Essar Energy will exit Kenya Petroleum Refineries (KPRL)

Essar Energy, an Indian energy company, intends to exit from its 50% owned joint venture business Kenya Petroleum Refineries Ltd (KPRL), which operates the oil refinery in Mombasa, in Kenya. Essar Energy, through its subsidiary Essar Energy Overseas Limited, has exercised a put option under the shareholders’ agreement to sell its stake in KPRL to the Government of Kenya, which owns the remaining 50% interest in the Mombasa refinery. This decision by Essar Energy follows an extensive series of studies by international consultants into the technical, economic and funding elements of an upgrade of the Mombasa refinery. Following these studies, Essar Energy believes that the upgrade is not economically viable in the current refining environment.

Essar Energy acquired its 50% stake in KPRL in July 2009 for a total consideration of US$7m from BP, Chevron and Royal Dutch Shell. Under the terms of the shareholders’ agreement established with the Government of Kenya at the time of the acquisition, Essar Energy has the right, under certain conditions, to exercise a put option under which the Government of Kenya would buy Essar Energy’s 50% share of KPRL for US$5m.