Russian energy major Rosneft will soon close the Essar Oil deal, according to a top official of the Russian company. Speaking to reporters at the sidelines of Petrotech 2016, Andrew James Balgarnie, Advisor to CEO of Rosneft, said: “We seek to close the acquisition of Vadinar Refinery in a few weeks.”
The statement comes a week after the Competition Commission of India gave green signal to the acquisition. Essar Oil is selling 98 per cent of equity to Rosneft Oil Company and a consortium of traders led by Trafigura and United Capital Partners. The all-cash deal assigns an enterprise value (a total of equity and debt, minus cash) of ₹72,800 crore for Essar Oil’s refining and fuel retail assets. An additional ₹13,300 crore will be paid for the adjacent Vadinar port and related infrastructure.
Essar Oil operates the refinery at Vadinar, Gujarat, with a capacity of 20 million tonnes per annum, a 1,010 MW captive power plant, and has a network of 2,700 operating fuel retail outlets.
According to the two definitive agreements that have been signed, Essar Energy Holdings and Oil Bico (Mauritius) — the controlling shareholders of Essar Oil Ltd — will sell 49 per cent stake to Petrol Complex Pte Ltd (a subsidiary of Rosneft Oil Company), and another 49 per cent to Kesani Enterprises Company Ltd (a consortium of Trafigura, the world’s largest commodity trader) and private equity group United Capital Partners. In this consortium, Essar will hold 2 per cent stake.
Equity inflow The equity inflow from the deal will help Essar Oil bring down its group-level debt of nearly ₹88,000 crore down by slightly over half, although the company’s management declined to give details of the exact cash inflow from the deal or how this will be deployed to repay loans across other group companies.