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Brookfield’s InvIT to invest Rs 13,000 crore for East West Pipeline takeover

RIL's current investment in preference shares valued at Rs. 4,000 crore will continue and will be converted into equity at the end of 20 years.

India Infrastructure Trust, an infrastructure investment trust (InvIT) set up by Brookfield as sponsor and 90 per cent investor, will invest Rs 13,000 crore to acquire the East West Pipeline, controlled by Mukesh Ambani.

As part of the transaction, the InvIT will acquire 100 per cent equity interest in Pipeline Infrastructure Private Ltd (PIPL), earlier known as Reliance Gas Transportation, which currently owns and operates the pipeline, a project implemented to transport gas from Kakinada to Bharuch, Reliance Industries Ltd (RIL) said in a statement.

Following this acquisition by Brookfield, the existing pipeline usage agreement has been reworked. The reserved capacity has been reduced to 33 million metric standard cubic metre per day (MMSCMD) against the 56 MMSCMD. Any unutilised capacity payment by RIL will be the difference between Rs 500 crore a quarter and actual revenue earned by PIPL, RIL said.

RIL will continue to be entitled to transport gas, either by itself or of any customers, free of cost against any outstanding unutilised capacity payments.

At the current approved final tariff of Rs 71.66 per million metric British thermal unit (MMBtu), if the average volume of gas transported is 22 MMSCMD, RIL will not be liable to make unutilised capacity payments.

The next review of tariff in April 2020 will also consider upward revision to tariff arising from determination of lower revised capacity of the pipeline, the 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, it said.

RIL will be entitled to a significant participation in the net earnings of PIPL under the mechanism specified in the pipeline usage agreement.

RIL's current investment in preference shares valued at Rs. 4,000 crore will continue and will be converted into equity at the end of 20 years.

Moreover, at the end of 20 years, RIL has the right to acquire equity shares of PIPL held by the InvIT at an equity value of Rs 50 crore.