NTPC disclosure refutes RIL claims

NTPC disclosure refutes RIL claims
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First Published: Thu, Sep 10 2009. 11 28 PM IST
Updated: Thu, Sep 10 2009. 11 28 PM IST
New Delhi: State-run NTPC Ltd, which is engaged in a legal tussle with Mukesh Ambani-controlled Reliance Industries Ltd (RIL) over the supply of gas from the latter’s D6 block in the Krishna-Godavari (KG) basin, filed its first detailed corporate disclosure in the stock exchanges refuting RIL’s claims made to the Union power ministry last month.
The public articulation of the utility’s position was prompted by a desire to address the concerns of shareholders, said a senior executive at NTPC.
“We are trying to clear the misinformation campaign,” added this person, who did not wish to be identified. People were beginning to wonder why the utility wasn’t responding, he said.
The disclosure filed by NTPC with the Bombay Stock Exchange and the National Stock Exchange on Thursday follows a 31 August communication from RIL’s executive director P.M.S. Prasad to Union power secretary H.S. Brahma in which RIL questioned NTPC’s rationale of sourcing costly liquified natural gas (LNG) and its actions pertaining to the gas sale-purchase agreement (GSPA) for 12 million standard cu. m a day (mscmd) of gas from RIL.
Responding to RIL’s statement about it accepting the letter of intent “based on the premise that outstanding provisions of the draft GSPA would be agreed to”, NTPC stated that the price bid was submitted by all bidders, including RIL, without any condition. It added that RIL’s bid of $2.34 (Rs113.26) per million British thermal unit (mmBtu) was accepted after an unconditional acceptance of GSPA.
NTPC said that RIL, instead of executing the agreement, had asked for significant changes in it, which was unacceptable to NTPC, and led to its suit against RIL in the Bombay high court.
The lawsuit between NTPC and RIL in the Bombay high court dates back to December 2005, with the point of contention being the existence and terms of a valid contract between the two. NTPC claims there is one in which RIL promised to supply 12 mscmd for the expansion of the state-owned power generator’s Kawas and Gandhar power plants, both in Gujarat, for 17 years at a price of $2.34 per mmBtu. RIL claims otherwise.
The utility filed an appeal in the Supreme Court on 5 September challenging an unfavourable Bombay high court order allowing RIL to amend its petition so as to include an earlier affidavit filed by the Union government in the same court, but in the case between RIL and Reliance Natural Resources Ltd (RNRL), promoted by Mukesh Ambani’s estranged younger brother Anil Ambani. This is the same case that has now moved to the Supreme Court.
Refuting the claim made by RIL in its communication about state electricity boards (SEBs) and the common man bearing a cost increase of around Rs15,000 crore over 10 years due to the utility’s decision to buy expensive LNG instead of RIL gas, NTPC said this procurement of LNG in the spot market does not involve a take-or-pay liability clause. With the power generation from spot LNG being entirely dependent on SEBs or beneficiaries, if they (beneficiaries) decline this power, it will not result in any financial liability for them, the utility added.
The take-or-pay clause means that even if NTPC does not take the contracted amount of gas, it will have to pay for it.
“Being a state-owned and listed entity, we can’t indulge in practices adopted by RIL. We have decided to inform our stakeholders from time to time through such disclosures. This approach has been decided upon after a lot of deliberations,” said the same NTPC executive.
An external spokesperson for RIL declined comment on the issue.
NTPC’s disclosure further stated that with gas being supplied at $2.34 per mmBtu, the savings made by the distribution companies and SEBs will amount to around Rs2,130 crore a year, with a saving of Rs32,000 crore over the 17-year period of the contract.
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First Published: Thu, Sep 10 2009. 11 28 PM IST
More Topics: NTPC | RIL | Gas | KG Basin | Power |