Essar Energy PLC : Statement regarding possible offer

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

THIS IS AN ANNOUNCEMENT FALLING UNDER RULE 2.4 OF THE CITY CODE ON TAKEOVERS AND MERGERS (THE "CODE "). THIS IS NOT AN ANNOUNCEMENT OF A FIRM INTENTION TO MAKE AN OFFER UNDER RULE 2.7 OF THE CODE AND THERE CAN BE NO CERTAINTY THAT AN OFFER WILL BE MADE

17 February 2014

Essar Capital Limited, the dedicated investment manager for Essar Global Fund Limited ("EGFL" ) confirms that EGFL has made an approach to Essar Energy PLC ("Essar Energy" ) regarding possible offers for the minority shares in Essar Energy it does not already own and for the 4.25% convertible bonds due 2016 guaranteed by Essar Energy (the "Convertible Bonds" ) (together the "Possible Offers" ). 

The Possible Offers, if made, would comprise an offer for the minority shares of Essar Energy that EGFL does not already own at a price of 70 pence per share in cash, representing a premium of approximately 17% to the undisturbed closing price on Thursday, 13 February 2014 and an offer to the holders of the Convertible Bonds at a price of 80, representing a premium of approximately 11% to the undisturbed closing price on Thursday, 13 February 2014.  EGFL intends that Essar Energy may then be de-listed from the London Stock Exchange.

By way of background, EGFL listed Essar Energy in 2010 and raised primary proceeds principally to be used by Essar Energy to build out refining and power capacity within its business; EGFL did not sell any shares in the listing and has not done so since.  Essar Energy's shares rose 52% from the 420p issue price to a high of 638p in December 2010.  Since listing Essar Energy has substantially expanded its asset base, including:

·   Refining capacity increased by over two times;

·   Complexity at its Vadinar refinery increased by almost two times; and

·   Power generation capacity increased by over three times.

However, Essar Energy has been impacted by a number of external factors, including:

·   GDP growth expectations in India have fallen by nearly 40% from 8.8% to 5.4% annually, at a time when there has been economic recovery in the United States and Europe;

·   Certain unforeseen issues, in particular regarding licensing of coal blocks and withdrawal / delays in environmental approvals, which have adversely impacted the power sector in India;

·   Adverse sentiment with regard to India's investment climate, including with regard to tax, regulatory and legislative developments and uncertainties, for example:

o  The unexpected tax ruling made by the Supreme Court of India in September 2012 accelerating a sales tax liability against Essar Oil; and

o  Ongoing tax disputes and retrospective tax legislation concerning, for example, Vodafone, Nokia, Cairn Energy and various other Indian and multinational companies.

EGFL has been a supportive shareholder throughout:

·   EGFL has not sold any shares in Essar Energy (either in the initial listing or since);

·   On the contrary, EGFL added to its economic interest in the shares of Essar Energy to a value of US$145 million at a price of 533p in January 2011; and

·   The value of EGFL's shareholding (and economic interests) in Essar Energy has fallen by circa. US$6 billion since the initial listing.

There is no certainty that any offer will be made.

Further comment will be made as appropriate.

Contacts:

RLM FINSBURY

A copy of this announcement will be available atwww.essarglobalfundltd.com.

The content of the website referred to in this announcement is not incorporated into and does not form part of this announcement.

BASES AND SOURCES

a)   The issue share price of Essar Energy of 420 pence is extracted from the Essar Energy IPO prospectus issued on April 30, 2010.

b)   The market price for Essar Energy Shares as of 13 February 2014 is the closing middle market quotations as derived from the Daily Official List.

c)   The high share price of 638p refers to intraday high on 9 December 2010 as derived from Factset.

d)   The annual GDP growth expectations for India are extracted from the April 2010 IMF World Economic Outlook report and the January 2014 IMF World Economic Outlook update report.

e)   The operating information relating to Essar Energy's refining capacity which increased from 260,000 bpd at listing in May 2010 to 741,000 bpd in March 2013 is extracted from Essar Energy's Investor Presentation from August 2013.

f)    The operating information relating to Essar Energy's refining complexity which increased from 6.1 in May 2010 to 11.8 in March 2013 is extracted from Essar Energy's Refinery Presentation from September 2010 and Investor Presentation from August 2013.

g)   The operating information relating to Essar Energy's power generation capacity which increased from a capacity of 1,220MW at listing in May 2010 to 3,910MW in March 2013 is extracted from Essar Energy's Investor Presentation from August 2013.

h)   The fall in value of EGFL's shareholding in Essar Energy is calculated at a constant exchange rate of 1.66 for the conversion of Sterling into US dollars and was derived from Bloomberg as of 13 February 2014.