Essar Energy 2010 net jumps 20% to $248 mn

London-listed Essar Energy Plc today reported a 20% jump in net profit for the year 2010 on the back of higher refinery margins.

Net profit in the 2010 calendar year was $248.3 million, as against $206.8 million in the previous year, Essar Energy Vice-Chairman Prashant Ruia said in a conference call.

The company earned $6.6 on turning every barrel of crude oil into petroleum products in 2010, as against a gross refining margin of $4.2 a year ago.

Revenues were up 42% at $10.005 billion.

Essar Energy Chief Executive Naresh Nayyar said: "This is a strong financial result driven by record refinery throughput of 14.7 million tonne per annum, a pleasing uplift of over 50% in current price gross refinery margins and high availability at our power plants."

Demand for energy in India is expected to continue to grow sharply and "we remain focused on delivering our key projects, which in 2011 includes the first phase of our Vadinar refinery expansion and another 2,910 Mw of power generation capacity", he added.

Nayyar said gross refining margins have been increasing ever since the fourth quarter of 2009.

"Post-crisis in Japan, where few refineries have been shutdown, there was a sudden spurt in refining margins and we see this trend continuing in the later part of the year," he said.

But the spurt in international oil prices has meant that Essar's plans for setting up petrol pumps will have to take a back seat as the difference between the price at which the company and its public sector competition sell petrol and diesel has widened.

State-owned Indian Oil, Hindustan Petroleum and Bharat Petroleum sell petrol and diesel at artificially lower rates and are compensated for the difference between the retail cost and cost of production by the government. Private retailers such as Essar sell fuel at rates closer to market price.

Nayyar said the company currently has over 1,400 petrol pumps and had planned to establish 1,700 by March 2011. Essar is "by and large" close to that number, with about 200 outlets under different stages of construction.

"Sudden rise in global oil prices and slowdown in deregulation, we are reviewing our plans and at present we are not pursuing retail plans aggressively," he said.

Essar sold about 8 million tonne of petrol and diesel when domestic rates were closer to market rates, but these have fallen to 0.3 million tonne a year.

"It is going down" further with the widening gap between the price at which petrol and diesel is sold at state-owned firm run outlets and those of private companies.