How RNRL will benefit from cheaper gas?
The Bombay High Court ruled in favour of RNRL in its 3-year-old conflict against Reliance Industries. If the court ordered is implemented, RNRL will walk way with 35 per cent of gas from KD6 basin for 17 years without investing single paisa
THE BOMBAY High Court ruled in favour of Reliance Natural Resources Limited (RNRL) in its 3-year-old conflict against Reliance Industries to supply 28 MMSCMD of gas to RNRL for 17 years at a price of $2.34 mmbtu as referred in the original MoU signed during the Reliance de-merger in 2005. The judgement favours RNRL without taking into account the government’s right over strategic natural resources of the nation and contractor’s interest ie RIL.
Both the parties had taken huge risk and made enormous investments for exploration of natural gas in the country. If the court ordered is implemented, RNRL will walk way with 35 per cent of gas from KD6 basin for 17 years without investing single paisa in exploration of gas, whereas companies from other sectors are struggling to get gas at cheaper price.
Impact on RNRL and RPower
If the gas is available to RNRL at lower gas price ie $2.34 as against a price of US$ 4.2/mmbtu, which was the Empowered Group of Ministers (EGoM) decided price, RNRL will not only alone reap benefits from the supply of gas but also Reliance power, which is waiting for gas for its gas based plant.
According to the prevalent view of the industry and a report published by broking firm Prabhudas Liladhar on RIL-RNRL case, it suggests that RNRL after getting natural gas from RIL at a lower price, will pass it on to Reliance Power, another ADAG firm, after charging a marketing margin of about $0.2/mmbtu to RPower. In addition, the landed price of gas at Dadri is expected to be at about $5.5/mmbtu, which will include a transportation cost of US$2.0/mmbtu to Dadri.
As a result, RPower will be meeting 32 per cent of its power generation capacity from gas, eventually will be able to reduce input costs. According to brokerage firm CLSA Asia-Pacific, if RNRL charges marketing margin in line as per prevalent market rates ie 12 cents/mmbtu, the landed cost of gas for RPower’s Dadri project will be around $3.9/mmbtu, leading to a power generation cost of Rs 2.1/kwh. The effect of this lower price (US$2.34/mmbtu vs US$4.20/mmbtu as per the EGoM) would benefit RPower’s Dadri project in terms of lower landed gas price and higher PLF.
Leading market analyst SP Tulsian stated that availability of gas to RNRL at a price $2.3/mmbtu, will result in gains for ADAG group will be equal to RIL’s losses. On a full-year basis, RIL is set to lose around Rs 3,500 crore supplying 28 MMSCMD of gas at $2.34 .
The irony of this verdict is that citizens of India will not be benefited in terms of getting electricity at cheaper cost due to complexity in the supply chain of electricity. The consumer will get electricity at market rate. The ultimate beneficiary will be ADAG group.
Impact on RNRL and RPower
If the gas is available to RNRL at lower gas price ie $2.34 as against a price of US$ 4.2/mmbtu, which was the Empowered Group of Ministers (EGoM) decided price, RNRL will not only alone reap benefits from the supply of gas but also Reliance power, which is waiting for gas for its gas based plant.
According to the prevalent view of the industry and a report published by broking firm Prabhudas Liladhar on RIL-RNRL case, it suggests that RNRL after getting natural gas from RIL at a lower price, will pass it on to Reliance Power, another ADAG firm, after charging a marketing margin of about $0.2/mmbtu to RPower. In addition, the landed price of gas at Dadri is expected to be at about $5.5/mmbtu, which will include a transportation cost of US$2.0/mmbtu to Dadri.
As a result, RPower will be meeting 32 per cent of its power generation capacity from gas, eventually will be able to reduce input costs. According to brokerage firm CLSA Asia-Pacific, if RNRL charges marketing margin in line as per prevalent market rates ie 12 cents/mmbtu, the landed cost of gas for RPower’s Dadri project will be around $3.9/mmbtu, leading to a power generation cost of Rs 2.1/kwh. The effect of this lower price (US$2.34/mmbtu vs US$4.20/mmbtu as per the EGoM) would benefit RPower’s Dadri project in terms of lower landed gas price and higher PLF.
Leading market analyst SP Tulsian stated that availability of gas to RNRL at a price $2.3/mmbtu, will result in gains for ADAG group will be equal to RIL’s losses. On a full-year basis, RIL is set to lose around Rs 3,500 crore supplying 28 MMSCMD of gas at $2.34 .
The irony of this verdict is that citizens of India will not be benefited in terms of getting electricity at cheaper cost due to complexity in the supply chain of electricity. The consumer will get electricity at market rate. The ultimate beneficiary will be ADAG group.
.As per the agreement RIL must supply the gas to RNRL at the same price. Wheras Govt should get its share as per the price fixed by EGOM. It may mean that RIL gets noting out of Gas supplied to RNRL. Let it be so because they have arrived at this decision as per their demerger agreement. Mukesh Ambani walked away with most profitable private sector company and profit from this gas must have been factored in for Anil Ambani. Shareholders will not loose any money as they own shares of both RNRL and RIL. Its only Mukesh who will loose as he has given RNRL to his younger brother.
.Till three years goverment don't know the rights ?
After giving judgement only they came to know ?
Why can't they unable to tell the concern to the court before giving verdict?
How the elder ambani signed the deal which makes the lose to the company?
There is no question of loss to a particular company , RNRL is not came from outside of somewhere else. As per the de merger scheme all RIL share holders alloted the RNRL share and thus company created. If where ever be the profit , it will go the same share holders only . There are numerous problem which can't solve immediately by judge by court in this case.
That's why court requested both the parties to go to your mother and get resolved. Ambani's are great in creating the weath's of their own and for share holders .
They should not waste even a single minute which is lose to them and india also. How many jobs they have created .
They should do more by concentrating their business more and more.
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