Essar OIL press_release_FDI
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For Immediate Release<br />
Rosneft and investment consortium led by Trafigura sign agreements<br />
to acquire 98% in <strong>Essar</strong> Oil<br />
<br />
Transaction includes ~Rs 72,800 crore ($10.9 bn) for <strong>Essar</strong> Oil’s refining and<br />
retail assets, and ~Rs 13,300 crore ($2 bn) for Vadinar port and related<br />
infrastructure<br />
<br />
This makes it India’s largest inbound <strong>FDI</strong><br />
Editor’s note:<br />
<br />
<strong>Essar</strong> Oil operates India’s second largest refinery and largest private sector oil<br />
retail network<br />
• Vadinar Refinery contributes 9% of India’s refining output<br />
• <strong>Essar</strong> Oil operates a pan-India network of 2,700 retail outlets<br />
<br />
The closing of the transaction is conditional upon receiving requisite regulatory<br />
approvals and other customary conditions. The Parties expect to obtain the<br />
relevant approvals before the end of this year.<br />
Goa / Mumbai – India, 15 October 2016: <strong>Essar</strong> Energy Holdings Limited and Oil Bidco<br />
(Mauritius) Limited—companies incorporated and managed under the laws of Mauritius—the<br />
controlling shareholders of <strong>Essar</strong> Oil Limited (EOL) have entered into separate definitive<br />
agreements for the sale of 98% of EOL. The first sale and purchase agreement envisages the<br />
sale of 49% to Petrol Complex Pte. Ltd (a subsidiary of PJSC Rosneft Oil Company); the second<br />
envisages the sale of the remaining 49% to Kesani Enterprises Company Limited (owned by a<br />
consortium led by Trafigura) at an enterprise valuation of Rs 72,800 crore ($10.9 bn) (the<br />
“Transaction”). An additional Rs 13,300 crore ($2 billion) will be paid for the acquisition of Vadinar<br />
Port, which has world-class storage and import/export facilities.<br />
The business transaction was announced in the august presence of Mr Narendra Modi,<br />
Honourable Prime Minister of India, and Mr Vladimir Putin, Honourable President of the Russian<br />
Federation, at the BRICS Summit in Goa (India).<br />
The all-cash deal encompasses EOL’s 20 million tonne refinery in Gujarat, India, and its pan-<br />
India retail outlets. The closing of the Transaction is conditional upon receiving requisite<br />
regulatory approvals and other customary conditions. The Parties expect to obtain the relevant<br />
approvals before the end of this year.<br />
www.essar.com<br />
Page 1
For Immediate Release<br />
Investing in EOL, which operates one of the world’s most complex refineries and runs India’s<br />
largest private sector retail network, gives the new stakeholders a strong foothold in the Indian<br />
market that will witness robust demand growth for petroleum products in the long term. The<br />
growth for refined petroleum products in the Indian market for the next five years is expected to<br />
be in the 5%-7% range.<br />
EOL’s value has also been strengthened by the integrated nature of its business and the<br />
strategic positioning of its assets. Its 20 million tonne oil refinery in Vadinar, which accounts for<br />
9% of India’s total refining output, is supported by a 1,010 MW captive power plant, and<br />
complemented by a network of around 2,700 operating retail outlets. The additional Rs 13,300<br />
crore that the new stakeholders have agreed to pay is for the 58 million tonne deep draft port in<br />
Vadinar that helps in importing crude and exporting finished products.<br />
Rosneft Oil Company is the world’s largest petroleum company with revenues in excess of $80<br />
billion. The Company’s main business activities include exploration & production, refining and<br />
product marketing in Russia and across countries in North America, Latin America, Europe, Asia<br />
and the Middle East.<br />
Trafigura Group is one of the world's leading independent commodity trading and logistics<br />
group of companies with revenues of approximately $100 billion. United Capital Partners (UCP)<br />
is a large independent Russian private investment group with investments of over $3.5 billion in<br />
various industrial sectors.<br />
The Transaction is the single largest tranche of foreign direct investment in India, and reestablishes<br />
the image of India as an attractive destination for foreign investments. Earlier in<br />
2007, <strong>Essar</strong> Group, together with Hutchison Whampoa, brought Vodafone into India through an<br />
$11.1-billion transaction. With the current Transaction, this is the second instance that <strong>Essar</strong> has<br />
brought in world leaders in the sector to participate in the India growth story.<br />
<strong>Essar</strong> Group Chairman, Mr Shashi Ruia, said: “It is a historic day for <strong>Essar</strong>. The transaction<br />
demonstrates our unique ability to build world-class assets and create immense value in our<br />
businesses. The monetisation of our stake in <strong>Essar</strong> Oil will help drive the next level of growth for<br />
our other businesses.”<br />
Mr Prashant Ruia, Director, and <strong>Essar</strong>, said: “We have once again reinforced our unique<br />
expertise in project incubation, execution, value creation and monetisation. We have established<br />
world-class assets that have attracted the attention of leading global companies and investors.<br />
The deals we have done have led to an <strong>FDI</strong> infusion of more than $30 billion into India.”<br />
Mr Igor Sechin, CEO, Rosneft, said: “This is a significant milestone for the Company. Rosneft is<br />
entering one of the most promising and fast-growing world markets. At the same time, this project<br />
provides unique opportunities for synergies with the existing assets of the Company and is<br />
www.essar.com<br />
Page 2
For Immediate Release<br />
consistent with Rosneft's enhanced presence in the fast growing markets of other APR countries,<br />
such as Indonesia, Vietnam and The Philippines.”<br />
Mr Jeremy Weir, Chief Executive Officer of Trafigura, said: “This is an important and exciting<br />
investment. <strong>Essar</strong> Oil occupies a strategic position in the global oil market and owns world-class<br />
refining and infrastructure assets that will create multiple synergies with our trading business.”<br />
Mr Ilya Sherbovich, Managing Partner of UCP, stated: “We are very pleased to reach an<br />
agreement to acquire shares of <strong>Essar</strong> Oil Limited. This is a top-tier asset operating in the<br />
promising Indian market, one of the largest and rapidly developing economies in the world. The<br />
announced transaction establishes a strategic partnership between our investment consortium<br />
members. Deal participants have extensive operational and financial expertise, which we believe<br />
will help to unlock significant value and provide strong financial results for all investors.”<br />
Notes to editors<br />
About <strong>Essar</strong> Global Fund Ltd<br />
--- Ends ---<br />
<strong>Essar</strong> Global Fund Limited (EGFL) is a global investor, controlling a number of world-class<br />
assets, focused on India, and diversified across the core sectors of Oil & Gas, Steel, Power,<br />
Ports, Projects, Shipping, Mining, BPO and other services. The Fund’s portfolio companies have<br />
aggregated revenues of about Rs 2 lakh crore and employ over 60,000 people.<br />
About Rosneft<br />
Rosneft is the leader of Russia’s petroleum industry and the world’s largest publicly traded<br />
petroleum company. Company’s main activities include prospecting and exploration of<br />
hydrocarbon deposits, oil, gas and gas-condensate production, upstream offshore projects,<br />
processing, as well as oil, gas, and product marketing in Russia and abroad. The Company is<br />
included in the list of strategic companies and organizations of Russia. Company’s largest<br />
shareholder (69.50% of the equity) is ROSNEFTEGAZ OJSC, fully owned by the Russian<br />
Government, while BP holds 19.75% of shares, one share belongs to the state represented by<br />
Federal Agency for State Property Management, whereas the remaining shares are free floating.<br />
www.rosneft.com<br />
About United Capital Partners (UCP)<br />
United Capital Partners (UCP) is an independent, private investment group established in 2006<br />
to manage the assets of its partners and co-investors. UCP invests in high-potential private<br />
companies and in liquid securities traded on domestic and international markets. UCP has a<br />
successful investment track record in the following industries: FMCG and retail, financial<br />
infrastructure and services, internet technologies, high-tech materials production, heavy<br />
machinery, oil & gas and petrochemicals. www.ucpfund.com<br />
www.essar.com<br />
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For Immediate Release<br />
About Trafigura<br />
Founded in 1993, Trafigura is one of the largest physical commodities trading groups in the<br />
world. Trafigura sources, stores, transports and delivers a range of raw materials (including oil<br />
and refined products and metals and minerals) to clients around the world. The trading business<br />
is supported by industrial and financial assets, including 48.8 percent owned global oil products<br />
storage and distribution company Puma Energy; global terminals, warehousing and logistics<br />
operator Impala Terminals; Trafigura's Mining Group; 50 percent owned DT Group which<br />
specialises in logistics and trading; and Galena Asset Management. The Company is owned by<br />
over 600 of its almost 5,300 employees who work in offices in 37 countries around the world.<br />
Trafigura has achieved substantial growth over the last ten years, growing turnover from USD12<br />
billion in 2003 to USD97.2 billion in 2015. The Group has been connecting its customers to the<br />
global economy for more than two decades, growing prosperity by advancing trade.<br />
www.trafigura.com<br />
Media Contacts<br />
Manish Kedia,<br />
Senior Vice President – Corporate Affairs, <strong>Essar</strong><br />
Phone: +91 98197 30092,<br />
Email: manish.kedia@essar.com<br />
Anupam Chaturvedi, Adfactors PR<br />
Mobile: + 91 9820026830,<br />
Email: anupam@adfactorspr.com<br />
Ms Victoria Dix, Trafigura’s Press Office<br />
Phone : +41 (0) 22 592 4528 or<br />
Email : media@trafigura.com<br />
Ravi Muthreja,<br />
Vice President - Corporate Communication, <strong>Essar</strong><br />
Phone: + 91 99301 34566,<br />
Email : Ravi.Muthreja@essar.com<br />
Ignaty Pavlov<br />
International communications- Rosneft<br />
Phone : +7 9853030146<br />
Email : im_pavlov@rosneft.ru<br />
Irina Lanina, UCP communications<br />
Phone : +7 (916) 907 50 79<br />
Email : lanina@ucpfund.com<br />
Engage with us on Social Media<br />
Facebook Twitter YouTube Instagram<br />
www.essar.com<br />
Page 4
For Immediate Release<br />
FACT SHEET<br />
<strong>Essar</strong> Global Fund Limited (“<strong>Essar</strong>”) is a global investor, controlling a number of worldclass<br />
assets, mainly focused in India, diversified across the core sectors of Oil & Gas,<br />
Steel, Power, Ports, Projects, Shipping, Mining, BPO and other services. The Fund’s<br />
portfolio companies have aggregated revenues of about Rs 2 lakh crore and employ over<br />
60,000 people.<br />
<strong>Essar</strong>’s business model is all about incubating, nurturing, scaling and monetising. Its<br />
businesses have always attracted the attention of global players—be it Vodafone, or<br />
Teleperformance, or Rosneft & the UCP-Trafigura consortium—as well as premium<br />
valuations. <strong>Essar</strong> has also made sure that it monetised its businesses at the right time,<br />
choosing significant inflection points in its evolution as an organisation to use the<br />
proceeds from the monetisation to reinvest in the next phase of growth. <strong>Essar</strong><br />
businesses have attracted a consolidated <strong>FDI</strong> infusion of about $30 billion, which is the<br />
largest for a business group. Some of the assets that <strong>Essar</strong> grew to world-class scale—<br />
and monetised at landmark valuations and at opportune stages in its evolution—were<br />
Hutchison-<strong>Essar</strong> and Aegis. While Hutchison-<strong>Essar</strong> was monetised at an enterprise<br />
valuation of $18 billion, <strong>Essar</strong> sold the US, Costa Rican and Philippine operations of<br />
Aegis for $610 million.<br />
<strong>Essar</strong>’s strategy is to not just set up a business or a manufacturing facility, but to invest<br />
in the complete value chain so that input costs can be brought down and dependence on<br />
external vendors minimised. In fact, <strong>Essar</strong> Projects, an <strong>Essar</strong> group company, has built<br />
every Greenfield project for <strong>Essar</strong>, managing end-to-end execution, right from<br />
Engineering and Procurement to Construction and Operational Maintenance. <strong>Essar</strong> also<br />
invested in high-end technology, safety measures and sustainable initiatives to make its<br />
assets truly world-class in scale, complexity and stature. The assets are completely<br />
backward integrated through setting up of captive ports, power plants and other<br />
supporting infrastructure, as well as forward integrated to value-add to the product<br />
portfolio and capture niche markets.<br />
About the transaction<br />
<br />
<br />
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Largest single tranche of inbound foreign direct investment<br />
Transaction pegs <strong>Essar</strong> Oil’s enterprise value at Rs 72,800 crore ($10.9 billion)<br />
plus an additional Rs 13,300 crore ($2 billion) to be paid for Vadinar Port<br />
<strong>Essar</strong> Global Fund decided to monetise <strong>Essar</strong> Oil, one of its key assets, after<br />
Rosneft and many other overseas firms evinced a keen interest in picking up a<br />
stake in the company<br />
www.essar.com<br />
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For Immediate Release<br />
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Rosneft, the Russian government owned integrated oil company, has picked up a<br />
49% stake in <strong>Essar</strong> Oil Limited<br />
Consortium of Trafigura and UCP pick up another 49% stake<br />
All-cash deal expected to close in Q1 2017, subject to all necessary approvals<br />
<strong>Essar</strong> plans to utilise proceeds from the stake sale to deleverage the Group and<br />
pave the way for strategic consolidation and growth in other businesses<br />
There is no non-compete fee under the transaction with Rosneft<br />
Deal in line with government’s vision to attract high ticket foreign investments into<br />
India<br />
Transaction includes 20 MTPA refinery at Vadinar (Gujarat) and all supporting<br />
infrastructure<br />
Deal demonstrates the ability of Indian businesses to attract overseas investment<br />
and indicates foreign players’ belief in the India growth story<br />
Transaction also gives Rosneft and the UCP-Trafigura consortium access to<br />
<strong>Essar</strong> Oil’s pan-India network of over 2,700 fuel retail outlets<br />
Deal will help <strong>Essar</strong> deleverage almost 50% of its Rs 88,000 crore debt and<br />
substantially reduce interest costs<br />
About <strong>Essar</strong> Oil<br />
<strong>Essar</strong> Oil was set up using an equity capital of about Rs 9,000 crore in the 1990s.<br />
The transaction values the Company at over 8 times that cost. This is an<br />
indication of the phenomenal value that has been created through strategic<br />
investments<br />
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<strong>Essar</strong> Oil’s 20 MTPA refinery at Vadinar is a world-class refinery across several<br />
aspects, like performance, safety compliance, engineering and plant complexity.<br />
In a 2014 benchmark study by Solomon, <strong>Essar</strong> Oil was in the first quartile for 15<br />
out of 26 performance indicators<br />
Vadinar Refinery can handle all kinds of crude, including the toughest crudes<br />
It produces and exports petroleum products meeting Euro IV and Euro V<br />
standards<br />
Vadinar refinery production constitutes 9% of India’s refining output<br />
<strong>Essar</strong> Oil currently has more than 2,700 retail outlets—the largest in the private<br />
sector—and is setting up an additional 2,000 outlets, which are in various stages<br />
of implementation<br />
<strong>Essar</strong> Oil Limited is a privately held company after a complete delisting from the<br />
bourses in 2015. Only 2% of the equity remains with public shareholders who had<br />
not participated in the delisting<br />
www.essar.com<br />
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For Immediate Release<br />
Refinery was commissioned in 2008<br />
Integrated infrastructure of power plants, port and retail assets provides full<br />
flexibility to the refinery<br />
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Refinery has consistently been performing at above 100% capacity utilisation<br />
Within four years of commissioning, refinery capacity increased from 10.5 MTPA<br />
to 20 MTPA, while complexity doubled from 6.1 to 11.8<br />
Refinery’s Gross recovery Margins (GRM) have been consistently higher than its<br />
peers<br />
<strong>Essar</strong> Oil has the best safety record in the industry, with more than 8 years<br />
without LTI (Lost Time Injury)<br />
<strong>Essar</strong> Oil has the requisite land and has obtained approvals for all possible<br />
expansion activities, including doubling of refinery capacity and the setting up of a<br />
petrochemical complex<br />
<strong>Essar</strong> Oil’s Vadinar complex was built around a natural deep-draft port, with a<br />
liquid cargo terminal. Facilities on site include two jetties for handling liquid<br />
petroleum products, tanks for storage of crude oil and finished petroleum goods,<br />
and rail and road gantries for dispatch of petroleum products. The Vadinar port<br />
has been the best performing port under the Kandla Port Trust for two consecutive<br />
years, and has just completed 10 years of operations<br />
<strong>Essar</strong> Oil has registered consistent Y-on-Y growth in retail sales over the last few<br />
quarters<br />
<strong>Essar</strong> Oil Vadinar refinery has produced higher proportion of middle & light<br />
distillates Y-on-Y, ensuring better margins<br />
One third of the 3,000-acre Vadinar complex is reserved for a green belt that has<br />
4 lakh trees<br />
<strong>Essar</strong> Oil’s Vadinar refinery was voted among the top 20 most energy efficient<br />
units in India by CCI. The Company was ranked among India’s Carbon Disclosure<br />
Leaders for 2015 by CDP<br />
<strong>Essar</strong> Oil has a retail presence in 28 states & UTs; its products marketed through<br />
58 supply locations<br />
Not just petrol & diesel, <strong>Essar</strong> Oil also manufactures LDO, Sulphur, FO, Bitumen<br />
& PetCoke<br />
www.essar.com<br />
Page 7