Benefits Seen Accruing Only In Four Years As Plant Will Take Time To Take Shape
WINNING the court case against Reliance Industries (RIL) has been a great positive for Reliance Natural Resources (RNRL) on the bourses. However, it is not yet clear as to when it will translate into revenues and profits for the company. Firstly, there is a high probability that the matter will be dragged to the Supreme Court. Further, RNRL — or its group companies for that matter — do not yet have a gas-based power plant in operation.
This means, even if it can get the gas at a discounted price, it can avail of the benefits only in the long run. Given the long gestation period of the power plant from conception to commissioning, this could well extend to four years.
The favourable verdict lends better visibility to Reliance Infra’s gas-based ultra mega power plant (UMPP) at Dadri, which is under construction. The plant, which was originally planned with a 3,750-mw capacity, was later scaled up to 7,450 mw. The first phase of the gas-based power project comprising 1,400 mw is likely to be operational by mid-2010.
The Dadri project, which was planned before the split of the Ambani brothers, has received most approvals, including an environmental clearance and water linkages. ADAG is also in possession of more than 2,000 acres at the project site. However, the lack of clarity on fuel supply had kept it from achieving a financial closure.
The 28 million metric cubic meters of natural gas per day (MMSCMD) from RIL will be sufficient to produce around 6,250 mw of power.
In January 2009, the empowered group of ministers (EGoM) had assured supply of natural gas for the Dadri project once it was ready to begin operations. “This is without prejudice to the court case and subject to availability of gas,” the government counsel had told the Bombay High Court during one of the hearings of RIL-RNRL case.
“This is a zero-sum game. The gains for ADAG group will be equal to RIL’s losses. On a full-year basis, RIL is set to lose around Rs 3,500 crore supplying 28 MMSCMD of gas at $2.34,” commented SP Tulsian, an independent equity advisor. “However, the clarity is lacking on when RIL is supposed to start supplying gas to RNRL,” he added. Thus, although the market is sharing the jubilant mood in the ADAG Group today, it is unclear when the ground reality will get any better
WINNING the court case against Reliance Industries (RIL) has been a great positive for Reliance Natural Resources (RNRL) on the bourses. However, it is not yet clear as to when it will translate into revenues and profits for the company. Firstly, there is a high probability that the matter will be dragged to the Supreme Court. Further, RNRL — or its group companies for that matter — do not yet have a gas-based power plant in operation.
This means, even if it can get the gas at a discounted price, it can avail of the benefits only in the long run. Given the long gestation period of the power plant from conception to commissioning, this could well extend to four years.
The favourable verdict lends better visibility to Reliance Infra’s gas-based ultra mega power plant (UMPP) at Dadri, which is under construction. The plant, which was originally planned with a 3,750-mw capacity, was later scaled up to 7,450 mw. The first phase of the gas-based power project comprising 1,400 mw is likely to be operational by mid-2010.
The Dadri project, which was planned before the split of the Ambani brothers, has received most approvals, including an environmental clearance and water linkages. ADAG is also in possession of more than 2,000 acres at the project site. However, the lack of clarity on fuel supply had kept it from achieving a financial closure.
The 28 million metric cubic meters of natural gas per day (MMSCMD) from RIL will be sufficient to produce around 6,250 mw of power.
In January 2009, the empowered group of ministers (EGoM) had assured supply of natural gas for the Dadri project once it was ready to begin operations. “This is without prejudice to the court case and subject to availability of gas,” the government counsel had told the Bombay High Court during one of the hearings of RIL-RNRL case.
“This is a zero-sum game. The gains for ADAG group will be equal to RIL’s losses. On a full-year basis, RIL is set to lose around Rs 3,500 crore supplying 28 MMSCMD of gas at $2.34,” commented SP Tulsian, an independent equity advisor. “However, the clarity is lacking on when RIL is supposed to start supplying gas to RNRL,” he added. Thus, although the market is sharing the jubilant mood in the ADAG Group today, it is unclear when the ground reality will get any better
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