Tariff approved by PNGRB beats estimates…
Petroleum and Natural Gas Regulatory Board (PNGRB) in an order dated
September 11, 2012, has reduced the provisional pipeline tariff for GSPL’s
high pressure Gujarat gas network by 12.5% to | 0.9 per scm (GCV of
9500 kcal per scm) as against its effective pipeline tariff of | 1 per scm
(with retrospective effect from November 2008). The tariff set by PNGRB
is 39.3% lower than the tariff submitted by GSPL yet higher than our
assumption of | 0.75 per scm for FY13E and FY14E. PNGRB has asked the
company to treat the system use gas (SUG) and unaccounted gas as
operating expense and has disallowed the company from recovering the
cost of SUG (0.3% of transported volumes) from customers (both these
orders to be implemented with retrospective effect). Overall, this order
has a positive impact and we maintain our BUY rating.
http://content.icicidirect.com/mailimages/ICICIdirect_GujaratStatePetronet_EventUpdate.pdf
Net impact of order positive
According to the order, the tariff charged by the company has ranged
between | 0.1 per scm and | 1.65 per scm for different customers, which
works out to an average tariff of | 0.97 per scm. However, after adding
the cost of SUG and unaccounted gas charged from customers, GSPL
realised an average tariff of | 1.03 per scm.
We have tried to calculate the possible retrospective impact after
assuming the decrease in tariff for low pressure pipelines to be same. The
retrospective one-time impact of the differential tariff of | 0.13 per scm
then works out to ~ | 511 crore pre-tax and ~| 337 crore post tax. The
terms of adjustment are yet to be decided and there could be revision in
the retrospective impact once clarity emerges on certain issues.
The apportionment of the levelised tariffs over all tariff zones has to be
submitted by GSPL for Board’s approval within 10 days from the issue of
the order. We have revised our FY13E and FY14E estimates to | 8.6 and
| 9.3, respectively, to reflect the pipeline tariff fixed by PNGRB. We have
valued GSPL based on DCF (WACC-12.1%, terminal growth-2%) to arrive
at a price target of | 92.
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