You are here » Home » Companies » Company Overview » Petronet LNG Ltd

Petronet LNG Ltd.

BSE: 532522 Sector: Others
NSE: PETRONET ISIN Code: INE347G01014
BSE LIVE 15:58 | 22 Sep 225.35 -5.55
(-2.40%)
OPEN

230.85

HIGH

231.70

LOW

224.35

NSE 15:57 | 22 Sep 225.50 -5.40
(-2.34%)
OPEN

230.00

HIGH

231.90

LOW

224.50

OPEN 230.85
PREVIOUS CLOSE 230.90
VOLUME 107365
52-Week high 242.20
52-Week low 162.90
P/E 19.15
Mkt Cap.(Rs cr) 33,803
Buy Price 0.00
Buy Qty 0.00
Sell Price 225.35
Sell Qty 80.00
OPEN 230.85
CLOSE 230.90
VOLUME 107365
52-Week high 242.20
52-Week low 162.90
P/E 19.15
Mkt Cap.(Rs cr) 33,803
Buy Price 0.00
Buy Qty 0.00
Sell Price 225.35
Sell Qty 80.00

Petronet LNG Ltd. (PETRONET) - Director Report

Company director report

Dear Shareholders

On behalf of the Board of Directors it is our privilege and honour to present theEighteenth Annual Report and the Audited Accounts of your Company for the financial yearended 31st March 2016.

physical performance

The financial year 2015-16 saw the Company operate its DaheJ Terminal at 111% capacityutilization inspite of the challenges faced in the long term supply agreements. The demandfor LNG was robust albeit at the current market prices which led to a discussion andreworking of the pricing under the long term LNG Contract. The Company was successfullyable to feed the market by processing LNG under spot/short term deals inspite of thereduction in volumes under the long term Contract.

During the financial year 2015-16 the DaheJ Terminal handled 170 LNG Cargoes andsupplied 566 TBTUs of RLNG. 2224 LNG Road Tankers were also loaded and dispatched.

The utilisation of Kochi Terminal remained extremely low in the absence of pipelinenetwork for gas evacuation. 10 Cargoes (including reload) were handled at the KochiTerminal during the full year.

financial performance

During the year your Company achieved a turnover of Rs 27133 Crore as against Rs39501 Crore in 2014-15. Inspite of an increase in quantity the reduction of turnover invalue term is primarily due to reduction in LNG prices and increase in regas servicecargoes. The net profit during the year stood at Rs 914 Crore as against Rs 883 Crore

in the previous year. A summary of the comparative financial performance in the fiscal2015-16 and 2014-15 is presented below:

(Rs in crore)

Particulars 2015-16 2014-15
Revenue from operations 27133 39501
Other Income 170 155
Total Revenue 27303 39656
Cost of LNG imports 25076 37611
Gross Margin 2227 2045
Salary & other operating expenses 466 452
Finance charges 239 293
Depreciation 322 315
Profit before Tax 1200 985
Tax expenses including deferred tax 286 102
Profit after Tax 914 883
Amount Transferred to Reserves:-
General Reserve 92 89
Debenture Redemption Reserve 78 78
Earnings (RS) per Share 12.19 11.77

dividend

Keeping in view the performance and dividend policy of the Company the Directors arepleased to recommend a dividend of 25% on the paid-up share capital of the Company for theyear ending 31st March 2016.

financing of projects

The Company managed its finances well during the financial year 2015-16. The strongcash flows helped your Company to fund the ongoing capital expenditure from its internalaccruals without any need to draw on the credit lines approved by the banks and financialinstitutions.

Your Company continues to enjoy good rapport with the lending agencies.

The credit rating of your Company continues to remain unchanged both from domestic aswell as international agencies.

lng sourcing

Your Company has long-term supply contracts for LNG imports with RasGas Qatar andMobil Australia Resources Company (MARC) Australia for 7.5 MMTPA & 1.44 MMTPArespectively. While the LNG supplies from Qatar commenced in 2004 the Australian LNG fromGorgon is expected to hit the Indian shores by the end of 2016 or early 2017.

Due to sharp decline in crude prices the price of LNG under RasGas long term contractwas on the higher side vis-a-vis other term LNG and spot LNG leading to lower off-take byconsumers. With a view to mitigate the impact of high priced LNG your Company along-withoff-takers GAIL IOCL and BPCL under the guidance of Ministry of Petroleum & NaturalGas undertook the task of price restructuring with RasGas Qatar. After a series ofmeetings a new pricing mechanism was agreed to between the parties. Your Company workedrelentlessly to accomplish the goal within a pre-defined time frame and executed theamendments to the upstream and downstream sale and purchase agreements with the revisedprice formula. New prices have become effective w.e.f. January 2016. In fact such pricerestructuring under a long term contract is a very unique accomplishment which yourCompany could achieve with its very own strong team as well as guidance from theGovernment. Such price reopening is very rarely done in the global LNG trade.

In the middle of difficulty lies opportunity as part of the price restructuringexercise your Company signed another long term deal with RasGas Qatar for 1 MMTPA for aperiod of about 12 years from 2016 to 2028. The volumes under this contract have been soldto GAIL IOCL BPCL and GSPC and supplies have started w.e.f. January 2016.

Besides the long-term LNG contracts your Company also buys LNG on spot and short-termbasis from many international players It is in touch with the major suppliers andproducers to secure LNG at a competitive price for the Indian markets.

expansion of dahej terminal

Your Company is further expanding the regasification capacity of its Dahej Terminalfrom 10 MMTPA to 15 MMTPA. As on 31st March 2016 the expansion projectachieved a progress of 94%. Subsequently the expansion project is on track and in August2016 the Company has started commissioning activities of the project with certainincremental send-out of RLNG to its customers though the full commissioning of theexpanded facility would be completed in the last quarter of 2016.

further expanison of dahej terminal

Your Company is looking at further expansion of Dahej terminal from 15.00 MMTPA to17.50 MMTPA with addition of one LNG Storage Tank and 2.5 MMTPA Regasification facilities.The Company is in the process of awarding EPC contracts for both Regasification facilitiesand LNG Storage Tank Project.

shipping arrangements

Three LNG ships namely 'Disha' 'Raahi' and 'Aseem' carry the entire LNG volume fromRasGas under a longterm contract to Dahej. Shipping Corporation of India (SCI) is anequity partner in the ship-owning companies and all three ships are manned managedmaintained and operated by SCI. The ships operate on a long-term time charter basis.

During FY 2015-16 the overall shipping operations at Dahej LNG terminal have runsmoothly and the jetty utilization has been very good without any downtime. However dueto low offtake under long-term contract for certain period during 2015-16 the ship(s)remained underutilized and consequently the Company was not able to fully recover thecharter hire payments under the long term contract as of now. Time Charter costs beingpass-through cost to offtakers in the long run the Company would be able to recover fullysuch costs which would not be recovered this year due to low LNG offtake.

Construction of a ship to carry LNG from Australia under a long-term agreement is inprogress as per schedule. A consortium of companies namely MOL NYK K-Line and TheShipping Corporation of India (SCI) will jointly own this ship. PLL has a right tosubscribe upto 26% equity in this LNG ship. The ship will be delivered to PLL in November2016 and will be used primarily to transport LNG from Gorgon Australia to Kochi.

As is the case with the first three ships the fourth ship will also be mannedmanaged maintained and operated by SCI.

lng terminal at kochi

During the year Kochi terminal operated at very minimul levels due to lack ofevacuation pipelines to Bangalore and Mangalore. Only Phase I pipeline was operational andfor most part of the year BPCL-Kochi Refinery was the only major consumer.

The average capacity utilization during the year was only 3%. Some value added serviceslike storage & reloading GUCD (Gassing Up and Cooling Down) as well as LNG bunkeringservices were also provided during this year. There has been very little physical progressin KKBMPL Phase II pipeline activities in the year as the pipeline to connect to Bangalorevia Tamil Nadu was under litigation and the pipeline to connect to Mangalore which is tobe laid entirely within Kerala by GAIL is under re-tendering stage.

new business initiatives

Having gained extensive experience in LNG handling capabilities the Company is takingsteps to develop a small scale LNG market in the Country. The initiatives undertaken byyour Company towards this new concept are briefly explained below:

(a) LNG Bunkering: Your Company has already showcased its ability for providing LNGas bunker fuel to LNG powered ships from the Kochi LNG terminal.

(b) LNG through trucks: Your Company is supplying LNG through trucks from DaheJ aswell as Kochi. Your Company is in further discussions with various potential industrialcustomers who are not connected with pipeline for supplies of LNG by road tankers.

(c) LNG as automotive fuel: For land transportation your Company plans to provideLNG as automotive fuel for heavy duty trucks by setting up LNG dispensing stations onmajor highways.

(d) LNG as marine fuel: In relation to water transportation PLL plans to provideLNG as marine fuel to LNG powered inland waterway barges especially for National Waterway1.

(e) LNG powered locomotive: Your Company is also in discussion with railwayauthorities to introduce LNG powered locomotive in India.

Possibility of utilizing the cold energy by setting up cryogenic ware house forrefrigerated storage of various products is being worked out. Your Company has alsoinitiated pre-project activities in this regard and has made provision in process plant toinstall equipment in future.

The Company has prepared a Feasibility Report for setting up a satellite LNGregasification terminal alongwith a power generation plant at Port Blair. The facilitymay also have provision to supply regasified LNG for city gas distribution and industrialancillary units. An MoU in this regard has been signed with Andaman & NicobarAdministration.

Training Center at Kochi

LNG is expanding its footprint as a fuel of choice in the Indian sub-continent andgoing forward there will be a huge demand for skilled and trained manpower in this nichetechnological area. Therefore your Company Is planning to use infrastructure at KochiTerminal for setting up a Centre of Excellence in LNG Training one of its kind in thispart of World to develop a talented skilled pool of professionals. The Company has alreadycompleted several activities like Training Curriculum Faculty Development InfrastructurePlanning etc. and it is expected to commission the Training Centre during the nextfinancial year.

adequacy of internal financial controls with reference to the financial statements

The Company has developed adequate internal control systems commensurate to its sizeand business. PLL has appointed M/s Ernst & Young as Internal Auditors who conductregular audits for various activities. The reports of the Internal Auditors are submittedto the Management and the Board's Audit Committee. There is a thorough review of theadequacy of internal control system.

details of joint ventures/associate companies

A Solid Cargo Port through a Company namely Adani Petronet (DaheJ) Port Private Ltd.had commenced its operations in August 2010 at DaheJ Port. Solid Cargo Port Terminal hasfacilities to import/export bulk products like coal steel and fertilizer. PLL has 26%equity in this Solid Cargo Company and the balance equity is held by the Adani Group.

performance and financial position of solid cargo joint venture (jv) company

The financial highlights of solid cargo JV Company for the year ended 31stMarch 2016 are as under:

Partioulars 31st March 2016 31st March 2015
Revenue from Operations 344.31 484.68
Other Income 8.36 6.44
Total Income 352.67 491.12
Operating Expenses 104.05 154.27
Employee benefits expenses 11.98 10.50
Depreciation and amortization expense 67.91 52.70
Finance Cost 63.35 55.14
Other expenses 15.89 17.33
Total Expenses 263.18 289.94
Profit before Tax 89.49 201.18
Tax expenses 33.72 115.54
Net Profit for the year 55.77 85.64

The cargo handling operations at the port are fairly mechanized and port is wellconnected with road and railway. The cargo handled comprises steam coal rock phosphateand project cargo etc. Due to challenging developments in the domestic coal mining sectorthere has been a major decrease in import of coal into the Country. This has affected thethroughput of the port which has experienced a decline.

conservation of energy technology absorption and foreign exchange earnings and outgo

All possible measures have been undertaken successfully by your Company to achieve thedesired objective of energy conservation and technology upgradation. In order to ensureoptimum conservation of energy and absorption of technology your Company's engineers havebeen interacting with industry peers technology providers and EPC Contractors. They havealso been nominated to important national and international seminars. A team has closelyworked with Project Consultant and EPC Contractors in all phases of designing andconstruction of DaheJ and Kochi LNG Terminals.

foreign exchange earnings and outgo

Your Company has incurred outgo in foreign exchange to the extent of Rs 23165 Croreduring the year under review. Foreign exchange earnings during the year were Rs 350 Crore.

extract of the annual return

The extract of the annual return in Form No. MGT - 9 is attached herewith as AnnexureA and is a part of the Board's report.

corporate social responsibility (csr)

Your Company fully understands its responsibility towards the society and has beenconstantly contributing its bit towards various causes. In its endeavour to be morefocused towards its social goals the Company is developing a more structured approach toenhance access to quality healthcare enrich the lives of people in the rural communitiesenvironmental causes and enhance the educational quotient in the country.

The Company is in process of finalizing short-term medium- term and long-term strategyto channelize the resources in manner so as to derive maximum socio-economic impact fromtargeted approach. In line with its social goals as enumerated above the Company hasalready identified several projects in the areas of Healthcare Education EnvironmentRiver Surface Cleaning Agriculture Swatch Bharat etc. where your Company will spend theannual CSR budget in a progressive manner.

directors

A) Changes in Directors and Key Managerial Personnel

During the year under review following are the changes among the Directors:

Directors Resigned
Name Date of Resignation
Dr. A. K. Balyan 15th July 2015
Shri B. C. Tripathi Nominee of GAIL 19th November 2015
Shri Atanu Chakraborty Nominee of GMB 11th April 2016

The Board placed on record its appreciation for the contributions made by Dr. A. K.Balyan Shri B. C. Tripathi and Shri Atanu Chakraborty.

Directors Appointed
Name Date of Appointment
Shri Prabhat Singh 14th September 2015
Shri Subir Purkayastha Nominee of GAIL 1st December 2015

B) Declaration by Independent Directors

Three Independent Directors namely Shri Arun Kumar Misra Shri Sushil Kumar Gupta andDr. Jyoti Kiran Shukla were appointed to the Board. Declaration by all the IndependentDirector(s) has been obtained stating that they meet the criteria of independence asprovided in subsection (6) of Section 149 of the Companies Act 2013.

An Independent Director may hold office for a term up to a period of three years on theBoard of a Company from their respective date of appointment.

C) Formal Annual Evaluation of the Board

The Board adopted a formal mechanism for evaluating its performance and as well as thatof its Committees and individual Directors including Chairman of the Board. The exercisewould be carried out through a structured evaluation process considering various aspectsof the Board's functioning such as composition of Board and Committees experience andcompetencies performance of specific duties and obligations contribution at the meetingsand otherwise independent Judgment governance issues etc. The Independent Directorsevaluated the performance of the entire Board. However the Company is in process ofadopting all the requirements as stated in SEBI (LODR) Regulations 2015.

D) independent director's meeting

A meeting of the Independent Directors was held on 28th March 2016 withoutthe attendance of NonIndependent Directors and members of the management. The IndependentDirectors reviewed the performance of the non-independent Directors and the Board as awhole the performance of the Chairperson of the Company taking into account the views ofexecutive Directors and nonexecutive Directors and assessed the quality quantity andtimeliness of flow of information between the Company's management and the Board that isnecessary for the Board to effectively and reasonably perform their duties.

key managerial personnel

Shri Prabhat Singh MD&CEO Shri R. K. Garg Director (Finance) and Shri K. C.Sharma Company Secretary are the Key Managerial Personnel of the Company in terms ofSection 203 of the Companies Act 2013.

number of meetings of the board of directors

During the year six Board Meetings were held on 25th April 2015 30th July 201519th October 2015 10th December 2015 10th February 2016 and 28th March 2016. Theintervening gap between the meetings was within the period prescribed under the CompaniesAct 2013 and also as per SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.

audit committee

The Company has duly constituted an Audit Committee of the Board. The Audit Committeecomprises the following Directors as on 31st March 2016:

1 Shri Arun Kumar Misra Chairman

2 Shri D. K. Sarraf Member

3 Shri Sushil Kumar Gupta Member

All the Members of the Audit Committee are non-executive Directors and two out of threeMembers are Independent Directors namely Shri Arun Kumar Misra and Shri Sushil KumarGupta. The quorum of the Audit Committee is two Members.

The Chairman of the Audit Committee also attended the last Annual General Meeting ofthe Company held on 24th September 2015.

nomination and remuneration committee

In terms of provisions of Section 178 of Companies Act 2013 as well as the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Board ofDirectors has constituted a Nomination and Remuneration Committee. As on 31stMarch 2016 the Nomination and Remuneration Committee comprises of the followingDirectors:

1. Shri Arun Kumar Misra Chairman

2. Shri D. K. Sarraf Member

3. Shri Sushil Kumar Gupta Member

All the Members of Nomination and Remuneration Committee are non-executive Directorsand two out of three Members are Independent Directors namely Shri Arun Kumar Misra andShri Sushil Kumar Gupta.

Policy on Whole-time Directors' Appointment and Remuneration

Pursuant to Article no. 109 and 111 of the Articles of Association of the Company theBoard may appoint Managing Director & CEO and other whole-time Directors subject toprovision of Section 203 and other applicable provisions of the Act.

The Search Committee as constituted by the Board from time to time finalizes thequalification age experience and other relevant criteria for the position underconsideration and the notification for the vacant position is circulated in advance. Basedon the suitability of the candidates the Search Committee of the Board shortlistscandidates for personal interaction and recommends potential candidates in order of meritto Nomination and Remuneration Committee which in turn makes its recommendations to theBoard. The final recommendation with suitable compensation and other terms forappointment is then approved by the Board subject to confirmation by the Shareholders inthe General Meeting.

Such appointment is for an initial term not exceeding five years at a time upon suchterms and conditions as approved by the Shareholders.

Compensation Policy

A Compensation Benchmarking Survey is periodically done to assess the competitivenessof total remuneration which is being paid to Directors Key Managerial Personnel andSenior Management.

The outcome of the same is presented before Nomination and Remuneration Committee toassess the reasonableness to attract retain and motivate Directors and other seniormanagerial personnel. Based on the latest exercise conducted during this year a revisedcompensation structure has been implemented w.e.f 01.04.2015 for all the employeesincluding Directors Key Managerial Personnel and Senior Management Team.

particulars of loans guarantees or investments under section 186 of the companies act2013

No loans investment / guarantee have been given by the Company under Section 186 ofthe Companies Act 2013.

Insurance

The Company has taken appropriate insurance for all assets against foreseeable perils.

Significant and Material orders passed by or courts

There are no significant and material orders passed by the Regulators courts orTribunals which would impact the going concern status and the Company's future operations.

particulars of contracts or arrangements with related parties

The particulars of every contract or arrangements entered into by the Company withrelated parties referred to in sub-section (1) of Section 188 of the Companies Act 2013including certain arms length transactions under third proviso thereto is disclosed inForm No. AOC -2 attached as Annexure C.

particulars of employees pursuant to

SECTION 197 OF THE COMPANIES ACT 2013

Pursuant to provisions of Section 197 of the Companies Act 2013 read with the Rule 5of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the namesand other particulars of employees are set out in Annexure D to the Directors'Report.

secretarial audit report

A Secretarial Audit Report submitted by M/s A. N. Kukreja a Company Secretary inpractice is annexed with the report as Annexure E. Regarding inadequate number ofIndependent Directors as stated in the Secretarial Audit Report it is stated that theCompany is in the process of finding suitable candidates to be appointed as IndependentDirectors and the requisite number of Independent Directors will be appointed shortly.

DISCLOSURES pursuant TO SECTION 197(12) OF THE COMPANIES ACT 2013

The ratio of remuneration of each Director to the median employees remuneration andsuch other details in terms of Section 197 (12) of Companies Act 2013 read with Rule 5 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 formspart of Directors' Report and is attached herewith as Annexure F.

DISCLOSURE UNDER SEXUAL HARRASSMENT OF WOMEN AT workplace (PREVENTION PROHIBITION& REDRESSAL) ACT 2013

During the year ended 31st March 2016 no complaint(s) of Sexual Harassment has beenreceived by the Company.

CORPORATE GOVERNANCE CERTIFICATE

As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 the Report on Corporate Governance together with Auditors' Certificate regardingCompliance of the SEBI Code of Corporate Governance is annexed herewith.

MANAGEMENT DISCUSSION AND ANALYSIS

The Annual Report contains a separate section on Management Discussion and Analysiswhich is a part of the Directors' Report.

INDUSTRIAL RELATIONS

Your Company continued to enjoy cordial and smooth relations amongst all its employeesat Dahej and Kochi terminals.

risk management policy

The Company has laid down policies and procedures to inform the Members of the Boardabout the Risk Assessment and Minimization Procedure. A Risk Management Committeeconsisting of an Independent Director and all the Whole-time Directors periodicallyreviews the procedures to ensure that Executive Management controls risk through properlydefined framework. The risk assessment framework encompasses inter-alia methodology forassessing risks on an ongoing basis risk prioritization risk mitigation monitoring planand comprehensive reporting system.

DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES

The Board of Directors of the Company has approved the Vigil Mechanism in terms ofprovisions of Section 177 of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 for Directors and employees of the Company toreport to the management concerns about unethical behavior actual or suspected fraud orviolation of the policy. The same has also been hosted on the website of the Company.During the year ended 31st March 2016 no complaint has been received underVigil Mechanism.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of clause (c) of sub-section (3) of Section 134 of theCompanies Act 2013 Directors hereby confirm that:

(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;

(b) the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the Company for that period;

(c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

(d) the Directors have prepared the annual accounts on a going concern basis;

(e) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and

(f) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.

deposits

During the year your Company did not accept any deposits from the public under Section73 of the Companies Act 2013.

statutory auditors

M/s T. R. Chadha & Co. Chartered Accountants will retire at the ensuing AnnualGeneral Meeting (AGM) of your Company and being eligible offer themselves forre-appointment. The re-appointment if made for the financial year 2016-17 will have tobe approved by Ordinary Resolution as required under Section 139 of Companies Act 2013.

auditors' report

Auditor has submitted an unqualified report for the financial year 2015-16.

cost auditor

The Board of Directors has appointed M/s K. L. Jaisingh & Co. as the Cost Auditorof the Company for the Financial Year 2016-17.

The Cost Audit Report for the year 2014-15 has been filed under XBRL mode on 6thOctober 2015.

acknowledgements

The Board of Directors sincerely thanks and wishes to place on record its appreciationof the Ministry of Petroleum and Natural Gas Government of India State Governments ofGujarat and Kerala Promoters of the Company Engie (erstwhile GDF Suez) RasGas ExxonMobil and other LNG suppliers gas off-takers and consumers of re-gasified LNG AuditorsLenders and the Employees of the Company for their whole-hearted co-operation andunstinted support. The Directors want to express their deep-felt thanks and best wishes toall the Shareholders for the continued support and the trust they have reposed in theManagement. The Directors look forward to a better future and further growth of yourCompany.

For and on behalf of the Board of Directors
Place : New Delhi (K.D. Tripathi)
Date : 19th August 2016 Chairman