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PNGRB plans to allow lenders to replace defaulting city gas companies
Lenders will have a right to replace a defaulting city gas licensee with a new entity in consultation with the downstream regulator, as per a draft proposal by the Petroleum and Natural Gas Regulatory Board (PNGRB).
The proposed amendment is aimed at addressing a key regulatory concern of lenders that was holding back financial closure for many city gas licence areas.
The regulator, which has distributed 136 licences in the past two years and aims to award licences for another 50 districts this year, expects the proposed changes to help expedite financial closure for current and future licensees and speed up work programme.
PNGRB plans to allow lenders to replace defaulting city gas companies
The current rules bar transfer of 50 per cent or more stake in a license area to any new party in the first five years of the license or till the completion of promised work programme, giving rise to concerns that lenders may be stuck if a licensee defaulted on servicing loans in early years.
The new regulatory proposal would permit lenders to get a new entity to take over the licence and the liabilities that came with it.
In case of default by a licensee, lenders are expected to inform the regulator, which would give 90 days to the licensee to cure the default, failing which the licence may be suspended if so desired by the lenders, as per the draft.
After the suspension of licence, lenders will have to inform the regulator of their intention to install a substitute for the original licence-holder.
Lenders can then select a substitute within 90 days. The regulator would then transfer the city gas licence to the new entity if it meets all license conditions, as per the draft. The new entity will have to assume all the liabilities and responsibilities of the original licensee.
In the draft proposal, PNGRB has also described in greater detail on when the financial closure will deem to have been achieved by the licensees.
The licensees will now have to offer component-wise detailed cost of project, year-wise spending and financing plan, and approval of the same by the board of directors of the company.
In case of borrowings-funded plan, a licensee needs to submit firm sanction order from lenders, legally binding loan agreements.
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