Brookfield Asset Management is set to acquire the East West Pipeline, a 1,386km long natural gas pipeline in India, owned by Reliance Industries (RIL) for INR130bn ($1.88bn).
Image: Reliance to sell the East West Pipeline to Brookfield’s InvIT. Photo courtesy of rawpixel from Pixabay.
The acquisition of the East West Pipeline will be carried out by India Infrastructure Trust, an InvIT established by Brookfield as sponsor and 90% investor. The trust will be acquiring 100% equity interest in the pipeline’s holding company Pipeline Infrastructure Private Limited (PIPL).
As of now, Brookfield has filed the preliminary placement memorandum pertaining to the acquisition of the natural gas pipeline, laid between Kakinada in Andhra Pradesh state and Bharuch in Gujarat state.
The 48inch pipeline, which sources gas produced from the KG-D6 project located in Krishna Godavari Basin, crosses the states of Andhra Pradesh, Telangana, Karnataka, Maharashtra and Gujarat.
Authorized as a common carrier pipeline, the East West Pipeline has been in operations since 2008 following two years or so of construction.
The gas transported through the pipeline is delivered to RIL’s petrochemical complex in Gujarat and also to various customers through branch line connections along its route.
In connection with the change of ownership, RIL said that the existing pipeline usage agreement has been reworked. Under the revised terms, the reserved capacity of the East West Pipeline has been reduced to 33 MMSCMD from 56 MMSCMD.
The Indian conglomerate said that any unused capacity payment by it will be the difference between INR5bn ($72m) a quarter and actual revenue made by PIPL.
RIL also said that it will continue to hold the rights to transport gas by itself or of any customers, free of cost against any outstanding unused capacity payments.
The company said that as per the terms, it will not be liable to make unused capacity payments if the average volume of gas transported is 22 MMSCMD at the current approved final tariff of INR71.66 ($1.04)/MMBTU.
RIL, in a statement, said: “Considering the new investments in the upstream sector in the KG basin, and the growing LNG imports, ability to swap gas, the average volume expected to be transported through the pipeline is expected to be significantly higher compared to the current levels.”