Ruias Barred From Refining, Fuel Retail Biz

Ruias Barred From Refining, Fuel Retail Biz

Ruias will never be able to re-enter the oil refining and retailing sector in the country as they have signed a non-compete pact with buyers of Essar Oil, Rosneft and its partners.

“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, told a separate presser after the announcement of the conclusion of deal.

The deal involves a non-compete clause in the agreement that will bar the Ruias from entering any part of the oil refining and retailing in the country, EOLs 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.

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Fountain today said Ruias will continue to hold 1 per cent stake in Essar Oil after the deal, through a 2 per cent holding in the consortia of Trafigura and UCP.

“I do not 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.

The company said it feels the Essar brand is “very strong” and will be retaining the same at the petrol pumps. It will also be continuing with an ongoing plan to ramp up the number of fuel stations to 6,000 from the present 3,500 in the “near term”.

Fountain said the new board has asked the management to come up with an asset development plan which may include strategies on inorganic growth and also verticals to be entered into like engineering, procurement and construction.

When asked about state-run LIC continuing to have a representation on the board (its executive director R Sudarsan is on the board), Fountain said once LIC is paid their dues, the board representation will be cancelled.

On the fate of the minority shareholders, who will continue to hold over 1.7 per cent of the company, he said a plan will be drawn in to understand what to do with this lot.

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