After some initial hiccups in its talks with Shell union at Stanlow refinery in the UK, Essar Energy has made some progress after agreeing to maintain status quo on the pension policy it will inherit from Royal Dutch Shell Plc.
In the second round of consultation meetings with Unite, the union, held on March 14, Essar Energy agreed to provide for the replication of the Shell pension benefits in the Essar pension plan, so that the existing staff can retain the current benefits, a statement from the union said.
Essar has also agreed that the terms and conditions package offered to employees, including employee benefits, will remain unchanged for a minimum period of two years.
However, union representatives have requested that Shell/Essar continue to provide a final salary pension scheme for all employees, including new starters. The union and Essar have also found consensus in the composition of the pension trustee board, that would now be equally represented by the union and the company. One of the trustees would be independent, though the union wanted the chair of the trustee board to be an independent member.
The union had further requested that the pension provision at Shell Stanlow remain as is, without the introduction of a defined contribution scheme. Essar agreed in response to remove the defined contribution proposal as an option for existing employees, but that it would be retained for new starters.
Pension was a key point in the consultation with the unions for Essar to smoothly conclude its plans to take over the Stanlow refinery from Shell. This leaves two other issues that are expected to be discussed in the next rounds of meeting — a share-save scheme that Stanlow workers enjoyed with Shell and a group appraisal policy, which Essar wishes to change to individual annual evaluation.
On February 18, Essar and Shell had signed an exclusivity agreement for the former to buy Shell’s Stanlow refinery near Ellesmere Port, Cheshire, for $350 million. The union consultation process before the deal could be closed is a mandatory process stipulated by the UK laws. However, the union’s agreement to the deal is not a pre-condition for successful completion of the acquisition.
An Essar Energy spokesperson in London said the company did not wish to comment at every stage of development in the consultation process. He, however, said the progress of talks with the unions have been satisfactory and the company expects the deal to be finalised in the stipulated time.
The current agreement between Shell and Essar is valid till end of this month. If by March 31 Essar Energy decides not to proceed with the acquisition, it has agreed to pay Shell a break fee of $50 million. Similarly, Shell has agreed to pay Essar Energy a break fee of $10 million if it chooses not to go ahead with the sale.
With the completion of the acquisition, Essar will also take on board 960 workers at Shell’s Stanlow refinery.
Under the terms of the agreement, payment for the Stanlow Refinery will be made in two stages, with $175 million payable on completion of the acquisition and a deferred payment of $175 million plus interest payable on the date of the first anniversary of the completion of the acquisition. Payments from Essar Energy to Shell for the acquisition will be funded from existing cash resources and possibly also from a new debt facility.
