Essar group to sign $1 bn deal with China

In the first-of-its-kind arrangement, Essar Energy Plc, controlled by billionaire brothers Shashi and Ravi Ruia, and its refining subsidiary — Essar Oil — will on Tuesday enter into a memorandum of understanding (MoU) with China Development Bank (CDB) and PetroChina.

In the first-of-its-kind arrangement, Essar Energy Plc, controlled by billionaire brothers Shashi and Ravi Ruia, and its refining subsidiary — Essar Oil — will on Tuesday enter into a memorandum of understanding (MoU) with China Development Bank (CDB) and PetroChina.

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The deal would allow Essar Energy access to raise over $1 billion of funds as external commercial borrowings (ECBs). The group would enter into a long term product offtake agreement with PetroChina that is linked to this loan amount.

The deal would mean Essar getting an advance for the petroleum products that it would export to the Chinese market via PetroChina. As Chinese financing will support exports from India, this makes it the first of its kind of deal.

“As part of our initiative to dollarize our debt, we have been in discussion with several international banks... Chinese banks and CDB are part of that conversation,” an Essar spokesperson said.