Brookfield To Buy Mukesh Ambani-Owned East West Pipeline

India Investment Trust, sponsored by Canadian investor Brookfield, will buy Mukesh Ambani’s privately owned East West Pipeline Ltd. for Rs 13,000 crore.

The InvIT will acquire 100 percent equity interest in Pipeline Infrastructure Pvt. Ltd., owner and operators of the pipeline that transports Reliance Industries Ltd.’s eastern offshore KG-D6 gas to customers, according to an exchange filing by Ambani’s flagship company.

Pursuant to this acquisition, the existing pipeline use agreement has been reworked. RIL will have to offtake at least 22 million metric standard cubic meter per day of gas from this pipeline at the revised tariff. If it fails to do so, then RIL will be liable to pay the differential amount to Pipeline Infrastructure, the filing said. The amount payable for any unutilised capacity by RIL will be the difference between Rs 500 crore per quarter and the actual revenue earned by Pipeline Infrastructure.

The Petroleum and Natural Gas Regulatory Board approved a 37 percent rise in tariff from April 1 for the pipeline, newswire PTI reported. Transporting natural gas on the east-west pipeline would cost Rs 71.66 per million British thermal unit on gross calorific value basis, the report said citing the oil regulator’s March 12 final tariff order.

Earlier a sharp drop in KG-D6 production had resulted into a lower offtake, but considering the new investments in the fields, growing LNG imports and the ability to swap gas, the average volume expected to be transported through the pipeline is likely to rise, the filing said.

Also, the value of convertible preference shares owned by RIL in Pipeline Infrastructure is valued at Rs 4,000 crore under the reworked agreement. These can be converted into equity shares at the end of 20 years. RIL will have the right to buy shares of Pipeline Infrastructure held by the InvIt at the end of 20 years at Rs 50 crore.

The East West Pipeline is engaged in transmission of natural gas. It commenced operations in late 2008 and owns a network of 1,400 km of high-pressure pipeline with an original design capacity of 80 mmscmd. It also transports gas from sources, including regasified liquefied natural gas terminals. It is connected to pipelines of operators such as GAIL (India) Ltd. and Gujarat State Petronet Ltd.