Anil merges RNRL with Reliance Power

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Money Matters

Another Sunday and another major announcement from the ADAG group, that does not believe in the popular number Never on a Sunday. The group on Sunday announ-ced the merger of Reliance Natural Resources Limited (RNRL) with Reliance Power (Rpower) in a Rs 50,000 crore all-stock deal.
RPower will give its one share for every four shares held by RNRL. This deal, which is weighed in favour of RPower, according to analysts, could see RNRL’s stock plunge on Monday.
Stock market advisor Mr S.P. Tulsian said that the stock could fall from Rs 63, Friday’s closing to Rs 44. He said the merger was done obviously on the direction of the government as it will now be easier for the government to allocate gas to Reliance Power.
The merger was approved by both the boards on Sunday. The 1:4 valuation was done by KPMG. RPower said it would now benefit directly from the gas supply master agreement (GSMA) with Reliance Industries Ltd. Earlier RNRL was set up to trade in gas as when the GSMA with RIL was signed RPower had not put up any new plant. But RIL refused to give the gas as it said it was the government’s prerogative to decide who will get gas, at what price and in what quantity. This was the subject of the year long court case between the two groups. RPower, which has yet to generate even one unit of new power has plans to put up over 8,000 MW of gas based power generation capacity.
RNRL, according to analysts, is basically a shell company with stakes in coal bed methane blocks and an oil block.
The contribution from RNRL’s net worth of around Rs 1,900 crore, will lead to an increase in Reliance Power’s net worth to over Rs 16,000 crore, the company said in a press release.

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RPower may seek gas supply
New Delhi : After merging RNRL with itself, Anil Ambani Group firm Reliance Power is likely to apply to the government for the allocation of natural gas, reasoning that it being an end-user meets the eligibility criteria for allotment.
As per the government’s gas utilisation policy, gas can be allocated only to an end-user and traders like Reliance Natural Resources Ltd are barred.
Sources said though RIL had signed a new gas sales master agreement (GSMA) with RNRL expressing its intent to supply natural gas from KG-D6 field on terms laid in the government’s policy, it could not have entered into an actual gas sale purchase agreement with it as such a pact can be signed only with end-users.
Reliance Power is now expected to formally apply to the government seeking allocation of natural gas to its proposed Dadri plant or any other plant.
Sources said an empowered group of ministers may meet this month to decide if exceptions to the present policy can be made so that Reliance Power’s proposed plants can get fuel from KG-D6 fields by reserving or blocking certain volumes for it. — PTI