Reliance Natural Resources-A $ 5 bn market cap, without a business
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K.Karthik Raja
Feb 13, 2008, 6:50:39 AM2/13/08
to Kences1
Reliance Natural Resources-A Controversial Bet, Gone Awry
CMP Rs 117
No. Of shares outstanding- 1633 mn
Market Cap- Rs 19100 crore
Q3 Eps 08- 0.15 paise
High-Rs 249.7 hit on Jan 9, 2008
Low-Rs 21.65 hit on April 2, 2007
A $ 5 Bn Market Cap, but where's the business?
-RNRL does accept the GSMA's as the terms are not in its favour or not
as per the family agreements made.
-There are no projects that have been set up by RNRL which can offtake
the RIL gas, which is expected to begin flowing from July-August 2008.
-Even if such GSMA's get concluded at the instance of the Bombay HC
and amicably in favour of RNRL, Reliance Natural Resources had
intended to use the gas to fire up the Dadri Gas based Power Plant.
-The Dadri Power Plant is no where near take-off/completion but RNRL
is liable to pay for atleast 14 MMSCMD of Gas produced by RIL, and due
to RNRL, on a "take" or "pay" committment.
So what is the $ 5 bn market cap of RNRL for? A company with no
business on ground and no GSMA in place?
Reliance Natural Resources Ltd (RNRL) has informed BSE about the
following:
On October 15, 2007, the Hon'ble Bombay High Court disposed of the
Company Application No. 1122 of 2006 filed by the Company against
Reliance Industries Ltd (RIL), seeking implementation of demerger of
gas supply business from RIL with the following conclusions /
directions:
- Memorandum of Understanding / family arrangement dated June 18, 2005
(MoU) and its content are binding upon both parties RIL and RNRL.
- The Gas Supply Master Agreement (GSMA) as formed and finalized on
January 12, 2006 is in breach of the Scheme of Demerger sanctioned by
the Bombay High Court on December 09, 2005 (Scheme).
- The term "suitable arrangement" as referred to in the Scheme needs
to be read and interpreted by taking into account the terms of the MOU
as well as the Scheme and it is necessary for the working of the
Scheme.
- It would be appropriate for both RIL and RNRL to re-negotiate, re-
consider and settle the terms of existing GSMA and Gas Supply Purchase
Agreement (GSPA) within four months.
- Interim orders granted on May 03, 2007 and June 20, 2007 to continue
for further four months.
The List of the order & the way it affects shareholders of RNRL:
A.The Bombay HC could not find either side wrong on the Gas Supply
Master Agreement, and asked RIL and RNRL to re-negotiate the
agreement. So legally it seems there is nothing for the court to
intervene or decide.
B. What was the GSMA as claimed by RNRL:
-NTPC to get a firm allotment of 12 MMSCMD of Natural Gas from the KG-
Dhirubhai fields, after which RNRL to get 28 MMSCMD of Gas from RIL,
which will be considered the base volume.
-In case NTPC contract does not materialise the 12 MMSCMD allocated to
NTPC will also go to RNRL, with the Base Volume raised to 40 MMSCMD.
-50 per cent of Base Volume of gas is to be supplied to RNRL over 2
years, 2008-09 and 2009-10.
-The price and commercial terms for the aforesaid gas supply will be
no worse than those applicable to NTPC.
-After 2010, RNRL will have the first option to get 40 per cent of the
gas produced by RIL (Called the Option Volume).
-Supply Of Option Volume will be at market rates.
-Gas can be used for all projects of ADAG.
-Gas cannot be traded.
-Gas cannot be swapped.
-For Base Volume ADAG allowed to set up its own gas pipeline, but
still have to pay the transportation cost for the East-West pipeline
being put up by RIL, whether RNRL uses the same or not.
-Gas Supply Master Agreements for Base Volume and Option Volumes were
to have been made in accordance with Best Internationational practices
and on Bankable terms.
Conclusion:
-RNRL does accept the GSMA's as the terms are not in its favour or not
as per the family agreements made.
-There are no projects that have been set up by RNRL which can offtake
the RIL gas, which is expected to begin flowing from July-August 2008.
-Even if such GSMA's get concluded at the instance of the Bombay HC
and amicably in favour of RNRL, Reliance Natural Resources had
intended to use the gas to fire up the Dadri Gas based Power Plant.
-The Dadri Power Plant is no where near take-off/completion but RNRL
is liable to pay for atleast 14 MMSCMD of Gas produced by RIL, and due
to RNRL, on a "take" or "pay" committment.
So what is the $ 5 bn market cap of RNRL for? A company with no
business on ground and no GSMA in place?
www.kences1.blogspot.com
CMP Rs 117
No. Of shares outstanding- 1633 mn
Market Cap- Rs 19100 crore
Q3 Eps 08- 0.15 paise
High-Rs 249.7 hit on Jan 9, 2008
Low-Rs 21.65 hit on April 2, 2007
A $ 5 Bn Market Cap, but where's the business?
-RNRL does accept the GSMA's as the terms are not in its favour or not
as per the family agreements made.
-There are no projects that have been set up by RNRL which can offtake
the RIL gas, which is expected to begin flowing from July-August 2008.
-Even if such GSMA's get concluded at the instance of the Bombay HC
and amicably in favour of RNRL, Reliance Natural Resources had
intended to use the gas to fire up the Dadri Gas based Power Plant.
-The Dadri Power Plant is no where near take-off/completion but RNRL
is liable to pay for atleast 14 MMSCMD of Gas produced by RIL, and due
to RNRL, on a "take" or "pay" committment.
So what is the $ 5 bn market cap of RNRL for? A company with no
business on ground and no GSMA in place?
Reliance Natural Resources Ltd (RNRL) has informed BSE about the
following:
On October 15, 2007, the Hon'ble Bombay High Court disposed of the
Company Application No. 1122 of 2006 filed by the Company against
Reliance Industries Ltd (RIL), seeking implementation of demerger of
gas supply business from RIL with the following conclusions /
directions:
- Memorandum of Understanding / family arrangement dated June 18, 2005
(MoU) and its content are binding upon both parties RIL and RNRL.
- The Gas Supply Master Agreement (GSMA) as formed and finalized on
January 12, 2006 is in breach of the Scheme of Demerger sanctioned by
the Bombay High Court on December 09, 2005 (Scheme).
- The term "suitable arrangement" as referred to in the Scheme needs
to be read and interpreted by taking into account the terms of the MOU
as well as the Scheme and it is necessary for the working of the
Scheme.
- It would be appropriate for both RIL and RNRL to re-negotiate, re-
consider and settle the terms of existing GSMA and Gas Supply Purchase
Agreement (GSPA) within four months.
- Interim orders granted on May 03, 2007 and June 20, 2007 to continue
for further four months.
The List of the order & the way it affects shareholders of RNRL:
A.The Bombay HC could not find either side wrong on the Gas Supply
Master Agreement, and asked RIL and RNRL to re-negotiate the
agreement. So legally it seems there is nothing for the court to
intervene or decide.
B. What was the GSMA as claimed by RNRL:
-NTPC to get a firm allotment of 12 MMSCMD of Natural Gas from the KG-
Dhirubhai fields, after which RNRL to get 28 MMSCMD of Gas from RIL,
which will be considered the base volume.
-In case NTPC contract does not materialise the 12 MMSCMD allocated to
NTPC will also go to RNRL, with the Base Volume raised to 40 MMSCMD.
-50 per cent of Base Volume of gas is to be supplied to RNRL over 2
years, 2008-09 and 2009-10.
-The price and commercial terms for the aforesaid gas supply will be
no worse than those applicable to NTPC.
-After 2010, RNRL will have the first option to get 40 per cent of the
gas produced by RIL (Called the Option Volume).
-Supply Of Option Volume will be at market rates.
-Gas can be used for all projects of ADAG.
-Gas cannot be traded.
-Gas cannot be swapped.
-For Base Volume ADAG allowed to set up its own gas pipeline, but
still have to pay the transportation cost for the East-West pipeline
being put up by RIL, whether RNRL uses the same or not.
-Gas Supply Master Agreements for Base Volume and Option Volumes were
to have been made in accordance with Best Internationational practices
and on Bankable terms.
Conclusion:
-RNRL does accept the GSMA's as the terms are not in its favour or not
as per the family agreements made.
-There are no projects that have been set up by RNRL which can offtake
the RIL gas, which is expected to begin flowing from July-August 2008.
-Even if such GSMA's get concluded at the instance of the Bombay HC
and amicably in favour of RNRL, Reliance Natural Resources had
intended to use the gas to fire up the Dadri Gas based Power Plant.
-The Dadri Power Plant is no where near take-off/completion but RNRL
is liable to pay for atleast 14 MMSCMD of Gas produced by RIL, and due
to RNRL, on a "take" or "pay" committment.
So what is the $ 5 bn market cap of RNRL for? A company with no
business on ground and no GSMA in place?
www.kences1.blogspot.com
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