Reliance Industries will invest Rs 1.5 lakh crore across energy, petrochem and telecom businesses over the next three years as it looks at expansions to supplement falling natural gas production.RIL Chairman Mukesh Ambani, the world's richest energy billionaire, however, gave few details on plans for its long-anticipated launch of 4G telecom services. "Reliance has embarked on the largest investment programme in its history. We are committed to investing Rs 150,000 crore in the next three years," said Ambani, as his mother Kokila Ambani, wife Nita Ambani and children watched. Reliance, India's fourth-largest company by market value, has been under pressure from investors worried by its slowing natural gas business and its drive into consumer sectors such as telecoms and retail. Reliance has for years looked to diversify beyond its core energy business, but profits have been elusive. Reliance Jio Infocomm, its telecoms unit, is the only Indian company to have nationwide permits for 4G services. Nearly three years after acquiring the airwaves, it is yet to start commercial services. Chairman Mukesh Ambani, India's richest man, told shareholders at the company's annual general meeting that he had a bullish view of the potential for digital services in India, and the unit would more than triple its headcount to 10,000 over next year, but did not say when services will be launched. "Let me assure sceptics that my continued optimism is based on the significant strides that we at Reliance have taken in the past year - towards engineering and testing a world-class broadband network, and in developing a suite of compelling and synergistic digital services," he said. "Our impatience to reach our goal demands a sense of urgency, but not careless haste," Ambani said, amid speculation that the company will make its commercial 4G network launch later this year. $26 Bn Investment PlanReliance Jio has finalised key vendors and suppliers required for the initial launch of the services, Ambani said. "Together with our partners, we have charted an ambitious plan for the next 12 months, and we at Reliance Jio foresee making rapid progress over this period towards launching our services across India," he said. Shares in Reliance were down 1.1 per cent at Rs 793.00 at 1:19 p.m. The stock was about 0.5 per cent lower before Ambani began his speech. Reliance is making investments exceeding 1.5 trillion rupees across its five business areas - energy exploration and production, petroleum refining and marketing, petrochemicals, retail, and 4G, Ambani said. Referring to the gas discovery that Reliance, along with partners BP Plc and Niko Resources Ltd, announced last month in the KG-D6 block off India's east coast, Ambani said more prospects have been lined up for exploration drilling over the next few quarters. He said various "production augmentation efforts" were underway to maximise recovery from existing fields in KG D6 block, where output has disappointed expectations. RIL Gains Nearly 3% Ahead Of AGM (Reuters)
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Shares of Reliance Industries Ltd on gained nearly 3 per cent in an otherwise sluggish stock market ahead of its 39th annual general meeting to be held on Thursday, 6 June 2013. At the 6 June AGM, the RIL management is expected to throw some light on its future business policy and especially on its STAR strategy (Smart Transformation at Reliance). RIL's scrip ended the day 2.56 per cent higher at Rs 800.55 on the BSE. During the intra-day trade, the stock gained 2.86 per cent to Rs 803.On the NSE, the bellwether scrip settled at Rs 802, up 2.79 per cent.RIL was the top gainer on both the key indices -- Sensex and Nifty. In terms of volume, 3.81 lakh shares of the company changed hands on the BSE, while over 29.14 lakh shares were traded on the NSE."Oil and gas major Reliance Industries gained ahead of its annual general meeting on Thursday. The street is expecting new announcements in the field of telecom and connectivity which the company operates under Reliance Jio Infocomm," said Milan Bavishi, Head Research, Inventure Growth and Securities. Meanwhile, in the stock market, the BSE benchmark Sensex ended the day at 19,568.22, up 22.44 points. Higher Natural Gas Price To Boost RIL Profit In FY'15: FitchFitch Ratings had said on 4 June 2013 that a higher natural gas price will help improve Reliance Industries' profitability in 2014-15 fiscal and would lead it to invest more in raising production. The flagging eastern offshore KG-D6 fields contributes about 40 per cent of the company's revenue from oil and gas exploration and production business in 2012-13 fiscal, Fitch Rating said affirming RIL's Long-Term Foreign Currency Issuer Default Rating at 'BBB-' and LT Local Currency IDR at 'BBB'. The Outlook on the foreign currency issues default rating is stable while the same for local currency IDR is positive, Fitch Ratings said in a statement. The government is considering raising natural gas prices to $8-8.5 per million British thermal unit from current $4.2. "This re-pricing has met resistance from the user industries largely power and fertiliser as well as from the finance ministry. If upwardly revised, RIL's E&P revenues and profitability are expected to be significantly higher from FY15, when the price revision is due," the statement said. "Also importantly, we believe higher gas prices will also likely lead to RIL (and its partner) BP investing for more production growth," it said. Fitch Rating said the company has comfortable liquidity with a high cash balance of Rs 84,000 crore. "RIL also enjoys very good access to banks and capital markets, domestically as well as internationally." "An upgrade of RIL's ratings, particularly the local currency IDR of 'BBB'/ Positive, which is not constrained by the country ceiling of India's 'BBB-' sovereign rating, is also predicated on RIL meaningfully improving the results of its domestic upstream operations," it said. It said the recent gas discovery and potential gas price hikes will "lead to higher investments and production over time which will be positive for its credit profile." "Fitch may consider an upgrade over the next 12-18 months based on developments and RIL's plans to expand production and reserves," the statement said. Fitch said it may revise the Positive Outlook on its LC IDR to Stable if the company does not demonstrate strong prospects of materially improving its upstream profile in the next 12 months, or due to any large debt funded investments that will lead to its leverage being sustained over 1.5 times. RIL's foreign currency IDR will be negatively affected if India's Country Ceiling is lowered from its current 'BBB-' level, it said. The company continues to face declining production in its key block - Krishna Godavari - D6 (KG-D6). Gas production from the block declined to 26.1 million standard cubic meters per day (mmscmd) in FY13 (42.8 mmscmd in previous year) - given the geological challenges and high water and sand ingress. (Agencies)
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NTPC, India's largest power producer, scrapped its bond sale scheduled for 20 June' 2013 after a sell-off in government bonds caused worries about the pricing of its debt, four sources with direct knowledge of the bond sale said. The firm was planning to raise up to 10 billion rupees through an issue of dual tranche bonds. Trading in government bonds was halted earlier in the day after yields hit their upper circuits on a global riskoff following the Federal Reserve's comments on tapering of its stimulus programme. The trading band has subsequently been removed for the day. The benchmark 10-year government bond rose as much as 10 bps from its previous close. It was last trading at 7.33 per cent. Corporate bonds in India are priced on the government bond yield curve.(Reuters)
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NTPC has agreed to pay outstanding bills of over Rs 2,000 crore to Coal India in instalments, according to sources. This marks a thaw in the ongoing cold war between the two public sector organisations. They came to blows after NTPC alleged losses of Rs 11,000 crore due to ‘poor quality’ coal supplied by Coal India. Two months ago, NTPC stopped payments to Coal India and Coal India, in turn, stopped supplies.NTPC refused to comment on the outstanding payments but confirmed that quality issues are being addressed. CIL says NTPC has dispatched the first installment of Rs 170 crore.If the CIL claim is to be believed, the staunch stance of NTPC dismissing the overdue payments has amounted to nothing. Earlier, this year dust was thrown up when NTPC refused to pay Rs 2,839 crore for the coal supplied to them from coal India’s subsidiary Eastern Coalfields and claimed a loss of Rs 11,000 crore because of the poor quality coal.Read Also: Quality Row Between Coal India, NTPC Escalates At the time CIL stopped supplying coal impacting power production in 16 states, NTPC was seeking support from other utilities to showcase the poor quality of coal. “We did not get the fuel we were being charged for and do not view that as outstanding bill,” explained the NTPC spokesperson. In April, the Central Institute of Mining and Fuel Research (CIMFR), Dhanbad was engaged to assess the coal quality of the disputed mines that supply to NTPC. The coal from the mines sampled is supposed to be between G-10 and G-13 in terms of heat value. NTPC has said the supplies were of much inferior quality and paid ECL at the rate of lowest rank coal (G-17) thus accumulating the Rs 2,000+ crore outstanding payment. According to the coal producer, after weeks of third party sampling it was found that in 60 per cent dispatches, coal quality fell short by one grade, while in close to 30 per cent of the instances, quality was as promised. A large variation in coal quality was noticed only in 10 per cent of the samples. “The sampling results show that large variations are not the norm and are due to natural causes,” explained Neeladhari Roy, general manager for Eastern Coal fields.Said Roy, “NTPC has agreed in principal to pay the due amount but in installments.” The coal quality variations were pegged down to natural causes like moisture loss etc. The third party sampling was carried out last month and NTPC is verifying the results in its own lab.Though NTPC refused to comment on the outstanding payment, the company spokesperson said the two have ironed out their differences and are on a path of reconciliation. Additionally, after the ministry’s letter to the PMO on June 18 regarding 69 unsigned FSAs of which 28 belong to NTPC and its joint ventures, there are chances of the agreements being finalised soon. By the end of this week, the agreements are expected to be signed and stamped. The question of fuel quality is to be taken care of through joint sampling at the loading as well as unloading points. At present, fuel is being supplied as per a memorandum of understanding and is charged as per the gross calorific value slabs announced in 2011-12.The tiffs between the two maharatna companies have farflung and long lasting impacts but this time around one ought to be grateful that it took just a few months to reach a resolution unlike the 10-year-long legal battle between the two on the Karanpura mines in Jharkhand.mmatbworld(at)gmail(dot)com
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India's fourth-largest iron ore producing state expects to raise production by a third to about 37 million tonnes this fiscal year, even as mining restrictions in two other states turn the country into an importer of the steelmaking ingredient. Chhattisgarh produced 27.7 million tonnes in the year ended March 2013, with all of that output going to local steel mills, said N.K. Xaxa, mines director of the state. The higher production would benefit companies such as JSW Steel Ltd which have been forced to import iron ore amid steady steel demand and falling output of the raw material. "Demand is very high, so we are raising production," he told Reuters. "We've not been able to meet demand of the local steel companies because of some geopolitical issues." Xaxa declined to specify why the state's output will rise this year. State-owned National Mineral Development Corp, Steel Authority of India Ltd, Essar Steel and Chhattisgarh Mineral Development Corp are some of the iron-ore lease holders in Chhattisgarh, Xaxa said, adding that his department has sanctioned 18 leases. JSW and Essar Steel buy ore from NMDC. India's output of iron ore is estimated to have fallen to about 140 million tonnes in the year ended March 31, 2013, from 207 million in 2011, after the Supreme Court placed a ban on mining in Karnataka and Goa states following allegations of irregularities. Output was 167.3 million tonnes for the 2012 fiscal year. In April, the top court allowed some mines in Karnataka to resume operations subject to conditions. Goa, India's No.1 iron ore exporting state, expects court approval to resume by year-end the production and export from mines with a capacity of about 40 million tonnes. Xaxa said he did not think there was any irregularity with respect to iron ore mining in Chhattisgarh.(Reuters)
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US-based Institute for Energy Economics and Financial Analysis (IEEFA) has raised questions over the Indian conglomerate GVK's proposed $10-billion Alpha coalmine, port and rail project in Australia, warning potential investors that it was uneconomical and represented an unacceptable level of risk to them.The latest report was released today by the organisation under the name "Stranded: A financial analysis of GVKs proposed Alpha Coal Project in Australias Galilee Basin"According to IEEFA statement, the report comes amid Australian rail operator AURIZON negotiating for partnering with Indian conglomerate GVK on the construction of the rail and port components of the Alpha project at a cost of USD 6 billion.Commenting on the risk profile of the project, the co author of the report Tom Sanzillo, former first deputy comptroller of New York, labelled GVK "a weak investment partner" and the Alpha project "a quagmire, not an investment".GVK is seeking to raise a total of $10 billion capital to build Australia's largest black coal mine in Queensland's remote, untapped Galilee Basin.Besides, it would also involve construction of 500 KM of rail infrastructure across agricultural land and floodplains to the coast and to develop a highly controversial coal export terminal through the iconic, UNESCO World Heritage listed Great Barrier Reef.The IEEFA report has also alleged the Indian company is overcommitted. It said with 16 greenfield infrastructure projects worth $20 billion across six asset classes, it is highly overleveraged, carrying debt of $2.8 billion with a market capitalisation of only $243 million.The report further said that the project confronts potentially insurmountable regulatory, environmental, operational, logistical and financial hurdles.This will likely delay the project and escalate costs to the extent that the project is unviable even for a company with a healthy balance sheet, it said.GVK purchased its Galilee Basin coal deposits from Hancock Prospecting in 2011 for $1.26 billion near the peak of the coal price cycle of $133 a tonne, a deal for which it was awarded "Asia Deal of the Year".The coal price has since slumped to $88 a tonne with cost of production at more than $70 a tonne, as major coal producers now sell, downscale and cancel greenfield projects in response to the weakening global coal outlook, the report said. (PTI)
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K. Ramchand, managing director at one of India's biggest road builders, is doing something unusual to help dispel the gloom pervading much of the country's infrastructure sector today: bidding for new projects.His company, IL&FS Transportation Networks Ltd, signed a $300-million contract in April to build a six-lane highway. The project will link an eastern industrial zone afflicted by some of India's worst traffic snarls to mining districts such as Dhanbad, the nation's coal capital.The IL&FS deal marks a sharp turnaround from last year when investor interest in public works plummeted. To rekindle investment in new, modern roads that India badly needs, the government has been rolling out a slew of policy measures, including a strategic shift in how projects are financed."Last year, I think, has been a typically bad year," Ramchand said in an interview at a hotel in the business hub of Gurgaon outside New Delhi. "There is definitely an upswing, there is no doubt about it, because I think the mood is much better."The most significant policy change is that the government has moved away from its much-vaunted but troubled public-private partnership (PPP) model to fund projects.Under the PPP model, developers finance construction out of their own pocket, often in exchange for the right to charge toll fares.The government will revert to a form of contract where it funds part of the road building, taking on more of the risk of the project itself, said a top government official, speaking on condition of anonymity.To give some idea of the scale of the change, the government will fund 70 per cent of the 9,600 kilometres (5,965 miles) of road projects that it aims to award this fiscal year.That is a sharp departure from the goal set earlier by India's Planning Commission to build 60 per cent of roads in public-private partnership.The changes have even drawn the attention of foreign private equity players, with the likes of Macquarie Group Ltd looking to acquire completed projects.Choked & ConstrictedIndia relies heavily on roads to move freight due to its archaic railway network and under-developed river canal system. But its roads are often constricted, pot-holed and choked with traffic, slowing deliveries and hitting competitiveness."Road costs in India are higher by about 30 per cent," McKinsey said in a report, comparing them with costs in the United States. "This not only results in higher prices and lower competitiveness, but also hampers economic growth."The government plans to pour $1 trillion into infrastructure over five years. But its efforts to attract private investment have stumbled, partly because of red tape and cautious bankers.India awarded less than 2,000 kilometres worth of new road construction contracts in the last fiscal year, against a target of 9,500 kilometres.To get investment in the sector moving again, the government has tweaked its policy so that developers no longer have to wait for clearance from forest authorities to start construction - a hassle that had stalled projects in the past.Another boon is the central bank's move to reclassify loans to road builders as secured loans rather than unsecured loans, which would give more comfort to banks to lend to projects.IL&FS is hoping to add $880 million of new orders this fiscal year, Ramchand said.Rival Lanco Infratech Ltd said in an interview in May that it aims to sign one or two road projects this year. It last won a contract in 2010.Another developer, KMC Constructions Ltd, which has a tie-up with the private equity firm 3i Group PLC, is also scouting for projects to add to its $580 million order book."We're looking at the projects, definitely, because this is the time to bid for the projects," said Shashank Shekhar, vice president for business development at KMC.(Reuters)
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A ministerial group approved a draft bill on Wednesday, 29 May '2013 to set up a coal regulator, the coal minister said, in a step towards better supervision of a sector that is the nation's main source of energy but is riddled with corruption and supply bottlenecks.Coal Minister Sriprakash Jaiswal did not give more details of the powers the body will enjoy. The bill must next be approved by the full cabinet and parliament.(Reuters)
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