MUMBAI: Reliance Industries (RIL) has scrapped its plan to transfer 80% of its participatory interest in the famous D-6 block of the Krishna Godavari basin gas field, perhaps the company's most valued asset, to four of its subsidiaries.
The company had sent a letter to the petroleum ministry on Thursday withdrawing its earlier application which sought permission to transfer the stake to the subsidiaries. Under the production sharing contract, any contractor (here RIL) is supposed to get the government's nod for transferring stake in any asset. In the letter, RIL says that it has organised funds required for the exploration and production of the block, officially known as KG-DWN-98/3, and therefore wants to abandon its plan to transfer its participatory interest to the subsidiaries. In its application to the ministry for the proposed transfer three months ago, it had said the move was aimed at increasing flexibility in organising finances for the development of the project. RIL's investment in the KG basin blocks is expected to be around $8 billion. Interestingly, RIL, had got the go-ahead from the Directorate General of Hydrocarbon on this on August 21. The proposal had then been forwarded to the petroleum ministry. When contacted, a RIL spokesperson confirmed the development. "RIL has raised the requisite financial resources and is no longer pursuing the application for assignment of participating Interest (PI) to the subsidiaries. Implementation of the project has not been hindered," the spokesperson said. "However, in view of non-receipt of such approval/confirmation, we have successfully firmed up alternate means of financing and have met the cash requirements of the project.... We are entitled to assign the PI as envisaged in the...PSC but having raised the requisite finance as aforesaid, there is no need at this time for us to pursue the means of financing that would envisage assignment of PI and for the record hereby formally withdraw the..application and request that no further action need be taken thereon," RIL said in its letter addressed to the joint secretary (exploration) in the ministry of petroleum. ET has a copy of the latter. Industry experts said RIL's move could have been partly driven by the criticism of its big shareholders. A few major shareholders, especially the foreign institutional shareholders, had questioned the logic of the proposed move in the past few days after the development came to the fore on Tuesday. ET was the first to write about the proposed move in its edition dated August 26. RIL clarified the next day that these four companies, Reliance KG Exploration and Development, Reliance KG D6 E&P, Reliance KG Basin and Reliance E&P KG, are wholly-owned arms. But there were reports saying at least one of these companies could be part-owned by two top-level RIL executives. The timing of RIL's withdrawal from the proposed move assumes significance. RIL has withdrawn the transfer of the participatory interest on Thursday, four days before the hearing of the legal case between the company and Anil Ambani's Reliance Natural Resources (RNRL) in the Bombay High Court. Industry observers said had the move not be abandoned, it would have presented a target from RNRL's lawyers, led by Ram Jethmalani on Monday. In the course of his arguments in the High Court last week, Mr Jethmalani had asked for the transfer of RIL's participating interest in the KG basin to RNRL so that the latter can sell the gas till its proposed 7,800 mega watts (MW) power plant at Dadri comes up. On this, the government counsel TS Doabia had said in the High Court that RIL cannot transfer or assign its participating interest in favour of any other company without government approval, under the provisions of the production sharing contract. RIL holds 90% equity in the KG basin while the remaining 10% is held by Niko Resources. RIL shares on BSE gained 3% or Rs 63 to closed at Rs 2137 on Friday over the previous day close. The stock has lost 5% in the last one week but gained 2% in the last one month http://economictimes.indiatimes.com/RIL_scraps_KG_basin_stake_transfer_to_arms/rssarticleshow/3426594.cms -- Posted By Ronald Chisley to Investor Forums at 8/31/2008 08:58:00 AM --~--~---------~--~----~------------~-------~--~----~ Logon at – http://investorline.co.in/blogs/news Learning Center- http://investorline.co.in/blogs/learning Mutual funds - http://investorline.co.in/blogs/mutualfunds Life Insurance - http://investorline.co.in/blogs/lifeinsurance Investor Journal - http://investorline.co.in/blogs/investor Latest News - http://investorline.co.in/blogger/?q=aggregator/categories/ Create your own Forum & Blog at - http://investorline.co.in/blogger To post to this group, send email to [email protected] Visit this group at-http://groups.google.com/group/investor-forums?hl=en -~----------~----~----~----~------~----~------~--~---
