Thin refinery margins and high debt take their toll on Europe's largest independent refiner by capacity: Today the Swiss based Petroplus filed for insolvency. It's the end of an aggressive, acquisition driven business model that just would not pay.
Zug/Switzerland – Petroplus had been bargaining with lenders since late 2011 – but seemingly unsuccessful: After the banks called in debts of about US $ 1.75 billion, the Swiss refiner gave in. Now the company says, its main goal would be to ensure the safe shut down of all Petroplus' operations and the preservation of value for the company's stakeholders. According to a recent statement, the board of Directors decided to file for insolvency or composition proceedings (“Nachlassstundung”) in Switzerland as soon as possible.
As a reaction, Petroplus shares had dropped by more than 80 percent to 0.23 Swiss francs by noon. A year earlier they were trading close to 15 francs.
Coryton Refinery (10% of UK Fuel Supply) On the Brink of Extinction
Petroplus had already stopped production at three of its refineries in Switzerland, France and Belgium and significantly cut productions in Germany and Britain, where the company operates the Coryton refinery, providing about ten percent of the UK's fuel supplies. According to Reuters, the company said it has halted all supplies from Coryton. Meanwhile BP, Petroplus' major customer at Coryton denied any immediate supply issues across its retail network. Now motorist across the UK carefuly eye the petrol prices.
Insolvency Result of Errant Strategy, Insiders Say
Petroplus demise comes as result of an errant strategy, industry experts believe: The company followed a largely private equity-backed, aggressive and acquisition driven business model. Now, with thin refinery margins and large overcapacity along Europe's refineries, the company just could not come back in the black. In December 2011 banks revoked planned credits of about US $ one billion, cutting the crude oil supply virtually off for Petroplus refineries.
No Oil Shortage Expected, Despite Petroplus Demise
Jean-Paul Vettier, Petroplus’ Chief Executive Officer, said, “It is unfortunate to have reached the point where the Executive Committee and Board of Directors have to inform our employees, shareholders, bondholders and other stakeholders about these circumstances. We have worked hard to avoid this outcome, but were ultimately not able to come to an agreement with our lenders to resolve these issues given the very tight and difficult European credit and refining markets. We are fully aware of the impact that this will have on our workforce, their families and the communities where we have operated our businesses.”
Around 2,500 Jobs At Stake
The insolvency puts around 2,500 jobs across Europe at risk. Petroplus staff was only informed by a press release, as employees told PROCESS. Operation at Petroplus' major German site in Ingolstadt continue, although only at half capacity we were told.
Supply problems for oil, fuel and petrochemical products are nevertheless unlikely, insiders believe: Competitors, such as India's Essar which operates a refinery in the north of England, will be keen to profit from the 667,0000 barrels per day gap that the Petroplus refineries leave.