London-listed Essar Energy reported better-than-expected operating earnings for the fiscal 2013 on stronger margins and improved capacity in its refining business. The company reported a current price Ebitda of more than $1 billion,at $1.33 billion,against $484 million in the previous 15-month period to March 2012. This result exceeded a company-provided analysts’ estimate of $1.16 billion. Essar Energy this year moved its year-end to March from December,making the previous comparative period a 15-month one.
Analysts focus on current price Ebitda as it gives the best indication of how the underlying business is performing,stripping out timing differences,particularly relating to crude oil inventory gains and losses as a result of volatile global oil prices. Essar Energy reported an after-tax loss of $175 million compared with a loss of $764 million in the previous 15-month period as total interest costs nearly doubled to $878 million. The company’s net cash,cash equivalents and bank deposits also fell to $177 million at the end of March from $437 million a year earlier as it paid out more on interest.
With net debt of around $6.7 billion at the end of March,Naresh Nayyar-controlled Essar Energy has been looking to replace its rupee debt with cheaper dollar debt. The company has outlined plans to replace at least $2.27 billion of Essar Oils (Vadinar refinerys) rupee debt with dollars. Essar Energy,which has completed a $481-million tranche as part of this scheme,expects to refinance at least another $2 billion of debt. The dollarisation drive is expected to save around $6 million on every $100 million of debt refinanced.
Essar Oil has faced rising debt and interest costs after being hit by a R6,000-crore sales tax notice from the Gujarat government for its Vadinar refinery. It lost a case in the Supreme court last year seeking to avoid paying the tax bill for the Gujarat refinery. The company now has a remaining balance on the back-tax claim of $712 million and has tied up a facility to cover it as it aims to shore up its financial footing.
Essar Energy is also looking to raise $900 million in cheaper rupee bonds for its domestic power business. It has already raised the first tranche of R629 crore ($114 million) of this amout. Essar Energy’s power business has a gross debt of around $3 billion. The company,which also owns a 50% stake in Kenya Petroleum Refinery,and 2,034 mmboe of reserves and resources at its exploration and production blocks,has reduced capex to $1.19 billion.