Fesco to double gas station network, positions for eventual stock market listing
Four years after market entry, the Jamaican-owned gas marketing company Fesco plans to virtually double its network to 20 retail gas stations from eleven, and introduce the brand to Kingston where gas sales are most voluminous.
The expansion will be executed over two years at a cost of approximately $600 million.
Future Energy Source Company Limited, the operating company for Fesco, plans to develop six new service stations, and convert the other three to the Fesco band by enticing dealers that operate under rival brands to switch.
"In 2018, the company plans to open three locations and another three in early 2019," said Fesco shareholder and chairman Lynden 'Trevor' Heaven.
"It costs between $60 million and $100 million to set up a gas station," Heaven explained, adding that the investment would be financed jointly by Fesco and the franchise holder in the co-development deals.
Fesco will put enough space in the design of the six new locations to allow for the eventual addition of electrical charging stations for hybrid and electric cars.
The locations are planned for Kingston, Ocho Rios, St Catherine, Hanover and Clarendon. Heaven noted that urban centres are high-volume sales points and important to generate scale and brand recognition.
"We have to have a Kingston location as a sort of flagship in order to drive volumes and presence in the market," he said.
JSE listing in future
Heaven said that Future Energy's medium-term vision includes listing Fesco on the Jamaica Stock Exchange, but added that the company needed to achieve more growth before going public - central to which was the expansion to 20 stations.
In early December, Fesco celebrated its fourth anniversary. Heaven reasoned that the company has always met or exceeded its fuel volumes.
"We are profitable, and can only grow by increasing our volumes," he said.
Heaven did not disclose Fesco's market share. The outspoken past president of the Jamaica Gasolene Retailers Association has long championed the need for home-grown marketing companies, while protesting the treatment of retailers by multinational marketing companies. The large three multinationals include Rubis, Total and Texaco, which hold around 76 per cent market share.
The other 24 per cent is shared by locals, including Petcom, Unipet, Fesco and Epping.
"I always articulated this vision to start a marketing company," said Heaven "because there is really no need for these multinationals."
Heaven, who once operated a gas station branded under the Texaco flag, got his chance to form a marketing company in 2013. Five gas station owners and operators banded together to form Fesco.
Heaven, Hugh Coore, Errol McGaw, Junior Williams and Trevor Barnes are equal partners, each holding 180 shares in Future Energy Source Company Limited, which was incorporated in February 2013.
The Jamaican Government was a player in the market until it sold off Petcom to Phoenix Fuels last year for around $2.3 billion. However, Petroleum Corporation of Jamaica, which owned Petcom, is in the process of hiring a consultant to study a possible market re-entry, as first reported on Wednesday.
Heaven is advising the Government that if it decides to get back into the business, it should do so through acquisition and mergers rather than through a start-up operation.
"I would suggest consolidation of local entities as the best option. So take ownership of two or three local entities to make one large brand to compete against the three major multinational entities," he said. "I do not think getting into the market as a new company is the way to go."