Archive for December, 2009

Ambani gas row: govt approval must, RIL tells SC

Thursday, December 17th, 2009

Reliance Industries Ltd on Wednesday reiterated its earlier stand before the Supreme Court that the government being the owner had the last word on gas pricing.
RIL in its final phase of arguments before a bench headed by Chief Justice K G Balakrishnan said Anil Ambani-led RNRL has itself maintained that the May 12, 2005 draft contract between RIL and NTPC should be the template for fixing gas prices and the same provided for the government approval.
RNRL has been demanding gas at $2.34 per unit, the rate at which RIL had agreed to supply gas to power PSU NTPC in a international competitive bidding.
RIL said the June 30, 2005 draft contract between it and NTPC specified that government approval was needed for supply of gas at $2.34 per mmbtu. The family MoU of 2005 between Mukesh group and his estranged younger brother Anil for supply of gas to latter’s Dadri power project was based on the draft NTPC contract, RIL counsel Harish Salve said.
“If you go by the NTPC draft agreement which the RNRL says is the template agreement for the supply of gas, then there exists a clause that the price of the gas is subject to the government approval,” he said, adding that “RNRL’s contention is vague and absurd.” He refuted RNRL’s arguments that it had a reservoir of gas of more than 400,000 square kilometer and clarified that many of these wells did not yield gas so far.
The MoU was only for supplying gas from KG basin as long as it lasted and that too subject to the government approval, he added.
RNRL counsel Mukul Rohatgi said if it did not have a appropriate agreement specifying clearly six issues related to price, tenure, quantity for gas supply to its Dadri plant, then demerger scheme would be in jeopardy.
“One of the four businesses of RIL which were demerged to Anil as per the would be extinguished if the MoU is not executed as per the scheme. The court has powers to annul the scheme of demerger and this will be disastrous. Nobody wants it. Even the shareholders do not want it. It would be an extreme step,’’ he said, adding, “I want to trouble the court least but request the court to remove the hitches”.
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RIL reopens 900 oil stations, selling at PSU rates

Thursday, December 17th, 2009

The Mukesh Ambani-run Reliance Industries (RIL) has reopened about two-thirds of its 1,432 petrol pumps in the country and is selling about 2,000 kilolitres of auto fuel per day, RIL President (Refinery Business) P Raghavendran said today.

“We are selling about 2,000 kl per day from 900 petrol stations, mostly in the Western and Southern markets,” he said here, adding at many of these stations, it is selling the fuel at rates on par with the heavily subsidised price of its public sector rivals.

Reliance had shut its 1,432 filling stations in March 2008 after sales dropped to almost nil as it could not match the subsidised price offered by the government-owned IndianOil, Bharat Petroleum and Hindustan Petroleum, who got compensated from the government for selling fuel below cost.

“We are selling where we can match PSU price,” he said.

The three state-run retailers sell petrol at Rs 3.85 a litre lower than cost of production and diesel at Rs 3.71 per litre lower.

Raghavendran said we are the only nation that is so heavily dependent on imports to meet oil needs yet subsidies the fuel heavily.

Unlike sectors like fertilizers, the oil subsidy is limited only to public sector firms, he said, and pointed out that in the 2008-09 fiscal, the government issued oil bonds worth over Rs 103,000 crore to PSU fuel retailers for selling petrol, diesel, domestic cooking gas and kerosene below cost.

The model of permanently adopting such a large subsidy programme is not sustainable for the economy, he said.

Reliance surrendered its only-for-export status for one of its refineries in Jamnagar which is now being used to supply fuel to its outlets.

Essar Oil, which used the sliding oil prices since October 2008 to reopen 1,292 out of its 1,316 petrol pumps and is planning to add another 1,500 in next one year, is also selling fuel at almost the same rates as PSU rates.

IOC, BPCL and HPCL get bonds from the government and discounts from crude producer ONGC for selling petrol, diesel, domestic LPG and kerosene below cost. The same compensation is not given to private retailers like Reliance, Essar and Royal Dutch Shell, he pointed out.

Source: http://www.business-standard.com/

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Reliance, Hardy May Review India Gas Finds on Completing Well

Wednesday, December 16th, 2009

Hardy Oil & Gas Plc and partner Reliance Industries Ltd. may drill seven wells at two gas fields that could mark it as the largest in India with reserves estimated at as much as 20 trillion cubic feet.

The U.K.-based explorer specializing in South Asia and Nigeria and Reliance Industries are currently drilling one well in the KG-D3 block and may drill another three wells next year, Chief Executive Officer Perayya Sastry Karra said in an interview in New Delhi today. They also plan to drill three wells in the KG-D9 block after abandoning one that showed “poor” reservoir sands, the company said in October.

“We went after the biggest prize,” Karra said. “These fields are likely to be huge, and we will take a re-look at the possible reserves by March when we have completed more wells in the two blocks.”

Hardy in May estimated that potential resources in the D3 and D9 fields may be as much as 9.5 trillion cubic feet and 10.8 trillion cubic feet, respectively, citing figures from consultant Gaffney, Cline & Associates Ltd. The forecast puts the two fields together at twice the size of India’s biggest, also operated by Reliance Industries, India’s most valuable company.

The two blocks located in the Krishna-Godavari basin may help Reliance, the operator and 90 percent owner of the two fields, boost income from selling natural gas in the world’s second fastest-growing major economy, where availability of the fuel is half the amount needed to run power, chemical and fertilizer plants.

Source:

http://www.bloomberg.com/apps/news?pid=20601091&sid=aJHeaA_dtmD4

Mukesh Ambani lays out aggressive vision for RIL

Wednesday, December 16th, 2009

Mukesh Ambani, chairman of Reliance Industries Ltd, India’s largest private company, today laid down a road map for business transformation and value creation for the company at its 35th annual general meeting.

Ambani said the company has lined up aggressive plans for oil and gas exploration work over the next three years, as it seeks to further strengthen its position in the energy business. It would include overseas acquisition. Reliance was working on developing nine gas fields around the Dhirubhai-1 and -3 gas discoveries, currently producing around 45 million standard cubic meters per day (mscmd) or 40 per cent of India’s total gas output. “Initial field development planning for accelerated monetisation of nine more gas discoveries in this block is underway,” Ambani added.

The company is also planning a new petrochemical complex at Jamnagar in Gujarat, with an annual capacity of two million tonnes of olefins and matching downstream capacities increasing the total capacity to four million tonnes.
Reliance began pumping gas from its find in the Krishna-Godavari basin off India’s east coast in April. “Gas production has crossed six billion cubic metres and the field is slated to plateau production by the second half of 2010. This production is from just three of the 19 discoveries in the area,” he said.

The Krishna-Godavari basin’s D6 block began oil production in September last year and is currently producing between 10,500 and 11,000 barrels of oil per day from three wells. Three more wells are to be added to more than double the output. “Oil production from the D26 (MA) field has been 2.8 million barrels (since production started) with daily peak production expected by the end of the year,” Ambani told the shareholders.

On November 10, RIL announced it had made its first oil discovery in the Cambay basin, Gujarat. “Reliance will continue to accrue oil and gas properties overseas to add to existing assets in Oman, Yemen, Colombia, East Timor and Peru,” Ambani added.
Reliance has a current cash balance of Rs 19,400 crore and its net debt is now at less than 21 months of cash flow, Ambani said.
As part of its corporate social responsibility intiative, he announced that the company would be setting up a Rs 500-crore Reliance Foundation to address the social development imperatives of the country. The corpus would be later increased to Rs 1,000 crore and would provide formal and vocational education, high-quality healthcare, rural development and urban renewal, and protection and promotion of India’s heritage of arts and culture.

Source: http://www.business-standard.com/india/news/mukesh-ambani-lays-out-aggressive-vision-for-ril/376790/

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RIL woos Lyondell creditors as mgmt fights back

Tuesday, December 15th, 2009

New York bankruptcy court to hear former owner’s updated rescue plan today. Reliance Industries Ltd (RIL), in its efforts to gain control over LyondellBasell, is looking to team up with the unsecured creditors and bond holders of the bankrupt Dutch petrochemicals giant.

Sources close to the development said the move came after the LyondellBasell management filed an updated rescue plan last week that centred on a $2.5 billion cash infusion by the company’s former owner and two investors, despite receiving an unbinding offer from RIL for an acquisition.

A bankruptcy court in New York will hear the updated rescue plan of the management tomorrow and take the views of creditors to LyondellBasell on the proposal.

RIL executives, however, indicated that the company would wait for the result of tomorrow’s hearing before floating a concrete proposal on formulating an alternative plan. “Before we know the result of the hearing, it is worthless to work on our plans. If the court approves the revival plan of the existing management, the chances would be less for RIL,” they added.

The Indian petroleum giant feels the unsecured creditors, who are fighting against the management and secured creditors in court, may raise their voice against the $2.5 billion revival proposal and come up with a better alternative after working with RIL.

An email sent to RIL did not elicit any response. A team of RIL officials is still in the US, meeting creditors, management officials and legal experts to frame a binding proposal for buying LyondellBasell. “The proposal of RIL is likely to be submitted before the bankruptcy court, provided it wins the support of unsecured creditors and bond holders. The company’s earlier plan to submit the proposal to the LyondellBasell management went off track after the management came out with its own plan,” said sources in the banking sector.

The revival plan of the management, if implemented, may dilute the rights of the equity holders and transfer the company to the sponsors of the $2.5 billion rights issue: Former owner and Russian-born billionaire Len Blavatnik and two investors, and its secured creditors. According to legal experts, as there is no collateral offered to unsecured creditors for their loans, the equity offering to them would depend on the court’s verdict.

LyondellBasell, which had revenues of $50 billion before it filed for bankruptcy protection last January, had urged creditors to accept the refurbished proposal but the unsecured creditors rejected the offer.

The committee of unsecured creditors, called ‘Creditors’ Committee’, last week urged the court to allow it to work directly with potential investors, including RIL, for rescuing the world’s third largest petrochemicals company. The committee, in a filing before the bankruptcy court, expressed fear that the management might not give due consideration to the RIL proposal.
“A sale to, or other significant investment by, a strategic investor (like RIL) would interfere with the interests of these institutional investors (they are also in race to gain control of LyondellBasell) who have powerful influence over debtors (the LyondellBasell management),” the committee said, requesting the court for the power to work on an alternative rescue plan with companies like RIL.

The general unsecured creditors hold $2.3 billion worth of debt, in addition to the $1.35 billion debt with bond holders. Moreover, Lyondell had arranged a temporary bridge loan of $8.5 billion to buy Basell in December 2007, which is also on the merged entity’s books.

The secured creditors, who now support the LyondellBasell management, have arranged $12.1 billion worth of loans for the acquisition. Citibank, Merrill Lynch, ABN Amro, UBS Securities, Merrill Lynch Capital Corp, Goldman Sachs Credit Partners, Pierce, Fenner & Smith and Citigroup Global Markets arranged the bridge loan. The $12.1 billion secured credit was offered by Citibank, Citigroup Global Markets, Goldman Sachs Credit Partners, Deutsche Bank Trust Company Americas, Merrill Lynch, Pierce, Fenner & Smith, ABN AMRO and UBS Securities.

The US bankruptcy court will clear the revival plan of the LyondellBasell management if half of the debtors in each class accept the proposal. Also, the half should also have two-thirds of the claims in financial terms. After filing the revival proposal, the management said it might rework the plan if a class of claimants disapproved it.

Last week, the unsecured creditors rejected the $300 million settlement offer to the management which would allow the company to go forward with a plan to exit bankruptcy protection. Lyondell’s unsecured creditors had sued the lenders and advisers who put together the 2007 deal, including Citigroup, Deutsche Bank AG and Goldman Sachs Group Inc, contending that the buyout of US firm Lyondell by Dutch company Basell left the combined entity doomed to fail because it had “unreasonably small capital” to support the debt from the merger.

Source: Business Standard

RIL set to decide on LyondellBasell

Tuesday, December 15th, 2009

The firm is expected to take a call within a day on whether to submit a final proposal to buy the petrochemicals firm

India’s most valuble company, Reliance Industries Ltd (RIL), is expected to take a call within a day on whether to submit a final proposal to acquire bankrupt petrochemicals maker LyondellBasell Industries AF, according to people familiar with the situation.

Mukesh Ambani-controlled RIL had submitted a non-binding proposal of $10-12 billion (Rs46,700-Rs56,040 crore) on 21 November for Rotterdam, Netherlands-based LyondellBasell.

A decision on the final bid is contingent on the inputs received from a team of senior RIL executives who had been working on the deal in the US.

The people familiar with the situation, who spoke on condition of anonymity, said the executives have since returned and new facts they have gleaned about the target firm may influence the final decision on the bid.

For example, while LyondellBasell’s debt is at $27 billion, RIL is believed to have learnt that many of its creditors have a right to increase interest rates, which they have to almost 12%.

The people say that while talks have been under way with creditors, debt of this magnitude and cost has to be renegotiated before the company can submit a binding final proposal.

Shutting down LyondellBasell’s old facilities in the US and Europe could be messy and there are concerns related to integration and management issues given that RIL does not have a track record of major overseas ventures of this scale.

The management as well as promoters of LyondellBasell have made it clear over the last few days that they are not interested in losing control of the company.

LyondellBasell submitted a revised proposal last week to a US bankruptcy court aimed at taking the company out of bankruptcy proceedings.

The people familiar with the situation also said that RIL was not keen on a hostile takeover of the firm.

Source: http://www.livemint.com

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Much In Pipeline - Reliance Industries Ltd

Monday, December 14th, 2009

In a boost to its bid to acquire troubled petrochem firm LyondellBasell Industries, Reliance Industries Ltd (RIL) has got support from the official, court-recognized committee of unsecured creditors.

The committee, which represents the interests of a large number of creditors, has urged the court to allow it to directly work with potential investors, including RIL, to arrive at a deal to rescue the company. The committee, in a filing before the bankruptcy court of New York handling the issue, expressed fear that the LyondellBasell management may not give due consideration to the RIL proposal and urged the court to let it work out a parallel plan along with RIL and others.

It pointed out that the interest of a potential investor such as RIL may not be compatible with those of the institutional investors already suggested as possible rescuers by the management.

This committee of unsecured creditors has opposed the plan suggested by management, worrying about the huge “haircut” they will have to take. The court will take up the matter before 15 December, the date on which emergency loans taken by the company after bankruptcy come up for repayment.

According to US bankruptcy laws, the court has the final decision to approve or disapprove any reorganization plan. However, in the initial stages, the court allows the company to come up with a plan. It is then put to vote by different classes of creditors.
The plan can then be vetoed by a substantial group of creditors.
However, the court can exercise its powers to force a reorganization plan if the creditors fail to agree on one. We maintain a buy on RIL, with a target price of Rs1,170.

Source: Live Mint
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Govt may penalise Reliance Comm, says minister

Friday, December 11th, 2009

Government may impose a penalty on Reliance Communications Ltd after examining a state audit report that found the No. 2 telecoms firm under-reported revenue for two years, the telecoms minister said on Thursday.

Andimuthu Raja told parliament his ministry was studying the report submitted by a special auditor earlier in the year.

“The department shall raise additional demands including interest and penalty, as per licence terms, on the concerned licencees, after examination,” he said in a written reply to a question.

Raja did not say how much the penalty could be or by when the government would decide on its course of action.

A Reliance Communication spokesman reiterated the firm’s denial of any wrongdoing.

“There is no irregularity or discrepancy whatsoever in the accounts of the company,” he said in an email.

RCOM strongly affirms that it anticipates no additional financial liability towards licence or spectrum fee.”

Shares in Reliance Communications, which has a market value of over $8 billion, were up 2.4 percent at 186.20 rupees by 0848 GMT while the Mumbai exchange was up 0.6 percent.

The minister had said on Monday the auditor found Reliance under-reported revenue to the telecoms regulator in 2006/07 and 2007/08

Source: http://in.reuters.com/article/topNews/idINIndia-44618820091210

Three ADAG Firms Under Govt Scanner

Thursday, December 10th, 2009

Reliance Infrastructure, Reliance Natural Resources and Reliance Communication have violated overseas debt norms

The government on Tuesday said three Anil Ambani group firms - Reliance Infrastructure, Reliance Natural Resources and Reliance Communication — have violated overseas debt norms.

The matter pertaining to Reliance Infrastructure has been referred to Enforcement Directorate over non-payment of penalty and that of RNRL for further probe, also by ED.

In a written reply in Rajya Sabha, Minister of state for Finance Namo Narain Meena said end-use violations have been observed by RBI in respect of two external commercial borrowing transactions by Reliance Infrastructure — $360 million and $150 million.

The company brought the proceeds raised through the ECBs to India and kept these invested in debt mutual funds, pending utilisation for the declared end-use in gross violation of the existing guidelines, he said.

A penalty of Rs 124.68 crore was imposed on Reliance Infrastructure, he said, adding that since it did not pay the penalty in accordance with the rules and provisions of FEMA, the violations were refered to the Directorate of Enforcement (DoE) in December, 2008 for adjudication.

Reliance Natural Resources Ltd issued foreign currency convertible bonds of $300 million for the purpose of project under the automatic route. As much as $275 million (Rs 1,127 crore) were brought to India in May, 2007 and were parked in debt mutual funds pending utilisation.

Subsequently, in August 2008, an amount of Rs 1,160 crore ($275 million) was invested in a wholly owned subsidiary in Singapore, the minister said.

Since the alleged transactions have cross-border angle and since RBI does not have privileges of investigation, the issue has been referred to the DoE for undertaking investigation in the matter.

He said a study of audited report for the year 2007 revealed that the unutilised money of Rs 5,142 crore raised through FCCBs by RCom has been deposited interest free with a wholly owned subsidiary, which in turn has held the same in bank deposits.

After, ascertaining the facts, the company was advised to apply for compounding. The company in its response has stated that the proceeds of the FCCBs were utilised for permitted end-use-telecom capital expenditure taking into account the business exigencies and denied any contravention of the regulation, the minister said, adding that the reply is being examined for taking further action.

As per the existing rules, corporate which have violated the existing ECB policy and are under investigation by RBI and/or DoE are allowed to avail ECB only under the approval route, the minister informed.

Source: http://www.businessworld.in/bw/storyContent/2009_12_01_Three_ADAG_Firms_Under_Govt_Scanner.html

Ambani gas row: Apex court questions family MoU

Wednesday, December 9th, 2009

As the gas dispute between the two Ambani brothers nears the last phase of arguments in the Supreme Court, the bench has posed some questions to both the companies that can be best described as sticky.

On the penultimate day before Anil Ambani led Reliance Natural Resources Ltd’s (RNRL) team ends arguments in the gas dispute with Mukesh Ambani’s Reliance Industries Ltd (RIL), it has filed one more affidavit reiterating its stand on the government stand for the ninth time.

In response to the affidavit, the three-judge bench observed that the policies decided by Empowered Group of Ministers (EGoM) on gas pricing are of national interest.

Also, the bench asked whether the price, tenure and quantity of gas is part of scheme of demerger of erstwhile RIL?

After 22 days of hearing of the Ambani family gas dispute in the apex court, everything seems culminating to one point where the Supreme Court is asking whether the EGoM decisions are valid or not, RIL claiming that government approval is must for all the contracts and RNRL saying they don’t need government intervention for a contract under family MoU.

Source: http://profit.ndtv.com/2009/12/09003739/Ambani-gas-row-Apex-court-que.html

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