According to newspaper reports, BSES plans to pick up 12% equity stake in natural gas storage and distribution company Petronet LNG. The offer was initiated by Petronet LNG and has found favour with the power distribution and generation major.
BSES is a power distribution and generation company with an exclusive licence to distribute power in Bombay's northern suburbs. It has a consumer base of over 1.8 m consumers. The company has also made a foray into the telecom services business by launching BSES Telecom.
Petronet LNG, a joint sector company, is engaged in the distribution of LNG. The company is yet to finalise its equity partners. Public sector companies – Indian Oil, Gas Authority of India (GAIL), and Bharat Petroleum Corporation Ltd. (BPCL) are expected to account for 50% stake in the company, while the balance will be offloaded in favour of private sector refineries and strategic partners.
BSES’ stake in Petronet LNG is to be viewed favourably, largely due to its three proposed power plants, which are expected to run on gas. By investing in Petronet LNG, BSES’ will be able to meet its LNG requirements without any hitches. Over the long term, this will improve its Plant Load Factor (PLF) as raw material (LNG) supply will be regular. Tying up feedstock requirements is a problem that has plagued several power projects.
Analysts have taken a favourable view of BSES' cost efficient performance, and are optimistic of the company's ability to improve upon it further. They have recommended the stock as a 'BUY'.
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