up will be slow, one year, assuming that you're able to get to Kochi from January onwards if GAIL starts from December -- say it will take about a year for them to start taking volumes?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [142]

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Our understanding is six to nine months for them to be in a position to start taking the volumes in a significant manner.

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Vikash Jain, CLSA - Analyst [143]

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Okay, and the other thing was also on BPCL, you said that they are thinking about doing a (inaudible) and this could go up. What kind of a number are we looking at when it goes up? Say about 2.5 MMSCMD or so?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [144]

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Incrementally yes, (inaudible). But that timeline for that has not been finalized.

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Vikash Jain, CLSA - Analyst [145]

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Okay, so just what that brings us to, keeping in mind that about 0.8 MSSCMD or 0.2 million tons is roughly the swing volume of FSCT. And you said 0.75 million to 1 million tons could be the Mangalore section, the three consumers. So, that basically means that it's more like 1.5 million to 1.7 million tons assuming whenever BPCL expansion is. That is the kind of volumes that we are looking at say post about nine months to a year after the Mangalore pipeline expands. Are those numbers broadly right? I'm just adding them.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [146]

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Yes, I think that actually you are right. And there can be an incremental to that as I said one is small because it was also (inaudible) start picking up. But when the pipeline has information directionally you are (multiple speakers).

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Vikash Jain, CLSA - Analyst [147]

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And I think -- and you did indicate I think in the last call. So, are you looking at maybe a way to make things more affordable and to possibly attract more volume some way in terms of bringing down data for the more attainable level for Kochi if the need be, because to support more volume growth?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [148]

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If it's a requirement of the market we are happy to look at anything to support the market. But as of now we do not see the requirement to have a relook at the status.

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Vikash Jain, CLSA - Analyst [149]

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Okay. And just one more thing, this 0.75 million to 1 million ton demand -- this consumption in the Mangalore section, is it being marketed by GAIL or IOCL in the sense that the Australian volumes -- are they being marketed for this incremental demand?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [150]

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As I said earlier, so as far as [BLA] is concerned the Gorgon volumes are there with this reorganization. And right now a lot of that volume is coming today. And if they are able to market it to the consumers in Mangalore then it will go there. So (multiple speakers).

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Vikash Jain, CLSA - Analyst [151]

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Yes. But basically what you're saying is that you are not really concerned or privy to that discussion ad they are doing it.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [152]

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(Inaudible).

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Vikash Jain, CLSA - Analyst [153]

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Okay, thank you so much, sir.

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Operator [154]

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Rohit Ahuja, BOB Capital Markets.

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Rohit Ahuja, BOB Capital Markets - Analyst [155]

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First, I wanted clarity on the competitive terminals like you mentioned Mundra and [Nor]. There were some media reports saying Mundra initially only about 1.5 MMT capacity will be accessible. And Nor also the pipeline that they bid for is not going to be ready, so they are going to supply to local areas (inaudible) constrained. So, could you specify how much will be available this year and next year and beyond that how will be the ramp-up for these capacities?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [156]

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I would request you to be talking to those terminals. But to give you a sense of whatever we understand, and as we have been saying, and Nor is a totally different market for us. And Nor is connected to the natural gas (inaudible), so we do not see it as a competitive terminal. Whatever volumes they're able to take (inaudible) completion of their pipelines. I think primarily they are targeting the CPCL (inaudible) to start with. And then (inaudible).

Mundra also -- yes, we also understand that there are capacity constraints in the pipeline and they may not be able to take very significant volumes to start with. From, again, a competition perspective we have been saying that because of the growth which is happening in the Indian markets some volumes from that growth area will go to Mundra.

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Rohit Ahuja, BOB Capital Markets - Analyst [157]

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And also (inaudible) mentioned your tariffs are going to be much lower than Mundra. We also heard about another agreement being signed by GAIL with [Adani] for [Downdrapor] terminal. Could you give some color like how are the tariffs as compared to Dahej in terms of at what percentage they are higher or some kind of color on that?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [158]

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I don't think they have published their tariffs, or whether they are available publicly. But I think you have to take your assessment that there were new terminals coming up, spending INR500 crores plus. Then the kind of tariffs too looking at traditional (inaudible) would be.

And they certainly require much more money to (inaudible) much higher throughput. Both of which perhaps are not possible in the current scenario to even achieve their minimum threshold.

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Rohit Ahuja, BOB Capital Markets - Analyst [159]

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So, would you say your current tariffs at Kochi, would they be a benchmark for these terminals because they'll be operating on low utilization initially?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [160]

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That we won't be able to comment. We do not know how (multiple speakers) strategy.

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Unidentified Company Representative [161]

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Once they have sunk in so much money (inaudible) variable cost (inaudible) on that.

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Rohit Ahuja, BOB Capital Markets - Analyst [162]

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Right, but would they be like working around a 10% IRR assumption for when (inaudible) tariffs or --?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [163]

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This is a hypothetical question. So, (multiple speakers). We won't be able to comment on that.

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Rohit Ahuja, BOB Capital Markets - Analyst [164]

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Just wanted color on the tariff mechanism you have across the board.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [165]

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(Inaudible) and we'll answer your question.

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Rohit Ahuja, BOB Capital Markets - Analyst [166]

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No problem. Thanks for this.

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Operator [167]

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Sabri Hazarika, Emkay Global.

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Sabri Hazarika, Emkay Global - Analyst [168]

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About this 2.5 million ton expansion, have you tied up any tolling parties for that or are you planning to do it entirely on spot?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [169]

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We are working towards as we said, the current tie-ups are significantly higher than the current capacity. And as our market demand grows we are also seeing spot volume requirements coming up in the market. Now whether spot is bought by (inaudible) for (inaudible). But we have not, as of now, tied up any significant contracts, but we are working towards that.

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Sabri Hazarika, Emkay Global - Analyst [170]

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So, where are you seeing the demand coming from for this 2.5 million tons in the sector? Is there anything -- any specific projects or anything?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [171]

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The [terminal] growth has been as you have seen the [PPCN] numbers in all the sectors across. So, we will not be able to pinpoint because we are not actively marketing to these sectors. But we have seen fertilizer continues to take robust volume, [power sector] has also been consuming little volumes and CGD as our (inaudible) mentioned has been a significant user of our LNG. And there has been a growth in these sectors.

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Sabri Hazarika, Emkay Global - Analyst [172]

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Okay. And just last two clarifications on the numbers. For Gorgon you said 18 TBTU was the total volume of which Kochi and (inaudible) long-term is -- Kochi (inaudible) and (inaudible) long-term is Gorgon and minus 18 would be the (inaudible) portion. That's right?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [173]

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That's right. Firstly only it is around 17, slightly lower than 17.

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Sabri Hazarika, Emkay Global - Analyst [174]

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Around 17 for this quarter and it was around 18 for last quarter, right? Okay, and second, on the CGD you said at around IND6,000 crores kind of number you said for eight year. So, can you just clarify on that?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [175]

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Yes, these are the numbers we have given that total (inaudible) CGDs are there, which we have -- for which we have permitted the [base]. And likely capacity will be around (inaudible) crores. And the likely consumption in those CGDs will be around 1 MMBTU.

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Sabri Hazarika, Emkay Global - Analyst [176]

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In five years?

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [177]

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In eight years.

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Sabri Hazarika, Emkay Global - Analyst [178]

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In eight years. Okay, sir, fair enough. Thank you so much.

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Operator [179]

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Ladies and gentlemen, that's the last question. I now hand the conference over to the management of their closing comments.

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Vinod Mishra, Petronet LNG Ltd. - Director of Finance [180]

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Okay, thank you very much to all and this has been a wonderful session for all of us and I think all the queries must have been answered. And you people are in fact making already [a mess] in the market. So, if there is any question or query, we are always there to answer anything.

And hopefully our expectations are high, people's expectations are high. So, we are trying to prove that we are able to meet the expectations of the market. And we will continue to strive towards increasing the shareholder value in our Company and let us hope for the best in future. Thank you very much.