When Anil Ambani took
Reliance Power public in 2008, the Rs 11,560 crore offering, the biggest Indian public issue till then, was subscribed a whopping 69 times. Much of that investor optimism has waned since. The scrip is now trading at Rs 110, a fifth of its listing price, during which period the Sensex has fallen only 0.1 per cent. Central to the calamitous drop in the share price have been the fuel and land issues plaguing Reliance Power's projects, some of which have a litigious history.
In the latest adverse development to befall the company, the Delhi High Court on July 3 said 11 power distribution companies could claim damages from Reliance Power for its delayed Rs 17,500 crore
ultra mega power project (UMPP), of 4,000 MW, in Krishnapatnam, Andhra Pradesh, which has been stalled owing to a rise in Indonesian coal prices following a change in the country's regulations last year. The developer could lose its bank guarantee of Rs 300 crore but it has already filed for arbitration.
One of Reliance Power's other two UMPPs, at Sasan in Madhya Pradesh, has also been embroiled in a legal dispute with Tata Power going to court against Reliance Power using excess coal from the captive mines allotted to the project for its other power plant also in Madhya Pradesh. The company's third UMPP is in Tilaiya, Jharkhand.
The company's most ambitious project, the gas-based 7,480 MW plant in Dadri, Uttar Pradesh, has not been immune to legal disputes either. After the Supreme Court ruled in Mukesh Ambani's favour in his dispute with Anil in May 2010, the bleak fuel supply scenario for the Dadri project only became worse. Adding to the developer's woes was an Allahabad High Court judgment in December 2009 that was a setback for land acquisition for the project. Reliance Power appealed against it at the apex court where it is still pending. While Reliance Power is unlikely to revive the project before the Supreme Court delivers its verdict and there is fuel availability, the path ahead for its Krishnapatnam and Sasan projects is bound to be far from smooth.
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