The country's three major oil companies will be tempted to sell their shares in Refining New Zealand as it moves from processing crude to storage making it a ripe takeover target, according to a research note from investment house Forsyth Barr.
File photo. Photo: 123rf.com
The Marsden Point Oil Refinery is processing its last scheduled batch of crude oil before it becomes a bulk storage facility for imported refined fuel.
A report by analysts Andrew Harvey-Green and Mark Robertson said once Refining NZ transformed into Channel Infrastructure (CHI) the big three shareholders - Z Energy, BP and Mobil - would look to quit their collective 36 percent holdings.
"With none of the oil companies participating in the equity raise, and the strategic rationale for them owning NZR post-conversion limited, a sell-down at some point is expected.
"The expected sell-down could go two ways, either a new owner - infrastructure investor/private equity/trade buyer - looks to buy the three parcels triggering a takeover, or the shares get placed in the market."
The report said CHI might be an attractive infrastructure company for big investors.
"A takeover would represent the greatest possible upside for investors (shareholders) and we estimate a takeover price range of $1.34 to $2.26 (a share)."
The company is currently trading about $1 a share, and that price range would value it between $499m and $841m.
The analysts highlighted three areas of growth for CHI: providing additional private fuel storage; providing strategic reserves to the government; and, developing its Maranga Ra solar farm opportunity.
They said CHI might pick up other fuel terminals, such as those at Wiri, the Auckland end of the supply pipeline from Marsden Point, which are currently owned by the oil companies.
The report named potential buyers of CHI as including First Gas, which owns gas pipelines in New Zealand, and Australian bulk liquid storage specialists Quantem, and Stolthaven Terminals, part of the Norwegian listed global marine group, Stolt-Nielsen. The latter two already own fuel terminals in New Zealand.
Earlier this year Refining NZ posted a loss of more than half a billion dollars as it wrote down the value of the Marsden Point refinery ahead of its conversion to a fuel import only terminal.