Oil Min rejects oil PSUs buying ADB stake

The board of all the four promoter companies approved exercising the first right of refusal over ADB stake and cash buyout of the multilateral lending agency’s interest.

However,the ministry,whose Secretary is the Chairman of Petronet,vetoed the proposal at a March 26 meeting,sources privy to the development said.

“Keeping in view the specific approval of the Cabinet on restricting the aggregate Government/PSU participation to 50 per cent of paid up capital for providing the desired flexibility to Petronet LNG Ltd to operate in a dynamic LNG import market,the existing shareholding structure in the context of PSU participation,should be retained,” minutes of the March 26 meeting stated.

If the ADB stake goes to state firms,Petronet would come under scrutiny of official auditor CAG and CVC because of PSU holding exceeding 50 per cent,something that the company and the ministry was opposed to.

The ministry has instead asked the PSUs to offer the ADB stake to a strategic investor like a LNG supplier,they said.

“The Boards of respective promoter companies would deliberate and decide upon an option which would add long-term value to the business of Petronet,” the minutes stated.

It remains to be seen how the state firms,whose boards have approved of buying ADB stake in proportion of their shareholding,would justify the move.

Sources said the ministry is keen on offering the ADB stake to Qatar in lieu of getting an additional 5 million tons a year of LNG supplies on a long-term contract.

But,companies like GAIL are opposed to ideal unless Qatar agrees to sell LNG at a discount to its current asking price of an equivalent to 14.5 per cent of the ruling global oil price,which translates into over four times the predominant domestic price of USD 4.2 per million British thermal unit.

Oil Minister S Jaipal Reddy is believed to be against the idea of overriding the interest of GAIL,IOC,BPCL and ONGC.

Gaz de France International (GDFI) holds a 10 per cent in PLL and also has the right of first refusal over ADB’s stake.

But the French energy giant has decided to waive this off.

ADB’s 5.2 per cent stake is to be split equally among the four PSU promoters.

The price payable to ADB would be the lower of either the average of the weekly high and low of the closing price of Petronet during the six months preceding the date of purchase,or the average of the weekly high and low of the closing price of Petronet during the last two weeks preceding the date of purchase.

Sources said the legal opinion taken by the promoters states that Petronet would not be considered a government company following an acquisition of additional equity by the PSUs from ADB.

PLL would not turn into a PSU following the acquisition of stake by the PSUs because neither of the conditions specified in Section 617 of the Companies Act would be met.

The conditions are that at least 50 per cent of the paid-up capital of Petronet should be held by the central government or by one or more state governments,or Petronet should be a subsidiary of a government company.

The state-run firms have argued that the acquisition of shares offered by ADB will result in securing a controlling interests in Petronet.

As Petronet has got long-term plans to increase its capacity in more locations,additional investments in PLL will help the promoters grow their gas business,they said.

Also,on their initial investment of Rs 99.37 crore,the promoters have been rewarded by a dividend of Rs 77.3 crore till date. Besides,the investment has appreciated manifold from Rs 99.37 crore to Rs 1,500 crore at current market prices.

The ADB had in fact first proposed to exit Petronet in 2008,but then company CEO Prosad Dasgupta was in favour of a third party like Chevron or steel baron Lakshmi Mittal’s group buying the stake instead of the four promoters.