ERG opts to reduce its exposure to refining; Lukoil to increase to 80% its stake in ISAB, an Italian refining complex with a capacity of 320,000bpd.

The board of directors of ERG S.p.A. today approved the exercise of a put option on 20% of ISAB S.r.l., valued at €400 million (excluding inventory). Following this transaction, Lukoil will own 80% of ISAB and ERG 20%.

The transaction closing is expected to take place during 2Q12. ERG will continue to be represented on the board of directors of ISAB and on the management committees, while the operating processing agreement has been temporary amended to be consistent with the new role of ERG in ISAB.

ERG and Lukoil have also modified the agreements signed in 2008, with particular reference to ERG's lock-up period for the exercise of its put option on the remaining 20% stake in ISAB, which is extended until October 1, 2013.

A provision has also been included to the effect that, if ERG should exercise its put option on the remaining 20% stake between October 1 and 31, 2013, the parties undertake to finalise the transaction during the period between December 15 and 31, 2013. All other terms and conditions remain unchanged.

Alessandro Garrone, ERG's CEO, says: “This transaction allows ERG to downsize its presence in the refining business against a background of continuing crisis and to further consolidate the group's financial structure with a view to supporting its future development projects during a difficult financial period. ERG continues to maintain a significant industrial presence at the Priolo site, where it has important business relations with ISAB as regards its ERG Power and ISAB Energy thermoelectric plants.”

In this transaction, Rothschild has acted as financial adviser and Francesco Novelli (lawyer), of the law firm Grimaldi e Associati, as legal adviser.