PETRONET - PETRONET LNG LTD. Share Price

Management Outlook:
Petronet LNG anticipates sustained growth driven by expanded Dahej terminal capacity (5 MTPA by June 2025), targeting 40-50% capacity booking. Long-term LNG contracts (post-2026) from GAIL, IOCL, and GSPC are expected to boost volumes. Global LNG prices are projected to soften to $7-$8 post-2027 due to supply glut, enhancing India's demand. Kochi terminal utilization (20-25% currently) may rise to 40-50% post-connection to the national gas grid (expected mid-2025). The petrochemical project (commissioning by 2027) involves a Rs.3,000"“3,500 Cr annual capex from FY26, with ethane/propane sourcing strategies under negotiation.

Key Points:

1. Volumes: Q3 FY25 throughput at Dahej was 213 TBTU (9M FY25: 686 TBTU, +6% YoY). Kochi utilization improvement hinges on pipeline connectivity.
2. Expansion: Dahej's 5 MTPA expansion to enhance spot LNG handling; discussions ongoing for capacity bookings.
3. UOP Charges: Rs.1,666 Cr total dues (provisioned Rs.702 Cr). CY21 dues (Rs.360 Cr) to be recovered via bank guarantees by March 2025. Defaults reduced to BPCL (Rs.117 Cr in CY24).
4. Financials: Q3 PAT at Rs.867 Cr (vs. Rs.848 Cr QoQ). Inventory/trading gains: Rs.83 Cr/Rs.26 Cr.
5. Pricing & Tax: Spot LNG prices to stay $12-$14 near-term. VAT (15% in Gujarat vs. 5% in Kerala) remains a hurdle; GST inclusion sought.
6. Petrochemicals: Capex focus on propane dehydrogenation plant; third jetty construction underway for feedstock imports.
7. Demand Sensitivity: Utilization tied to LNG price competitiveness vs. alternate fuels; $7-$8 pricing post-2027 could spur demand.

Management remains confident in maintaining 95-100% terminal utilization post-expansion, driven by India's gas demand and infrastructure upgrades.

Question 1: "So, I think my first question is on the volume side. So, while your total volumes have still been decent, but what we are seeing is that the long-term volumes have been below 100 TBTU, it used to be higher than that in FY '23-'24. So, what's driving this bit of slowness on the long-term side for Dahej? Any thoughts?"
Answer: Long-term volumes are tied to scheduled cargo arrivals and remain stable year-round. The slight dip compared to previous quarters reflects scheduling adjustments, not a structural decline. Spot/short-term volumes fluctuate with LNG prices, but long-term commitments are unaffected.

Question 2: "Second question is on the UOP dues, any progress there that we noticed that there is another one for CY '24 as well, INR 117 odd crore. Any progress on what the off takers are now willing to pay? You had a bank guarantee. Can you enforce that and any further thoughts there?"
Answer: The INR 117 crore UOP dues (CY24) relate to BPCL's default. Bank guarantees are valid until March 31, 2025, and will be invoked if payment isn't received by then. For CY21, INR 315 crore is provisioned, with recovery expected by March 2025.

Question 3: "First question is on Dahej Terminal, you are just around the corner on the 5-million-ton expansion and the current capacity kind of at least in Q3 has not achieved 100%. So, I was just thinking what is the plan on the ramp up of this 5 million ton and how much of this is under firm offtaker agreements?"
Answer: The 5 MTPA expansion (operational by June 2025) aims to boost spot cargo handling. Capacity bookings are underway, targeting 40-50% utilization initially. Utilization depends on LNG price competitiveness; softer prices (expected late 2025) could drive higher demand.

Question 4: "In the last two years, GAIL and IOCL and GSPC has signed a few of the long-term contracts, largely starting from 2026. Is any of this volume going to come to Dahej or Kochi?"
Answer: A significant share of new long-term volumes (post-2026) is expected at Dahej due to its expanded capacity and connectivity. Discussions are ongoing with off-takers to book ~40-50% of new volumes at Dahej, leveraging its proximity to demand centers.

Question 5: "What is the tax structure for LNG imports, and how would GST inclusion impact Petronet?"
Answer: LNG currently faces 15% VAT in Gujarat (5% in Kerala) but isn't under GST. Inclusion under GST would eliminate cascading taxes, reduce consumer costs, and boost demand. The company is advocating for this change with ministries.

Question 6: "How do marketing margins work for spot vs. long-term contracts?"
Answer: Marketing margins apply only to spot/short-term sales. Long-term contracts (e.g., Qatar, ExxonMobil) are back-to-back with no margin; revenue comes solely from regasification fees.

Question 7: "What is the Capex outlook for petrochemicals and non-petchem projects?"
Answer: FY25 Capex: ~INR 1,500 crore (INR 340 crore for petchem YTD). FY26 Capex: INR 3,000"“3,500 crore for petchem (70% debt-funded) and ~INR 1,000 crore for non-petchem (e.g., third jetty). Petrochemical startup is targeted for late 2027.

Question 8: "What is the timeline for global LNG price moderation and its impact on utilization?"
Answer: Spot LNG prices are expected at $12"“14/MMBtu short-term, easing to $7"“8/MMBtu post-2027 as new global liquefaction capacity (200+ MTPA) ramps up. Lower prices will drive higher utilization, especially in price-sensitive Indian markets.

Question 9: "What is the status of UOP recoveries and provisioning?"
Answer: Total UOP dues: INR 1,666 crore (INR 702 crore provisioned). CY21 dues (INR 360 crore) are non-recoverable now; CY22/23 dues (INR 695 crore and INR 610 crore) allow cargo adjustments until Dec 2025/2026. Waivers totaled INR 184 crore in 9MFY25.

Question 10: "What is the utilization outlook for Kochi terminal post pipeline connectivity?"
Answer: Kochi-Bangalore pipeline completion (mid-2025) will connect to the national grid, enabling gas swapping. Utilization could rise to 40"“50% (vs. ~20% now) as customers prioritize cheaper Zone 1 tariffs over distant sources like Dahej/Dabhol.