Essar Oil completes $12.9 bn sale of India assets to Russia's Rosneft

21 Aug 2017


The Ruias-controlled Essar Oil today announced the completion of the sale of its India assets, which includes a 20-million tonne oil refinery and retail assets besides the nearby Vadinar port,  to a consortium led by Russia's government controlled Rosneft, for $12.9 billion.

According to Essar Energy, the refinery at Vadinar (one of the world's largest, with a complexity index of 11.8), in Gujarat and retail assets (India's largest private sector retail network), are together worth $10.9 billion while the Vadinar Port and related infrastructure assets are worth $2.0 billion.

Essar Energy owns about 3,500 retail outlets, a power plant and a port.

The transaction perimeter of the Vadinar refinery also includes the Vadinar Port (capacity of 58 million tonnes with world-class dispatch and storage facilities) and the Vadinar power plant (a 1,010 MW state-of-the art, multi-fuel unit that supplies both power and steam to the Vadinar refinery).

Under the deal shareholders of Essar Oil Limited (EOL), which include Essar Energy Holdings Limited and Oil Bidco (Mauritius) Limited, both Mauritius-incorporated, will transfer 98.26 per cent of EOL to Roseneft.

Rosneft (through its subsidiary, Petrol Complex Pte. Ltd) has acquired 49.13 per cent stake, and Trafigura-UCP consortium (through Kesani Enterprises Company Limited) has acquired an equal stake. The remaining 1.74-per cent stake continues to be held by retail shareholders.

''The investment, which represents Russia's single largest foreign investment anywhere in the world, will open a new chapter for Indo-Russian economic cooperation. The transaction is also the single largest foreign investment in India, and re-establishes the country's image as an attractive destination for foreign investments,'' Essar Oil stated in a release.

The deal stuck more than 10 months after it was announced on 15 October last year on the sidelines of the BRICS summit in Goa, however, got delayed after the lenders wanted their debt worth over Rs45,000 crore to be cleared.

Essar Oil's lenders included State Bank of India, ICICI Bank, IDBI Bank, Axis Bank, Yes Bank, and rest of the consortium.

With the completion of this transaction, Essar Oil claims to have helped attract more than $30 billion of foreign investments into India. Previously, in 2007, Essar Group, together with Hutchison Whampoa, had brought Vodafone into India in a $11.1 billion transaction.

VTB Capital acted as Essr Oil's investment banking partner on the deal; and its legal and other advisors in bringing the transaction to closure.

''Today is a historic day for Indo-Russian economic ties. This transaction reflects the shared vision of two of the world's most dynamic leaders. I congratulate Rosneft, Trafigura and UCP for investing in a world-class oil business, which we are proud to have built. For Essar, the closure of this landmark transaction ushers in a new phase of growth across our portfolio of businesses that hold great promise in India's enduring development story,'' Essar founder Shashi Ruia said.

''With this deal, we have completed our monetisation and deleveraging programme, which is the largest undertaken by any corporate in recent years. We have substantially deleveraged our portfolio companies' balance sheets, reducing debt by over $11 billion (Rs70,000 crore). With the completion of our capex programme, we now look forward to a period of growth in our wider portfolio of businesses,'' Prashant Ruia, director, Essar Capital, said.

Essar Energy Holdings Limited director Dhanpat Nahata welcomed Rosneft, Trafigura and UCP as the new shareholders of EOL, and thanked his colleagues, the deal team of Essar Energy and our advisors for this achievement.

''This day marks the beginning of a new chapter for EOL. Together with our partners we intend to support the company to significantly improve its financial performance and, in the medium term, adopt an asset development strategy. The closing of the deal is a remarkable achievement for Rosneft too: the company has entered the high-potential and fast-growing Asia-Pacific market. The acquisition of the stake in the Vadinar refinery creates unique opportunities of synergies with existing Rosneft-owned assets and will help improve efficiency of supply to other countries within the region,'' Rosneft CEO Igor Sechin stated.

''Essar Oil will now be able to take advantage of the strengths of its international investors to further develop and enhance value to this world class asset.  Our stake in Essar Oil also complements Trafigura's growing presence in India at a time when the country's economic outlook is positive,'' Jeremy Weir, CEO of Trafigura, commented.

Essar Global Fund Limited (EGFL), which owns Essar Group companies, is a global investor, owning a portfolio of companies that control and operate a number of India-focused companies diversified across the core sectors of oil and gas, steel, power, port projects, shipping, mining, BPO and other services. The Fund's portfolio companies have aggregate revenues of about US$15 billion. The Fund is managed by its investment manager, Essar Capital Limited.

Essar Energy Holdings Limited, Mauritius, an indirect subsidiary of EGFL, owns oil and gas assets which includes Stanlow refinery in the UK and oil and gas blocks in India, Indonesia, Nigeria, Madagascar and Vietnam. 

Rosneft is the leader of Russia's petroleum industry and the world's largest publicly traded oil and gas company by reserves and liquid hydrocarbon production.

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