Essar Oil Ltd (EOL), which is setting up a 10.5 million tonne refinery in Gujarat with an investment of Rs 7,500 crore, has achieved financial closure after the financial institutions led by ICICI agreed to fund the gap of Rs 1,184 crore.
While ICICI has sanctioned around Rs 600 crore to the project and IDBI around Rs 300 crore, the remaining is being sanctioned by IFCI, Unit Trust of India, General Insu-rance Corporation and Life Insu-rance Corpor-ation.
The project attained financial closure after ABB had given an in-principle project completion guarantee, including a performance guarantee.
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As part of the financial closure, ICICI had agreed to provide a Letter of Credit for ABB Lumens, an engineering, procurement and construction contractor.
The project had been delayed for quite some time after the promoters have approached the financial institutions for funding up to Rs 1,184 crore for completing the project.
ABB had even threatened to stop construction at the site if ICICI failed to open a letter of credit guaranteeing Essar Oil's future payments. It had also asked the promoters of the project to enter into a tripartite agreement with ICICI for the completion of the project.
Confirming the financial closure, institutional sources said, "We did not want our Rs 3,000 crore investment to go waste." EOL had already invested around Rs 5,000 crore into the project of which Rs 3,000 crore was funded by the financial institutions. The project has attained around 70 per cent completion. The project is now expected completion by the third quarter of 2001. Out of the total Rs 2,500 crore required to complete the project, while Rs 1,184 was to be debt funded with the remaining be bought in as equity.
Of the equity part, while the promoters had agreed to bring in Rs 400 crore by way of bank loans, Rs 395 crore has been funded by Asea Brown Boveri, EPC contractors to the project. ABB has pumped in Rs 395 crore as bridge equity and remaining Rs 185 crore as deferred credit.
It has also been agreed between the institutions and promoters that the latter's additional equity of Rs 400 crore will be picked up later by a strategic partner. The company has been in negotiations with the state-owned Bharat Petroleum Corporation Ltd (BPCL) and Oman Oil refinery.