Brookfield to seal Reliance Gas Pipeline deal of $2 billion

MUMBAI: Canada based investor Brookfield is all set to buy the lossmaking East West Pipeline Ltd (EWPL), earlier known as Reliance Gas Transportation Infrastructure Ltd, for an enterprise valuation of Rs 14,000 crore ($2 billion).

Brookfield is looking to focus on the renewable energy space in India. It is also sponsoring an infrastructure investment trust (InvIT) called India Infrastructure Trust.

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If it seals the deal it will take over the 1,400 km common carrier pipeline from Kakinada on the east coast to Bharuch in Gujarat.

The Competition Commission of India (CCI) has approved the transaction last week. Brookfield has also filed an application with the Securities and Exchange Board of India (Sebi) for registering the InvIT.

The pipeline housed under EWPL is being transferred to an entity called Pipeline Infrastructure Pvt Ltd (PIPL), a wholly owned subsidiary of Reliance Industries Holding Pvt. Ltd (RIHPL). Which belongs to Mukesh Ambani and family, the promoters of Reliance Industries Ltd (RIL).

The $2 billion will be evenly split between equity and debt and Brookfield is already in negotiations with ICICI Bank for financing, according to a source.

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Ambani is also said to be negotiating a clause with Brookfield that would allow buying back the asset after 20-25 years.

“It’s a great way of monetising an asset. Brookfield and the four other small sponsors of the trust will get cash flows from the pipeline, which will give them their desired yields,” said a Reliance executive. “InvITs are tax-efficient vehicles and give an optionality in the future to add more assets.”

Brookfield’s India bets include the largest commercial real estate transaction in India in 2014, acquiring a 15 million square foot portfolio of office properties from Unitech. It has also purchased a portfolio of six toll roads in last two years, making it 246 km of roadways, and a majority stake in a cell phone tower network. It has gas pipelines in Brazil, coal terminals in Australia and even gas stations in Canada.