Anil Ambani promoted Reliance Natural Resources Ltd. (RNRL) and Reliance Power Ltd. will be merged. This was decided in a meeting of the boards of the two companies today. The all stock deal is pegged at over Rs. 50,000 cr. or $ 11 billion.
Shareholders of Reliance Power will get 4 shares of RNRL for every share of Reliance Power.
The exchange ratio is based on independent valuation by KPMG.
RNRL was born out of the demerger of Dhriubhai Ambani's Reliance empire five year ago. The purpose of creation of RNRL was for sourcing, supply and transportation of fuels, primarily natural gas.
As per the demerger scheme, RNRL was to source natural gas from Reliance Industries and trade it to ADAG power plants including the proposed mega 7,800-MW Dadri unit near here being set up by R-Power.
However, with the Supreme Court on May 7 upholding the government policy on pricing and utilisation of natural gas, RNRL almost had no role left in supply of gas to R-Power.
According to government's Gas Utilisation Policy, trading or profiteering from natural gas sales is not allowed – no company can buy the fuel from a producer and sell it to an end consumer like a power firm for a margin.
Suppliers like RIL can only enter into a Gas Sales and Purchase Agreement (GSPA) with an actual user of gas.
Though it had signed a Gas Sales Master Agreement (GSMA) with RNRL expressing its intent to supply natural gas from eastern offshore KG-D6 fields, RIL can enter into a GSPA only with R-Power which is to implement the Dadri or other power plants of ADAG.
The apex court had on May 7 rejected RNRL's plea for gas from RIL at rates arrived in a private family agreement, saying the government alone had the right to approve the price of fuel and fix its user.
The apex court said RIL can sell gas to RNRL at government-set prices of USD 4.2 per million British thermal unit and asked the two to enter into fresh agreement.
After the Court ruling, the two brothers had called a truce in a pact signed on May 23 wherein they decided to do away with the non-compete agreement barring each other's companies to enter into the same business. This meant that the brothers could start new ventures and compete with each other. The exception was gas fired power plants.
As per Supreme Court's direction, RIL and RNRL entered into a new GSMA last week. The new GSMA is consistent with the government's gas utilisation policy.
According to a press release by the company, Reliance Power will derive substantial benefit from RNRL’s Gas Supply Master Agreement (GSMA) with RIL.
Reliance Power’s plans for setting up upto 10,000 MW gas based power plants will be accelerated. Reliance Power will benefit from gas from RNRL’s 4 CBM (coal bed methane) blocks.
RNRL shareholders to benefit from Reliance Power’s diversified generation portfolio of 37,000 MW and substantial coal reserves.
RNRL shareholders, representing approx. 80% of its capital, are also shareholders of Reliance Power.
Over 80% of RNRL shareholders received their shares free on demerger from RIL.
Reliance Power will have over 6 million shareholders, the world’s largest shareholding family.
Source: NDTV Profit