The current low spot price environment should support the government’s plans to bring about major reforms in the domestic gas consumption space, including the revival of gas-based power plants. This coupled with weaker competition would aid continued higher utilisations for the company. We reiterate Buy on PLNG.
Revival of stranded gas-based power plants to aid imports
Spot LNG prices have weakened (trading at ~6-7% slope to Brent) amid rising supply glut with expansions in the US, Australia and Russia. Also, domestic production is behind schedule. Taking advantage of low LNG prices, the Gujarat Electricity Regulatory Commission (GERC) has approved a 278-MW long-term PPA (for 19 years) for Torrent Power’s (TPW’s) UnoSugen gas plant (total capacity: 383 MW) and its Ahmedabad and Surat distribution circles. Low LNG prices have also resulted in the government looking for possible solutions to revive gas-based power plants.
