Essar Oil to raise Rs4,600 crore to expand Vadinar refinery

Energy company Essar Oil, part of the Ruis-promoted Essar Group, is raising Rs4,600 crore ($920 million) to fund the expansion of its 10.5 mtpa refinery at Vadinar in Gujarat to16 mtpa.

The company said that it has received approval for the 10-year loan at a prime lending rate of 11.75 per cent from State Bank of India, ICICI Bank and IDBI Bank and would be signing the loan agreements some time next month, to fund the first phase of its refinery expansion plan, which will be completed by December 2010.

In May 2008, the Ruias-promoted company had said that it would raise debt of up to $5 billion to finance its $6 billion refinery expansion programme at Vadinar and for acquisition of oil and gas blocks. (See: Essar Oil to raise $5 billion for expansion, acquisitions)

The first phase expansion currently underway will cost the company around Rs7,810 crore ($1.6 billion), of which, Rs4,600 crore will be financed through debt, while the rest through promoters contribution of Rs1,200 crore, internal accruals and equity.

However, the current expansion will also raise the company's debt from the current Rs9,200 crore to Rs13,800 crore.

In the second phase, Essar Oil will increase capacity to 34 MTPA at an additional cost of $4.44 billion, which may be partly financed through a $700 million foreign loan.