Deloitte statement further highlights Stanlow concerns

Concerns surrounding money siphoned out of the Stanlow oil refinery have been raised by Deloitte, after the accounting giant quit as auditor to the parent company of the refinery – Essar Oil UK.

It has been reported that dividends and loans were siphoned out of Essar Oil UK in the period leading up to the company’s participation in the government’s pandemic VAT deferral scheme to the tune of £356 million.

The company has gained a 6 month stay-of-execution in the deadline to pay this VAT bill but the ability to do so will be heavily influenced by what happens at the refinery; the recovery of margins, which are still depressed and plant utilisation levels.

With refineries being largely fixed cost operations (around 90% of the total, mainly comprising personnel costs), it will need utilisation levels of at least circa 85% – the level at which US refineries are currently running. European plants have more recently been running at a percentage around the high 70s.

Alongside Deloitte, Lloyds, PwC and law firm Linklaters have all cut ties with Essar Oil UK. Deloitte’s statement, originally written in October 2020, is the first time one of the professional firms advising Essar Oil UK has pinpointed governance concerns.

Current auditors, PKF Littlejohn, signed off the latest set of accounts for the year ending September 2020, which revealed a $186 million loss.

Essar, which is chaired by Prashant Ruia, claims to have invested $1 billion (£715 million) in Stanlow since purchasing it from Shell in 2011 for £801 million. It is said it received lenders’ consent for the loan.

A spokesperson for Essar Oil UK said:
“EOUK is well advised by a suite of highly experienced, professional firms. We have always sought to implement the highest standards of corporate governance.

“In October 2020, PKF replaced Deloitte as our auditors after ten years. PKF remain our auditors today, alongside other high-calibre advisors.

“EOUK’s financial statements for the period ending September 2019 were signed off by Deloitte. The next set of financial statements [for the period ending September 2020] were signed off by PKF.”

 

 

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