NTPC: PETRONET-LNG SAYS NO TO 26%, BUT WHY?

Vol 2, PW 23 (09 Dec 98) Midstream & Downstream
     

Nothing would give Petronet-LNG greater satisfaction than to operate as a private sector corporation.

This is key to understanding the acrimonious dispute underway between Petronet-LNG and the National Thermal Power Corporation (NTPC), a state-owned power supplier. NTPC is demanding a 26% equity stake in the Petronet-LNG holding company, on the grounds that it is the companys largest potential customer, especially in Kerala.

It also wants a 26% equity stake in the joint venture company which will be set up to build the Cochi terminal. Petronet-LNG fiercely opposes both propositions and is offering no more than 10%.

Privately, a top source at Petronet - LNG tells this report it does not want another PSU with an equity stake in the company as this will tilt the balance towards PSUs and make it accountable to a long list of (dreaded) government-run agencies like the Central Vigilance Commission (CVC), the Comptroller & Auditor General (CAG) and Central Bureau of Investigation (CBI). It would much rather have the freedom to operate as a private player.

This is impossible, however, if NTPC were to take a 26% equity stake. The reason for this is simple: 50% of Petronet-LNG is owned by four PSUs: ONGC, Indian Oil Corporation, GAIL and Bharat Petroleum.

Each have 12.5% and none are prepared to shed equity to accommodate a 26% stake by NTPC. They might, however, be prepared to shed 2.5% each to allow NTPC a 10% stake.

LNG Summit