HC Order May Have Bearing On Reliance Power's IPO

MUMBAI: The Bombay High Court's order to Anil Ambani group's RNRL and Mukesh Ambani's Reliance Industries to rework a gas supply agreement may have a bearing on the upcoming IPO of Reliance Power, two of whose projects rely on gas supplies from RIL's KG basin fields.

Reliance Power, a subsidiary of Reliance Energy that is seeking to raise up to $3 billion (Rs 12,000 crore) through the public offering, said in its draft prospectus that it intended to get coal and gas for its two projects at a combined investment of over Rs 30,000 crore from RNRL.

But the court today asked Reliance Industries and RNRL to renegotiate within four months, a gas supply master agreement (GSMA) between them saying it has to be a "bankable" pact.

Reading out the order, Justice A V Mohta said the GSMA will have to be in-line with the family arrangement between Ambani brothers prior to demerger of Reliance group.

Meanwhile, the court's interim order barring RIL from selling gas from KG fields to any third party will continue.

Reliance Power in its draft prospectus to SEBI has said that it has not arranged for "any alternative sources of coal or gas for our Shahpur Coal, Shahpur Gas and Dadri projects."

The company proposes to issue 130 crore equity shares of face value Rs 2 in the public offer, expected to mop up Rs 12,000 crore. The company intends to use the proceeds from the issue to fund new projects, including the 4,000 MW Ultra Mega Power Project at Sasan and the 7,480 MW Dadri power project.

RNRL had taken Reliance Industries to court over implementation of GSMA, under which the Mukesh Ambani group firm is to supply gas from Krishna-Godavari fields to RNRL.

"Currently, RNRL does not have any right to coal resources of its own. In addition, RNRL is in litigation with respect to its gas reserves, which may impact the availability and pricing of the fuel for our two gas-fired thermal projects," Reliance Power said in its draft prospectus.

Reliance Power has identified 12 power projects including the 4,000 MW Shahpur project in Maharashtra. The project would be developed in two phases - 1,200 MW Shahpur Coal and 2,800 MW gas-fired Shahpur Gas.

While Shahpur Gas is expected to start operations in March 2011, Shahpur Coal is scheduled to be commissioned in December 2011. The first Dadri project is expected to be on-stream by September 2011.

"We intend to seek supplies for our super critical coal- fired project, Shahpur Coal through RNRL or third parties. In addition, we are planning to seek supplies of natural gas from RNRL for our gas-fired projects at Shahpur and Dadri primarily from its rights to KG Basin gas reserves," Reliance Power added.

RNRL approached the High Court seeking amendment to GSMA, saying that present agreement did not ensure certainty regarding quantity of supply and its tenure.

Either of the parties can come back to the court if they fail to rework the deal within four months.