Fesco acquires Wilson Beck’s LPG assets
Future Energy Source Company Limited (Fesco) has acquired the assets of Wilson Beck LPG Limited (WB) as it gears up to launch its own LPG (liquified petroleum gas) business later this quarter under the Fesgas brand.
“The assets appealed to us for many reasons, including the plant’s capacity and throughput. We are intentional about opportunities that allow us to expand our value-added products and to efficiently serve our broad customer base. We are pleased with the acquisition and are encouraged by the support we have received so far from the staff and dealers,” said Managing Director Jeremy Barnes in a release on the Jamaica Stock Exchange (JSE).
Fesco had made its LNG intentions known from as early as late 2020 ahead of its initial public offering where it raised $240 million. In the last year, it’s raised $1.7 billion through two bonds geared at building out its LPG capacity. Over its first nine months up to December 2022, Fesco has spent $1.34 billion on property, plant and equipment (PPE) with a significant amount dedicated towards its LPG entry.
“Yes, we bought other LPG assets on our own. So, we got storage tanks, cylinders, filling equipment, but this acquisition enables us to cut down the time to construct and setup as it’s already in place. Right now, although we’re just going to be testing the facilities and beta testing of the Fesgas brand, you’re going to see from next month Fesgas trucks around the place just testing our facilities and delivery capabilities before we’re ready to launch,” Barnes said in a Thursday phonecall to the Jamaica Observer about its LPG entry which it’s aiming to start by June.
He highlighted that this acquisition gave it an inorganic way to tap into an existing operational setup without having to wait an extended time to begin sales. However, Barnes was mum on the cost of the transaction which closed last Wednesday and highlighted that the company’s unaudited fourth quarter results should be out by May 15. Fesco’s audited financials for the period ending March 31 should be released by June 29.
WB is a partnership between American Gregory Beck and attorney-at-law Timothy Wilson. It has its distribution hub and filling plant at Bernard Lodge, St Catherine under a 20-year lease on a two-acre plot. The business just hit its third year of operation this month and had an arrangement with TexGas which is a Texaco subsidiary.
According to Beck in a Gleaner article, about US$1.5 million ($225 million) was invested in setting up the Bernard Lodge location. The location has two storage tanks, five filling stations, and a quality control weigh station. WB was capable of filling up to 500 cylinders per day and had agreements with 25 dealers across Kingston, St Andrew, St Catherine & Clarendon with further ambitions on the southern end of Jamaica. It offered 27-pound cylinders under a red colour scheme with the WB logo.
“Based on the changing landscape of this industry, it was the right move for us at this time. Fesco will inherit a state of the art LPG filling plant at Bernard Lodge, St Catherine as well as a loyal group of gas dealers from the distribution network we have built in south-eastern Jamaica. We are confident that they will be a big part of the Fesgas success story and continue to market the brand to their customers. We are encouraged by the leadership and vision from Fesco and believe they can successfully leverage the foundation we have built to become a household name for cooking gas in Jamaica,” said managing director of WB Gregory Beck in the disclosure.
The changing landscape mentioned could reference the fact that Massy Holdings Limited is seeking to acquire IGL Limited for US$140.3 million. Although the deal is pending approval by the Fair Trade Commission, both players are the largest distributors in the packed and bulk LPG market. Regency Petroleum Company Limited also listed on the Junior Market of the JSE in December where it was able to raise $170.70 million in fresh equity and benefit from a 10-year tax remission just like Fesco.
When asked about the uptake of its Futron 93 fuel, Barnes said, “That’s pretty promising and is getting better every month. It’s only at seven locations currently and we’re building additional stations which will have 93. There has been a steady take up of it. Most of the comments from the customers is that they’re really appreciating that they can get a high-octane fuel without needing to buy Octane boosters.”
He mentioned that Porsche, Mercedes-Benz, BMW and Subaru are flocking to the locations for the $250 per litre fuel compared to the $330-$350 per litre fuel available in other parts of the market.
Barnes also mentioned that Fesco is seeking to add an additional two locations by the third quarter of its 2024 financial year (FY). Fesco added two locations in its first year of listing and added an additional two in Ocho Rios, St Ann and Whitehall, St Elizabeth during its 2023 FY. Fesco hit its 10th anniversary on February 4.
Fesco was able to surpass its 2022 FY net profits of $253.64 million within the first six months of the 2023 FY. Its nine months earnings currently stand 154 per cent higher at $434.40 million compared to $170.79 million. This comes against the backdrop of revenue spiking nearly twofold from $8 billion to $20.14 billion.
Fesco’s total assets are up 47 per cent for the nine months from $2.79 billion to $4.13 billion with its PPE at $2.45 billion. Total liabilities and shareholders equity closed the period at $2.96 billion and $1.16 billion, respectively.
Fesco’s stock price remains down 23 per cent year-to-date at $4.20 with its market capitalisation at $10.5 billion. The stock market remains closed on Monday with the market set to react at 9:30 am on Tuesday morning.
“We did well this year and we’ve done well since our listing [April 2021]. We’re very eager and keen to start the business, but we’re just getting everything right before we actually start, and the WB acquisition was very important. We’re training, developing systems, taking on staff to ensure that we deliver a great product with Fesgas. With any business, there’s an investing time where your costs might be a little bit higher before you have any revenue. For the full year coming up, we believe it will be a positive year, but every business takes time to build out,” Barnes closed.