Total Buys Stake in Indian Adani Gas (Update 2)
(Adds comment from Wood Mackenzie)
French Total October 14 said it will pick up stake in Indian private city gas distribution company, Adani Gas - a unit of Adani Group.
Adani Group holds 74.8% stake in Adani Gas of which Total will acquire 37.4%, Total said in a statement. To reach a 37.4% shareholding in Adani Gas as per Indian stock market regulation, Total will initially launch a tender offer to public shareholders to acquire up to 25.2% stake and then will buy the remaining shares from Adani Group, it said.
“Taking into account the divestiture of the group's interest in Hazira terminal early 2019, the establishment of this partnership on gas in India represents a net acquisition cost for Total of approximately $600mn over 2019-2020,” Total said.
As part of the partnership, Total said it will supply LNG to Adani Gas and will also form a joint venture to market LNG in India and Bangladesh.
Talking to CNBC TV18, Adani Group CFO Robbie Singh said the deal is expected to be completed by January 2020. He told the television channel that Adani Gas will ride the distribution channel for Total and the capital outlay over the next three years will be about Indian rupees 70bn (about $1bn).
After the transaction, Adani Group and Total will each own 37.4% of Adani Gas while the rest will be owned by the public.
Analysts at Wood Mackenzie said Total's investment was a "show of faith" that India's gas demand would grow from today's 6% to 15% by 2030. Wood Mackenzie forecasts gas demand will double from some 37bn m³ in 2018 to reach 75bn m³ by 2030, equivalent to 7% of the energy mix. LNG will meet about half this demand growth, providing a major growth opportunity for Total.
The development of the Mundra and Dhamra regasification terminals provides Total with market access for its LNG and being on the east coast they will face less competition from other terminals. Adani Gas was an active bidder in the recent distribution auction rounds, which will provide Total with firm demand for gas, and accelerate Total's Indian gas marketing and distribution business. WoodMac said.