RNRL -Reliance Power Merger

In a mega Rs 50,000-crore deal, the Anil Ambani group on Sunday announced merger of RNRL with another group firm Reliance Power, which would now become a direct beneficiary of the gas deal signed with Mukesh Ambani-led Reliance Industries.It marked the latest episode in a corporate saga after the Ambani brothers reached an agreement over a gas dispute.

As part of the all-stock deal, Reliance Power will give one of its shares for every four held in RNRL. RNRL shareholders, including the promoters, would get Reliance Power shares worth about Rs 7,150 crore, as per the current market prices. Out of these, promoters would get shares worth over Rs 3,600 crore.

The deal comes within days of RNRL signing a revised gas supply deal with Reliance Industries (RIL) for power projects, which are under the charge of Reliance Power. Following the Supreme Court decision on May 7, wherein its plea was rejected for cheaper gas from RIL, the Anil Ambani group firm RNRL had lost much of its relevance as a business entity.

Announcing the deal, the two companies said in a joint statement "Reliance Power's plans for setting up up to 10,000 MW gas-based power plants (would) be accelerated" and Reliance Power would "derive substantial benefit from RNRL's Gas Supply Master Agreement with RIL".

Ahead of today's board decision, RNRL shares closed at Rs 63.65 a piece and Reliance Power at Rs 175.15 on Friday.
RPL and its shareholders will derive substantial benefits from the proposed amalgamation including gas supply under RNRL’s GSMA with RIL facilitating accelerated implementation of RPL’s plans for setting up over 8,000 mw of gas based generation capacity,” the companies said in a joint statement.

The merger will accelerate R-Power’s plans for setting up an 8,000 mw gas-fired power unit,” ADAG said in the media statement. Post merger, R-Power will have ownership of RNRL’s share in four coal-bed methane blocks and an oil and gas block in Mizoram. RNRL’s proposed shipping venture will also come in handy for R-Power because it will be able to use the vessels for captive usage. On the other hand, RNRL shareholders will benefit from R-Power’s generation portfolio of 37,000 mw and its coal reserves in India and abroad, the media statement added.

“This (merger) has proved that RNRL has always been a shell company,” said Mr Tulsian, adding that the RNRL stock might open at Rs 42-43 in early trades on Monday, a huge discount to the stock’s Friday’s close of Rs 63.55. The merger swap ratio is in line with the two companies’ market capitalisation, or the value of the total shares at ruling market price. At Friday’s close, RNRL’s market capitalisation stood at Rs 10,394crore, nearly one-fourth of that of R-Power’s Rs 41,979 crore.

Last month, it has announced plans to buy two Indonesian coal companies through its unit Reliance Coal Resources. Reliance Coal Resources Ltd has entered into share purchase agreements with two Indonesian coal firms that own three coal mines there, Reliance Power had said. The coal from Indonesia will be used for the Krishnapatnam ultra mega power project- a 4,000-MW supercritical coal-fired power generation facility and other power projects of Reliance Power.

In May, Reliance Power has acquired 433 MW of power generation assets from another group company Reliance Infrastructure for Rs 1,095 crore. It comprises 220 MW at Samalkot in Andhra Pradesh, 165 MW in Kerala and 48 MW in Goa. With acquisition of Reliance Infrastructure assets and commissioning its 600 MW Rosa Power projects in UP, Reliance Power will have over 1000 MW capacity under its portfolio.


Source : Business.rediff.com, Economic Times, Hindustan Times.
Posted by : Rishma Shetty