PSU Gas Major GAIL To Join Solar Bandwagon

By Prasanna Singh/ Updated On Thu, Jun 10th, 2021

Gas Authority of India Limited (GAIL), the largest operator of gas pipelines in the country, has announced plans to enter solar power development. GAIL commands ~70% market share in gas transmission and has a Gas trading share of over ~ 50% in India. GAIL and its Subsidiaries / JVs also have a formidable market share in City Gas Distribution. In the Liquefied Natural Gas (LNG) market, GAIL has a significant portfolio.

In the new effort to go ‘green’, GAIL joins virtually every Public sector Undertaking PSU in the energy space, that is already in, or has announced plans to add solar to its portfolio. Gail’s immediate plans are to bid for a 400-megawatt (MW) capacity along with partner Bharat Heavy Electricals Ltd (Bhel) in a state-run Solar Energy Corporation of India (Seci) tender, said a top executive on Wednesday. BHEL is also considering manufacturing of solar cells and panels.

Manoj Jain, chairman and managing director of Gail said that besides bidding for its own projects, the firm would also actively consider acquiring operational solar assets if possible. The firm has very low debt, and the gas business has recovered somewhat after the lockdown induced slowdown from 2020. Gail has announced a net profit for the fourth quarter ended March fell of ₹1,908 crore from ₹3,018.2 crore in the year-ago period. Turnover was at ₹15,472 crore in the quarter. The PSU had reported a net profit of ₹4,890 crore for 2020-21 on a turnover of ₹56,529 crore.

GAIL has been trying to make an impact in renewable energy for some time now. An earlier deal with the fraud ridden Infrastructure Leasing and Financial Services Ltd (IL&FS) involved buying ILFS’s 874 MW operational wind energy portfolio to the state-run gas utility for ₹4,800 crore. The deal was dropped when NYSE listed Japan’s Orix Corp. acquired these assets to add them to Hyderabad-based Greenko’s portfolio, with a $980 million in Greenko Energy Holdings.

While the solar sector broadly welcomes these diversifications from PSU’s, considering the fact that energy PSU’s tend to be much better managed and cash rich, for investors in these firms, it has been a mixed experience. Lack of experience and vision in many times has led to unrelated diversifications according to some, severely hitting valuations vis a vis private sector counterparts. As of now, the cumulative PSU commitments for Solar seem to be well over 20 GW, for the period ending 2025. And 30 GW plus by 2030. With power major NTPC leading the pack.

Comparison is drawn to the rich valuations firms like Adani Green energy, Tata Power etc get, versus the very conservative valuations firms like GAIL gets. Even in its own Gas sector, GAIL has not done too well, when it comes to market expectations of future growth from the firm. State owned firms like Gujarat Gas, Adani gas, or even Indraprastha Gas and Mahanagar Gas have done much better with their focused approach..