Monday, September 26

Australia Shell fuel owner Viva to pay $201 mln for convenience chain

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Viva Energy Group Ltd, owner of the Shell service station chain in Australia, plans to buy the convenience stores on its sites from Coles Group Ltd, giving it a bigger convenience store network than arch rival Ampol Ltd.

Viva, which also runs Australia’s second-largest oil refinery, will break a long-standing lease agreement and pay the grocer A$300 million ($201 million) for the 710 Coles Express outlets on its property, the companies said in separate statements on Wednesday.

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The agreed deal reflects the impact of years of fuel retail disruption on two of Australia’s biggest companies. For Viva, it presents an opportunity to broaden customer engagement ahead of an expected demand recovery and transition to electric vehicles, while supermarket operator Coles gets out of a non-core business.

Fuel sales in Australia have dipped since COVID-19 restrictions kept people home, then again in 2022 when Russia’s invasion of Ukraine sent energy prices soaring. Coles Express pre-tax profit fell 37.3% to A$42 million in the year to June, Coles reported last month, citing COVID-19 and the war.

“For all fuel operators the last few years, during COVID, have been challenging times with restricted travel, and of course the Ukrainian conflict has led to a surge in energy and oil prices,” Coles Chief Executive Steven Cain said in a call with journalists .

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“Viva expects that fuel volumes will increase as the year goes by,” he said.

The deal will also help Coles improve its environmental credentials by cutting off a revenue stream linked to fossil fuels.

“From a Scope 3 point of view this will be positive for Coles,” Cain said, using the term for carbon emissions indirectly generated by a business.

Viva, 45% owned by Netherlands-based energy giant Vitol SA , in a statement said it expected demand for traditional fuels to remain strong “well into the next decade.”

CEO Scott Wyatt on an analyst call said “the opportunity to evolve and transform this business is as strong as ever.”

Shares of Viva rose 5% in morning trade, against a 1% decline on the broader market, while Coles’ share price was flat. Shares of Viva rival Ampol were down 2%.

($1 = 1.4928 Australian dollars) (Reporting by Byron Kaye in Sydey, Sonali Paul in Melbourne and Himanshi Akhand in Bengaluru; Editing by Shinjini Ganguli and Christopher Cushing)

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