The proposed merger of three Gujarat government energy companies with Gujarat Gas will help synergise and ensure a long-term sustainable future for the new entities born out of the process, said Milind Torwane, managing director of Gujarat Gas. However, once the merger concludes, the four-decade-old Gujarat State Petroleum Corporation (GSPC) will cease to exist.
Pointing to reasons for the proposed reorganisation of the energy business held by entities --- GSPC (exploration, production and gas trading arm), Gujarat State Petronet Ltd or GSPL (gas transmission entity), GSPL Energy Ltd or GEL (gas trading firm) and Gujarat Gas (City Gas Distribution entity) --- Torwane told businessline, “When the last restructuring happened of GSPC, the three companies were not on equal footing. GSPC was still in debt, and Gujarat Gas was newly acquired. Over the last 7-8 years, GSPC, GSPL and Gujarat Gas are debt free. The average annual PAT (Profit After Tax) is in the range of ₹1,000-1,200 crore. This has been the case for the last 2-3 years. Now there is equal footing in these three companies and any combination --- merger, demerger or amalgamation --- will not burden the other companies.”
“Secondly, looking at the challenges in the energy sector, it is better to synergise within the Group and grab the opportunities. The challenge will be to cater to the new energy market. The energy scenario is changing fast, and there is a growing demand for energy,” added Torwane, the MD of GSPC and the joint managing director of GSPL. After the merger with Gujarat Gas, there will be no change in the employee strength. Currently, Gujarat Gas has about 1200 employees, while there are 250 employees each at GSPC and GSPL.
GSPC will cease to exist
In the year 2023-24, GSPC’s turnover stood at ₹18,452 crore, GSPL at ₹2,031 crore, GEL at ₹131 crore and Gujarat Gas at ₹16,293 crore. “Till we get approval from the regulators including Securities and Exchange Board, all three companies --- GSPC, GSPL and GEL --- will continue to exist as they currently are. Once approvals come, there will be only two companies --- Gujarat Gas, which will handle exploration, trading and city gas distribution and GSPL Transmission Ltd, which will take care of the transmission business. Gujarat State Petroleum Corporation Ltd (GSPC) will cease to exist,” Torwane said. Incorporated initially as Gujarat State Petrochemicals Ltd in 1979, GSPC was behind the controversial 20 trillion cubic feet (tcf) of gas discovery in the KG Basin in 2005. Later, the company acquired Gujarat Gas from British Gas in 2013.
When asked about the lessons from GSPC’s KG Basin initiative, the official said, “GSPC now has clean books. Taking lessons from the KG basin exercise, the board decided to farm out loss-making E&P units. So, at present, all our units are profit-making.” In 2016-17, GSPC sold its 80 per cent stake in the KG basin (NELP-III Block KG-OSN-2001/3) for ₹8,100 crore to ONGC.
Gujarat Gas to have additional strength
After combining with GSPC, Gujarat Gas, which was only a CGD entity, is expected to garner “additional strength” and will have a presence in the upstream business, which includes sourcing of natural gas. “The customer base will be widened. The revenues and margins will be on the higher side. Earlier, margins used to be distributed between Gujarat Gas and GSPC. Now it will be just one company sourcing the gas and directly passing it on to the end-users. So these are advantages,” the official said.
There won’t be significant changes in volume or revenue for the transmission company that will be born out of this process. However, GSPL India Gasnet Ltd --- which owns the 765-km Mehsana-Bhatinda natural gas transportation pipeline --- and GSPL India Transco Ltd --- which was formed to set up a 1450-km pipeline from Krishna Godavari basin in Andhra Pradesh to Bhilwara in Rajasthan --- will be transferred to GSPL Transmission Ltd.
Other entities where GSPC has investments will pass on to Gujarat Gas. This includes GSPC LNG Ltd, which has a 5 million tonnes per annum LNG terminal at Mundra, two gas-based power plants – 700 MW of GSPC Pipavav Power Co Ltd and 350 MW Gujarat State Energy Generation Ltd – and a few renewable power plants of 100 MW.