Bulked-up Ampol won’t wait for EV policies

Z energy

Ampol is not waiting for the federal government to implement policies to encourage the transition to electric vehicles (EV) as it seeks to use the increased bulk and expertise from its proposed $1.9 billion acquisition of Kiwi petrol retailer Z Energy to accelerate the shift.

New Zealand and many other countries have strong incentives to encourage a faster uptake of electric vehicles but the federal government has been slow to follow suit and during the 2019 election campaign said Labor’s electric vehicle sales targets would destroy the weekend and tradespeople’s livelihoods.

Ampol chief executive Matt Halliday said he expected electric vehicle prices to continue to fall and this would increase the incentive for road users to switch by making them more competitive with petrol-engined cars.

But he said the solution needed to be much broader than just EV incentives, and cited the need for charging stations to be as ubiquitous as petrol stations, so owners could charge at home, at work and on the road.

“I think the policy framework is always important but I think what’s most important is businesses likes ours – Z and Ampol – are taking active steps,” Mr Halliday said after announcing the takeover.

“It’s incumbent on us to take a leadership position for our customers. That’s what we are doing independently, and we think we will be better able to do it together.”

Ampol shares jumped 5 per cent to $30.66 in early ASX trade after the announcement and ended the day up 2.6 per cent.

Mr Halliday said Ampol was confident it could fund the deal mostly from debt. He said the company had discussed the idea of replicating Ampol’s move last year to spin off its Australian retailing sites into a real estate trust to raise cash, and would look to raise $600 million via a hybrid security issue with “significant equity credit”.

Ampol last year raised $682 million by selling 49 per cent of its Australian real estate into a REIT with Charter Hall and Singapore’s GIC. The company said it would also sell its existing New Zealand retail business, Gull, to help ease regulatory approvals.

Ampol and Z announced earlier that they had entered into a binding agreement to acquire Z for $NZ1.97 billion ($1.86 billion), following weeks of due diligence and negotiations between the two companies.

RBC Capital Markets’ analyst Gordon Ramsay said he estimated a spin-off of Z’s sites would yield about $NZ150 million while the sale of Gull – purchased by Ampol in 2017 for $NZ340 million – could yield net proceeds north of $NZ400 million.

Mr Ramsay said the deal should be earnings per share and cash flow positive from 2023, with annual cost savings and synergies of $NZ60 million to $NZ80 million from fuel procurement and overheads, and additional benefits for Ampol’s refining, trading and shipping businesses from the looming closure of New Zealand’s last refinery.

“We are positive on this acquisition and believe the Z Energy bid fits well into Ampol’s business model, as both companies are market leaders in their respective home markets,” Mr Ramsay said in a note.

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