Arcelor-Nippon JV to buy Essar group's strategic infrastructure

Wednesday 31st August 2022 08:39 EDT

ArcelorMittal- Nippon Steel India (AM/NS India) has inked an agreement with India's Essar Group to buy certain infrastructure assets that are “strategic” to its steel-making operations in the country. Following this pact, the two parties are expected to withdraw all cases against each other in various courts.
AM/NS India - a joint venture between ArcelorMittal SA and Japan’s Nippon - will buy three ports, two power plants and an electricity transmission line from Essar for $2.4 billion, which will strengthen the integration of its manufacturing and logistics operations.
The port assets - located in Gujarat, Andhra Pradesh and Odisha - are either captive or allied to AM/NS India’s steel-making and gaining full ownership of them will ensure seamless connectivity for movement of raw materials and finished goods between the manufacturing facilities as well as for exports, AM/NS India has said.
On the other hand, Essar will use most of the sale proceeds to retire debt and some for growth capital requirements. With this deal, Essar will conclude its planned asset-monetisation programme and “complete the debt repayment plan of $25 billion with the Indian banking sector”, the group said.
AM/NS India and Essar have been involved in legal disputes with each other after the former acquired the later’s steel unit in Hazira, Gujarat through the bankruptcy route in 2018-19. While AM/NS India got the steel plant, the complex also houses other infrastructure assets such as a port terminal and two power plants but these were excluded from the bankruptcy proceedings despite being critical to the steel-making operations. AM/NS India claimed that its Essar Steel acquisition gave it the right to use the captive infrastructure, but Essar opposed it saying that they were not part of the bankruptcy process. The matter relating to transfer of ownership of these assets is pending before the courts. The dispute will end now after Essar inked an agreement to sell the assets to AM/NS India. Moreover, the steel company will now be able to modernise and expand the infrastructure capacities.
Separately, Essar has entered into a 50:50 joint venture with ArcelorMittal SA (and not AM/NS India) to build a liquified natural gas (LNG) terminal in Hazira. As and when it is operational, it will cater to the needs of AM/NS India, a person in the know said.
After the deal with AM/ NS India is concluded, the $15-billion Essar will be left with a clutch of assets in India, the UK, the US and other countries across energy, infrastructure, metals and mining and technology and services. The group, which manages assets worth $8 billion, will now “focus on building new and modern infrastructure assets in India and overseas”, said its director Rewant Ruia.

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