OMV Looks to Sell Turkish Unit Petrol Ofisi

 

OMV is focusing on growth in its upstream business, which covers crude oil and natural gas production, and its integrated downstream business, covering refining, sales and distribution.

 

Petrol Ofisi, with its retail station network, no longer fits this strategy, the company said.

 

OMV made no comment on the price it is seeking for the unit.

 

It was not yet in talks with potential buyers nor had it received any expressions of interest for the business, a spokesman said.

 

"In such a heavily regulated market, it is very difficult for a foreign company to survive," a source with knowledge of the matter told Reuters. "The most likely interested parties would be locals."

 

Turkey has some of the steepest fuel prices in Europe but heavy taxes and other regulations leave little margin for profit for the 70 different retailers.

 

Central Europe's biggest energy group said it was in the process of selecting advisors to sell the unit, which operates nearly 1,800 petrol stations in Turkey and last year generated sales of around 10 billion euros.

 

In past deals, OMV's top advisors have included JP Morgan and Deutsche Bank. Law firm Dentons advised the group when it increased it stake in Ofisi in 2010.

 

It could take 12 to 18 months until a deal was closed, the OMV spokesman said.

 

OMV will be the second foreign company to sell its fuel distribution business in Turkey following Total's exit last year, through the sale of some of its Turkish retail activities to diversified local conglomerate Demiroren.

 

Demand for refined products saw years of robust growth in Turkey, thanks to rising economic output and cheap credit that facilitated car sales. While demand has stalled over the past few years, the long-term outlook is buoyant, analysts say.

 

But despite promising growth prospects, market competition and price caps absorb profits. Market watchdog EPDK sometimes sets a cap for the price of refined products at the pump, leaving little room for retailers to raise the price.

 

Like its rivals, OMV has had to cope with slumping oil prices. It was forced to write down around 2.8 billion euros last year, outweighing 2014's headline operating profit of 2.2 billion euros.

 

Chief executive Rainer Seele plans to unveil OMV's latest strategy on February 18, which analysts hope will shed light on investment plans and expansion projects. They are also awaiting more details on a planned asset-swap with Gazprom in Russia.

 

OMV has slashed ambitious investment plans in recent months, and analysts expect they will have to cut them further.