Essar Energy secures new debt pact for Vadinar

Essar Energy PLC, an India-focused integrated energy company, announced on April 4, that its subsidiary Essar Oil Ltd. has completed the process for exiting the corporate debt restructuring (CDR) loan program set up in December 2004 to help cover the construction of its Vadinar refinery in Gujarat.
The loan has been replaced with new debt of about US$1.65 billion on commercial terms from similar group of lenders. In addition, as part of dollarization of its rupee term debt, Essar Oil has refinanced INR26.11 billion (US$470 million) of rupee term loans into equivalent foreign currency debt of US$481 million through ECBs/swaps.
Lalit Gupta, Essar Oil managing director and chief executive officer, said, “The CDR exit marks a significant step forward for Essar Oil. Complete stabilizing of our expanded capacity pave the way for us to move forward positively to maximize value for all our stakeholders.”
Suresh Jain, chief financial officer, Essar Oil, said, “We are thankful to our lenders for their continued faith in us. The CDR exit will lead to greater operational and financial flexibility for the organization. We have begun the process of swapping our costly rupee debt with cheaper dollar loans that will lower our interest cost significantly, improve our cash flow, and strengthen the balance sheet.”
The company had received approval of US$2.27 billion to replace its high cost rupee debt with ECBs, and now with the CDR exit, the company will be able to refinance the remaining rupee loans to ECB. This will help reduce long-term interest costs.
The Vadinar Refinery, which started commercial production in May 2008 with a capacity of 10.5 million metric tons per year (mmtpa), now has a capacity of 20 mmtpa, or 405,000 barrels per day.
This makes the fully integrated refinery India’s second largest single location refinery and amongst the most complex globally.
With this increased complexity, Essar Oil is able to take over 85% of ultra heavy and heavy crude in its crude diet and yet produce higher grade products like Euro IV and Euro V compliant gasoline and gasoil to cater to the domestic and international markets.
(April 4, 2013)