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8/3/2019 Essar Purchases Stanloiw
1/22
Essar EnergyExclusivity Agreement and offer for Stanlow refinery
8/3/2019 Essar Purchases Stanloiw
2/22
Disclaimer
This Document does not constitute or form part of and should not be construed as, any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribefor, any securities, nor shall it (or any part of it), or the fact of its distribution, form the basis of, or be relied on in connection with or act as any inducement to enter into, anycontract, commitment or investment decision whatsoever.This Document and any information made available orally or in writing at any presentation or delivery of this Document is confidential and should not be distributed, published,copied or reproduced (in whole or in part) or disclosed by its recipients to any other person for any purpose, at any time or in any form other than with the prior written consentof the Company. By accepting receipt of this Document, you undertake not to forward this Document to any other person, or to reproduce, copy or publish this Document, inwhole or in part, for any purpose.The information contained in this Document has not been verified by the Company, its advisers or any other person and may be updated, completed, revised and amended inany way without liability or notice to any person. No reliance may be placed by any person for any purpose whatsoever on the information or opinions contained or expressedin this Document or on the completeness, accuracy or fairness of such information and opinions.No undertaking, representation or warranty or other assurance, express or implied, is made or given as to the accuracy, completeness, sufficiency or fairness of the informationor opinions contained or expressed in this Document or any information made available orally or in writing at any presentation or delivery of this Document and, to the extentpermitted by law and regulation, no responsibil ity or liability, howsoever arising, directly or indirectly, is accepted by any person for any loss, cost or damage suffered orincurred as a result of the reliance on such information or opinions or otherwise arising in connection with this Document. In addition, no duty of care or otherwise is owed byany person to recipients of this Document or any other person in relation to this Document or any information made available orally or in writing at any presentation or deliveryof this Document. Recipients of this Document should conduct their own investigation, evaluation and analysis of the business, data and property described in this Document.The information and opinions contained in this Document, unless otherwise specified, are provided as at the date of this Document. Distribution of this Document does notconstitute a representation, express or implied, by the Company, the Group, or their respective advisers, affiliates, officials, directors, employees or representatives that the
information contained in this Document will be updated at any time after the date of this Document. The information contained herein or any information made available orallyor in writing at any presentation or delivery of this Document is subject to change without notice and past performance is not indicative of future results. The Company mayalter, modify or otherwise change in any manner the content of this Document, without obligation to notify any person of such revision or changes. The information contained inthis Document has not been independently verified.Certain statements, beliefs and opinions contained in this Document or any information made available orally or in writing at any presentation or delivery of this Document areor may be forward-looking statements. Forward-looking statements can be identif ied by the use of forward-looking terminology, including, without limitation, the termsbelieves, estimates, anticipates, expects, intends, plans, goal, target, aim, may, will, would, could or should or, in each case, their negat ive or othervariations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risksand uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Groups ability to control orpredict. Forward-looking statements are not guarantees of future performance and are subject to a number of risks and uncertainties. No representation is made that any ofthesestatements or forecasts will come to pass or that any forecast result will be achieved.Neither the Company, nor any member of the Group, or any of their respective affiliates or directors, officers, employees, advisers or representatives, provides any warranty,representation, assurance or guarantee, express or implied, that the occurrence of the events expressed or implied in any forward-looking statements in this Document or any
information made available orally or in writing at any presentation or delivery of this Document will actually occur. You are cautioned not to place any reliance on these forward-looking statements. None of the Company or any member of its Group is under any obligation and expressly disclaims any intention or obligation to update or revise anyforward-looking statements, whether as a result of new information, future events or otherwise.Certain information included in this Document and/or information made available orally or in writing at any presentation or delivery of this Document relates to reserves,resources, capacity and other technical measurements. Such information is sourced from technical expert reports where possible or Group data. Such information is basedon engineering, economic, geological and other technical data assembled and analysed by the Group's staff, including engineers and geologists, and that data in certain casesis reviewed by third parties. There are numerous uncertainties inherent in estimating quantities and qualities in respect of such information, including many factors beyond theGroups control. No assurance can be given that the indicated amount of reserves or resources will be recovered or that the Group's assets can continuously operate at thecapacities indicated.By accepting or accessing this Document or attending any presentation or delivery of this Document you agree to be bound by the foregoing limitations and conditions and, inparticular, will be taken to have represented, warranted and undertaken that you have read and agree to comply with the contents of this notice.
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8/3/2019 Essar Purchases Stanloiw
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Summary
8/3/2019 Essar Purchases Stanloiw
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Summary
Essar Energy signs exclusivity agreement with Shell
Offers to buy Stanlow refinery for US$350m in cash
High complexity, large scale refinery positioned to thrive in UKmarket
Provides optionality for export of high quality products to the UKfrom Vadinar refinery in India
Competitive acquisition price
Enhances Essar Energys competitive position: focused on quality andgrowth
4
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Key Transaction Details
Essar Energy signs exclusivity agreement for Shells Stanlow refinery and associated assets
Essar Energy to sign asset purchase agreement by 31 March 2011 or pay break fee of
US$50 million
Shell has 3 further business days to sign asset purchase agreement or pay break fee ofUS$10 million
Consideration US$350m cash, with staged payments of US$175m on closure and US$175mplus interest at end of first year, following closure
Shell to supply crude oil to the refinery for five years
Stanlow Refinery to sell approximately 50%-60% of refined products to Shell for up to 10years, depending on product
Separate payment for crude and refined products/inventory at time of closure (circa US$780million)
Consideration from internal cash resources and potentially a new debt facilityInventory to be funded predominantly through a working capital facility to be put in place byEssar Oil UK, prior to completion.
Expected to be earnings enhancing within the first year
Transaction expected to close in the second half of 2011
5
Nothing in this announcement is or is intended to be a profit estimate for any period or a forecast of future profits and any statements relating to earningsaccretion should not be interpreted to mean that Essar Energys earnings per share for the current or future financial periods will necessarily match orexceed its historical published earnings per share
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UK Refinery Landscape: Stanlow is a Quality Asset
Stanlow is the 2nd largest UK refinery by capacity and with Nelson Complexity
of 8.2
UK total refining capacity of circa 90mmtpa, of which more than half currentlyfor sale, sold or closed
Opportunity for Essar Energy to purchase a high quality asset
6
Refinery OperatorNameplateCapacity(MMTPA)
Connectivity
Fawley Exxonmobil 16 Pipeline, Water, Rail, Road
Stanlow Shell 14 Water, Pipeline, Road, Rail
Humber Conocophillips 11 Water, Pipeline, Road, Rail
Pembroke Chevron 10 Water, Road, Rail
Grangemouth Ineos 10 Pipeline, Road, Rail
Coryton Petroplus 11 Water, Pipeline, Road, Rail
Lindsey Total 11 Water, Pipeline, Road, Rail
Milford Haven Murco 6 Water, Pipeline, Road, Rail
Teeside Petroplus 5.8 Water, Pipeline, Road, Rail
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0
2
4
6
8
10
12
14
(10,000) 40,000 90,000 140,000 190,000 240,000 290,000 340,000 390,000 440,000
NC
F
Capacity (bbl/day)
Stanlow: In Top Tier of EU Refineries by Capacity and Complexity
Refinery capacity vs. Nelson Complexity Factor (Western Europe)
Source: OGJ 2009
Stanlow
Suitable high volume product mix
The talent of its employees and current managers
Technical efficiency of the plant equipment
Compliant with safety standards
Proximity to high value product markets
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8439
8140
33763307
1987
1182
861
678
417
322
364
144
0
200
400
600
800
1000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Vlissingen from Totalto Lukoil, 2009:
190,000 b/d
Coryton to Petroplusfrom BP 2007:172,000 b/d
Ruhr Oel to Rosneftfrom PDVSA, 2010:
500,000 b/d
Milford Haven toMurphy Oil from Total,
2007: 108,000 b/d
Petit Couronne andReichstett to Petroplusfrom Shell, 2007: total
239,000 b/d
Stanlow to Essar fromShell, 2011: 296,000
b/d
US$ per barrel complexity adjusted capacity (excluding inventory) (RHS)
Stanlow mostcompetitively
priced of recent
transactions
Competitive Acquisition Price vs. Comparator EU deals
8
US$ per barrel daily throughput capacity (excluding inventory) (LHS)
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Leading Market Position in National Supply Envelope
9
Teesside - closed
Humber
Lindsey
Coryton
Stanlow
Liverpool
Mcr. Airport
Newcastle upon Tyne
NWNE
CC
South
WestSE-WL
SE-Thames
Kingsbury
Manchester
HeathrowAvonmouth
Buncefield
Fawley
Pembroke
Milford Haven
Main Line
Government Pipeline
Finaline
UKOP North
UKOP South
ESSO Midline
Manchester Jetline
The UK Energy Corridor
KEY
The North West and Central Corridor
100-250 kbpd
>250 kbpd
REFINING CAPACITY Advantaged location
Positioned to serve the UKEnergy Corridor
Natural supply envelope
North West and Midlands
Leading supply position
Supported by integration intoextensive pipeline logistics andgood road links
Birmingham
UK Refining Overview
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Refinery Overview
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Stanlow Refinery Overview
Located on south side of the Mersey estuary near Ellesmere
Port Nameplate capacity 296,000b/d
Currently operating at around 220,000b/d
Nelson Complexity 8.2
Accounts for circa one sixth of UK petrol other mainproducts diesel and kerosene for aircraft fuel
Crude oil received at Tranmere oil terminal on the Merseyand transferred by pipeline to Stanlow
Stanlows finished products are distributed as follows:
20-25% by pipeline via the northern end of the United KingdomOil Pipeline (UKOP) running to Shell Haven on the Thames
Circa 55% by road from the loading terminal at Stanlow
Circa 20% by ship, via the Manchester Ship Canal
650 hectare site11
Stanlow is the UKs
second largest refineryby capacity and has the
complexity to thrive in UKmarket
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Superior Assets
12
Complex site
with deep
conversion
Largest residue
cat crackerwithin the Shell
group
Integrated base
oil plant
Comprehensive
petrochemical
linkages
CD3
CD4
Platformer
HVI Lube OilUnit
AromaticsExtraction
GasolineBlender
Merox
Propylene
Splitter
Fuel Oil Blender
Alkylation
Ethyleneimport
Crude Ethyl Benzene
Shell HigherOlefins Process(SHOP)
Alcohols (SHF)
RefineryLubesChemicalsRetained by Shell
KEY
Fuel gas
LPG
Alpha OlefinsInternal Olefins
Alcohols
Gasoline
Toluene
Benzene
Ethylbenzene
Jet
Gasoil
Propylene
Fuel Oil
Base Oils
Bitumen
Cat Cracker
Gas Oil HDS Gas Oil Blender
PRODUCTS
Process Overview
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Site Configuration: Key Process Units
13
UNIT TECHNOLOGY BUILD YEARCAPACITY
(KT/D(KB/D)
T/A CYCLE(Years)
T/ADURATION
(Days)
Crude Distillation(x2)
CDU Shell 1965/1973 39 296 3.5/6 33/36
CCR Platformer PF3 UOP 1984 4.1 35 6 14
AromaticsExtraction
U53 UOP 1974 2.6 19 7 30
Ethyl Benzene Unit EBU Badger 1991 0.6 4.5 3 42
Alkylation Alky UOP 1989 1.3 12 3.5 45PP Splitter PPS Shell 1989 0.8 10.4 3.5 35
GasoilDesulphurisation
HDS Shell 1968 8.0 60 1.5 34
Residue CatalyticCracker
FCC Shell 1988 11 76 3.5 35
Luboil High VacuumUnit
HVU Shell 1969 3.2 21.6 5 34
DistillateHydrotreater
HDT2 Shell 2001 (1) 2.5 19.1 3.5 30
NaphthaHydrotreater
HDT3 Shell 1984 4.1 35 3.5 34
CD Hydro CD_H CD Tech 2004 3.4 23 3.5 35
HD Select HD-Sel CD Tech 2004 1.9 13 3.5 35
1 Revamp
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Yield Profile
14
TYPICAL YIELD High Nelson complexity of 8.2 enableshigh black to white oil conversion
Fuel oil production is significantlylower than industry norm
Since early 2009, gas-to-liquidimports has supported increased jetand diesel production
Speciality grades
Production of lubricants base oils,differentiated fuels and bitumen is adifferentiator to marker margins
Bitumen, although minimal to date,has been significantly expanded tocapture higher value product as wellas creating a sulphur sink formedium sulphur crudes
Chemical grades offer significantupgrading
Propylene sold via pipeline to anupgrading customer within the UK
Ethylbenzene is sold to Shells
Moerdijk Plant in the NetherlandsNote: Included within refinery fuel and loss is up to 0.8% of total yield that is
consumed in units to be retained by Shell
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Strong Personal Safety Performance
15
RECORDABLE INJURY FREQUENCY
Accountability for personal safety
at all levels in the organisation
Comprehensive HSE Management
Systems
Embedded culture of learning from
incidents and near misses
Strong Contractor safety culture
Joint ownership of the
responsibility for safety on site
Supporting processes developed
in line with Global Shell learning
Frequency per million man hours
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Financials
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Stanlow Financial Summary
17
US$000 FY 2008 FY 2009 H1 2010
Refinery Intake Volumes (000bbl) 73,351 72,883 29,121
Sales 9,688,747 5,365,232 2,520,843
Gross Margin 615,755 244,847 144,140
Operating Expenses (198,154) (184,120) (81,404)
EBITDA 417,601 60,727 62,736
Gross Refining Margin (US$/barrel) 8.4 3.4 4.9
IEA benchmark GRM (US$/barrel) 4.9 1.3 2.7
Headcount ~960 FTEs
During the first six months of 2010 some of the units at the Stanlow Refinery were not operational for 50 days due to a planned refinery turnaround outage.
The above results have been prepared to present the normalised and standalone operations of Stanlow. Historically, Stanlow did not exist as a separate legal entity and hencethe results of Stanlow were not available on a standalone basis. The above results have been prepared by extracting/ carving out financials from various entities afterconsidering various standalone and normalisation adjustments. These adjustments relate to transaction scoping and future structure of the business, accounting categorisationvs. that followed generally, transfer pricing arrangements proposed, changes to pension plan, planned and unplanned shutdowns, one off items, CSO income etc. Further,results as presented above are based on replacement cost basis (current cost of supply basis) and are on constant currency basis.
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Stanlow Funding Plan
Stanlow acquisition to be funded from internal sources andpotentially a new debt facility
Working capital will be funded predominantly through a newworking capital facility to be put in place by Essar Oil UK, prior tocompletion.
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Focus on Quality and Growth
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Refining Capability
20
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Vadinar and KenyaPetroleum current
throughput
Vadinar phase I bymid-2011
Stanlow by mid-2011 Vadinar optimisationby Sept 2012
Vadinar phase II - inthe future
Vadinar current Vadinar phase I Stanlow
Vadinar optimisation Vadinar phase II Kenya Petroleum
Barrels of crude daily throughput capacity
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Summary
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8/3/2019 Essar Purchases Stanloiw
22/22
Summary
Essar Energy signs exclusivity agreement with Shell
Offers to buy Stanlow refinery for US$350m in cash
High complexity, large scale refinery positioned to thrive in UKmarket
Provides optionality for export of high quality products to the UKfrom Vadinar refinery in India
Competitive acquisition price
Enhances Essar Energys competitive position: focused on quality andgrowth
22
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