The much awaited RIL-RNRL tussle has come closer to a conclusion today with the Supreme Court ruling a verdict, providing a road map for the contract negotiations, which we believe is in favour of RIL. The key highlights of the verdict are:
The Production Sharing Contract (PSC) to over-ride all other agreements
6 weeks given to RIL & RNRL to re-negotiate on gas supplies and tenure within parameters of PSC.
Pricing of the gas to be within the guiding principles of the EGOM.
We believe that the verdict gives a tacit indication for selling of the gas at $4.2/mmbtu. The verdict was in contrast to the Bombay High court judgment given on 15th June ’09, which directed RIL to supply 28mmscmd of gas at $2.34 for a period of 17 years from the commissioning of RPower’s gas based power plant.
What does this mean for RIL?
As far as financial implications of the verdict are concerned, RIL would continue to sell KG-D6 gas at government approved price of $4.2/mmbtu, implying no impact on cashflows. We note that cash flows would be negatively impacted by $700mn annually for selling 28mmscmd of gas at $2.34/mmbtu viz. a viz. $4.2/mmbtu.
No comments:
Post a Comment