EOL deal prevents Ruias from re-entering India oil refining, retailing: Rosneft
21 Aug 2017 4:43 PM GMT
Mumbai: Asserting that only commercial considerations were the sole driving factor behind the $12.9 billion acquisition of Essar Oil, Rosneft, the new owners of the country's second largest oil refinery, said they have a non-compete pact under which the Ruias will never be able to re-enter the oil refining and retailing sector in the country.
"The core of the deal the way it ended up is based on commercial valuation...they (new owners) are looking to make commercial returns, they want this to be commercially successful," Tony Fountain, the newly-appointed chairman of Essar Oil that was sold to the Moscow-controlled oil giant Rosneft told reporters at a separate presser which was held after the Essar Group announced the conclusion of the deal earlier in the day.
The deal involves a non-compete clause in the agreement, as per which the Ruias will not be able to enter any part of the oil refining and retailing in the country, EOL's non-executive director Jonathan Kollek said.
However, the Ruias will continue to run their refinery in Britain wherein they has 9 million tonne facility at Stanlow and also their coal bed methane blocks in the country.
"They cannot build a refinery, they cannot build petrol stations. There is a non-compete, forever," he said, adding Rosneft will pay a royalty to Essar group for using the brand name of Essar Oil at the over 3500 petrol pumps, which are also part of the deal.
However, the new management, which includes appointees from the new owners –Russian oil major OAO Rosneft, and a consortium of Russian private equity fund UCP and Swiss commodity company Trafigura -- did not divulge the fees paid.
"That (fee) is part of the commercial terms. There is a payment as you would expect in normal course of business for having access to license and brand. That is part of the overall valuation," Fountain said.
Fountain on Monday said Ruias will continue to hold 1 per cent in Essar Oil even after the deal, through a 2 per cent holding in the consortia of Trafigura and UCP.
"I don't want to speak about their intention of how long they intend to hold that, but we are certainly assuming that they will be with us with that investment," he said.
Fountain said the new owners' intention is to run the company with highest standards of corporate governance followed all over the world.
The company said it feels the Essar brand is "very strong" and will be retaining the same at the petrol pumps.
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