Apollo in talks with Stanlow refinery owner amid dash for cash

15 April 2021, 15:23 | Updated: 15 April 2021, 16:40

Apollo Global Management, one of the world's largest investment groups, is in talks to provide hundreds of millions of pounds of funding to the owner of the Stanlow oil refinery as it tries to navigate through a financial crunch.

Sky News has learnt that Apollo has been in discussions with Essar Oil UK for several weeks about structuring a deal that would involve it taking a significant position in the company's capital structure.

Any deal could involve providing approximately £400m in new funding to the company.

A person close to Apollo said the New York-listed firm was one of several parties negotiating with Indian-owned Essar Oil UK and that a transaction was far from certain.

Among the obstacles to concluding a deal with the owner of Britain's second-biggest oil refinery were the corporate governance-related concerns which had prompted the resignation of two legal advisers to the company and the termination of a borrowing facility with Lloyds Banking Group, they added.

Part of any new funds secured by Stanlow's parent would be earmarked to repay at least part of a large outstanding bill owed to HM Revenue and Customs, according to insiders.

The identity of other prospective funders was unclear on Thursday.

Apollo's involvement in the process is logical given its frequent involvement in complex corporate financing situations.

It held detailed talks about a deal to buy assets from the collapsed supply chain finance group Greensill Capital before withdrawing from the discussions.

In recent days, Sky News has revealed details of an unfolding crisis at Essar Oil UK that has left Whitehall officials concerned about its future.

The Stanlow refinery is responsible for supplying one-sixth of the UK's transport fuels - including through a pipeline from Stanlow to Manchester Airport - giving it an important role in the UK's industrial economy.

As well as the resignations of professional advisers, frustrations over the running of Essar Oil UK have triggered the departures of two chief executives within a year.

Essar Oil UK bought the Stanlow refinery at Ellesmere Port from Shell in 2011.

The site directly employs more than 900 people, with an additional 800 on-site contractors and a further 5,000 people working indirectly within the extended value chain, according to Essar Oil UK's website.

A source close to Essar Oil UK said the COVID-19 pandemic had depressed margins and impacted demand for its products, along with other refining businesses around the world.

Stanlow was now seeing increased demand for road transport fuels, and the company remained committed to a sustainable future and aiding the UK's decarbonisation agenda, the source said.

An Essar spokesman said: "We are in constructive discussions with multiple finance providers and are confident that we will put in place an optimal financing solution for the company.

"At this stage, we are not prepared to comment on specific names."

An Apollo spokesman declined to comment.