The deal represents Russia’s largest ever foreign investment into any country in the world.The controlling shareholders of Essar Oil Limited (EOL)—Essar Energy Holdings Limited and Oil Bidco (Mauritius) Limited, both companies incorporated and managed under the laws of Mauritius—recently announced the successful conclusion of the sale of 98.26% of EOL.
Rosneft (through its subsidiary, Petrol Complex Pte. Ltd) has acquired 49.13% stake, and Trafigura-UCP consortium (through Kesani Enterprises Company Limited) has acquired an equal stake. The remaining 1.74% stake continues to be held by retail shareholders.
The transaction was initiated in the august presence of Mr Narendra Modi, Prime Minister of India, and Mr Vladimir Putin, President of the Russian Federation. “The transaction marks the single largest outbound investment by a Russian company into any country”, said Mr Kamal Taposeea, Chairman of Essar Energy Holdings Limited. It will open a new chapter for Indo-Russian economic cooperation. It is also the single largest foreign investment in India and re-establishes India’s image as an attractive destination for foreign investments.
Essar Global Fund Limited (EGFL) is a global investor, owning a portfolio of companies that control and operate a number of world-class assets, focused on India and diversified across the core sectors of Oil & Gas, Steel, Power, Ports, 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, is a global investor, owning world-class oil & gas assets which includes Stanlow refinery in the UK and oil and gas blocks in India, Indonesia, Nigeria, Madagascar and Vietnam.
Commenting the transaction, Mr Jeremy Weir, CEO of Trafigura, said that “our stake in Essar Oil also complements Trafigura’s growing presence in India at a time when the country’s economic outlook is positive.” Founded in 1993, Trafigura is one of the largest physical commodities trading groups in the world. The Company has achieved substantial growth over the last ten years, growing turnover from USD12 billion in 2003 to USD98.1 billion in 2016.
Mr Yuri Soloviev, First Deputy President and Chairman of VTB Bank, has also expressed VTB Group’s interest in India. “India has become a core strategic market for the VTB Group and we look forward to working further with Essar and our broader Indian clients to further expand our franchise in the future”, said Mr Yuri Soloviev. VTB Capital acts as financial adviser to Essar Energy on the sale of world-class assets.
“We have been working on this transaction for over a year and its successful completion is a historic occasion”, said Mr Mr. Uday Gujadhur, Director of Essar Energy Holdings. While his partner, Mr Rewant Ruia, also a Director of Essar Energy Holdings Limited, explained that this transaction is in line with Essar Energy’s strategy of investing in world-class assets and exiting them at attractive valuations. He added that they will now be shifting focus on growing their other oil and gas assets including their refinery in the UK.
Mr Ilya Sherbovich, Managing Partner of UCP Investment Group, said that he is “confident that together with all the new shareholders - recognised leaders in their industries, we will oversee the growth potential of Essar Oil to increase the long-term value of the company.” UCP Investment Group (UCP) is an independent, private investment group established in 2006 to manage the assets of its partners and co-investors.
The deal includes EOL’s 20 MTPA Vadinar Refinery (one of the world’s largest, with a complexity index of 11.8), its pan-India network of over 3,500 retail outlets which represent India’s largest private sector retail network, as well as the associated refinery infrastructure. The transaction perimeter also includes the Vadinar Port (capacity of 58 million tonnes with world-class dispatch and storage facilities) and the Vadinar power plant for a total cost of US$ 12.9 billion.
Commenting on the closing of the transaction, Rosneft CEO, Mr Igor Sechin stated that “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.” 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. The closing of the deal is a remarkable achievement the Company: it 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.