Essar Oil UK out of the woods, arranges $850 million credit

Clouds of financial troubles are moving away from Essar Oil UK. It has secured more than $850 million fund from various sources to replace the earlier loan and access additional capital. The Ruia family controlled refining major is believed to have received the major funding from Apollo Global Management and a few other banks.

The $850 million funding includes bilateral arrangements with many of the refiner's key customers on enhanced payment terms and other long-term financing, linked primarily to crude supply.

The company will have to repay over $500 million towards the credit raised against receivables from Lloyds Bank. The British lender had ceased acting as Essar's main banker after the company ran into financial troubles due to pandemic-led disruptions.

The company, which owns and operates the 2 lakh barrels per day (bpd) Stanlow Refinery, said it has been working for the transition of the refinery to a "Low Carbon Energy Provider". It is building two blue hydrogen production hubs at Stanlow, which will attract $1.06 billion in investments, the company said.

Prashant Ruia, Chairman of Essar Oil UK, said the company has moved into a positive and progressive phase with the economic recovery in the UK. "We look forward to furthering our investments in exciting new technologies, securing high-tech jobs and the Stanlow's future at the heart of the UK's green revolution," he added.

According to the management, the product sales at Essar Oil UK have improved with the easing of lockdown restrictions in the country. The oil refiner expects to generate positive earnings before interest, tax, depreciation and amortisation (EBITDA) of $40 million in the ongoing quarter. In comparison, it had negative $18 million EBITDA in the corresponding quarter of 2020. It generated of $300 million EBITDA before the pandemic.

The company also expects benefits from the anticipated recovery in aviation fuel demand in the coming months. It is also planning to conclude further financing by June, besides delivering operational cost reduction initiatives during the year to further improve the position.

Essar Oil UK operates the Stanlow Refinery located on the south side of the Mersey Estuary near Liverpool. It produces 16 per cent of UK's road transport fuels and processes 10 million tonnes of crude and feedstocks annually.

Since acquiring Stanlow Refinery in 2011, Essar claimed it has invested $1 billion in the business. The refinery is the mainstay business of the Ruia family at present.

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