Caltex weighs carbon price as switch to Ampol backed

PERRY WILLIAMS

MAY 14, 2020

The Australian

Caltex has introduced a shadow carbon price for the first time as it weighs emissions exposure on its investment decisions while Ampol petrol stations are set to return to suburban Australia after a two-decade absence after shareholders backed a name change.

After an $8.8bn takeover bid was abandoned in April due to COVID-19 volatility, Caltex said it was internally testing a range of carbon scenarios as it weighs whether to restart its Lytton refinery in Brisbane later this year.

“One of the things we have done is introduced a shadow carbon price into our strategic and planning framework, and that will ensure the impacts of carbon pricing do play a role in our future decision making,” interim chief executive Matt Halliday told its annual general meeting on Thursday.

Both Caltex and rival Viva Energy have indicated government support may be needed to ensure the ongoing livelihood of their refineries amid soft margins and a demand slump.

A growing number of Australian corporates are factoring in carbon prices into their investment decisions in the expectation government policies will eventually follow as the nation faces pressure to cut its pollution levels.

“It helps us to understand, as we’re making capital allocation calls, what the impact of future carbon pricing will be on those decisions,” Mr Halliday told The Australian. “Clearly as we’re looking at making capital evaluation decisions on Lytton and everywhere else, the shadow carbon price plays a role.”

Caltex has brought forward and extended planned maintenance on Lytton to offset losses and will only restart the facility when the crude margin outlook recovers. Mr Halliday said the company was in talks with state and federal governments about Lytton amid COVID-19.

“We expect that the demand impacts are going to be prolonged and we are going to need to see the economic conditions that are suitable to make the restart decision.”

Shareholders overwhelmingly approved Caltex’s move to rebrand as Ampol over the next two years with 99.6 per cent in favour.

The first Ampol sites will appear in Sydney and Melbourne in the second half of 2020 with a national rollout in 2021 and use of the Caltex name officially shelved by the end of 2022.

The transition is expected to cost Caltex $165m. However, the transition should ultimately save Caltex $18m-$20m in annual trademark licence fees, which is in addition to cost-savings previously announced by the company.

Caltex stations are now run by ASX-listed Caltex Australia, which was using the brand name under license from Chevron.

However, the company said in December the US oil and gas giant – which just spent $425 million acquiring Puma’s network of Australian petrol stations – had terminated their licensing agreement.

The move triggered both the need to rename the corporate entity, as well as the return of the “iconic” Ampol brand to Australian highways and street corners.

The Ampol name in Australia dates back to 1936, when the Australian Motorists Petrol Company was formed in response to Australians’ concerns about petrol prices and allegations of transfer pricing by foreign oil companies.

The Ampol brand name was phased out after a merger with Caltex in 1995.

Caltex Australia had, however, maintained the brand for its Singaporean operations, which couldn’t operate as Caltex as Chevron was using that brand in most markets outside Australia.

Caltex also said it was unsure if either of its takeover suitors, Alimentation Couche-Tard or EG Group, would return when business conditions recover. Couche-Tard had said it would consider rebooting a tilt once Covid and economic ructions ease.

“We don’t know whether either EG or Couche-Tard will come back and approach us again with a takeover proposal,” chairman Steven Gregg told the AGM. “We’ve just left it that they will get on with their life and their business as we will with ours. While the management ultimately focused on running the business well during the takeover, there’s no question with clear air we will have more focus on delivering under the Ampol name in the future.”

Caltex shares were last down 1.9 per cent to $24.40.