Ravi Ruia and his nephew Prashant are leading the turnaround,
The Essar Group, which shed its steel and refinery assets as part of a deleveraging effort after group companies were referred to bankruptcy courts, is now charting a turnaround plan focussed around the clean energy business, two people familiar with the plans said.
Ravi Ruia and his nephew Prashant are leading the Essar Group’s clean energy ventures following the successful resolution of the group’s crushing $25 billion debt, the people said on condition of anonymity. In a 2 May letter to banks, the Ruias said the group is now transforming itself into a “new-age global business” with “future-centric assets”.
The group, with revenues of $15 billion and assets of $8 billion, is planning to “reinvest in new-age assets”, the Ruias said in the letter to the lenders, a copy of which has been reviewed by Mint.
“Having repaid about Rs 2 trillion ($25 billion) to all Indian banks and financial institutions, the Essar Group is now effectively becoming debt free,” Essar’s letter said, adding that the group has drawn a plan to invest in its core sectors of energy, infrastructure, logistics, metals, mining, technology, and retail.
Essar Group is also seeking to attract private equity and sovereign wealth funds specializing in ESG (environmental, social, and governance)-friendly businesses to support its investments in green energy assets, the people cited above said.
“While ongoing businesses will provide stable cash flows, our renewed focus will be to re-build assets, with strategic international partners, that are prudently financed,” the group said in its letter.
An Essar Group spokesperson declined to comment on the matter.
The new investments being planned by the Essar group include building the UK’s first 1GW blue hydrogen project, production of green hydrogen and green ammonia in Salaya (Gujarat), and a 14 mtpa (million tonnes per annum) iron-ore pellet plant in Odisha, the Essar group letter said.
Besides, the group is also building a 4 mtpa green steel plant at Ras-Al-Khair in Saudi Arabia (a first-of-its-kind in West Asia) and expanding its Salaya port for handling green and clean cargo as a part of the new strategy.
Additionally, Essar Group is planning fresh investments to ramp up its liquified natural gas (LNG) value chain, which includes augmenting LNG truck manufacturing and LNG fuel station facilities, according to the letter.
Essar Group said it will be “tactically monetizing some of the old carbon footprint heavy assets at full value”.
And while doing so, the group will retain assets that can be transitioned into ones in sync with the ESG theme. “These new next-generation technologies will be relevant for the next 30 years with lower carbon footprint and better efficiency, replacing the assets that we have monetized,” said the group.
The assets the group has monetized over the years have yielded a “multi-fold return on investment”, which underscores the conglomerate’s ability to build assets of global quality, the Ruias claimed in the letter.
“Investors and banks will be treading with caution,” said the head of research at a large broking firm. He, however, added that for Essar Group, getting a financier may not be too tough, especially with dozens of global ESG funds scouring investment opportunities with trillions of dollars in assets.
In the energy space, Essar group currently owns a 10 mtpa oil refinery in the UK, 12 trillion cubic foot hydrocarbon reserve in India and Vietnam, and a 1,200MW power plant in India.
In metals and mining, the group is working on a major iron ore mine and pellet project in the US and a high-grade thermal coal mine with 72 mt of reserves in Indonesia. In infrastructure, Essar Group has a 3 million cubic metre liquid storage terminal and a 20 mtpa capacity port in India.
Essar Group was an early entrant in the green energy space, which is now drawing massive investments from large domestic conglomerates, including the Tata group, Reliance Industries Ltd, and the Adani Group.
After entering the business in 2018, Essar Oil and Gas Exploration and Production Ltd (EOGEPL) now owns India’s highest-producing coal bed methane (CBM) block in Raniganj, West Bengal. Globally, CBM has emerged as a critical input for synthetic and natural green energy production.
EOGEPL has so far invested Rs 5,000 crore in exploration for commercial development of the Raniganj CBM Block, and the company plans to invest an additional Rs 2,000 crore in enhancing its reserve base and ramping up CBM production to contribute at least 5% to India’s total gas production.
This ESG trend underpins Essar’s new strategy, which was drawn up after the sale of a chunk of its power and port assets in 2022.
In August 2022, Essar Group agreed to sell some of its ports and power and transmission assets to ArcelorMittal Nippon Steel India for about $2.4 billion. The two parties also agreed to form an equal joint venture to build a 4 mtpa LNG terminal at Hazira in Gujarat.
Earlier, in November 2019, ArcelorMittal won approval from the Supreme Court to take over Essar Steel and pay the creditors. ArcelorMittal’s bid of Rs 42,000 crore was considered to be better than Essar’s bid of Rs 54,000 crore.
Source: The Mint
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