This story is from October 14, 2019

Total buys 37% in Adani Gas for Rs 5,700 crore

Total buys 37% in Adani Gas for Rs 5,700 crore
NEW DELHI: French oil and gas major Total SA on Monday announced buying a little over 37% stake in Adani Gas Ltd, the Gujarat-based Adani Group arm that sells natural gas as automotive and kitchen fuel, for an estimated Rs 5,700 crore.
This is the third instance in recent times of a foreign energy major piggybacking an Indian entity to establish a footprint in India, currently the fastest-growing fuel retail market in the world.
The Total-Adani deal follows BP and Reliance Industries forming a joint venture for fuel retail and Saudi Aramco acquiring a 20% stake in RIL’s refinery and petrochemicals business for an enterprise value of $75 billion.
Total and the Adani Group had in October last year announced a partnership for foraying into the growing fuel retail market and setting up infrastructure for importing gas in ships, or LNG (liquefied natural gas). This partnership followed Total’s exit from a joint venture with Royal Dutch Shell in a 5 million tonne LNG import terminal at Hazira in Gujarat.
The earlier partnership between Total and Adani envisaged investing $1 billion in setting up two LNG import terminals on the east and west coast, 1,500 petrol pumps over 10 years and related infrastructure. Total’s acquisition of a stake in Adani Gas marks a natural extension of that deal into city gas projects, a major thrust area for the Narendra Modi government.
“Total's investment in Adani is undoubtedly a show of faith in India's gas demand growth,” Nicholas Browne, research director at energy market tracker Wood Mackenzie, said. Natural gas accounts for just 6% of India’s energy basket at present. The government wants to raise it to 15% by 2030 in a bid to reduce the economy’s carbon footprint as part of its climate commitment.
“While we don't consider this likely, gas demand is set to grow considerably. Wood Mackenzie forecasts LNG demand will double from some 37 billion cubic metres (bcm) in 2018 to 75 bcm by 2030, equivalent to 7 per cent of the energy mix. LNG will meet approximately 50 per cent of this demand growth, providing a major growth opportunity for Total,” Browne said.

Total will first make an open offer to buy a 25.2% stake in Adani Gas. Depending upon the open offer’s success, it will buy a stake from Adani to take its holding in the company to 37.4%. The Adani family owns 74.8% stake in Adani Gas and will dilute shares to the public to bring down it's holding to 37.4%, or equal to Total, the two companies said in separate statements. The Adani family will sell some stake in the open market to meet the listing norm of keeping public holding at 25%.
The Dhamra and Mundra LNG terminals will provide Total a gateway, especially in the east coast where there is little competition, for importing gas from its global portfolio. Adani Gas’s city gas rights and infrastructure will provide marketing means.
The Adani-Total joint venture (JV) is building a 5 million tonne LNG import terminal at Dhamra in Odisha and will potentially hold 25 to 50 per cent interest in Gujarat government's Mundra import facility. The two will also set up a JV to market 3 million tonnes per annum of LNG in India and Bangladesh.
Adani Gas is targeting to set up 1,500 CNG stations to retail gas to automobiles and piped cooking gas to 6 million households. It will also set up 1,500 petrol pumps over 10 years. “Taking into account the divestiture of the Group's interest in Hazira terminal in early 2019, the establishment of this partnership on gas in India represents a net acquisition cost for Total of approx $600 million over 2019-20,” Total said in a statement.
Adani said 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 7.5% of the country's population and setting up world-class LNG, gas distribution and fuel retail infrastructure in India.
Adani Group Chairman Gautam Adani said: “Total's investment in Adani Gas reinforces India's natural gas and demand potential. 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. We look forward to working together towards delivering India's vision for clean and green energy.”
“Energy needs in India are immense,” Total CEO Patrick Pouyanne said in the statement. “The natural gas market in India will have strong growth and is an attractive outlet.”
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