Reliance likely to transform its energy business with a future perspective, says Morgan Stanley

Reliance Industries Ltd (RIL) plans to transform its energy business with an over-arching strategy to offer decarbonisation solutions globally at a competitive price in a market potentially worth $ 5 trillion by 2030, Morgan Stanley said.

Over the next few decades, the world will need to fundamentally retool the way it produces and consumes energy. Reliance is embracing the change and investing to provide green infrastructure solutions to power this change, via silicon and hydrogen — a $ 60 billion value creation opportunity, Morgan Stanley said in a report.

“The strategy is to provide supporting infrastructure in areas of hydrogen, integrated solar PV and grid batteries — all areas with high entry barriers, technological advances and good returns,” it said.

The oil-to-telecom conglomerate plans to create four giga-factories offering the entire spectrum of renewable/distributed energy solutions, as it capitalises on India’s quartz and silicon resources.

The focus on the hydrogen value chain offers significant opportunities to decarbonise energy operations, compliment energy storage with batteries and potentially export green ammonia.

The plan would make Reliance the largest renewable infrastructure producer with the potential to become an alternative technology supplier to the globe, within the current geopolitical setup, similar to how it exports high-grade refinery fuels.

“In the last decade, Reliance investments in technology drove USD 125 billion in value creation from scratch, and we see investment in green energy infrastructure as key to outperformance in the next decade,” it said, adding the success the firm has enjoyed from entry to offering telecom data in the past half-a-decade has surprised the market.

Silicon and hydrogen are expected to emerge as the next decade’s ‘New Oil’ for Reliance, with potential of up to USD 60 billion in value creation if things fall into place by 2025. “New energy EBIDTA potential is as big as the contribution from Reliance’s petrochemicals business now, but we think it will command a multiple twice as large,” Morgan Stanley said. Stating that there are multiple catalysts in the near term, it said chemical prices are picking up, gasoline margins are at multi-year highs, and demand is starting to recover.

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