OREANDA-NEWS. August 16, 2011. Essar Oil Ltd (EOL) has said it would raise up to USD 1.5 billion (Rs 6,800 crore) in foreign currency loans to fund expansion. It may raise the funds through either of the instruments or a mix of these, including equity shares, convertible debentures, global depository shares or American depository shares or foreign currency convertible bonds by way of public and/or private offering in domestic or international market(s) and/or qualified institutional placement.

 “The company’s board has given an ‘in-principle’ approval to explore possibilities of raising foreign currency loans to the extent of USD 1.5 billion, instead of rupee loans, for its ongoing projects,” said chairman Shashi Ruia at the company’s 21st annual general meeting at Jamnagar in Gujarat yesterday.

“The board has also deliberated the status of Essar Oil’s exit from Corporate Debt Restructuring and has decided to expedite the process to enable the exit before March 31, 2012,” he said.

EOL is expanding its Vadinar refinery in Jamnagar. The Phase-I expansion, which will take the facility’s capacity to 18 million tonnes per annum (mtpa) from 10.5 mtpa, is expected to be completed by September. Ruia said EOL had completed 92 per cent work of the Phase-I expansion by June 30.

The optimisation project, which will enhance the capacity to 20 mtpa, was 56 per cent complete by June 30. “We are confident the project will be completed by September 2012,” Ruia said.

The completion of Phase-I refinery expansion will enhance the complexity of the facility from 6.1 to 11.8. The increased complexity means the refinery can increase the proportion of heavy and ultra-heavy crude it processes, and produce a higher proportion of middle and light distillates. EOL also intends to use the funds for other businesses, including coal bed methane (CBM) and exploration and production.

On the exploration and production front, it has started test production at its Raniganj CBM block. As on June 30, the production was recorded at 33,000 standard cubic metres per day (scmd), which is being sold through truck mounted cascades. The block is awaiting approvals to start commercial sales.

Ruia said revenue and profitability would rise significantly this year after the increase in the company’s refining capacity. EOL posted a net profit of Rs 469 crore for the first quarter ended June 30, compared to a loss of Rs 70 crore in the same quarter a year ago. Gross revenue jumped 37 per cent to Rs 16,478 crore.

The board of directors approved the introduction of Essar Oil Ltd Employees Stock Option Scheme 2011 in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

The board also enhanced the power of the company to create security on assets of the company for securing borrowings from Rs 30,000 crore to Rs 40,000 crore. The board also enhanced the borrowing powers of the company from Rs 30,000 crore to Rs 40,000 crore, over and above the paid-up capital of the company and its free reserves.