Essar Oil secures new ‘time to pay’ arrangement with HMRC
Stanlow oil refinery owner Essar Oil (UK) has announced a deal with HM Revenue and Customs for a new ‘time to pay’ agreement regarding outstanding VAT payments.
EOUK and HMRC have agreed a phased payment schedule, aligned with EOUK revenues.
EOUK said it is confident of closing the last mile financings in the coming months after having successfully raised $1.1bn earlier in the year.
Weekend reports raised concerns that the refinery operator was close to collapse, which it strenuously denied.
It said it had been affected by a slump in demand for fuel, driven by the pandemic when demand from industry and the aviation sector dropped dramatically.
Essar said throughout the pandemic, including during the period that fuel demand was at very low levels, EOUK continued to run its Stanlow refinery, instead of shutting it down, to ensure adequate fuel supply to its customers across the UK.
More recently, though aviation volumes remain low, the road fuels market has started to return to more normal levels and as a result, EOUK turned EBITDA positive in early summer.
And, in light of the ongoing supply issues, EOUK has reached out to its refinery customers and offered additional supply to ease the recent fuel constraints.
EOUK has successfully increased vehicle shifts per day, from around 52 vehicle shifts per day in early August to more than 70 today.
This is expected to surpass 80 shifts by the end of October.
Road fuel sales volumes from EOUK’s Stanlow, Northampton and Kingsbury terminals over the last weekend (September 25-26) were up 22% against a ‘normal’ weekend, pre-COVID.
On Friday, September 24, sales volumes from the three terminals were up 14% on a ‘normal’ Friday.
In April this year Essar entered into a ‘time-to-pay’ arrangement with HMRC for a total of £770m in VAT. It has already repaid HMRC £547m, leaving a balance of £223m, as part of the Government opt-in scheme.
All companies under the TTP scheme have been given until January 2022 to meet their commitments.
EOUK had agreed to an accelerated schedule to make this payment and was in discussions with HMRC to modify that schedule. It said it fully expected to meet all payments by the January deadline. However, this weekend it admitted it had requested a short extension to the original schedule.
Satish Vasooja, chief financial officer of EOUK, said: “I would like to thank HMRC for its support. With this time to pay arrangement, we now have significant runway to stabilise our balance sheet which has been adversely impacted by the pandemic.
“The improved environment around margins gives us the confidence to continue to serve as one of the UK key fuel suppliers with a 16% market share. We will also progress our future energy transition programme whilst also supporting a large proportion of the UK’s much needed fuel supply.”