Essar to sell port infra to ArcelorMittal for Rs 19,000 cr

Essar group on Friday announced the signing of a USD 2.4 billion (Rs 19,000 crore) deal to sell certain ports and power infrastructure to ArcelorMittal Nippon Steel in one of the largest post-pandemic merger and acquisition deals in India.

In a statement, the Ruia-run firm said the deal also envisages a 50-50 joint venture between Essar and ArcelorMittal for building a 4 million tonnes a year LNG import terminal at Hazira in Gujarat.

Without giving details, it only identified certain ports and power infrastructure that are primarily captive to operations of the Hazira steel plant, which was acquired by ArcelorMittal Nippon Steel (AM/NS) in 2018-19, as part of the deal.

Separately, AM/NS India in a statement said the deal covers port assets in Gujarat, Andhra Pradesh and Odisha as well as two power plants at Hazira and an electricity transmission line.

AM/NS India had acquired Essar Steel for around Rs 42,000 crore in bankruptcy proceedings in 2018-19 and had claimed the acquisition had given it the right to the licence of port operations.

But Essar Bulk Terminal, part of the Essar group, opposed it saying the Hazira port was not a part of the bankruptcy process.

The matter went to the courts where it was being argued.

The two have now reached an agreement over it.

AM/NS said the deal covers a 25 million tonnes per annum capacity jetty at the all-weather, deep draft bulk port terminal at Hazira, Gujarat, captive and adjacent to the Hazira steel plant.

It also includes a 16 million tonnes all-weather, deep draft terminal at Visakhapatnam, Andhra Pradesh along with an integrated conveyor connected to AM/NS India's 8 million tonnes a year iron ore pellet plant in the port city.

A 12 million tonnes deep-water jetty at Paradip, Odisha along with a dedicated conveyor that handles 100 per cent of pellet shipments from AM/NS India's Paradip pellet plant is also part of the deal.

The deal also includes a 270 MW multi-fuel power plant at Hazira, which has a long-term power purchase agreement with the adjacent steelmaking facility. A 515 MW gas-based power plant, along with allied land, is also part of the transaction.

And so is a 100-kilometer Gandhar to Hazira transmission line, connecting AM/NS India's steelmaking complex with the central electricity grid, the firm said.

"The transaction is expected to be funded only by AM/NS India," it added.

Essar said the deal signed with ArcelorMittal also envisages a 50-50 joint venture partnership for building a 4 million tonnes a year liquefied natural gas (LNG) import terminal at Hazira, Gujarat.

Hazira already has a 5 million tonnes a year LNG import facility operated by Shell.

"Full ownership of the strategically located port assets in Gujarat, Visakhapatnam and Paradip will ensure seamless connectivity and supply chain security for movement of raw materials and finished goods between AM/NS India's manufacturing facilities in western, eastern and southern India, as well as for exports," the AM/NS statement said.

Acquisition of the power and transmission assets will ensure cost-effective, long-term power supply and energy efficiency at Hazira, it added.

ArcelorMittal Nippon Steel India (AM/NS India) is a joint venture between ArcelorMittal and Nippon Steel, two of the world's leading steelmakers.

Rewant Ruia, Director, Essar Ports & Terminals Ltd, said "With this deal, which yields a multifold return on our investments, Essar Ports & Terminals has unlocked value for all its stakeholders and will continue to focus on building new and modern core infrastructure assets in India and overseas."

Prashant Ruia, director, Essar Capital, said, "Essar is now repositioned for growth and resurgence. After consolidating our businesses over the last 4 years, we have now entered the next growth phase focused on helping build a sustainable energy future that will impact lives and livelihoods for a greener world."

With this deal, Essar will conclude its planned asset monetisation programme and complete the debt repayment plan of $25 billion (Rs 2 lakh crore) with the Indian banking sector being almost fully repaid.

Essar's aggregate revenues will stand at $15 billion (around Rs 1.2 lakh core) and an AUM (Asset Under Management) of $8 billion (Rs 64,000 crore) comprising various assets spread across India and overseas.

These assets in the energy sector include a 10 million tonnes a year refinery in the United Kingdom (UK), 15 trillion cubic feet reserves (including some producing fields) of unconventional hydrocarbons in India and Vietnam and a 1,200 MW power plant in India.

Also, infra sector assets include a storage terminal in the UK of 3 million cubic metres capacity and a 20 million tonnes a year port in India.

Metals and mining sector assets include a major iron ore mile and pellet project in the US. Technology and services sector assets include global EPC business and IT solutions provider with centres across 30+ countries.

"By monetizing assets in a planned and strategic manner, that were built with earlier technologies over the last several years, Essar is now poised to reinvest in new assets with the latest, more efficient and ESG-compliant technologies to last the next several decades," the statement said.

Essar has planned significant investments in its core sectors of energy, infrastructure, metals and mining and technology and services, it said, without giving details.

"While ongoing businesses will provide operational stability, our renewed focus will be to transition existing assets to Green and invest in sector-transforming clean businesses around the investment themes of decarbonisation and digitisation," it added.