IDFC, GSPC, Incap tie up for common carrier gas pipeline

HYDERABAD/NEW DELHI: IDFC Private Equity (IDFC PE) has joined hands with Infrastructure Corporation of Andhra Pradesh (Incap) and Gujarat State Petroleum Corporation (GSPC) to create a common carrier gas pipeline infrastructure.

IDFC PE will have a 50% stake in the company, while Incap and GSPC will hold 25% each in the venture. It is understood that Incap would invest Rs 235 crore as its equity contribution and, consequently, IDFC PE’s investment could in the region of Rs 470 crore. The debt-to-equity of the project would be 80:20 or 70:30. structure, to eventually connect each district of Andhra Pradesh, at an estimated cost of Rs 5,000 crore.

The state government is gung-ho about cashing in on the advantage that it is the landfall point for the huge gas reserves in the Krishna-Godavari basin. The Krishna Godavari Gas Network, floated by the three players, will create a common carrier infrastructure across Andhra Pradesh in much the same way as Gujarat State Petronet operates in Gujarat.

There is lot of interest in the pipeline infrastructure space in Andhra Pradesh with Reliance planning a cross-country trunk line connecting AP to Gujarat and to Dadri. BG India, part of BG Group, is looking at setting up three subsidiaries for natural gas distribution and transmission operations in AP, Karnataka and Tamil Nadu.

IDFC PE CEO Luis Miranda said, “We will finalise the business plan in the next three months. The project cost and investments are not frozen yet.” IDFC PE already has 20% in Gujarat Gas Petronet and is the first private equity firm in India to invest in pipeline infrastructure, he added.

The company, which will hold its first board meeting on September 19, is expected to start work on its business plan. The investments would be phased out over a couple of years. The gas pipelines would first be laid in the large towns of Andhra catering to the industrial demand before it expands to smaller places.

The infrastructure will be ready by ’08 to coincide with gas availability. The main consumers of gas in Andhra would be industries in power, fertiliser, cement, steel, bulk drugs, CNG and domestic distribution.

Incidentally, Andhra has a captive gas demand in its eight gas-based power plants of which four are operational and the rest are in the pipeline. The four operational plants, with a capacity of 999MW, are GVK Jegurupadu, Spectrum Kakinada, Lanco Kondapalli and BSES. The remaining projects in the pipeline, with a capacity of 1,499MW, are Vemagiri, Gautami Power, GVK Extension and Konaseema EPS Oakwell.