Essar Energy's half-yearly profit falls 28%

BS Reporters / London/Mumbai August 20, 2010 Lower gains on the value of its fuel inventories and weaker refining profits led London Stock Exchange-listed Essar Energy Plc to post a 28 per cent drop in its half-yearly profits. Essar, which raised $1.85 billion through its LSE listing this May, said the profit fell to Rs 519.7 crore from Rs 722.2 crore during the first half of 2009-10. “Inventory gains led to lower profits. However, revenues were up for the six-month period due to increase in volume and higher prices in the refinery business,” CEO Naresh Nayyar told reporters in London. The company reported an increase of 65.8 per cent in its revenues, at Rs 476.4 crore against Rs 287.2 crore during the first half of 2010-11. In the next four years, Essar plans to increase its power generation capacity to 11,500 Mw from the present 1,220 Mw. Vice chairman Prashant Ruia said with an exception of one power project, Mahan 1, all its oil and power projects were on track in terms of time and cost. Mahan 1, is facing minor delays in the transmission lines, but it will be sorted without any financial damage he said. Within a four-year time frame, the company is implementing 16 power and oil projects in the country, with a total capital outlay of around $10 billion, with an estimated $8 billion going into power sector and the balance $2 billion in fresh oil refining capacities. Of the projects, seven are new ones and the others are expansion of existing capacities in both sectors. Expanded capacities will stand at 11,470 Mw of power by 2014 and 18 million tonnes of refining capacity by 2012, against 1220 Mw of power and 14 mt of refining capacity today. Ruia said that though no definite plans exist for ‘green energy’, the company hopes to get into the sector by setting up wind energy farms, as well as setting up hydel projects in the country. It will also continue to scout for coal, oil and gas assets within and outside the country. “Talks with Royal Dutch Shell Plc to buy refineries in Europe are ongoing,” Ruia said. Essar has been in talks with Royal Dutch Shell to buy three refineries, two in Germany and one in the UK, for almost a year. The company will also look for retail oil assets (network of gas stations) outside India, he said. “By next year, we will start exporting oil,” he said. By the end of this financial year, the company hopes to have 1,700 retail outlets and 3,000 by end-March 2012. The company said that P Sampath, will be joining the company as its new chief financial officer, replacing Gerry Bacon from September this year. Bacon had joined Essar Energy in January this year and said he was leaving the company to pursue academic interests.