India Infrastructure Trust, an infrastructure investment trust (InvIT) sponsored by Brookfield, will acquire the East West Pipeline for ₹13,000 crore.
The pipeline is owned by Reliance Industries Ltd’s promoters’ family. Brookfield has filed the preliminary placement memorandum to this effect.
India Infrastructure Trust, an InvIT, was set up by Brookfield as sponsor and 90% investor. As a part of the transaction, the InvIT would acquire 100% equity interest in Pipeline Infrastructure Private Ltd. (PIPL) which currently owns and operates the pipeline.
Following this acquisition by Brookfield, the existing pipeline usage agreement has been reworked.
Now, reserved capacity will be reduced to 33 MMSCMD against 56 MMSCMD and any unutilised capacity payment by RIL will be the difference between ₹500 crore a quarter and actual revenue earned by PIPL. Besides RIL will continue to be entitled to transport gas, either by itself or of any customers, free of cost against any outstanding unutilized capacity payments.
At the current approved final tariff of ₹71.66/MMBTU, if the average volume of gas transported is 22 MMSCMD, RIL will not be liable to make unutilised capacity payments.
The next review of tariff in April 2020 will also consider upward revision to tariff arising from determination of lower revised capacity of the pipeline.
“Considering the new investments in the upstream sector in the KG basin, and the growing LNG imports, ability to swap gas, the average volume expected to be transported through the pipeline is expected to be significantly higher compared to the current levels,” RIL said in a statement.
RIL will be entitled to a significant participation in the net earnings of PIPL under the mechanism specified in the pipeline usage agreement.
RIL’s current investment in preference shares valued at ₹4,000 crore will continue and will be converted into equity at the end of 20 years.
Further, at the end of 20 years, RIL has the right to acquire equity shares of PIPL held by the InvIT at an equity value of ₹50 crore, the statement added.
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