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India’s Swan Energy to divest LNG terminal to Turkey’s Botas for $399 million
Swan Energy Ltd. plans to sell its 51% stake in a floating LNG terminal to Turkey’s Botas for $399 million. The deal, subject to shareholder and regulatory approval, comes after delays in commissioning the terminal due to the pandemic and a cyclone.
Sheersh KapoorAugust 15, 2024, 3:42:34 PM IST (Published)
Swan Energy Ltd., an Indian multinational conglomerate with diverse interests, is set to sell its stake in a floating liquefied natural gas (LNG) terminal to Turkey’s state-run Botas for $399 million.
The Mumbai-based company disclosed the transaction in a stock exchange filing, noting that the deal is expected to be finalized within the next six months, pending approval from both shareholders and regulatory authorities.
The floating storage and regasification unit (FSRU), known as Vasant 1, has a capacity of 180,000 cubic meters. Swan Energy, through its subsidiary Triumph Offshore Pvt., owns a 51% stake in the unit, while the remaining 49% is controlled by Indian fertilizer giant IFFCO.
It is currently unclear whether IFFCO plans to sell its portion of the unit as well, as spokespeople from both companies have not yet provided comments on this matter.
The terminal was initially intended to commence operations at Jafrabad port on India’s west coast during the 2019-2020 period. However, its commissioning faced setbacks due to delays in port facility construction, exacerbated by the COVID-19 pandemic and a cyclone that struck in 2022, as detailed in Swan Energy’s annual reports.
Despite these delays, the FSRU was delivered by Hyundai Heavy Industries Shipyard in September 2020 and has been chartered to Botas since January 2023.
India currently operates seven land-based LNG terminals, but five of these facilities are running at less than 50% capacity. This underperformance is attributed to weaker demand and a shortage of pipelines connecting these terminals to the national gas grid, further complicating the country’s energy infrastructure.
The sale of Swan Energy’s stake in the floating LNG terminal reflects ongoing shifts in the global energy landscape and highlights the challenges facing LNG infrastructure in India.
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The remaining stake in Triumph offshore pvt ltd(remaining 49%), was acquired from IFFCO by swan energy in june 2024 for 440 cr.
now TOPL is 100% subsidary.
@kdjolly The reply was w.r.t CNBC tv article you shared.
Operational Review for each business vertical of Swan Energy Limited based on the annual report for the fiscal year 2023-24:
1. Oil & Gas Division
Overview:
The oil and gas segment was a major contributor to the company’s revenue, reflecting Swan Energy’s strategic positioning in this sector. The global energy market’s volatility was effectively leveraged to enhance both output and revenue.
Key Developments:
- Revenue Contribution: This division contributed significantly to the 249% year-on-year increase in consolidated revenue, reaching ₹5,01,714.60 lakhs.
- FSRU (Floating Storage Regasification Units) Deployment: The deployment of FSRUs allowed the company to capitalize on the rising demand for liquefied natural gas (LNG). These units are pivotal to Swan Energy’s strategy of becoming a key player in the global LNG market, allowing flexible transportation and regasification of LNG, reducing bottlenecks in supply.
- Future Growth Potential: With the completion of the Swan LNG project expected in the next fiscal year, the division is set to further strengthen its presence in the oil and gas sector. Once operational, the project is expected to generate a new stream of steady revenue.
Challenges:
- Global Market Fluctuations: Despite the rise in revenue, the oil and gas division faced market challenges due to fluctuating global oil prices. However, Swan Energy mitigated these risks through strategic sourcing and FSRU deployments.
- Logistical Issues: The volatility of oil prices and geopolitical instability caused some logistical challenges, but the company responded with strategic adjustments to its operations.
2. Shipyard & Defence Division
Overview:
The acquisition of Reliance Naval and Engineering Limited (RNEL) in January 2024 marks Swan Energy’s foray into the defense and shipbuilding sectors. This acquisition is a critical move toward diversifying its operations.
Key Developments:
- Acquisition of RNEL: The acquisition, through the National Company Law Tribunal (NCLT) process, allows Swan Energy to enter the defense shipbuilding and repair sectors. RNEL’s strategic location and infrastructure provide a competitive advantage for Swan Energy in the defense sector.
- Restoration and Job Creation: Restoration efforts are underway to bring the shipyard to full operational capacity. Once fully functional, the shipyard is expected to create over 4,000 direct jobs, which will be a significant boost for the company’s industrial workforce.
- Strategic Importance: The defense sector is a growing market in India, and Swan Energy’s entry into this vertical positions it to tap into government contracts for naval and defense-related shipbuilding and repairs.
Challenges:
- Infrastructure Restoration: The process of restoring the shipyard to full capacity involves significant investment and time. This is a key focus for the coming year.
- Integration into Operations: Integrating the new acquisition into Swan Energy’s broader operations is a complex process that will require strategic coordination across departments.
3. Real Estate Division
Overview:
Swan Energy’s real estate division continues to focus on premium real estate developments in key Indian cities, with strong sales and potential future growth.
Key Developments:
- Completion of Cardinal One, Bengaluru: The division obtained the Occupation Certificate for Cardinal One, a significant milestone that will allow Swan Energy to proceed with the sale of inventory in the upcoming fiscal year. The project is expected to see full sales in the next year, contributing to revenue growth.
- New Developments: The company is actively exploring new real estate opportunities in Mumbai and Bengaluru, two of India’s most lucrative real estate markets.
- Land Assets: The company plans to utilize its large land holdings in Mangaluru and Bengaluru for future projects, potentially contributing significant long-term value.
Challenges:
- Real Estate Market Volatility: Although the real estate market has been recovering, it remains sensitive to economic conditions, interest rate fluctuations, and regulatory changes. Swan Energy will need to navigate these risks as it expands its real estate footprint.
4. Veritas Petroleum Division
Overview:
The Veritas division focuses on the petroleum products segment, which delivered solid performance driven by market disruptions and increased demand for petroleum products in India and Southeast Asia.
Key Developments:
- Revenue Growth: Veritas clocked a revenue of ₹3,85,455.36 lakhs, showing strong growth driven by the company’s ability to leverage industry disruptions and meet demand. The net profit margin improved from 4.4% to 4.8%.
- Bulk Sourcing and Optimization: Enhanced bulk sourcing strategies and optimized asset utilization were key to Veritas’ profitability, allowing the division to reduce costs and improve operational efficiency.
- Geographic Expansion: The division has capitalized on opportunities in Southeast Asia, a growing market for petroleum products, by delivering consistent and timely services.
Challenges:
- Market Disruptions: While the division benefited from market disruptions, volatility in crude oil prices and global supply chain issues posed significant challenges. The company responded with a focus on cost management and strategic sourcing.
- Environmental Regulations: Stricter regulations around the environmental impact of petroleum products could increase operational costs in the future, requiring proactive adjustments.
5. Textile Division
Overview:
The textile division remains a critical part of Swan Energy’s diversified portfolio. Despite sector-specific challenges, the division showed resilience by maintaining operational efficiency.
Key Developments:
- Capacity Utilization: The division operated at optimal capacity during the year, focusing on maximizing output despite challenges in the broader textile sector.
- Cost Management: Through effective cost management strategies, the textile division managed to improve its EBITDA margins. This was achieved by reducing operational wastage and improving procurement processes.
- Market Positioning: Although facing global headwinds in the textile industry, Swan Energy’s textile division has retained a competitive position in the market, supplying high-quality textile products.
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How does FSRU sale impact their business?
The sale of the Floating Storage and Regasification Unit (FSRU) by Triumph Offshore Private Limited (TOPL) has significant financial and operational impacts. As per the board meeting on July 31, 2024, the company approved the sale of the FSRU to BOTAS for $399 million. This transaction is pending various approvals including from shareholders and regulatory bodies.
One of the key impacts of this sale is that it enabled TOPL to make a pre-payment of ₹82,481 lakhs to its consortium of lenders, marking full repayment of its outstanding debt on August 1, 2024(Swan). This move substantially reduces the company’s debt burden, strengthening its financial position. Additionally, this sale is part of the company’s broader restructuring and financial strategy to enhance profitability and operational efficiency.
The FSRU was earlier generating revenue through various charter hire agreements with international clients, including interim utilization as an LNG carrier for companies like CNTIC V Power Energy and Tema LNG. The sale of this asset marks a shift in focus from interim utilization to a more sustainable long-term strategy involving debt management and operational improvements.
As per Annual report 2023-24
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Just one confusion. Has the 5 MMTPA terminal already been completed? Sources keep say it will be completed. In that case what explains the outperformance of the energy sector? Thanks
Swan Energy Limited (SEL) is developing an LNG port with an initial capacity of 5 MMTPA, extendable to 10 MMTPA, using a Floating Storage Regasification Unit (FSRU). The project operates on a tolling model and is 63% owned by SEL, with the Government of Gujarat holding 26% and Mitsui OSK Lines (MOL), the technical partner, owning 11%.
Key agreements include 4.5 MMTPA of regasification capacity reserved for GSPC, BPCL, IOCL, and ONGC for 20 years.
Construction progress has reached 83.95% as of March 2024, with major infrastructure like jetties and breakwaters nearing completion. The project has secured agreements for 90% capacity over a 30-year period, extendable by 20 years, ensuring a strong future.
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Hi @DANGAR777
Swan is planning to sale Floating Storage Regasification Unit (FSRU). Any idea on the impact of this sale on the upcoming LNG port?
thanks
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If Triumph Offshore, a subsidiary of Swan Energy, sells its Floating Storage and Regasification Unit (FSRU), it could impact Swan LNG’s operations and future revenue streams. The FSRU plays a key role in Swan LNG’s operations, as it is used for importing and regasifying liquefied natural gas (LNG) at the Jafrabad terminal in Gujarat.
Here are some potential impacts:
Operational Challenges for Swan LNG: Swan LNG depends on Triumph’s FSRU for LNG import operations. Selling the FSRU would require Swan to either lease or purchase a replacement, which could delay or disrupt the terminal’s operations. The Jafrabad terminal, scheduled to operate with a tolling model, would need this infrastructure to continue functioning.
Revenue Loss: Triumph Offshore has already generated substantial revenue by chartering out the FSRU before the full commissioning of Swan LNG. If the FSRU is sold, Swan could lose a significant revenue stream unless a new agreement is formed to continue using the asset on a lease basis.
Increased Costs: Selling the FSRU could result in increased operational costs for Swan LNG. They might need to lease a similar unit at a higher cost or invest in new infrastructure, impacting profitability in the short term.
However, if the FSRU sale is accompanied by plans for a new or more advanced unit, or if Swan Energy enters into a favorable lease agreement, the impact could be mitigated.
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Swan Energy honestly has a lot of variables currently and its not a business we can predict based on the numbers as we do not know to what extent the numbers are cooked . It is more to do with political connections and how your connections help you to grow.
Just one insight which no one has brought into picture till now is the leverage of proximity of Swan LNG Terminal and the Reliance Naval & Engineering ( Pipavav Port )
This could bring in synergies in the long run with sharing of the resources .
The reason for sale of FSRU sale would be surely get the funds ready for Reliance Naval which is the biggest trigger from Swan Energy .
Nikhil Vasantlal Merchant daughter Vinita is married to Naman M Patel, who is the nephew of Mr. Anil Ambani who was previous promoter of Reliance Naval. The bid by Swan Energy for RNEL , clearly signifies the value the asset holds and is timed to perfection with the impetus currently shown by our government towards Warships and private participation
Also , once the LNG terminal is up and ready , either Swan could give Reliance Naval the contract of building an FSRU provided it has the capability and capacity to build one or else take one on lease .
Some more interesting points.
The articles of the company were amended recently which included 2 new business areas
- Datacenter & IT
- Geospatial Mapping
The recent QIPs with Quant MF participation & BlackRock ( Jio connections again ) buying stake from the open market do give a validation to an extent that there are variables which may turn favorable for Swan in the coming years .
In addition , Mr. Nikhil Merchant in his personal capacity had invested in the preferential allotment of Balu Forge. What are the intentions of the investment are really unclear to me but if any board members can find more details it would be really helpful.
Their political connections cannot be doubted as IFFCO was holding 49% in the FSRU . IFFCO moved to NCLT against Swan Energy in March due to Swan wanting to prepay the loan by issuing shares to the lenders which would dilute IFFCOs stake. IFFCO did an out of court settlement with Swan in June and Swan bought IFFCOs 49% stake and then decided to sell off the FSRU at a profit . Swan made a mockery of IFFCO partnership and profited IFFCOs share in just a span of 6 months
To me the triggers are in the below priority
- Reliance Naval
- LNG Terminal
- Geospatial Mapping
- Data Centers ( as there is no clarity on how company is planning to grow in this space )
Disc : Invested & biased
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can you please share the full report?
These reports would more often than not be motivated to increase and pump up the price . I would take these reports with little to no confidence .
If u are investing in Swan or Veritas you are not investing in fundamentals but taking a bet on the promoters . As I mentioned previously , there are alot of variables in play and none of the forums members can predict the outcome of the variables .
The outcome can be both extremes so invest only the amount of money you are fine to lose . Connections can lead you to favours which cannot be apprehended from a logical point of view .
When I had invested , I was thinking of FSRU vessel as an advantage , now they have sold it off so overnight things have changed .
Just a thought : Some on the street compare Swan to Adani . Well Swan is going the same route but now Adani has become a giant who I do not think can be runover even when the political parties get switched over .
Seeing Adani acquisitions for quality companies like ITD Cementation is only making their business stronger which cannot right now be said for Swan . What future hold for Swan is unknown
These scripts we cannot be evaluate on fundamentals or we cannot even rely on their books as there would be a can of worms waiting to be uncovered .
It can only be valued , how do you see their connections playing to their advantage. Invest with caution and if u are ready for both extremes
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Arihant Report on Veritas
Veritas_India_Ltd.pdf (320.4 KB)