Russia’s Lukoil has rejected a takeover bid for Italy’s Priolo refinery by US private equity fund Crossbridge Energy Partners. This was reported by the Financial Times in recent days.
The Priolo refining, gasification and cogeneration plant, which is owned by ISAB srl, itself a wholly owned subsidiary of Swiss Litasco sa, which is indirectly controlled by Lukoil, represents one of the largest industrial sites in Europe and consists of three production sites interconnected by a system of pipelines.
As a reminder, Lukoil had acquired 49 percent of ISAB from Milan-listed ERG in 2008, based on an agreement that valued the entire asset at €2.75 billion and included the possibility for ERG to sell the rest of the capital in subsequent tranches (see the press release from that time here). Over the years Lukoil has since reached 100 percent.
ISAB ended fiscal 2021 with 2.6 billion euros in net revenues, ebitda of 614.6million, and net financial debt of 704 million (see Leanus report here, after registering for free). ISAB was the last refinery built and started up in Italy and is the second largest in the country and the fifth largest in Europe. The plant has an annual refining capacity of 10 million tons with a maximum of 14 million and produces electricity equal to about 18 percent of Sicily’s needs.
At the moment, however, only Russian oil arrives there from the parent company, because banks have been blocking credit lines that allowed crude oil to be purchased from countries other than Russia for months. In reality, the refinery is not under sanctions, however, the lenders have preferred caution, so if nothing changes, the refinery is destined to close, since as of December 5, as the latest EU sanctions package has mandated, Russian oil can no longer be imported into Europe (see the EU Commission’s press release here). The last tanker will arrive today, November 7, and if Lukoil is not allowed to purchase product for refining from other countries in the following days, the plant will be forced to stop. Unless the guarantees provided by the Italian Government owned export insurance company SACE are extended.
In any case, to clear the field of doubts, a week ago came a “comfort letter” from the Financial Security Committee of the Ministry of Economy and Finance, clarifying that ISAB, Lukoil Italia, Litasco and Oao Lukoil, are not subject to sanctions by the European Union. “The company is not subject to sanctions and therefore can as of now operate by acquiring oil also from other markets with the necessary financial and insurance coverage,” Minister for Enterprise and Made in Italy Adolfo Urso was keen to emphasize, speaking yesterday on Maria Latella’s ‘Il Caffé dellaDomenica’ on Radio 24. He added, “We hope that the company will continue its activity or if it considers it to sell the business to an Italian or foreign investor. In this case, as it is an area where there is Golden power, whatever a possible transfer of ownership might be conditioned by what we consider fundamental, which is above all the maintenance of production and employment levels.” In essence, the plant “must continue to produce,” safeguarding “the jobs of almost 10,000 families.”
All problems, of course, would be solved if Lukoil sold the refinery to the Americans. But it is clear that the road now seems barred. Crossbridge Energy Partners is an experienced operator in the sector, itself controlled by Postlane Capital Partners. In September 2021 it bought the Fredericia refinery in Denmark from Shell, along with all of its Trading & Supply assets (see the press release here). In addition to Denmark, Crossbridge owns assets in Houston, Odessa, Fort Wayne, Calgary, and Bordeaux.
