Essar Oil (UK) Limited (“EOUK” or “the Company”) provides an update on its financing, VAT payments and Governance.
As has been previously reported, EOUK has been navigating an extremely challenging trading environment over the last 18 months, given the significant impact the pandemic has had on the UK’s refining industry. EOUK and its advisers have been working on its financing and trading plans, with significant progress made to date, supported by a more positive trading environment at the refinery, with the refinery moving into positive EBITDA in the last few months.
Further to the announcement on 25th May 2021 that it had closed new financial arrangements of over USD$850 million with funding made up of liquidity from a diversified range of sources, EOUK can now confirm additional funding has been secured, bringing total funding availability to USD$1.1 billion. EOUK needs to raise the last tranche of financings of USD$300 million, which forms part of its original financing plan. Discussions are on-going with all key stakeholders and the Company expects to close these financings by the end of the year.
Once these matters are concluded, this will give the business a stable balance sheet to meet all its requirements, enabling it to continue with its energy transition programme.
EOUK entered into a time-to-pay (“TTP”) arrangement with HMRC for a total of £770 million in April 2021. EOUK has already repaid HMRC £547 million leaving a balance of £223 million, as part of the Government opt-in scheme available to all corporates in the UK. All companies under the TTP have been given until January 2022 to meet their commitments. EOUK had agreed to an accelerated schedule to make this payment and is in discussions with HMRC to modify that schedule. EOUK fully expects to meet all payments by the January deadline.
In recent months, EOUK commissioned an independent review conducted by Ashursts. In line with the recommendations, the Board has:
(1) Adopted the Wates Principles;
(2) Appointed Tim Bullock (Chairman of Bonroy Petchem and a former senior BP executive) as an independent non-executive director, and stated its intention to appoint one more independent director in the coming months;
(3) Appointed the new CEO (as executive director) and Andrew Wright (as non-executive director) to the Board, such that three of the six Board members are now based in the UK; and
(4) Appointed a four member Advisory Council, to assist the Board on a range of strategic themes and generally be available to help guide and steer the business having regard to their extensive experience.
Prashant Ruia, Chairman of EOUK, commented:
“The pandemic has led to extremely challenging time for the refining industry in the UK in particular, as a collapse in demand for our end products placed considerable financial and management strain on the business. The overall environment remains difficult, but given the considerable steps we have taken, we are now in a stronger financial position, and importantly, we are seeing improved levels of demand as the market recovers. We remain cautious about the medium term outlook for the business. I am pleased with the progress we have made on our VAT repayments and would like to thank HMRC for their continued engagement.”