With this agreement, Essar will complete its anticipated asset monetisation programme and finish the $25 billion debt repayment plan, practically completely repaying the Indian banking system.
In one of the largest post-pandemic merger and acquisition agreements in India, Essar Group on Friday announced the signing of a USD 2.4 billion (Rs 19,000 crore) agreement to sell certain ports and power assets to ArcelorMittal Nippon Steel.
The transaction also includes a 50/50 joint venture between Essar and ArcelorMittal for the construction of a 4 million tonnes per year LNG import terminal at Hazira in Gujarat, according to a statement from the Ruia-run company.
It only mentioned a few ports and electrical infrastructure that are mostly dependent on the operations of the Hazira steel plant, which was purchased by ArcelorMittal Nippon Steel (AM/NS) in 2018–19, without providing any further information.
Separately, AM/NS India stated in a statement that the sale includes two Hazira power plants, an energy transmission line, and port assets in Gujarat, Andhra Pradesh, and Odisha.
Essar Steel was purchased by AM/NS India for around Rs 42,000 crore during bankruptcy proceedings in 2018–19, and the company asserted that this acquisition gave it the right to the port operations licence.
However, the Essar group’s Essar Bulk Terminal objected, claiming that the Hazira port was not involved in the bankruptcy process.
The issue was brought up in court and argued there.
Now, the two have come to an understanding about it.
According to AM/NS, the agreement covers a jetty with a 25 million tonnes per year capacity at the captive, deep draught, all-weather bulk port terminal in Hazira, Gujarat, which is close to the Hazira steel plant.
Additionally, it features an integrated conveyor that connects to AM/NS India’s 8 million tonne per year iron ore pellet factory in the port city, as well as a 16 million tonnes all-weather, deep draught terminal at Visakhapatnam, Andhra Pradesh.
The deal also includes a dedicated conveyor that only handles pellet exports from AM/NS India’s Paradip pellet facility and a 12-million-ton deep-water jetty in Paradip, Odisha.
A long-term power purchase agreement between the nearby steelmaking factory and the 270 MW multi-fuel power plant at Hazira is also included in the arrangement.
A 515 MW gas-based power plant and related property are also included in the deal.
And so, according to the company, is a 100-kilometer transmission line that runs from Gandhar to Hazira and links AM/NS India’s steelmaking facility with the main electrical grid.
It continued, “The transaction is anticipated to be funded exclusively by AM/NS India.”
According to Essar, the agreement reached with ArcelorMittal also calls for a 50/50 joint venture partnership to construct a 4 million tonne per year LNG import facility at Hazira, Gujarat.
Shell already runs a 5 million tonne per year LNG import facility in Hazira.
The movement of raw materials and finished goods between AM/NS India’s manufacturing facilities in western, eastern, and southern India, as well as for exports, will be secured by full ownership of the strategically located port assets in Gujarat, Visakhapatnam, and Paradip, according to a statement from AM/NS.
The purchase of the transmission and power assets will guarantee Hazira’s cost-effective, long-term power supply and energy efficiency, it was said.
ArcelorMittal Nippon Steel India (AM/NS India) is a joint venture between the two top steel producers in the world, ArcelorMittal and Nippon Steel.
“With this deal, which yields a multifold return on our investments, Essar Ports & Terminals has unlocked value for all its stakeholders and will continue to focus on building new and contemporary core infrastructure assets in India and abroad,” said Rewant Ruia, Director of Essar Ports & Terminals Ltd.
Director of Essar Capital Prashant Ruia stated, “Essar is now repositioned for development and resurrection.
We have entered the next growth phase focused on assisting in the development of a sustainable energy future that will impact lives and livelihoods for a greener world after integrating our operations over the last four years.
With this agreement, Essar will complete its planned asset monetisation programme and finish the USD 25 billion (Rs 2 lakh crore) debt payback plan, practically completely repaying the Indian banking industry.
Essar’s total revenues would be USD 15 billion (about Rs 1.2 lakh core) and its AUM (Asset Under Management) will be USD 8 billion (roughly Rs 64,000 crore), which consists of a variety of assets located both domestically and abroad.
These energy-related assets consist of a 10 million tonnes per year refinery in the United Kingdom (UK), 15 trillion cubic feet of unconventional hydrocarbon deposits (including some producing fields) in India and Vietnam, and a 1,200 MW power plant in India.
An infrastructure sector asset with a 3 million cubic metre storage terminal in the UK and an Indian port with a 20 million tonne annual capacity are also included. A significant US iron ore mile and pellet plant is among the assets in the metals and mining sector. Assets in the technology and services sector include a global EPC company and an IT solutions provider with locations in more than 30 nations.
Essar is now ready to reinvest in new assets with the newest, more efficient, and ESG-compliant technologies to last for the next several decades, according to the statement. “By monetizing assets in a planned and strategic manner, that were built with earlier technologies over the last several years,” it said.
Essar claimed to have large plans for investments in its main industries, including energy, infrastructure, metals and mining, technology, and services, without providing any specifics.
“While ongoing operations will give operational stability, our renewed focus will be to transition existing assets to Green and invest in clean firms that are sector-transforming,” it stated. “Our investment themes will be decarbonization and digitisation.”
Prasanta Patnaik