Verdict can impact ADAG's power plans

With the Supreme Court delivering its much awaited verdict on the gas dispute between the Ambani brothers, the 2-1 verdict against the younger sibling, Anil Ambani, could have an adverse impact on the outcome of its power projects, including the 7,000 MW plus Dadri power project in Uttar Pradesh.

Notwithstanding the assertions by the ADAG Chairman Anil Ambani that his company would continue to pursue and achieve tremendous growth in the power sector, things looked a bit different on ground.

Dadri project

The Dadri project, hanging fire for years now, will now most likely have to buy gas at the government approved price of $4.20 per mBtu (million British thermal unit) as and when the Government makes any such allocation. The verdict has also rendered Reliance Natural Resources Limited (RNRL) as a shell company as it at present has little or no projects in hand.

The Mukesh Ambani-owned Reliance Industries Limited (RIL) hinted on Friday that might sell gas from its KG-D6 fields to RNRL at $4.20 per mBtu.

It also said that the tenure of gas supply would have to be drastically cut from 17 years as being sought by RNRL. This could have an impact on the long-term cost analysis on the power generation plans of its gas-based projects, which are estimated at 8,000 MW, and projections by the ADAG would have to be re-drawn and re-done in the changed circumstances.

There will be no impact of this verdict on its Ultra Mega Power Projects as they are all coal-based units and already half-way through with their implementation.

The Supreme Court ruled that the Ambani family MoU could not over-ride the Government's right to fix price and approve utilisation of gas and had asked the two firms to renegotiate fuel supply.

“The price will be what the Government has fixed. Supplies will be subject to Government allocating the fuel to ADAG firms and the tenure of supply will have to be in line with development plan approved for the KG-D6 fields,” RIL Executive Director P. M. S. Prasad said soon after the verdict.

Family MoU

In the 2005 family MoU, RIL was to supply 28 million standard cubic meters per day (mscmd) of gas to RNRL for 17 years at $2.34 per mBtu. The gas was sought by RNRL to fire its proposed 7,800 MW power plant in Dadri, Uttar Pradesh.

Mr. Prasad said RIL would renegotiate the agreement in line with the Government policy.

The Dadri plant might not come before three years and practically supplies could not be for more than five years and the KG basin Dhirubhai-I and Dhirubhai-II finds were to last only for nine years.

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Printable version | Mar 28, 2020 5:36:38 PM |

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