5 months ago
31
Spurred by the need for cash to back continuing expansion and wanting to change its debt profile, petroleum marketing company Future Energy Source Company Limited, which trades as Fesco, retired $700 million in bonds, three years ahead of schedule, freeing itself of double-digit financing charges in the process.
The move has also freed up collateral, which previously backed the bonds, but now supports new borrowings tied to the company’s expansion drive.
Fesco redeemed the bond at the end of last December, three years ahead of its maturity date, initially set for December 22, 2027, and requested that the Jamaica Stock Exchange delist the instrument from the JSE Private Market, effective February 24.
The bond paid interest at 11.75 per annum. The loan that replaces it is 2.75 percentage points cheaper, at 9.0 per cent, and has an extended profile. Fesco CEO Jeremy Barnes says the petroleum marketing company negotiated an extension by 18 months to mid-2029.
The 2.75-percentage point difference is expected to yield about $16 million in savings on interest payments, Barnes said. In addition, the new terms allowed Fesco to take on other debt.
Regarding the redeemed debt: “It was a partially secured bond where they were holding a property as a part of the security, and we wanted that property to be free and clear,” Barnes told the Financial Gleaner.
The property now backs a construction loan.
In the quarter ending December, Fesco’s long-term debt was about $1.6 billion, having declined by $68.86 million relative to the similar period in 2023.
The new loan comes as Fesco begins development of its latest project – Fesco Oval – at Spanish Town Road, Kingston. That project represents a $500 million investment for Fesco, Barnes previously reported last year.
The selected contractor, Landmark Construction, is already laying the groundwork for the service station to be erected at the site. The project is scheduled for completion in September, a date that Barnes said still looks feasible.
“Construction is going well. We’re grateful for the construction team, for everybody involved – from the general contractor to the several subcontractors, to our project manager, to our financiers, to our own team at the office. It’s going along on schedule ...,” he said.
In other developments for the company, Barnes said the new Fesgas LPG business appears to be benefiting from Fesco’s brand recognition, as well as the partnership with delivery intermediary 7Krave.
However, “there’s still some work to do” in areas that are unfamiliar with the Fesgas name, he said.
As the Fesgas brand takes root, Fesco reported that during the December quarter, it acquired additional LPG and industrial storage assets to facilitate the business.
As for its core business as a distributor of petrol, the company said its sales grew, but that the additional volumes of fuel did not readily translate to increased revenue, due to the falling prices of fuel supplied to the market.
Sales revenue fell by 3.6 per cent to $7.33 billion in the October-December 2024 period on the back of a 17 to 20 per cent decline in fuel prices.
Additionally, Barnes said Fesco also suffered market fallout subsequent to the passage of Hurricane Beryl last July.
“Generally speaking, we had a slower-than-expected recovery from Beryl. The rain really disrupted night-time activity, especially; plus, people movement and normal activities were severely impacted in October and November,” Barnes assessed.
The company’s bottom line also compressed in the quarter, mainly due to additional costs linked to new service stations coming on stream, namely, Fesco Kitson Town, Fesco Hayes, Fesgas Bernard Lodge and Fesgas Naggo Head.
Earnings in the December quarter plummeted to $87.8 million, compared to $149 million in the prior year. Nine-month profit amounted to $406 million. Barnes said that despite the slowdown in prices, the company had an optimistic outlook due to the increased volumes in sales in both transportation fuels and LPG.
English (US) ·