“The verdict has signaled that the end-game is near and the two companies will have to sit down and talk,” Jagannadham Thunuguntla, head of equity at SMC Capitals Ltd. in New Delhi, said by telephone today. “The party which came out behind in the verdict may have to blink first.”

1. Reliance Power to Negotiate Commercial Issues on Gas (Update1)
By Rakteem Katakey and Archana Chaudhary
May 11 (Bloomberg) -- Reliance Power Ltd., controlled by billionaire Anil Ambani, will renegotiate
commercial terms to buy gas from Reliance Industries Ltd., which won the backing of India’s top
court to sell the fuel at state-set prices.
“There are 40 to 50 commercial issues,” Jayarama Chalasani, chief executive officer of Reliance
Power, said in a telephone interview yesterday, without elaborating. “Now there is clarity on how each
issue needs to be resolved in line with the Supreme Court judgment.”
India’s Supreme Court said May 7 Reliance Industries, controlled by Asia’s richest man Mukesh
Ambani, should negotiate gas sales afresh with brother Anil’s Reliance Natural Resources Ltd.,
which sought to buy the fuel at a discount to a state-set price in accordance with a family agreement.
“This particular negotiation will obviously be highly difficult,” said Abhineet Anand, a Mumbai-based
analyst with Antique Stock Broking Ltd. “The key will be the volume of gas. Lower amounts could be a
big negative.”
Manoj Warrier, a spokesman for Reliance Industries, declined to comment, saying the company had
nothing further to add to its May 7 statement, in which it said the gas supply agreements with
Reliance Natural would be renegotiated as stipulated by the Supreme Court.
Reliance Power shares declined 0.5 percent to 148 rupees at 9:12 a.m. in Mumbai trading, falling for
the seventh day in eight. Reliance Natural climbed 4.3 percent, the biggest gainer on the BSE 200
Index, and Reliance Industries rose 0.6 percent compared with a 0.2 percent decline in the benchmark
Sensitive Index.
Dadri Plant
Reliance Natural procures fuel for the Anil Ambani group, which is building 35,000 megawatts of
power generating capacity. Of that, 10,000 megawatts is gas-based including a planned plant at Dadri
in north India.
Gas from the Reliance Industries-operated KG-D6 field, India’s biggest, isn’t restricted to the plant at
Dadri, about 50 kilometers (31 miles) east of New Delhi, Chalasani said. Projects other than the 7,480
megawatt Dadri plant can use the gas, he said, without being more specific.
“As soon as the gas is made available, we can start construction” of plants, Chalasani said.
“Irrespective of whether Dadri is available or not, we can start using the gas in 24 to 36 months.”

2. An agreement with Reliance Industries on supply of gas will help Reliance Power raise finances for the
Dadri plant, Chalasani said.
Court Ruling
Reliance Industries should start renegotiations with Reliance Natural within six weeks, according to the
Supreme Court’s judgment. A revised agreement should be submitted to the company court within
eight weeks of the talks starting, the court said.
The government’s gas utilization policy and national interests can’t be violated during the
renegotiations and the family agreement, though not legally binding, should be taken into account,
the court ruled.
“The verdict has signaled that the end-game is near and the two companies will have to sit down and
talk,” Jagannadham Thunuguntla, head of equity at SMC Capitals Ltd. in New Delhi, said by
telephone today. “The party which came out behind in the verdict may have to blink first.”
Gas Allocation
The Ambani brothers will renegotiate volumes and tenure of gas to be supplied to Reliance Natural,
Alok Deshpande, an analyst with Elara Capital Ltd., said in a report yesterday. Anil Ambani said he
had an agreement with Mukesh to buy 28 million cubic meters a day of gas at $2.34 per million British
thermal units for 17 years.
The Indian government fixed the price of gas to be sold from the KG-D6 field in September 2007 at
$4.2 per million British thermal units for five years. The government has allocated the field’s current
output of around 63 million cubic meters a day to priority customers, including power stations and
fertilizer plants.
“The higher gas price will raise electricity prices,” Chalasani said. “For us, it is a pass-through.” He
didn’t say how much electricity prices would rise.
India plans to add 78,000 megawatts of power generating capacity in the five years ending March
2012 and 100,000 megawatts in the next five years to reduce blackouts in Asia’s third-biggest energy
consumer.
The court’s verdict won’t affect Reliance Power’s plans to add 25,000 megawatts of generation
capacity using coal and water, Chalasani said.