Dutch commodities trader Trafigura is investing $130 million (Rs 650 crore) to acquire 24 per cent stake in Hyderabad-based Nagarjuna Oil Corporation Ltd, valuing the company at $542 million. The refinery is being constructed at Cuddalore in Tamil Nadu.
In addition to acquiring an equity stake in the firm, Trafigura will invest another $120 million (Rs 600 crore) for the construction of extensive storage facilities and associated infrastructure at the refinery’s 2,500 acre site. Consequently, it will acquire 80 per cent stake in a new JV with Nagarjuna Oil called Portoil Ltd, which will construct the storage facilities and related infrastructure around the upcoming refinery.
The refinery, to be operated by Nagarjuna Oil, will have an annual capacity of six million tonnes with the ability to process 100 per cent heavy/sour grades of crude. Other partners in the project include TIDCO, an industrial development unit of the Tamil Nadu government, and the Tata Group through the Petrodyne and German engineering company ThyssenKrupp Uhde.
Tatas own around 30 per cent in the Nagarjuna Oil Corp, which was earlier a subsidiary of the public-listed Nagarjuna Oil Refinery Ltd. With the fresh share allotment to Trafigura, Tatas’ holding is estimated to have shrunk to around 25 per cent while Nagarjuna Oil Refinery’s holding has come down to 47.12 per cent.
The Tata Group had picked its stake five years ago for around Rs 350 crore and its current stake in the company could be valued at around Rs 550 crore as per VCCircle estimates.
The proposed refinery is located on the east coast of India, providing strategic advantages including the ability to receive Very Large Crude Carriers (VLCCs) via a single point mooring. Commissioning work at the refinery is expected to start this year with commercial operations scheduled to begin during the first half of 2013.
Jonathan Pegler, director (Oil, Asia-Pacific) at Trafigura said, “This is an important, long-term venture for Trafigura and an exciting project for all concerned. It plays directly to the strengths of Nagarjuna as a leading process operator and to Trafigura as a company committed to balancing international supply and demand for oil products.”
Trafigura is one of the world’s largest independent traders of oil and non-ferrous concentrates. It is involved in the sourcing and trading of crude oil, petroleum products, renewable energies, metals, metal ores, coal and concentrates for industrial consumers. Employing 3,360 people across 81 offices globally, Trafigura has access to approximately $33 billion in credit facilities, with investments in global industrial assets of more than $3.3 billion.
In the oil sector, Trafigura has access to more than 45 million barrels of storage facilities, through its owned terminals under the PUMA network and also through long-term lease agreements with third party oil terminals in over 65 locations worldwide. It also time-charters in excess of 80 vessels worldwide.
In the metals and minerals sector, Trafigura currently owns and operates concentrate storage facilities in South America, Africa and China, and one mine in Peru. Additionally, Trafigura has expanded its mining investment activities, incorporating projects in South America, Africa and Europe. It is a significant stakeholder in various publicly listed mining entities.
Coal is a relatively new business for Trafigura, which is developing as a supplier of thermal coal, coking coal and coke products to the global marketplace. Capitalising on resource trading and investment expertise, Trafigura has also diversified into asset management through the development of offshore hedge funds.