The Petroleum and Natural Gas Board (PNGRB) has called out Petronet LNG for “profiting at the expense of gas consumers”, a move that sent the company’s stock plunging 8.5% in intra-day trade on the BSE on Thursday. The shares later closed at Rs 323.2, down 6.95%.
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In a recent paper, PNGRB has noted that the company has been increasing tariffs at its Dahej terminal on an annual basis without passing on the benefits of capacity expansions and improved utilisation to the consumers.
Responding to the charges, Petronet LNG on Thursday said that regulating LNG terminals or their tariffs do not fall under the purview of PNGRB. As such, any regulation would require amendment/s in the PNGRB Act 2006, the firm said in an exchange filing.
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Meanwhile, Citi reiterated its “sell” rating on Petronet LNG with a target price of Rs 310, signalling a potential downside of over 4% from the current levels, which further weighed on the stock prices. The brokerage firm cited regulatory uncertainties as a significant risk to the company’s pricing power and profit margins. “PNGRB’s stance introduces significant regulatory uncertainty, threatening the sustainability of Petronet LNG’s historically strong pricing power,” it said. The company faces long-term risks to profitability amid escalating scrutiny, Citi added.
As per reports, PNGRB, in its recent discussion paper, had said that rising charges while capacities have increased along with over 90% capacity utilisation has led to the company (Petronet LNG) being able to profit immensely at the cost of gas consumers. It noted that as new terminals are established nationwide, they follow the same tariff basis as the Dahej unit, which needs reconsideration.
In its paper, PNGRB has also mentioned a regulatory framework to bring regasification activity under its purview. Regasification is the process of converting imported liquefied natural gas (LNG) back into its gaseous state for distribution purposes. “Some regasification terminals are designed for further expansion, potentially doubling their existing capacity. However, the benefits of such expansions are not shared with existing customers through reduced regasification charges,” PNGRB had said.
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