Essar secures financial future with $850m funding facilities

A Cheshire oil refiner has dispelled fears over its financial viability after securing new funds, it announced today.

Essar Oil (UK), which owns and operates the Stanlow Refinery on the banks of the River Mersey, today announced that it has closed new financial arrangements of more than $850m.

Doubts were cast early last month over the financial stability of the business following reports of talks between its management, the Government, and private equity investors over an urgent injection of funding.

Revenues had drastically reduced due to a massive fall in demand during coronavirus lockdowns which led to hardly any traffic on UK roads and the grounding of most of the world’s airline fleets.

But following today’s announcement it said this new funding source has allowed it to replace its former credit facility as well as access additional capital, so strengthening its financial position.

The funding is made up of liquidity from a diversified range of sources, including bilateral arrangements with many of its key customers on enhanced payment terms and other long term financings, linked primarily to crude supply.

With these financial arrangements now in place, the business has more low-cost liquidity to meet its upcoming requirements, and can continue to focus its energies on its transition to become a ‘Low Carbon Energy Provider’ of the future.

It is already working on delivering two blue hydrogen production hubs at Stanlow, which will attract £750m in total investment.

Follow-on capacity growth is planned to work towards the Government’s new target of 5GW of low carbon hydrogen for power, transport, industry and homes.

Stanlow is committed to reaching 80% of the Government-set targets.

In addition, the business said it remains committed to delivering the necessary operational cost reductions at the refinery over the course of the coming year in order to help secure its long term future and ensure it remains competitive in its traditional refining business.

It has also recently completed a review and update of its corporate governance and its board has adopted the recommendations arising out of that review process, which included independent input from Ashurst. As a result of that process, the board has committed to appointing two independent non-executive directors to the board.

Chairman, Prashant Ruia, said: “Securing this financing demonstrates the confidence all our stakeholders have in our long term vision for Stanlow.

“We believe this confidence will be further bolstered by the updates we have made to our corporate governance, which includes a commitment to appoint two new independent non-executive directors to our board. These appointments will further enhance our overall governance and risk assessment processes, as well as providing insights and strategic inputs to the business as it continues its transition to low carbon operations.”

He added: “With a strong economic recovery driven by the UK Government’s roadmap out of the pandemic, I feel that our business has moved into a positive and progressive phase for the benefit of all of our stakeholders and employees.

“We look forward to furthering our investments in exciting new technologies, securing high tech jobs and Stanlow’s future at the heart of the UK’s green revolution.”