The suitors to acquire BG’s 65.12 per cent stake in Gujarat Gas are busy finalising strategy as the dates for final ‘binding bids’ for the controlling stake draw closer.
Some have started exploring partnership opportunities and joint bids to improve their prospects and reduce competition. According to sources, GDF Suez, a euro 90-billion European energy power house, has already written letters to some Indian private sector companies in the race to buy a controlling stake in the country’s largest natural gas distributor by sales.
So far, said sources, seven bidding groups have been shortlisted after preliminary non-binding offers. Among the Indian public sector units, Bharat Petroleum (BPCL), Gujarat State Petroleum Corporation and Oil and Natural Gas Corporation (ONGC) have formed a consortium. Torrent Power and the Adani Group are among the Indian private sector candidates. Private equity investor Actis has also jumped into the fray, as have three European strategic energy and utility companies, including E.On and GDF Suez. Oil India is expected to join at a later stage, as a partner to a more serious player.
Last week, the shortlisted candidates had meetings with BG’s brass and its bankers, Citi, in Mumbai to flesh out further clarifications and data. The final binding bids have to come by end-February. BG expects to raise Rs 3,150 crore ($600 million) through this divestment.
GDF’s effort to reach out to the other suitors of Gujarat Gas is interesting, as the company already has a strategic 10 per cent stake in Petronet LNG, India’s largest gas LNG importer. The principal promoters of the company include GAIL, ONGC, IOC and BPCL. In November 2011, Petronet LNG and GDF SUEZ signed an agreement to continue 0.6 million tonnes of LNG supply through 2012. The nine cargoes will be sourced within GDF Suez’s LNG portfolio and delivered to Petronet’s Dahej LNG terminal in Gujarat.
Most of the bids have come at the market price or at a slight discount, as concerns over fuel supply, margins, expansion strategy and other operational challenges in Gujarat Gas continue. Friday’s closing price for the company’s stock was Rs 392.60/ share at the Bombay Stock Exchange, up, 0.2 per cent.
The bidders, therefore, are expected to form groups or consortia. As mentioned earlier, GDF officials have reportedly shown interest in meeting Indian counterparts and explore a common bidding strategy. Sources say some of the Indian strategic players like Adani may even explore a city gas JV with GDF for future projects across India. Adani’s city gas business is geographically limited but it has aspirations to be a national player and GDF is a global gas marketing and distribution giant.
An Adani Group spokesperson did not want to comment on speculation. Mails to GDF Suez’s headquarters in Paris earlier in the week remained unanswered.
Despite a freeze in gas rates in France, unfavourable market and geographical conditions across Europe, GDF Suez has been growing its business, clocking euro 90 bn in turnover and Ebitda (earnings before interest, depreciation, taxes and amortisation) of euro 16.5 bn. It has also taken a decision to invest euro 11 billion in new projects over 2011-2013. About 30 per cent of that is to be spent on expanding its positions outside Europe, into high-growth areas.
A key expertise of the group is transportation of natural gas over long distances. With 17 LNG tankers, it routes 16.5 million tonnes of LNG through the year.