Indian Oil Corp and Adani Gas Ltd plans to invest about Rs 9,600 crore (US$ 1.37 billion) in rolling out infrastructure that will be used for retailing CNG to automobiles and piped natural gas to household kitchens in 10 cities. The companies have recently won licences for these cities. Both firms have formed a joint venture in 2013 with holding equal shares. The venture is given name Indian Oil and Adani Gas Pvt Ltd (IOAGPL), which is for execution of city gas distribution (CGD) projects in numerous cities in the country.
IOAGPL has taken part in various bid rounds for city gas licence conducted by Petroleum and Natural Gas Regulatory Board (PNGRB). It has won the licence for 19 geographical areas (GAs).
According to the notice published by IOC, “In line with PNGRB regulations, authorization to the successful entity is issued by PNGRB only after the entity submits Performance Bank Guarantee (PBG) from any scheduled bank for a pre-determined amount for specific GA.
The shareholders meeting will be held in Mumbai on August 28.
City gas distribution (CGD) projects, require retailing of CNG to automobiles and marketing the piped natural gas to household kitchens for cooking along with to the industries that require fuel. These are usually long duration projects in which demand requirement is steady and revenue generation is only in the later years.
The 8 Gas project which have been started in Chandigarh, Allahabad, Panipat, Daman, Udham Singh Nagar, Ernakulam, Dharwad and Bulandshahr and the project in South Goa will start shortly.
In the period 2018-19, IOAGPL has won 10 more GAs and in development of CGD Project in these GAs would need capital expenditure of approx. Rs 9,600 crore (US$ 1.37 billion) to meet the required bid numbers.
According to the company, the funding needed for capital expenditure must be met from equity contribution or debt financing. The revenues that are generated from the commissioned Gas is insufficient to handle huge financial commitment in the form to achieve committed targets.
IOAGPL plans to participate in the bidding in coming time for CGD Projects and it may seek promoter’s assistance to provide required corporate guarantees (CGs) in favour of banks for issuance of PBGs to PNGRB on behalf IOAGPL.
The company also plans to appoint a full time Director under section 185 of the companies Act 2013. The support of Members is required through Special Resolution to deliver CGs in future in favour of banks on behalf of IOAGPL for issuance of PBGs in favour of PNGRB for CGD Projects in various GAs, up to a limit of Rs 100 crore.