R-Power and RNRL merger gets nod

Shareholders of Anil Dhirubhai Ambani Group (ADAG)-promoted Reliance Power (R-Power) and Reliance Natural Resources (RNRL) have approved merger of the two companies.

Shareholders of both companies approved the composite scheme of arrangement between the two companies with overwhelming majority at their respective meetings held on September 4. The meetings were convened on the order of the Bombay High Court, said R-Power and RNRL.

The boards of both companies had approved the merger on July 4. According to the proposal, RNRL would merge with R-Power in an all-share deal, under which RNRL shareholders would get one share of R-Power for every four shares. Upon completion of the merger, R-Power will have six million shareholders. RNRL shareholders, representing about 80 percent of its capital, are also shareholders of R-Power.

R-Power and RNRL had a combined market capitalisation of Rs 43,850.85 crore as on September 3. They had a combined market capitalisation of Rs 52,374 crore on July 2, the last trading day before the merger was announced.

A revised family agreement between the two Ambani brothers on May 23 to enter into a non-compete agreement and a Supreme Court judgment on gas supply had made RNRL, primarily a gas trading company with no activities, a non-relevant entity. It was formed for the supply and transportation of gas from various gas fields of Mukesh Ambani-promoted Reliance Industries (RIL) to ADAG companies for power and other projects.

RIL and RNRL had signed a revised gas sale master agreement (GSMA) in the last week of June, following a Supreme Court judgment on May 7, which directed the Ambani brothers to come up with a fresh family settlement. The court had denied RNRL’s plea to allocate 28 million standard cubic meters of gas per day (mscmd) for 17 years at $2.34 per million British thermal units (mBtu) from RIL, based on an earlier family agreement signed in 2005. The court struck down its claim, saying the government was the owner of natural gas under article 27.1 of the production-sharing contract with RIL.

R-Power today said the merger would help it accelerate implementation of plans to set up over 8,000 mega watts (Mw) of gas-based power projects, based on RNRL’s GSMAs with RIL. Further, the company would also benefit from RNRL’s coal bed methane (CBM) blocks.

RNRL has 45 per cent interest in four CBM blocks, with an acreage of 3,251 square kilometers and an estimated resources of about 193 billion cubic meters. It also has a 10 per cent share in an oil and gas block in Mizoram, with a reserve potential of up to 28 billion cubic meters.