Anil Ambani Wins Court Contest With Mukesh Over Gas
June 15 (Bloomberg) -- Mukesh Ambani's Reliance Industries Ltd., India's most valuable company, was ordered to sell natural gas to a company owned by his younger brother Anil for 44 percent less than the government-set price, lawyers said.
The Bombay High Court ruled the company honor a 2005 agreement to supply 28 million cubic meters of gas per day at $2.34 per million British thermal units for 17 years, Mukul Rohatgi, counsel for Anil Ambani's Reliance Natural Resources Ltd., said by telephone today. Reliance Industries will decide on its "future course of action based on legal advice," it said in an e-mailed statement today.
Reliance Industries fell the most in five months, while Anil Ambani's company jumped 24 percent after the ruling on the dispute sparked by the splitting of the family empire in 2005.
The decision may lower the value of the gas from the Krishna-Godavari block, Reliance's largest field, by as much as $3 billion to $13 billion, according to Nomura Financial Advisory & Securities India Pvt.
"The Reliance Industries share price has factored in a gas price of $4.20," said Vinay Nair, an analyst with Khandwala Securities Ltd. in Mumbai. Much of the company's "future earnings depend on gas sales from the Krishna-Godavari basin."
The ruling may cost the energy explorer as much as $800 million a year at a peak output rate, said Angel Broking Ltd. analyst Deepak Pareek in Mumbai.
Power Plants
"Reliance Natural still needs to set up power plants which can use the gas," Pareek said by telephone today. "Cash flows will fall for Reliance Industries but it may not be immediate."
Reliance Natural's affiliates "will set up a power plant with a capacity of more than 7,000 megawatts in the next three to four years," Rohatgi said today. He didn't say if the company will take gas from Reliance Industries before the plant comes up.
The court has not allowed trading in the gas, D.J. Kakalia, one of the lawyers for Reliance Natural, said at the court house.
Reliance Industries fell 7.8 percent to 2,178.80 rupees in Mumbai, the biggest decline since Jan. 7. The stock has climbed 77 percent this year compared with the 54 percent gain in the benchmark Sensitive Index.
Reliance Natural rose 24 percent to 108.35 rupees, the highest since May 22, 2008, and has surged 89 percent this year.
Reach Agreement
The companies are required to reach an agreement based on the terms of the memorandum of understanding signed in June 2005, according to Reliance Natural's lawyers.
The Bombay High Court said "the two companies should negotiate a new agreement within a month, with price, quantity and tenure as a must," Kakalia said. "These three parameters, as per the existing MoU, must be in the new agreement."
Reliance Natural procures fuel for the Anil Dhirubhai Ambani Group's power projects. Reliance Infrastructure Ltd. operates six power plants in India and plans to build another seven, according to data compiled by Bloomberg, while Reliance Power Ltd. is building at least three large stations.
Shares of Reliance Power rose 4 percent to 200.20 rupees while Reliance Infrastructure gained 1.4 percent to 1,196.90 rupees.
Reliance Industries had signed gas sale contracts with fertilizer makers and power producers before it began producing gas from the KG-D6 field in the Bay of Bengal on April 2.
Court Restraint
The court had in a verdict in June last year restrained the company from selling gas to companies other than Reliance Natural and state-owned NTPC Ltd., customers that had signed contracts for the fuel.
The ban was temporarily lifted in January, paving the way for supplies to fuel-starved fertilizer and power companies. India, the world's second-fastest growing major economy, imports 75 percent of its energy needs.
NTPC was little changed at 221.20 rupees. Deepna Mehta, a spokeswoman for the state-owned company, declined to comment.
"The verdict wouldn't necessarily mean the case will be resolved as the parties may even appeal in a higher court," Khandwala's Nair said.
The government set the price of natural gas from the Krishna Godavari field at $4.20 per million British thermal units when the price for crude oil is equal to or more than $60 a barrel, less than the $4.5 Reliance Industries had sought.
To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net M.C. Govardhana Rangan in Mumbai at grangan@bloomberg.net
June 15 (Bloomberg) -- Mukesh Ambani's Reliance Industries Ltd., India's most valuable company, was ordered to sell natural gas to a company owned by his younger brother Anil for 44 percent less than the government-set price, lawyers said.
The Bombay High Court ruled the company honor a 2005 agreement to supply 28 million cubic meters of gas per day at $2.34 per million British thermal units for 17 years, Mukul Rohatgi, counsel for Anil Ambani's Reliance Natural Resources Ltd., said by telephone today. Reliance Industries will decide on its "future course of action based on legal advice," it said in an e-mailed statement today.
Reliance Industries fell the most in five months, while Anil Ambani's company jumped 24 percent after the ruling on the dispute sparked by the splitting of the family empire in 2005.
The decision may lower the value of the gas from the Krishna-Godavari block, Reliance's largest field, by as much as $3 billion to $13 billion, according to Nomura Financial Advisory & Securities India Pvt.
"The Reliance Industries share price has factored in a gas price of $4.20," said Vinay Nair, an analyst with Khandwala Securities Ltd. in Mumbai. Much of the company's "future earnings depend on gas sales from the Krishna-Godavari basin."
The ruling may cost the energy explorer as much as $800 million a year at a peak output rate, said Angel Broking Ltd. analyst Deepak Pareek in Mumbai.
Power Plants
"Reliance Natural still needs to set up power plants which can use the gas," Pareek said by telephone today. "Cash flows will fall for Reliance Industries but it may not be immediate."
Reliance Natural's affiliates "will set up a power plant with a capacity of more than 7,000 megawatts in the next three to four years," Rohatgi said today. He didn't say if the company will take gas from Reliance Industries before the plant comes up.
The court has not allowed trading in the gas, D.J. Kakalia, one of the lawyers for Reliance Natural, said at the court house.
Reliance Industries fell 7.8 percent to 2,178.80 rupees in Mumbai, the biggest decline since Jan. 7. The stock has climbed 77 percent this year compared with the 54 percent gain in the benchmark Sensitive Index.
Reliance Natural rose 24 percent to 108.35 rupees, the highest since May 22, 2008, and has surged 89 percent this year.
Reach Agreement
The companies are required to reach an agreement based on the terms of the memorandum of understanding signed in June 2005, according to Reliance Natural's lawyers.
The Bombay High Court said "the two companies should negotiate a new agreement within a month, with price, quantity and tenure as a must," Kakalia said. "These three parameters, as per the existing MoU, must be in the new agreement."
Reliance Natural procures fuel for the Anil Dhirubhai Ambani Group's power projects. Reliance Infrastructure Ltd. operates six power plants in India and plans to build another seven, according to data compiled by Bloomberg, while Reliance Power Ltd. is building at least three large stations.
Shares of Reliance Power rose 4 percent to 200.20 rupees while Reliance Infrastructure gained 1.4 percent to 1,196.90 rupees.
Reliance Industries had signed gas sale contracts with fertilizer makers and power producers before it began producing gas from the KG-D6 field in the Bay of Bengal on April 2.
Court Restraint
The court had in a verdict in June last year restrained the company from selling gas to companies other than Reliance Natural and state-owned NTPC Ltd., customers that had signed contracts for the fuel.
The ban was temporarily lifted in January, paving the way for supplies to fuel-starved fertilizer and power companies. India, the world's second-fastest growing major economy, imports 75 percent of its energy needs.
NTPC was little changed at 221.20 rupees. Deepna Mehta, a spokeswoman for the state-owned company, declined to comment.
"The verdict wouldn't necessarily mean the case will be resolved as the parties may even appeal in a higher court," Khandwala's Nair said.
The government set the price of natural gas from the Krishna Godavari field at $4.20 per million British thermal units when the price for crude oil is equal to or more than $60 a barrel, less than the $4.5 Reliance Industries had sought.
To contact the reporters on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net M.C. Govardhana Rangan in Mumbai at grangan@bloomberg.net
No comments:
Post a Comment