Mukesh Ambani-led Reliance Industries Limited (RIL), one of the world’s leading energy corporations, is planning to raise more than $1 billion to fund its up-and-coming shale gas ventures in the US. RIL will undertake this proposition by selling bonds to foreign investors in the 2.25-2.50% range, about 125-150 basis points above Libor. The funds thus generated will also be directed to Reliance’s Jamnagar facility which is one of the world’s largest refining complexes.
Reliance Industries, India’s largest private sector conglomerate in terms of market valuation, is expected to draw funds with assistance from Citibank, Bank of America and UBS – the merchant bankers to the proposed 10 year dollar bond issue. The company plans to initiate talk with its investors from mid December onwards.
Industry speculations ascertain that RIL, as a priority, will direct a large portion of the funds generated from bond issue to meet the operational expenses of its shale gas projects in the US. The company has inked joint ventures with three US based shale gas companies - Chevron (RIL- Chevron), Carrizo (RIL- Carrizo) and Pioneer (RIL-Pioneer) to extract gas from the three shale gas fields. RIL has already started drilling on two beds and will start operations in the third one by May next year. Reliance Industries has so far invested close to $2.5 billion in its shale gas joint venture projects, with $400 million invested during the April-June financial quarter - the best ever financial quarter for Reliance in the last three years.
With plans to augment its existing shale gas projects and to increase the count of total shale gas assets in the coming years, RIL is keen on increasing its investments in this sector. Also, being an AAA rated firm, it will be relatively easy for the company to gather foreign investors who find it comfortable to invest in companies such as RIL.