Essar may end with just 25% in Kenya Petro
Under the agreement signed between Esmark and Essar, the former will pay a ‘break up’ fee of $20.5 million in case the transaction does not take place.
By TNN |
MUMBAI: After a failed bid for the Port Harcourt refinery in Nigeria, the Ruia promoted Essar Oil may have to be content with only 25% stake in the Mombassa-based Kenya Petroleum Refinery (KPRL).
This goes against the agreement that the group signed with the Kenyan government to acquire 50% stake in the four million metric tonne refinery. The Kenyan government now wants to retain majority stake in the refinery.
The government has asked Essar Oil to share the remaining 50% stake equally with Libya���s Tamoil Africa Holdings. Under the arrangement, Tamoil and Essar will now own a quarter of the refinery each, leaving the government with 50% stake virtual control of the facility.
According to sources, Essar has not accepted the government proposal and is still negotiating. Essar Oil���s official spokesperson, in an e-mail reply, said, ���The issue is under discussion with them.
We are yet to hear from them.���
The Kenyan government is favouring Tamoil because it is believed to have offered to provide debt financing of 70% of the capital expenditure with accruing interest at 1.5% above the Libor for the refinery upgrade.
As per the January agreement, Essar Energy Overseas, an Essar Oil subsidiary, was to acquire 50% stake from Shell Petroleum, Chevron Kenya and BP Africa. The three majors ��� Shell Petroleum, Beyond Petroleum and Chevron Kenya ��� had picked Essar to buy the stake through a competitive bid.
Essar is learnt to have offered a repayment rate 3.5% above Libor. Essar had offered to arrange $322 million upgrade loan and release the money within six months of agreement.
Essar Oil chief executive officer Naresh Nayyar in an analyst meet held in Mumbai last week said that Essar has submitted its proposal to the Kenyan government and is expecting an approval shortly. The three oil majors, however, will not be allowed to sell the stake directly to Essar.
This goes against the agreement that the group signed with the Kenyan government to acquire 50% stake in the four million metric tonne refinery. The Kenyan government now wants to retain majority stake in the refinery.
The government has asked Essar Oil to share the remaining 50% stake equally with Libya���s Tamoil Africa Holdings. Under the arrangement, Tamoil and Essar will now own a quarter of the refinery each, leaving the government with 50% stake virtual control of the facility.
According to sources, Essar has not accepted the government proposal and is still negotiating. Essar Oil���s official spokesperson, in an e-mail reply, said, ���The issue is under discussion with them.
We are yet to hear from them.���
The Kenyan government is favouring Tamoil because it is believed to have offered to provide debt financing of 70% of the capital expenditure with accruing interest at 1.5% above the Libor for the refinery upgrade.
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Tamoil has also promised that the loan was to be extended to a joint venture company to be formed for the project and would be owned 51% by the Libyans and 49% by the Kenyan government. As per the January agreement, Essar Energy Overseas, an Essar Oil subsidiary, was to acquire 50% stake from Shell Petroleum, Chevron Kenya and BP Africa. The three majors ��� Shell Petroleum, Beyond Petroleum and Chevron Kenya ��� had picked Essar to buy the stake through a competitive bid.
Essar is learnt to have offered a repayment rate 3.5% above Libor. Essar had offered to arrange $322 million upgrade loan and release the money within six months of agreement.
Essar Oil chief executive officer Naresh Nayyar in an analyst meet held in Mumbai last week said that Essar has submitted its proposal to the Kenyan government and is expecting an approval shortly. The three oil majors, however, will not be allowed to sell the stake directly to Essar.
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They will first sell it to Tamoil which will parcel half of the remaining 25% stake to Essar. If the deal goes through, it would be Essar Oil���s first international acquisition in the refinery space.Start a SIP with as low as ₹500 with ET Money App!
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