Galp open to separate partners for retail and refining

Galp is considering separate partners for its retail and refining businesses after the collapse of a proposed partial merger with Spain’s Moeve, the Portuguese energy group’s co-CEOs told ECO/Capital Verde. The move keeps open consolidation options in two core businesses with different strategic needs.

Co-CEO João Diogo Silva said Galp’s priority is to preserve the “strategic merit” of any future deal. In retail, the company wants a partner “clearly focused on the Iberian Peninsula and the customer”, while in its industrial business it is looking for scale, competitiveness, complementarity and some acceleration in the energy transition.

Those two components are “perfectly separable and not necessarily with the same partner”, Silva said. Co-CEO Maria João Carioca added that it would be “very strange” to already have a list of potential partners ready to activate on the same day Galp ended negotiations with Moeve after what she described as an intense and committed process.

Asked why no agreement was reached with the Spanish rival, Silva said only that the final commercial terms did not meet Galp’s investment rationale and capital allocation discipline. Separately, after Portugal’s environment and energy minister said a windfall tax on oil companies had been the right decision following Galp’s 68% rise in third-quarter profit, Carioca said the company had paid an effective tax rate of 43% in the quarter and warned that measures of that kind affect long-cycle investment decisions.

Silva said Galp has invested an average of €340 million a year in its Sines operations and that the industrial unit posted negative free cash flow in 11 of the past 20 years. He said it is easy to tax Sines in strong years, but harder to remember the years when the company invested and lost money there.

Government ‘keeping a close eye’ on Galp’s future partnerships

The Government says it will continue to monitor Galp’s stated intentions to form partnerships in the refining and retail sectors. Following the oil company’s announcement of a 68% rise in profits in the third quarter, the Minister for the Environment and Energy believes that the decision to levy a tax on excessive profits is further vindicated as “the right one”.

Maria da Graça Carvalho was speaking to journalists on the sidelines of the launch of the Cities’ Climate Passport, as part of the third National Meeting of the Covenant of Mayors for Climate and Energy, which took place on Monday in Torres Vedras.

Following the collapse of the agreement for a partial merger between Galp and Moeve, and the oil company’s statement that it remains open to new partnership opportunities, the minister says she will “monitor” “future developments”. “We will have to remain attentive to future partnerships”, she says.

The minister indicates, however, that she “welcomes” Galp’s intention to spin off its retail and refining businesses. “It will be useful because it will allow the State to focus its attention on the refinery”, she argues, noting that there had been “fears” that the country’s sole refinery might slip out of national control. She also views “very favourably” Galp’s stated intention to continue investing in green products, notably green hydrogen and advanced biofuels.

Faced with the 68% surge in Galp’s profits, and given that this lends weight to the Government’s intention to tax oil companies’ windfall profits, Maria da Graça Carvalho agrees: “Yes, that decision had already been taken. It is a bill currently before the Assembly of the Republic and shows that the Government made the right decision.” “We hope it will be passed by the Assembly of the Republic soon”, she concludes.

Originally published at Eco.pt