Essar completes $350MM purchase of UK Stanlow Refinery from Shell

Source: Essar Energy

Essar Energy plc (LSE:ESSR) has completed the $350 million acquisition of the oil refinery and other associated assets at Stanlow, near Ellesmere Port, Cheshire, in the UK from Shell (NYSE: RDS.A) (NYSE: RDS.B)

The Stanlow Refinery, near to Ellesmere Port in the north west of England, is the second largest refinery in the UK with a nameplate capacity of 296,000 barrels of oil a day. It supplies approximately one sixth of the UK's petrol, as well as being a key manufacturer of diesel and aircraft fuel. 

The acquisition of the Stanlow refinery gives Essar Energy direct access to the UK market. It is also aligned with Essar Energy's strategy to provide options for the export of high value fuel products from its refinery at Vadinar, in Gujarat state, India. Vadinar currently has a capacity of 300,000 barrels a day and this will be increased to 375,000bpd under a phase I expansion plan, due to be completed by the end of this year, and to 405,000bpd by September 2012 under a further optimisation project. 

Essar Energy also owns a 50% stake in the Kenya Petroleum Refineries Ltd refinery in Mombasa, Kenya, which has a nameplate capacity of 80,000 barrels per day. 

The consideration for the acquisition of Stanlow is payable to Shell in two instalments. The first, which was paid on completion, was for $175 million less an adjustment to reflect certain costs associated with the transferring of the Stanlow refinery to Essar Energy's subsidiary, Essar Oil UK Limited. 

The second instalment, of $175 million plus interest at the rate of LIBOR plus 4%, is payable on the date of the first anniversary of completion. 

A separate payment of $916 million has been made to Shell for the stock of crude oil, refined products and certain other inventory items on the Stanlow refinery site. This was determined by the market prices of these items on completion of the acquisition and was at cost. The payment for this stock is being primarily funded from a working capital facility consisting of a three year secured revolving credit facility for US$1.5 billion.



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