Bloomberg News

Investor Gary Klesch May Buy Three Petroplus Oil Refineries

February 07, 2012

(Updates with comments from Klesch in third paragraph.)

Jan. 27 (Bloomberg) -- Gary Klesch, chairman of commodity investment firm Klesch Group, may acquire three plants from insolvent Swiss oil refiner Petroplus Holdings AG as part of a spending spree triggered by overcapacity in the market.

Klesch is looking at Petroplus’s Coryton plant in England, Ingolstadt in Germany and Petit-Couronne plant in France, he said in a phone interview today. There is “no doubt” the firm will acquire refineries this year, in Europe or the U.S.

“I don’t think it will be 10 and I don’t think it’ll be one,” he said from Geneva. “We’re in a lot of asset negotiations. We’re being a picky shopper.” Klesch may also make acquisitions in the European chemicals and shipping industries, he said.

Petroplus, Europe’s largest independent refiner, filed for insolvency two days ago after talks with lenders failed. Swiss authorities have appointed administrators, the Zug, Switzerland- based company said today. Three of the company’s five European plants, including Petit-Couronne, are shut and the Ingolstadt and Coryton plants are running at reduced capacity.

The company joined LyondellBasell Industries NV, Eni SpA and Total SA in closing plants in Europe after profits for European refiners shrank. The 2008 recession reduced demand for fuels, leading to temporary shutdowns and facilities being put up for sale or converted to storage sites.

‘Picking Good Ones’

Klesch bought the Heide refinery in Germany from Royal Dutch Shell Plc in 2010 and also has businesses in commodities trading and aluminum smelting, according to its website. Adding refineries to its investments is at the top of Klesch’s “shopping list,” the chairman said.

While profit margins from refining have increased, lasting improvement isn’t likely until 2013, Klesch said.

“We’re going to have a wholesale dumping of refineries both good and bad and the trick is to shuffle through and pick the good ones,” he said.

Many refineries have what Klesch called “challenges” that include a failure by owners to spend money on equipment to bring plants up to current environmental and other standards.

Petit-Couronne in Normandy is “extreme, a tidal wave of under-investment,” he said, adding that another “big consideration” is the strong labor movement in France.

CGT union workers led protests in 2010 against an increase in the retirement age that blocked shipments and halted refinery operations, leading to nationwide fuel shortages.

Lindsey Plant

Klesch considered buying Total SA’s Lindsey plant in the U.K. and then rejected the idea because of concerns stemming from a fire last year and the 2005 Buncefield explosion at an oil depot outside of London, the chairman said.

Klesch’s asset search in Europe comes amid an economic slump that has led to higher unemployment and lower consumer demand in some countries. The International Monetary Fund said the 17-nation European region may enter a “mild recession” in 2012 as it forecast a 0.5 percent contraction.

“I would like to extend my thanks to the governments of Europe for making opportunities available to me,” Klesch said. “The forecast for the Eurozone doesn’t look great this year so as a result there are a lot of buying opportunities.”

--Editors: Alex Devine, Tony Barrett

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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