Essar Energy Plc today reported a 49% jump in earnings for the first half of 2011 on the back of higher refinery margins, but the London-listed firm said it continued to battle delays related to regulatory approvals for its projects.
Essar Energy's H1 earnings before interest, tax, depreciation and amortisation (EBITDA) were up 49% to $477.9 million, while pre-tax profit was up 80% to $278.5 million, CEO Naresh Nayyar said in a conference call.
"The first half of 2011 has been a mixed period for the company. Operational performance has been good, with a solid performance at our Vadinar Refinery (in Gujarat) and high availability across our power plants.
"This, together with a significant uplift in refining margins, has delivered a strong financial performance, with profit-before-tax up 80% to $278.5 million," he said.
Essar said it was still awaiting forest clearance from the government for its Mahan, Chakla and Ashok Karkata coal blocks, which will provide fuel for its Mahan-I and Tori power stations.
"We continue to experience delays due to slow progress with certain regulatory approvals, particularly for our coal blocks in India and Indonesia," Nayyar said.
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"... Delays to regulatory approvals and delays to the access of fuel supplies are a cause for concern," a company statement said. "Not only do these delays impact the economic returns on projects, but they are acting to discourage investment in the sector from project sponsors, debt providers and equity investors."
Essar said four major projects are on course for completion in the coming months, which according to analysts' consensus, will add around $2 billion to Essar Energy's EBITDA, taking the total to $2.7 billion in FY'2013, compared to $718 million delivered in FY 2010.
Phase-I expansion of the Vadinar Refinery, Nayyar said, was on track for completion by the end of 2011. This would increase the capacity of the refinery to 375,000 barrels a day from 300,000 bpd now.
Together with Essar's recently acquired Stanlow Refinery's 296,000 barrels a day capacity and half share of Mombasa Refinery's 80,000 barrels, Essar Energy's capacity will be increased to 710,000 bpd, he said.
Further, the company is implementing a refinery optimisation project at Vadinar, which will increase its capacity to 405,000 bpd by September, 2012.
The three power projects -- the 1,200-MW Salaya I, 1,200-MW Mahan I and 510-MW Vadinar Phase 2 projects -- totalling 2,910 MW, would be completed by March, 2012.
"Together, these will almost triple Essar Energy's operational generation capacity to 4,510 MW by next March, against 1,600MW today," he said.