Vitol fuels Viva float

Dutch trading giant looks to raise $2 billion

DUTCH trading giant Vitol has launched plans to float the $2 billion Viva Energy business it bought from Shell four years ago, including the Geelong refinery and Shell-branded petrol stations.

The planned float comes amid a stream of merger and acquisition activity that is changing the fuel sector, and follows Viva paying off its debt through the $1.5 billion 2016 real estate investment trust float of petrol station land.

Viva advisers Bank of America Merrill Lynch and Deutsche Bank last week launched a non-deal roadshow for the mooted 2018 initial public offering in Asia and are meeting institutional investors in Australia.

It is unclear whether Vitol and its partners are looking to raise money for investment or to take profits.

Viva would not confirm or deny the IPO plans.

“We are committed to sustainable growth and building a successful business so we can continue to meet around a quarter of Australia’s fuel needs efficiently and safely,” a Viva spokeswoman said.

“As part of responsible business planning, Viva Energy evaluates various alternative strategies and investments to create value.”

It could be a good time for Vitol — which controls Viva on behalf of a consortium that has previously included Abu Dhabi’s sovereign wealth fund — to go to market.

The Geelong refinery faced closure when Viva bought it in 2014. Viva surprised the market by keeping it open, and the refinery now appears profitable with strong margins.

At the same time, wholesale fuel demand is starting to pick up, led by renewed confidence from the resources sector and growing jet fuel demand.

A stake is also being offered to investors as retail competition heats up, with Caltex and BP putting a focus on improving the quality of their retail and convenience offerings as consumer habits change.

Market analysts have speculated Viva Energy had timed its IPO plans ahead of a contract with Coles Express that comes up for expiry next year.

Some questioned whether Coles’ $20 billion demerger from Wesfarmers would make contract renewal negotiations more challenging.

The potential IPO comes on the heels of Woolworths’ attempts to sell its service station network to BP for $1.8 billion, a move contested by the competition watchdog.

Smaller deals last year included Viva’s $250 million acquisition of Shell’s aviation business and Caltex’s $424 million acquisitions of Gull NZ and Milemaker. Viva owns the Geelong refinery and a network of more than 20 fuel import terminals through which it supplies a quarter of the nation’s refined fuel needs.

It supplies fuel to 50 airports around Australia and operates 1100 petrol stations throughout the country.