>RELIANCE INDUSTRIES LIMITED (MORGAN STANLEY)

RNRL Analyst Meeting Key Takeaways

Quick Comment: Reliance Natural Resources (RNRL) had an analyst meeting to discuss the litigation with RIL relating to gas. The key takeaways from the meeting follow.

RNRL suggested the government is concerned about the valuation price of gas and not the salenprice. RNRL suggested there is a difference between selling price and valuation base price for calculating profit petroleum for the Indian government. RNRL believes its contract with RIL was a commercial contract and that the government would not interfere in same. Also, RNRL has no say in what RIL pays to the government as profit on petroleum-based gas price.

RNRL management believes that the US$2.34/mmbtu contract price was “an arms-length contract” with RIL, based on a global bid received by NTPC. In addition, since it was over a tenure of 17 years vs. 5 years for the existing US$4.2/ mmbtu contracts, management believes they are not comparable. The company would not be surprised if once surplus gas is available in the country, US$ 2.34/mmbtu will be used as a valuation price by the government as well as a benchmark for future gas-based power projects.

No bankable gas agreement on hand so far: RNRL believes that it cannot start the Dadri (7480 MW) and Shahpur (2800 MW) power projects until it gets the Gas Purchase Contract inked and it will likely take the company approximately 2-3 years thereafter to set up the project. Assuming the court takes 6 months more to decide, we believe that RNRL could use RIL’s gas until sometime around July 2012. Any delays in the court case decision would delay the start of the project. After the high court judgment that went in RNRL’s favor, the case is up for hearing on July 20 in the Supreme Court. Here the government has not been allowed to be the
third party in the case but has been allowed to intervene.

To see full report: RIL