However, the Ruias will continue to run their refinery in Britain wherein they has 9 million tonne facility at Stanlow.
Mumbai: Asserting that only commercial considerations were the sole driving factor behind the USD 12.9 billion acquisition of Essar Oil, Rosneft, the new owners of the country's second largest oil refinery, said they have a non-compete pact under which the Ruias will never be able to re-enter the oil refining and retailing sector in the country.
"The core of the deal the way it ended up is based on commercial valuation...they (new owners) are looking to make commercial returns, they want this to be commercially successful," Tony Fountain, the newly-appointed chairman of Essar Oil that was sold to the Moscow-controlled oil giant Rosneft told reporters at a separate presser which was held after the Essar Group announced the conclusion of the deal earlier in the day.
The USD 12.9 billion deal, the largest FDI inflow into the country as also the largest investment out of Russia, was announced first by Prime Minister Narendra Modi and Russian President Vladmir Putin during the annual BRICS Summit in Goa last October and got concluded on Monday.
The deal involves a non-compete clause in the agreement, as per which the Ruias will not be able to enter any part of the oil refining and retailing in the country, EOL's non-executive director Jonathan Kollek said.
However, the Ruias will continue to run their refinery in Britain wherein they has 9 million tonne facility at Stanlow and also their coal bed methane blocks in the country.
"They cannot build a refinery, they cannot build petrol stations. There is a non-compete, forever," he said, adding Rosneft will pay a royalty to Essar group for using the brand name of Essar Oil at the over 3500 petrol pumps, which are also part of the deal.
However, the new management, which includes appointees from the new owners --Russian oil major OAO Rosneft, and a consortium of Russian private equity fund UCP and Swiss commodity company Trafigura -- did not divulge the fees paid.
"That (fee) is part of the commercial terms. There is a payment as you would expect in normal course of business for having access to license and brand. That is part of the overall valuation," Fountain said.
Fountain on Monday said Ruias will continue to hold 1 per cent in Essar Oil even after the deal, through a 2 per cent holding in the consortia of Trafigura and UCP. "I don't want to speak about their intention of how long they intend to hold that, but we are certainly assuming that they will be with us with that investment," he said.
Fountain said the new owners' intention is to run the company with highest standards of corporate governance followed all over the world.
The company said it feels the Essar brand is "very strong" and will be retaining the same at the petrol pumps. It will also be continuing with an ongoing plan to ramp up the number of fuel stations to 6,000 from the present 3,500 in the "near term".
The company has part-paid a few loans and will take USD 5 billion of loans into its book, including USD 4 billion in term loans and working capital facilities of USD 1 billion.
When asked about the over USD 2.4 billion owed to Iranian companies for crude sourcing, Fountain said it is a part of the overall deal consideration of USD 12.9 billion but is not included in the USD 5 billion debt that it is taking.
The liability will be extinguished soon, he added. He said Essar Oil will honour every contract on products and crude side, replying to a question whether it will continue to source crude from Iran and Venezuela as per earlier agreements or go for Russian crude.
In 2015 Essar Oil had entered into an one-year contract with Rosneft to purchase crude form them. Russia has the largest crude reserves in the world and Rosneft is the largest publicly traded oil and gas company in the world in terms of production as well as reserves. Fountain, however, was quick to add that for new contracts, maximising the returns will be the only priority.
EOL on Monday announced the name of Trafigura's chief financial officer B Anand as the new chief executive, replacing Lalit Gupta who will continue to be associated with the company as a senior advisor.
Fountain said the new board has asked the management to come up with an asset development plan which may include strategies on inorganic growth and also verticals to be entered into like engineering, procurement and construction.
When asked about state-run LIC continuing to have a representation on the board (its executive director R Sudarsan is on the board), Fountain said once LIC is paid their dues, the board representation will be cancelled.
On the fate of the minority shareholders, who will continue to hold over 1.7 per cent of the company, he said aplan will be drawn in to understand what to do with this lot.