Heating Oil Supplier News

OilFiredUp reported last week that the OFT has  accepted the undertakings offered by GB Oils Limited to address the competition concerns arising from its completed acquisition of Brogan Holdings Limited. As a result, the merger will not be referred to the Competition Commission.

Under the terms of the undertakings, Brogans’ oil distribution business on the Western Isles in Scotland will be sold to Highland Fuels to resolve competition concerns raised by the merger.

The OFT carefully assessed and consulted publicly on the proposed undertakings, as well as on the suitability of Highland Fuels as a purchaser of Brogans’ oil distribution business on the Western Isles. This included ensuring that Highland Fuels had been able to agree a new lease for Brogans’ Stornoway site.

Sheldon Mills, Director of Mergers said, ‘This merger would have led to a virtual monopoly for the supply of heating oils and transport fuels in the Western Isles.

“However, the sale package agreed today will restore pre-merger levels of competition for the benefit of the local community. The OFT believes that Highland Fuels, with its extensive experience of providing this service elsewhere in Scotland, is a suitable purchaser for the divestment business.’

To download the full OFT announcement please click here

The Financial Services Authority (FSA) has fined Steven Noel Perkins, a former oil futures broker, £72,000 for market abuse. The FSA has also banned Perkins from working in the financial services industry on the grounds that he is not a fit and proper person.

Perkins was an oil futures broker whose job was to trade orders on an execution only basis in Brent Crude Futures contracts (Brent) on the ICE Futures Europe exchange (ICE) for his firm’s clients. Perkins’ employer, PVM Oil Futures Ltd, did no proprietary trading, but in the early hours of the morning on Tuesday 30 June 2009, Perkins traded on ICE without any client authorisation. He traded in extremely high volume in the ICE August 2009 Brent contract and in doing so accumulated a long outright position in Brent in excess of 7,000 lots (representing over 7 million barrels of oil).

As a direct result of Perkins’ trading, the price of Brent increased significantly. Perkins’ trading manipulated the market in Brent by giving a false and misleading impression as to the supply, demand and price of Brent and caused the price of Brent to increase to an abnormal and artificial level.

In sanctioning Perkins, the FSA has also taken into account the fact that Perkins initially lied repeatedly to his employer in order to try and cover up his unauthorised trading.

Perkins’ trading seems to have been a consequence of extremely heavy drinking resulting from alcoholism, which he now acknowledges. He drank excessively over the weekend prior to 29 June and throughout Monday 29 June.

Immediately following this incident, Perkins joined a rehabilitation programme for alcoholics and he has stopped drinking. The FSA considers that it is possible that Perkins may be rehabilitated over time and may be fit and proper again in the future.  The ban has therefore been limited to a minimum term of 5 years.

Alexander Justham, director of markets at the FSA, said:

“The FSA views market manipulation extremely seriously. Perkins’ trading caused disruption to the market and has been met with both a fine and prohibition. This reinforces the fact that a severe sanction will apply in cases of market manipulation, even where no profit is made.

“Perkins’ drunkenness does not excuse his market abuse. Perkins has been banned because he is not a fit and proper person to be involved in regulated activities and his behaviour posed a risk to the proper functioning of the market.”

In determining the appropriate amount to fine Perkins, the FSA took into account his financial circumstances. Perkins’ behaviour merits a penalty of £150,000, but because this level of fine would cause Perkins serious financial hardship, this has been reduced to £90,000. Perkins also agreed to settle this case and therefore qualified for a 20 per cent discount under the FSA’s executive settlement procedures.

Boilerjuice has asked its customers to comment on the idea of moving towards a monthly payment scheme. In their blog they say:

“Gas and electricity suppliers do something similar; phone providers do it and now BoilerJuice could be doing it too… if you’d like us to. Basically, the plan would be for you to pay for your heating oil on a monthly payment basis so you build up a ‘bank’ of savings to go towards each heating oil purchase.”

This option could be appealing to customers who are wary of committing to a monthly payment scheme with a specific supplier. If Boilerjuice can sell it correctly, ie that the customer will always get the cheapest prevailing price when making an order, then it could even lure customers away from supplier payment schemes.

James Chapelard from Crains Manchester wrote an article today claiming that pre-tax profits at Bury-based Crown Oil have more than halved after a 20 per cent drop in sales to £103.1m.

Profits dropped to £433,994 in the year to August 31, 2009 compared to £905,000 in the prior year.

The Greensmith family did not recommend a dividend.

For the original article please click here

The United Kingdom Petroleum Industry Association has promoted Andy Roberts to Director of Environment, Health & Safety.

Roberts joined UKPIA in June 2007 and was then seconded to the DTI as head of downstream oil. He returned 2010 and started his new role on 1st May 2010.

On the 30th March the Energy and Climate Change Committee published its final report in relation to Fuel Poverty. The Labour Government committed itself to two targets in England:

• To seek an end to fuel poverty for vulnerable households by 2010; and
• By 22 November 2016 no person in England should have to live in fuel poverty.

The Committee notes that the first target is going to be missed and the second looks difficult to hit.

The Fuel Poverty Advisory Group gave evidence to the committee and it is interesting to note in the table below that not one member of this group has a expertise in the heating oil market:

At present there are 3 methods for assisting people in fuel poverty:

Winter fuel payments: households with someone between the ages of 60 and 79 (£250 payment); households with someone aged 80 or over (£400 payment);

Cold weather payments: people in receipt of Pension Credit or income-related Employment and Support Allowance that includes a work-related activity or support component; those in receipt of Income Support, Income-based Jobseeker’s Allowance or income-related Employment and Support Allowance in the assessment phase if they have a pensioner or disability premium included in their benefit or if they have a child who is disabled or under the age of five;

Warm Front: Householders aged 60 or over in receipt of one or more of the following benefits:

• Income Support
• Council Tax Benefit
• Housing Benefit
• Job Seekers Allowance (income-based)
• Pension Credit
• Income-related Employment and Support Allowance

Householders with a child under 16, or pregnant women with maternity certificate MAT-B1, in receipt of one or more of the following benefits:

• Income Support
• Council Tax Benefit
• Housing Benefit
• Job Seekers Allowance (income-based)
• Pension Credit
• Income-related Employment and Support Allowance

Householders in receipt of one or more of the following benefits:

• Working Tax Credit (with an income of less than £16,040, which must include a disability element)
• Disability Living Allowance
• Child Tax Credit (with an income of less than £16,040)
• Housing Benefit (which must include a disability premium)
• Income Support (which must include a disability premium)
• Council Tax Benefit (which must include a disability premium)
• War Disablement Pension (which must include a mobility supplement or Constant Attendance Allowance)
• Industrial Injuries Disablement Benefit (which must include Constant Attendance Allowance)
• Attendance Allowance

One issue that concerns WhichOilSupplier is the fact the heating oil users usually need to buy in bulk (minimum order is 500 litres). The Committee seems to recognise this by funding National Energy Action to study the role credit unions could have in helping people budget and save for heating oil.

According to the Committee, of the 925,000 households using heating oil (this figure seems a lot lower than the accepted number of 1.5-2 million), 214,000 are deemed as fuel poor ie 23%. This strikes us as a staggering number.

The Government notes that the modelled bill (modelled to meet the adequate standard of warmth used in fuel poverty estimation) for homes without a mains gas connection is around £250 higher annually than for those with a connection. DECC’s memorandum points out that, in addition to having to rely on more expensive fuels, homes off the gas grid tend to be larger - and therefore more expensive to heat - than those on it. This results in higher levels of fuel poverty.

Recommendation of the Committee:

“One modest but potentially helpful step the Government could take for people who rely on filling expensive oil or gas tanks concerns the timing of Winter Fuel Payments. We put it to the Minister that there might be benefits to bringing forward in the year the timing of payments to assist people who have to fill such tanks, when they could do so at a cheaper cost than in the middle of winter. He noted that it was the Treasury’s responsibility to determine the timing of such payments, but he did “think there was something” in the argument for making the payments earlier.”

The staggering of heating oil payments is now offered by many of the larger heating oil companies. WhichOilSuppplier welcomes this and encourages the industry as a whole to offer this as an option to vulnerable customers in fuel poverty.

We urge the Treasury and Dept of Energy & Climate Change to work together to bring forward winter fuel payments so that oil users can buy during the summer when prices are generally low.

We are concerned that the industry is increasingly moving to up front payment by credit or debit card. Whilst this make economic sense due to the cost of recovering bad debts, vulnerable households are likely to rely on cash or cheque payments only and we therefore urge credit unions to consider this issue and find a solution.

DCC today announced its results for the year ended 31 March 2010.

Revenue EUR 6,725.0m +5.1%

Operating profit EUR192.8m +6.9%

Profit before net exceptional items, amortisation of intangible assets and tax EUR182.1m +14.2%

Profit before tax EUR164.9m +19.7%

Commenting on the results, Tommy Breen, Chief Executive said:

“DCC had an excellent second half, which resulted in the Group’s operating profit for the full year increasing by 12.8% on a constant currency basis and profit before exceptional items, amortisation of intangible assets and tax increasing by 20.7%, also on a constant currency basis. This result was achieved against a backdrop of difficult economic and trading conditions and having delivered particularly strong operating profit growth of 22.4% on a constant currency basis in the prior year. Return on total capital employed increased to 18.4% in the year.

Adjusted earnings per share, on a constant currency basis, increased by 11.3%. Reported adjusted earnings per share was 5.2% ahead of the prior year, reflecting the adverse impact of the 6.9% weakening of the sterling/euro exchange rate in the year on the translation into euro of the significant proportion (2010: 75%) of DCC’s profits that are denominated in
sterling.

Cash generation was again particularly strong, helped by a reduction in working capital of E71.8 million, resulting in operating cash flow of E297.8 million. During the year, DCC completed a US private debt placement raising the equivalent of E284 million in 5, 7, 10 and 12 year funding. The strength of DCC’s business model and improving debt market conditions at the time of the placement led to the funds being raised on favourable terms.

DCC Energy, DCC’s largest division, had another year of excellent operating profit growth driven by significant development activity in Britain and continental Europe. DCC Energy’s proven ability to identify, execute, integrate and extract synergies from acquisitions was the key to this growth. The business also enjoyed the benefit of a second consecutive cold winter, although temperatures during the key trading months of April and from October through March were overall similar to the prior year.

The outlook for the year to 31 March 2011 is framed against the continuing uncertain economic outlook and has regard to an assumption that the weather pattern will not be as favourable as it was in each of the last two financial years. At this early stage the Group anticipates an operating profit increase of approximately 5% with adjusted earnings per share to be modestly ahead of the prior year, both on a constant currency basis. Based on an exchange rate of Stg£0.86 = E1.0, this equates to an operating profit increase of approximately 10% and an adjusted earnings per share increase of approximately 5%, both on a reported basis.DCC is in a very strong financial position which provides significant capacity as we pursue an increasing number of acquisition opportunities.”

We can reveal that F. Peart & Co has sold its oil business to DCC.

In a telephone conversation with the company, Freddie Peart confirmed to us that the acquisition took place on 30th April between F. Peart & Co and Energy Acquisitions Ltd, a subsidiary of DCC.

F. Peart & Co. Ltd, was established in 1923 when Fred Peart began a coal merchant business in Hartlepool. The business grew rapidly and in 1966 it diversified into fuel oil as the market took off.

Three generations later, the company is now the North East’s largest independent oil distributor, delivering over 120 million litres of fuel oil a year. The company also specialises in lubricants, fuel cards and heating services as well as operating a successful fencing division.

Clenergen Corporation (CRGE) has signed a Technical Agreement with Honeywell’s Envergent Technologies to produce ASTM standard pyrolysis oil with possible future upgrade to hydrocarbon fuels, using biomass wood chips produced from the cultivation of Marjestica , Beema Bamboo and Vaneshree.

Envergent Technologies, a joint venture between Honeywell’s UOP and Ensyn Corporation, is a provider of RTP(TM) rapid thermal processing, for the conversion of biomass such as wood chips to pyrolysis oil. Pyrolysis oil, a liquid biofuel, can be utilized as heating oil and a source of power for heavy equipment.

The technical agreement envisages testing of Marjestica, Beema Bamboo and Vanshree, fast growing plant species identified by Clenergen Corporation, as sources of feedstock for converting wood chips to pyrolysis oil. The high yield
per acre of biomass will reduce the cost of production significantly and is expected to produce a fuel oil substitute at costs that are at least 25% less than petroleum-derived fuel oils. The project will process 400 tonnes of wood chips per day and produce an estimated daily output of 250 tonnes of pyrolysis oil.

Upon the successful completion of feedstock tests scheduled for August 2010, Clenergen intends to contract Envergent to prepare a Front-End Engineering Design Study for use of the technology for Marjestica, Beema Bamboo and
Vanashree. The site specific designs, once completed, will be the property of Clenergen Corporation.

Commenting on the Agreement, Mark Quinn, Chief Executive Officer of Clenergen Corporation, said

“The future implications of this technology offer a sustainable source of renewable power for both the consumer and captive end users. It allows the company to expand its fuel supply operations in South America, Africa and Philippines to produce wood chips for conversion to heating fuels, renewable power and eventually hydrocarbon fuels, both for
domestic distribution as well as export to developed and industrialized nations.

As an energy provider, Clenergen will be able to convert wood to either chips for biomass power plants, pellets or liquid fuels for co firing with coal or downstream to pyrolysis oil and its subsequent conversion to hydrocarbon fuel for renewable diesel, jet fuel and
gasoline.”

About Clenergen Corporation
Clenergen Corporation is a publicly listed company on the OTC stock market (symbol CRGE). Clenergen offers strategic Clean Energy Generation and sustainable fuel supply projects to address the requirement for renewable and sustainable supplies of power. Clenergen has developed a unique supply of fuel for use with proven gasification, combustion steam, pyrolysis oil and pelleting technologies.

Brogan Fuels is now servicing the Merseyside area through its new office at Ellesmere Port. Sab Hoctor heads up the team.

In addition they have established a specialist lubricant oils division in Buckie led by Martin Reid.