Brookfield to acquire Mukesh Ambani's gas pipeline company for Rs 13,000 crore

Canadian asset management company Brookfield has finally entered into a deal with Mukesh Ambani's Reliance Industries (RIL) to buy loss-making East West Pipeline Ltd (EWPL), also known as Reliance Gas Transportation Infrastructure, for Rs 13,000 crore. The deal marks the first ever monetisation of any private gas pipeline in India. The Competition Commission of India had approved the deal in September 2018. As per the agreement, for East West Pipeline Ltd, Brookfield is sponsoring an infrastructure investment trust (InvIT) called India Infrastructure Trust as the acquisition vehicle, which will fund the deal through 90 per cent of its ownership. The deal will help EWPL pay its outstanding debt of Rs 13,715 crore (as of March 2018).

For the rest of 10 per cent stake, Brookfield may rope in other asset management companies, banks and insurers, including ICICI Prudential Asset Management Company, Serum Institute, Rosy Blue, and Bank of Baroda, reported the Economic Times. Apart from EWPL, Brookfield is also working out modalities with Reliance Jio to purchase its telecom tower assets -- a deal estimated to be around $8 billion, the daily reported.

After the deal, InvIT will own 100 per cent equity interest in Pipeline Infrastructure Private Limited, which operates the 1,400-km common carrier pipeline from Kakinada in Andhra Pradesh to Bharuch in Gujarat. The pipeline carries natural gas that is produced at the Krishna-Godavari basin block, which is managed by flagship firm Reliance Industries (RIL). A major reason the pipeline turned into a loss-making entity was its lower output. The pipeline had a capacity to transport 80 million standard cubic metre per day of natural gas but the output started declining since 2010.

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According to the last year's approval of the CCI, the pipeline housed under EWPL would be transferred to an entity called Pipeline Infrastructure Pvt Ltd (PIPL), a wholly-owned subsidiary of Reliance Industries Holding Pvt Ltd (RIHPL). "RIHPL would sell its entire issued and paid up equity share capital of PIPL to IIT," the CCI order said. Also, IIT will subscribe to the non-convertible debentures to be issued by PIPL. EWPL had operating revenue of Rs 884 crore and posted a net loss of Rs 715 crore in the year ended March 2018.

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KG-D6 fields, which began production in April 2009, hit a peak of 69.43 mmscmd in March 2010 before water and sand ingress forced the shutdown of wells, reported PTI. This peak output comprised 66.35 mmscmd from D1 and D3, the largest of the 18 gas discoveries on the KG-D6 block, and 3.07 mmscmd from MA field, the only oil discovery on the block, the agency said. Currently, the fields produce less than 4 mmscmd of gas, which EWPL transports to customers.

Edited by Manoj Sharma

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