Auditors have warned about the financial health of the company behind the Stanlow oil refinery, despite its efforts to refinance loans and settle a debt to HM Revenue & Customs.
Documents filed at Companies House show that losses at Essar Oil (UK) deepened from $221m (£168m) to $321m in 2021, a year in which government officials became concerned about the financial position of the company, which supplies 16% of UK road fuel from its refinery in Ellesmere Port, Cheshire.
The group reported progress in refinancing its debts, replacing a loan from Lloyds Bank with $325m of new lending.
Essar’s subsidiary, Stanlow Terminals Ltd, is working on a deal to raise up to $300m of debt and the group said it could also tap other sources of medium-term lending.
Essar Oil has also reduced the amount it owed to HMRC, after it took part in a scheme that allow companies hit by Covid-19 to defer VAT repayments.
At one stage in March 2021, Essar owed £771m to HMRC but it said this had since been reduced £109m and was due to be settled completely this month.
But an auditor’s report warned of uncertainty over the company’s discussions about new loans to help it weather the impact of Covid-19, which significantly reduced demand for fuel before a recent revival in conditions.
The report said that while financing proposals were under discussion, to mitigate the risk of the company defaulting on payments, the talks had not concluded.
This, the auditor said, “may cast significant doubt on the company’s ability to continue as a going concern”.
The accounts were signed off before the invasion of Ukraine and do not make any reference to the possible impact of the war on the company or its ties to Russia.
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Essar, which is ultimately owned by the Indian billionaire Ruia brothers, has previously distanced itself from its parent company’s lending arrangement with the Russian bank VTB.
Earlier this year, dockers refused to unload Russian oil shipments destined for the refinery. Stanlow later said it was seeking alternative supplies.
The company’s accounts do refer to its contract with Litasco, a Switzerland-based commodity trading company ultimately owned by the Kremlin-linked oil firm Lukoil.
As the Guardian reported earlier this year, Litasco has a claim on Stanlow that kicks in if Essar defaults on payments under an oil sale and purchase agreement. Essar has said that Litasco has no ability to influence operations at the terminal.
