Monday, October 24, 2016

Trafigura Consortium Buy Indian Refining $10.9 Billion USD Retail Assets

Trafigura Logo

Trafigura-led consortium have bought Essar Oil Limited's (EOL) refining and retail assets for $10.9 billion, according to EOL.

The all-cash deal encompasses EOL's 20 million ton refinery in Gujarat, India, and its pan-India retail outlets. The closing of the transaction is conditional upon receiving requisite regulatory approvals and other customary conditions.

The parties expect to obtain the relevant approvals before the end of this year.

This transaction is the single largest tranche of foreign direct investment in India, and re-establishes the image of India as an attractive destination for foreign investments, Essar said. With the current transaction, this is the second instance that Essar has brought in world leaders in the sector to participate in the India growth story, it said.

Essar Energy Holdings Limited and Oil Bidco (Mauritius) Limited -- companies incorporated and managed under the laws of Mauritius -- the controlling shareholders of Essar Oil Limited (EOL), have entered into separate definitive

agreements for the sale of 98% of EOL.

The first sale and purchase agreement envisages the sale of 49% to Petrol Complex Pte. Ltd (a subsidiary of PJSC Rosneft Oil Company), and the second envisages the sale of the remaining 49% to Kesani Enterprises Company Limited (owned by a consortium led by Trafigura).

The total sale value was pegged at $10.9 billion, and another $2 billion will be paid for the acquisition of Vadinar Port, which has storage and import/export facilities.

The Indian refinery sale to Rosneft follows an OPIS report in March on Rosneft's plan to buy equity in Essar's Vadinar refinery, the second largest refinery in India.

Investing in EOL, which operates one of the world's most complex refineries and runs India's largest private sector retail network, gives the new stakeholders a strong foothold in the Indian market that will witness robust demand growth for petroleum products in the long term, Essar said. The growth for refined petroleum products in the Indian market for the next five years is expected to be in the 5%-7% range, it said.

EOL's value has also been strengthened by the integrated nature of its business and the strategic positioning of its assets, Essar said. Its 20-million-ton oil refinery in Vadinar, which accounts for 9% of India's total refining output, is

supported by a 1,010 MW captive power plant, and complemented by a network of around 2,700 operating retail outlets, the company said.

The additional $2 billion that the new stakeholders have agreed to pay is for the 58-million-ton deep draft port in Vadinar that helps in importing crude and exporting finished products, Essar said.

Rosneft Oil Company is the world's largest petroleum company with revenues in excess of $80 billion, according to Rosneft. The company's main business activities include exploration and production, refining and product marketing in Russia and across countries in North America, Latin America, Europe, Asia and the Middle East.

Trafigura Group is one of the world's largest independent commodity trading and logistics group of companies with revenues of approximately $100 billion. United Capital Partners (UCP) is a large independent Russian private investment group with investments of over $3.5 billion in various industrial sectors. 

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