Reliance Industries plans US expansion

Mukesh Ambani, India’s richest man and the head of the Reliance Industries business empire, is planning to expand his energy operations in the US, in a move underscoring how attractive the US remains in spite of its current economic difficulties.

The billionaire who expanded his father’s petrochemicals company into India’s most powerful conglomerate, plans to spend $10bn-$12bn in an expansion of Reliance’s US business, according to people he has confided in.

Mr Ambani's determination to grow outside India is part of his ambition to build a world-class company with a global reach – an ambition impossible to achieve if he operates only in India. Mr Ambani has told associates he considers the US, with India, as the “safest place” in the world in which to invest, the people added.

“Mukesh Ambani has become too big for India,” said the chairman of one of India’s leading banking groups. “In America, nobody looks at a billionaire.”

Reliance Industries, which has annual revenues of $44bn, operates the world’s biggest refinery complex on India’s west coast and the country’s largest gasfield on its east coast. The company is also expanding in what Mr Ambani calls “industries of the future” in India, such as telecommunications, hospitality and retail.

Mr Ambani’s decision comes at a time when the Indian business community is increasingly disillusioned with the government, in spite of an 8-9 per cent economic growth rate. A series of scandals and accusations of government inaction have led to frustration and a sense that India is losing its momentum among Indian corporations.

“Everyone in corporate India is risk-averse,” said the chief executive of one large infrastructure company. “They have done their asset accumulation and now they wish to derisk, and one way to derisk is to go offshore.”

Reliance has bought a series of stakes in US shale gas ventures this year, spending almost $3.5bn. Mr Ambani has said in the past he believes that shale gas will be increasingly attractive as a source of energy thanks to technological breakthroughs and the desire in the US to lessen dependence on foreign oil supply.

Reliance bought a 45 per cent holding in the Eagle Ford shale gas field in south Texas. It also paid $1.7bn for a joint venture with Atlas Energy, which has a shale gas field on the borders of Pennsylvania, West Virginia and New York states.

Mr Ambani is likely to seek local partners as he develops his strategy for North America. His preference is for partnership with a publicly listed entity, in the interests of transparency.

However, one potential link-up could be with KKR, the private equity firm. Henry Kravis, its co-founder and a frequent visitor to India, will be in Mumbai next week, and he and Mr Ambani plan to dine together.

KKR has deep knowledge of the US energy industry, through investments ranging from pipeline companies to utilities, such as its joint investment with TPG in Energy Future Holdings, the former TXU.

Reliance’s international expansion suffered a setback this year when an attempt to buy LyondellBasell for $14.5bn was thwarted by a management-backed debt restructuring proposal for the the Dutch chemicals group.