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French oil and gas giant Total S A has acquired a 37.4% stake in Adani Gas Ltd , the listed gas unit of the diversified Adani Group, for ₹6,155 crore as it bets big on India’s shift towards a gas-based economy to address climate change concerns by using cleaner and greener fuels.
The deal gives Total joint control of Adani Gas . The acquisition is the largest foreign direct investment in India’s city gas distribution (CGD) sector.
Total, the world’s second-largest LNG company, will purchase 37.4% shares in Adani Gas through a tender offer to public shareholders to acquire up to 25.2% shares at ₹149.63 per share, subject to applicable regulations and purchase the residual shares from the Adani Family.
Also read: Adani Gas standalone net up 44%
The Adani family and TOTAL SA shareholders will ultimately hold 37.4% each and public shareholders the remaining 25.2%.
The stocks of Adani Gas surged 13.37 per cent to Rs 156.05 in the 30-share BSE index Sensex.
As part of the acquisition, Total will bring its LNG and retail expertise and also supply up to 3 mt of LNG to Adani Gas. Total and Adani will also establish a joint venture to market LNG in India and Bangladesh.
Taking into account the sale of its 26% equity in the LNG regasification terminal at Hazira in Gujarat in early 2019, the gas partnership with Adani represents a net acquisition cost for Total of about $600 million over 2019-2020, Total said in a statement.
“This partnership with Adani is cornerstone to our development strategy in this country”, said Patrick Pouyanné, Chairman and CEO of Total.
“Energy needs in India are immense and the Indian energy mix is key to the climate change challenge. Firmly investing to develop the use of natural gas in India is in line with Total’s ambition to become the responsible energy major. The natural gas market in India will have a strong growth and is an attractive outlet for the world's second-largest LNG player that Total has become,” he added.
The deal is part of Total’s plan to invest as much as $18 billion a year between 2019 and 2023 to deliver growth, mostly through higher LNG sales of 50 million tonnes (mt) a year by 2025, according to a September 2019 presentation on ‘Strategy and Outlook’.
“Total’s investment in Adani Gas reinforces India’s natural gas and demand potential,” Gautam Adani, Chairman, Adani Group, said. “The partnership will derive significant synergies between Adani’s capabilities of developing world-class assets and Total’s global best practices as well as leveraging business synergies across LNG, fuel retail and city gas distribution,” he added.
Total plans to open 4,000 service stations in new markets by 2025 of which 1,000 would be in India, it said in the presentation.
City Gas Distribution is a natural extension of the plans of both partners to invest in infrastructure and assets worth over US$1 billion, which span Liquefied Natural Gas (LNG) infrastructure and marketing and fuel retail business, announced in October 2018.
The expanded partnership will develop regasification terminals, including Dhamra LNG, on the East coast of India and market LNG to the Indian customers.
Read more: Total picks up 50 per cent stake in Dhamra LNG Terminal
Both partners would make significant investments in the next 10 years across the businesses to develop India’s gas infrastructure, distribution, marketing businesses with a presence in over 15 states reaching out to approximately 7.5% of India’s population and setting up global-scale LNG, gas distribution and fuel retail infrastructure in India.
As part of the existing Joint Venture, Adani and Total in the coming years will target to build a fuel retail network of 1,500 retail stations, on the main roads of the country, such as highways and intercity connections.
Adani Gas will also be setting up 1,500 CNG stations for gas distribution over the next 10 years in its and its joint ventures’ geographical areas.
The Adani family currently owns 74.8% stake in Adani Gas, which was listed on November 5 last year.
The deal comes less than a year after Total signed a memorandum of understanding (MoU) with the Adani Group on October 17 last year to form a joint venture for running liquefied natural gas (LNG) regasification terminals at Mundra and Dhamra and roll out 1,500 fuel stations over ten years to tap demand in the world’s fastest-growing energy market.
India is the world’s largest energy market after China and the Unites States but is the fastest growing among the three with a growth rate of 5 per cent. The government has outlined plans to more than double the share of natural gas in India’s overall energy mix from 6.2% to 15% by 2030 driven by abundant supply, competitive pricing, infrastructure expansion and regulatory initiatives to tackle stringent emission norms and meet global climate change commitments.
Adani Gas operations
Adani Gas is India’s biggest private city gas distribution company with exclusive authorisation to develop infrastructure, operate and market gas in 38 geographical areas (GA) and supply piped natural Gas (PNG) to residences, commercial and industrial units as well as compressed natural gas (CNG) to automobiles, catering to about 7.5% of India’s population covering 71 districts in 15 states.
Currently, Adani Gas operates in five geographical areas on its own with another 14 GA’s under implementation. It operates in another 8 GA’s through a joint venture with Indian Oil Corporation with 11 more under execution.
The company runs a pipeline network of over 6,500 kms, more than 84 CNG stations with a customer base over 403,000 spread over Ahmedabad, Vadodara, Faridabad and Khurja.
Adani Gas sold 1.5 million metric standard cubic metres per day (mmscmd) of CNG and PNG in FY19, clocking revenue of ₹1,823.49 crore and net profit of ₹228.71 crore.
The infrastructure conglomerate is also constructing a 5 mt capacity LNG import terminal at its Dhamra port in Odisha. The Group is also building a 3.2 mt LPG terminal at Mundra port and a 1.2 mt LPG terminal at Dhamra.
The government has created entry barriers by granting 8-years marketing exclusivity and 25 years network exclusivity to CGD firms with no regulation around marketing margin and product pricing.
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