"The business continued to perform to expectation
in this 37 week period.
We expanded our international businesses both organically and through acquisition and grew delivered-in sales in the UK. Our biodiesel manufacturing operation made a particularly strong contribution following investment in incremental process improvements. "
Andrew Owens, Chief Executive
April – December 2017
Following a change in our financial year,
our latest report relates to the 37 week period from
15 April – 31 December 2017.
The most significant market change this period was the introduction of new legislation in the UK to increase biofuel supply obligations, which we expect will support the continued strong performance of our biofuels business.
Effective April 2018, the percentage of biofuel that UK fuel suppliers are required to blend into their petrol and diesel increased from 4.75% to 7.25%, with further rises legislated for in subsequent years. With new caps on supply of crop-based biofuel, these higher obligations will be met primarily from waste-based biofuel of the kind we manufacture in the UK. Our investments in biodiesel manufacturing facilities and raw material supply chains position us well to meet this demand growth.
Global demand for diesel continued to rise as a result of world economic growth. With OPEC maintaining its production restrictions, diesel stocks started to deplete this period, exacerbated by hurricanes in the latter half of 2017. As a result, diesel markets tightened and returned to backwardated market conditions. Therefore, we sold out the diesel we were holding in long-term storage at Thames Oilport and on Teesside.
In the UK, road fuel demand remained flat and surprisingly dieselisation continued, with diesel demand rising 1.0% in the 2017 calendar year and gasoline demand falling by 1.9%. We expect this trend to reverse as a result of Government plans to improve air quality by curbing the use of diesel vehicles, which in calendar year 2017 resulted in a fall in new diesel car registrations.
This period we made three acquisitions, taking over Inver Energy in the UK and Ireland, CAN-OP in Canada and concluding a waste oil origination joint venture in Australia. Each of these transactions was originated through our industry relationships.
UK and Ireland Fuels
We were pleased to acquire Inver Energy’s fuel infrastructure and supply businesses, giving us a supply footprint in Ireland for the first time. Inver’s business model is very similar to Greenergy’s, based on importing lowest-cost products and staying close to customers.
In the UK, strong refining margins resulted in highly competitive market conditions. However, we continued to grow, delivered-in sales to commercial and retail customers, including as part of our branded wholesaler agreement with Esso. The number of independent forecourt sites we were contracted to supply increased organically by 32% over the 37 week period. As we earn trust and respect in the sector as a flexible and high service fuel supplier, we won new business from all competing brands.
In line with the growth of our delivered-in business, we expanded our in-house haulage capability within Greenergy Flexigrid, recruiting additional drivers and extending our fleet to minimise our reliance on sub-contractors.
We continued our infrastructure investments to develop cost and operating efficiencies, commissioning two new product pipelines. The first links the deep-water jetty at our North Tees facility with our other terminals on Teesside, allowing large and lower cost diesel ships to supply all terminals. The other, on the Thames, allows gasoline ships to discharge at much higher rates, cutting jetty time and demurrage bills.
We continue to use our UK experience and capabilities to expand in new markets.
In Canada, we are developing flexible supply chains and investing in infrastructure in order to provide low-cost fuel to our customers, using sea and rail access to deliver supply resilience throughout the year.
Our acquisition of CAN-OP, a fuel marketer and terminal operator in Northern Ontario, gives us an additional rail-fed distribution location in the growing Ontario fuels market. We also completed the development of the Breakaway retail brand offer and commenced roll-out of the concept to Canadian dealers. With developments both in our supply chain and our customer offer, we are well positioned for further growth in Canada.
The Brazilian market increased its reliance on fuel imports, creating ongoing, but transient, supply opportunities for us in Brazil. We expanded our diesel supply into Brazil and towards the end of the period made our first gasoline imports, building on our reputation as a trusted trading counterparty.
In the Middle East, we are part of Bahrain Gasoline Blending (BGB), a new strategic joint venture between nogaholding, Bapco (the national oil company of Bahrain) and Greenergy. This period, BGB successfully blended gasoline to meet domestic Bahraini demand and made its first export cargo. The joint venture is evaluating engineering works to expand and enhance the gasoline blending facilities in Bahrain to give greater trading capability and flexibility.
Demand for waste-based biofuel increased significantly in the UK from April 2018 as a result of the introduction of higher blending obligations. In anticipation of these higher mandates we have been working to increase our production of biodiesel from waste through a variety of incremental expansion investments at our manufacturing facilities. Our biodiesel output was 26% higher this period compared with the same period in 2016.
As we expand our biodiesel manufacturing operations in the UK, we are also investing upstream to source waste oils globally. This period we concluded a new joint venture partnership in Australia and expanded our joint venture operations in China.
We also invested further in upstream raw material supply chains, including through a new joint venture in Australia, in order to access growing volumes of feedstock with quality characteristics best suited to our manufacturing facilities. We have been particularly successful in moving used cooking oil from Asia to the UK and we plan more investments in this area.
We continue to make strategic infrastructure investments to support our fuel supply objectives.
In the UK, we opened Thames Oilport for diesel supply by truck having regenerated former refinery infrastructure for use as an import terminal. This gives us a second supply location on the Thames and deep-water import capability.
We also made strong progress towards realising the value of the substantial surplus land associated with Thames Enterprise Park, which uses land not required for Thames Oilport. Our first land disposals were ahead of expectation and the permitting process for land development gained strong momentum.
Through the acquisition of Inver Energy we also now own a share of the Foynes terminal in Ireland and 100% of the Cardiff terminal in the UK.
In Canada, we completed works to double the size of our first rail-to-road supply location
in Toronto, creating additional capacity at a location that is convenient for customers.
Following our acquisition of the CAN-OP business in Northern Ontario, we plan to refurbish and
expand the Thunder Bay fuel terminal in order to benefit from its position at a key petroleum
15 April 2014 - 14 April 2015