JV with GMDC sets platform for Mukesh’s entry into power

Mukesh Ambani is testing the limits of his non-compete agreement with brother Anil Ambani by proposing an entry into power.

Under the brothers’ business separation agreement, power is reserved for Anil Ambani till 2016.

This is reflected in Reliance Industries Ltd’s move to float a joint venture (JV) with state-owned Gujarat Mineral Development Corporation for lignite gasification and one of the end-user areas being explored is power generation for commercial usage.

GMDC will remain partner in three commercial projects, the total cost of which will be Rs 5,000 crore, said C J Jose, chairman, GMDC. “The project is based on emerging technology to generate ‘Syngas’ by gasification of lignite or coal at a depth of about 150 metres or more and which cannot be mined,” he added. RIL has a 51% stake in the JV while the rest is with GMDC, which will supply 600 million tonnes to generate gas. A pilot study is on and, based on the gasification results, the end-user will be decided. A 2,000 mw power plant is considered feasible. The project’s status is open as of now and Reliance may go in for either gas supply through pipelines or power generation, official sources said.

As per the agreement with Anil Ambani, RIL cannot enter into competitive areas, including power generation, for a stipulated timeframe. “If RIL enters into power generation after June, 2016, they will not be violating the agreement,” said sources in the Reliance Anil Dhirubhai Ambani Group. A query by e-mail to RIL remained unanswered at the time of writing.

The pilot project for gasification of lignite will be over after a year whereas it could take about 5-10 years to implement the project as a commercial venture, sources said.

Meanwhile, a US based firm promoting cleaner energy has decided to invest $5 million in the project. The state government may launch a special purpose vehicle and GMDC will be a dominant player in the power project if it fructifies.

Source : DNA