Gujarat State Petronet — Weak Demand, But Tariff, Expansion Issues To Be Resolved Over FY23: ICICI Securities
With a high probability of negligible tariff decline, GSPL’s standalone business value itself can see an appreciation.
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ICICI Securities Report
We met with the senior management of Gujarat State Petronet Ltd. for an update on business and the outlook ahead. Key takeaways:
Demand prospects remain muted in Gujarat across sectors, be it power or city gas distribution. As a result, contracted transmission flows have shrunk to less than 27 million metric standard cubic meter per day in Q2 FY23-to-date and are unlikely to see much traction in the near term.
Lack of traction would be due to the widening differential between liquefied petroleum gas and gas, and weak economics of gas usage for power at current liquefied natural gas rates. Nevertheless, ‘use or pay’ charges and some opportunistic trading of cargoes bought in June 2022 at less than $30/metric million British thermal unit (in an environment of $40-45/mmbtu spot prices) are likely to help keep earnings resilient over the near term.
In recent months, the reconstituted Petroleum and Natural Gas Regulatory Board has moved ahead on long-pending issues with respect to Gujarat State Petronet tariff and capex inclusions.
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