Great Eastern Energy offers CBM play with Indian listing

Great Eastern Energy Corp (GEECL), the country’s first coal-bed methane (CBM) gas producer, is set to get listed soon on the domestic stock exchanges, with the Y K Modi-promoted entity filing its draft red herring prospectus with the market regulator, the Securities and Exchange Board of India (Sebi).

“We have filed the prospectus on Monday and would come out with the IPO after clearance from Sebi is received. We wouldn’t be timing the market,” chairman and managing director Y K Modi told dna.

Apart from Modi and his family, which have 59.30% combined stake, there isn’t any major Indian investor in GEECL with

Lloyds Banking Group plc and Prudential plc holding stakes above 10% each.

The IPO constitute fresh issue of 78 lakh shares and offer of sale of up to 4 lakh shares by promoter entity, YKM Holdings International.

The issue offers Indian investors — Great Eastern is already listed on the London Stock Exchange —an opportunity to invest in the CBM sector for the first time, and particularly when the gas price formula based on the Rangarajan committee recommendations is set to kick in from April 2014.

GEECL is already producing CBM gas from Ranigunj (South) block in West Bengal having an estimated original gas-in-place of 2.40 trillion cubic feet while it has recently been awarded a 25% participating interest in an adjacent block, Raniganj (North) by ONGC.

These apart it has rights to develop Mannargudi block in Tamil Nadu.

GEECL produced 0.24 million standard cubic metre a day of gas (mmscmd) from 137 producing wells in FY12-13 and as on March it has contracts and memoranda of understanding for an aggregate commitment of up to 1.13 mmscmd of CBM, the prospectus said.

It also has a steel pipeline network of over 110 kilometres and also seven CNG dispenser outlets, supplying the fuel to industrial customers in and around Asansol-Durgapur industrial belt.

GEECL has invested Rs 1,119 crore till March in developing Ranigunj block, and as per plans, it would be investing Rs 316 crore in the current year and Rs 332 crore in fiscal 2015 for drilling 40 wells each year.

“Once we obtain the necessary approvals, we intend to commence exploration and development of Mannargudi block. Under the minimum work programme, we will be required to drill 50 core holes and 30 pilot production wells,” GEECL said.

GEECL’s scaling up of production in Ranigunj in future could get impacted by factors such as an adverse draft mining lease deed of West Bengal government, which the company refused to accept as it would have compelled GEECL to allow other parties to carry out coal mining in the same block, the prospectus said.

Additionally, Coal India and a private party, Bankura DRI Mining, have claimed mining rights in portions of the same block, which GEECL has contested.