Russia’s Rosneft acquires 49% in India’s Essar Oil

GOA, India, Oct 17 (PRIME) -- Russian state-owned oil major Rosneft and a consortium of investors has acquired a 49% stake in Indian refinery Essar Oil Limited for U.S. $12.9 billion, the company said in a statement on October 15.

Apart from Rosneft, the consortium includes oil trader Trafigura and investment group United Capital Partners (UCP). The price of Rosneft’s 49% stake in the company will be defined on the basis of actual net debt and net circulating capital as of the deal’s closure, Rosneft said.

The company will supply the most viable blends of oil to the refinery that will allow it to increase the facility’s economic efficiency, including own Rosneft’s oil, possibly Venezuelan blends, and oil from third parties, the company said.

A representative of the company told PRIME that the price of the 49% stake may reach $3.5 billion, and the Indian refinery will start paying dividends very soon. Acquisition of the stake bears no additional credit risks for Rosneft, and the stake means no further consolidation, so Essar oil will continue to receive project financing.

Andrei Kostin, CEO of the country’s second largest bank VTB, told reporters that the bank will provide $3.9 billion to Essar to restructure its debt.

“This is the largest investment is India’s history,” he said.

The bank said in a statement that the financing will help finalize the deal of Rosneft, Trafigura and UCP acquiring up to 98% in Essar Oil, Vadinar Port and Vadinar Power for $12.9 billion.

Rosneft agreed to buy the stake in the refinery in the city of Vadinar in mid-2015. The company also agreed to supply 10 million tonnes of oil to the facility annually for 10 years.

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