Billionaire Mukesh Ambani led Reliance Industries is going to sell its East-West Pipeline to Brookfield for Rs 13,000 crore. According to the deal, Brookfield sponsored InvIT will acquire 100% equity interest in Pipeline Infrastructure Private Limited (PIPL), which owns and operates the pipeline.
Reliance Industries in a press release said that Brookfield has filed the preliminary placement memorandum, in terms of which India Infrastructure Trust, an InvIT set up by Brookfield as Sponsor and 90% investor, will invest Rs. 13,000 crore to acquire the East West Pipeline.
As per the details of the usage agreement after Brookfield’s acquisition, Reliance Industries said that the reserved capacity has been reduced to 33 MMSCMD (Million Metric Standard Cubic Meter Per Day) against the 56 MMSCMD (Metric Standard Cubic Meter Per Day).
Any unutilized capacity payment by RIL would be the calculated difference between Rs 500 crore a quarter and actual revenue earned by PIPL. RIL said they would continue to be allowed transport gas, either by itself or of any customers, free of cost against any outstanding unutilized capacity payments.
The statement mentioned a current approved final tariff of Rs. 71.66/MMBTU, if the average volume of gas transported is 22 MMSCMD, RIL will not be liable to make unutilized capacity payments. The further review of tariff in April 2020 will also consider upward revision to tariff arising from determination of lower revised capacity of the pipeline.
After taking into account the new investments in the upstream sector in the KG basin of the firm and the flourishing LNG imports. The ability to swap gas and the average volume expected to be transported through the pipeline is may be significantly higher as compared to the current levels.
The firm added that RIL would be entitled to a significant participation in the net earnings of PIPL under the mechanism specified in the pipeline usage agreement. RIL’s current investment in preference shares valued at Rs 4,000 crore to continue and will be converted into equity at the end of 20 years. After a completion of 20 years, RIL said that it has the right to acquire equity shares of PIPL held by the InvIT at an equity value of Rs 50 crore.