Essar seeks further $300m to shore up finances

Oil giant Essar Oil UK, which operates the giant Stanlow refinery close to the Mersey, is looking to raise more cash after auditors warned about the company’s financial health. Tony McDonough reports

Stanlow
Essar Oil (UK) oil refinery at Stanlow near Ellesmere Port

 

Essar Oil UK (EOUK) is seeking a further $300m (£230m) in new financing after auditors warned about the financial health of the business.

EOUK has filed its financial results for the year to September 30, 2021. They showed a pre-tax loss for the 12-month period of $321m (£168m) against a loss of $221m  in the previous year. It reported improved revenues of $7.3bn (£5.6bn).

EOUK, which employs almost 800 people at its Stanlow refinery in Ellesmere Port, had suffered a torrid time during the COVID-19 pandemic. Multiple lockdowns sent demand for fuel plummeting. The company supplies 16% of the UK’s road fuels and also supplies aviation fuel to a number of airports including Liverpool and Manchester.

In January LBN reported the company had successfully secured more than £800m in new financing to shore up its balance sheet. However, the accounts stated it was looking to secure further funding.

It says it is currently in negotiations to secure an extra $300m via its subsidiary Stanlow terminals. However, because these discussions are not yet concluded, independent auditors PKF Littlejohn stated this uncertainty “may cast significant doubt on the company’s ability to continue as a going concern”.

EOUK is reporting a much better trading environment. Its report says it recorded its best quarterly sales for more than a year in the three months to December 31 as the UK’s recovery from the pandemic gathered pace. Trading is now at 95% of pre-pandemic levels.

However, the accounts were signed off before the Russian invasion of Ukraine so the accounts offer no insight into how that volatile situation will impact on the company in the coming weeks and months.

In the directors report, Deepak Maheshwari, EOUK chief executive, struck an upbeat note. He said: “With the successful rollout of vaccinations in the UK that started in November 2020, travel and other restrictions imposed earlier were relaxed in a phased manner from April 2021.

“This resulted in a phased rebound in economic activities across the sector with increasing demand for petroleum products and associated refining margins during the fourth quarter of the financial year with the trend continuing thereafter.”

In January, EOUK formed a new £1bn joint venture to build the largest hydrogen production hub in the UK. It will play a central role in the Hynet project which will supply low-carbon hydrogen to industries across the North West.

Ut has formed Vertex Hydrogen with Progressive Energy to build the UK’s largest hydrogen hub at Stanlow close to Ellesmere Port. The initiative is a core part of a wider strategy by Essar globally to focus on investing in energy transition.

And in February the company revealed that it is to install the UK’s first refinery-based furnace capable of running on 100% hydrogen in a £45m investment. It says the furnace will become operational in 2022. It will replace three existing furnaces at the site which will be decommissioned.

EOUK contributes to significant shipping activity on the Mersey and there are more than 700 vessels coming in and out of the Mersey every year. Supertankers berth at the Tranmere Oil Terminal next to the Cammell Laird shipyard and around 500 smaller vessels berth at Stanlow.

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