Russia’s UCP plans to keep Essar Oil stake for 3-5 years, Trafigura also likely to exit

MOSCOW: Russian private investment group United Capital Partners (UCP), which agreed to buy a stake in India’s Essar Oil, plans to keep a stake in the company for

Published on: Oct 19, 2016, 06:00:13 IST

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MOSCOW: Russian private investment group United Capital Partners (UCP), which agreed to buy a stake in India’s Essar Oil, plans to keep a stake in the company for the next 3-5 years, UCP representative Irina Lanina said.

UCP and its partner Trafigura signed an agreement on Saturday to buy a 49% stake in Essar Oil, which includes a 400,000 barrels per day refinery, import and export units, and gas stations.

In written replies to Reuters questions, Lanina said that UCP is sticking to long-term strategy regarding its stake in Essar Oil but “everything depends on the market situation and the asset’s valuation.”

“We plan to make this investment in a consortium with our partner Trafigura and are likely to exit together with them as well. As of now, we are looking at (remaining in Essar) for 3-5 years but time will show.”

Russian state oil company Rosneft will get a 49% stake in Essar Oil in the deal, which was structured to mitigate western sanctions and was valued at $12.9 billion. It gives the energy giant a gateway into the world’s fastest growing fuel market.

Lanina said that UCP plans to use its own funds and credit facilities to finance the acquisition of its stake but did not say how much it would cost.

Under the agreement, the 49% stake is equally split between Trafigura and UCP. The billionaire Ruia brothers own the remaining 2% stake.

Rosneft has close and longstanding ties with its other partners in the Essar deal.

UCP’s president Ilya Shcherbovich was a Rosneft board member in 2012 and 2013. Shcherbovich has said that UCP has acted as a consultant to Rosneft on investments, though without disclosing concrete deals or projects.

UCP is also a minority shareholder in Russian oil pipeline monopoly Transneft, and took the company to an arbitration court earlier this year over what it said was an insufficient dividend payout.

Rosneft also has a long association with Trafigura, which is its biggest long-term buyer of Urals crude oil.

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