Offer is for $100 m FCCBs which translate to 7.5-12.5% equity

Richa Mishra

New Delhi, Dec. 14

The consultants appointed by Qatar Investment Agency (QIA) is said to have completed the due diligence exercise for Qatar to buy stake in Petronet LNG Ltd (PLL). A senior official said, "They have completed the due diligence. They have to come back to us before the year's financial closure."

Response awaited

Indications are that PLL expects a response from Qatar shortly. India had made an offer of an equity stake to Qatar during a meeting between the Qatar Finance Minister, Mr Yusuf Hussain Kamal, and the Union Petroleum Minister, Mr Murli Deora, in October.

This was even as India was seeking an additional LNG supply from Qatar. The possibility of such deals coming through sent the PLL stock surging by 20 per cent on October 5 closing at Rs 57.90. PLL stock on Thursday closed at Rs 49.80 on BSE.

Qatar was offered an opportunity to subscribe for Petronet's $100-million foreign currency convertible bonds (FCCB), which upon conversion into equity shares would translate into 7.5-12.5 per cent equity stake.

Decision

Only after the due diligence is done would it be decided which Qatari Government agency would be used for the purpose, the official added. Petronet had earlier too offered Qatar a stake in the company.

However, Qatar did not show much interest at that time. Qatar Investment Agency is now looking at investing in energy-related projects in India.

As regards the ongoing negotiations with Qatar for short-term supply of 1.25 million tonnes of LNG from that country, the official said a discussion on pricing was under way.

While Qatar is understood to have lowered its price to around $7-8 per million British thermal unit (mBtu) from its earlier offer, India is seeking a price closer to $5 mBtu, according to market sources.

Dahej terminal

Petronet would receive the 1.25 mt of LNG at its Dahej terminal. India currently has a contract to buy 7.5 mt of LNG a year from Qatar. However, the current supply from Qatar is only five mt. Petronet has a 25-year contract to buy LNG from Ras Laffan Liquefied Natural Gas Co Ltd II (RasGas II), a joint venture between the state-run Qatar Petroleum and Exxon Mobil.

Through this contract, Petronet currently imports five mt at its Dahej terminal in Gujarat and would start importing 2.5 mt more from 2009.

Asked whether this 1.25 mt was part of the 2.5-mt LNG expected from Qatar in 2009, the official said, "This 1.25 mt of LNG was an additional short-term contract and not part of the already contracted 2.5 mt."

(This article was published in the Business Line print edition dated December 15, 2006)
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