MIRA
INFORM REPORT
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Report Date : |
17.07.2008 |
IDENTIFICATION
DETAILS
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Name : |
OIL REFINERIES LTD. |
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Registered Office : |
P.O. Box 4, Haifa (31000), Hahistadruth Avenue,
Refineries Area, Haifa Bay HAIFA 2960 |
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Country : |
Israel |
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Financial as on : |
31.03.2008 |
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Date of Incorporation : |
11.8.1959. |
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Legal Form : |
Private
Limited Company |
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Line of Business : |
Oil refiners -
dealing in Refining, Production and Marketing of Crude Oil and its products |
RATING &
COMMENTS
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MIRA’s Rating : |
Aa |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
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Status : |
Very Good |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
name & address
OIL REFINERIES LTD.
(Also known as BAZAN, which is the Hebrew name
initials(
Telephone 972
4 878 81 11
Fax 972
4 878 84 97
P.O. Box 4, Haifa (31000)
Hahistadruth Avenue
Refineries Area, Haifa Bay
HAIFA 2960 ISRAEL
HISTORY
Originally established as a private limited company,
registered as such as per file No. 51-021347-3 on the 11.8.1959.
Subject was
established in order to continue the activities of UNITED REFINERIES LTD.,
which was established in 1938 by the British authorities, following the
acquisition of the activities by the State of Israel.
Originally
established under the name of HAIFA REFINERIES LTD., which changed to the
present name on the 1972, following the erection of the oil refineries in Ashdod
in 1970.
Converted into
a public limited liability company and registered as such as per file No.
52-003665-8 on the 4.12.1990.
By the end of
2005 subject became fully State-owned (after being 74% State-owned).
By February 2007,
the State completed the privatization of subject in 2 stages, the first of
which when it sold subject's operations and assets in the Ashdod Refineries in
September 2006 to the PAZ OIL Group.
In February 2007, the State launched a process selling
all its shares in subject (the Haifa Refineries) to institutional and private investors (see below), through private and
public issuance, in consideration of US$1.57 billion.
SHARE CAPITAL
Authorized share
capital NIS 2,000,000,010.00, divided into -
2,000,000,010 ordinary shares of NIS 1.00 each,
fully issued.
SHAREHOLDERS
Until February
2007, subject was fully owned by State of Israel, through the Ministry of
Energy and Infrastructure, after in February 2006, the State completed the
purchase of the 26% held by THE ISRAEL CORPORATION LTD. in subject, for a sum
of NIS 677.5 million.
In February 2007 the State
launched a 2 stages bid to sell all of the State's shares in subject. The first
stage included the sale of 44% of the shares to institutional
investors, according to a company value of US$ 1.279 billion. The bid was
opened only to major financial institutions, both from Israel and from abroad.
The bid marked demands of 3.5 times the offered
shares. Half of the shares were allocated to foreign investors, and 181
institutional bodies in all.
In the 2nd stage of the bid, the control in subject (the
reminding 56%) was offered to the public. 2 Groups acquired the controlling
shares, as reflects in the present ownership structure:
1.
ISRAEL
CORPORATION LTD., 45.08%, a public company whose shares are traded on
the Tel Aviv Stock Exchange, controlled by the OFER
BROS. Group, headed by Sami Ofer and his son Idan Ofer,
2. PETROLEUM CAPITAL HOLDINGS LTD. (PCH), 15.76%, fully owned by ISRAEL PETROCHEMICAL ENTERPRISES LTD. (IPE), a public company whose shares are traded on
the Tel Aviv Stock Exchange, which is 61% controlled
by MODGAL INDUSTRIES (99) LTD., controlled by David Federman, Jacob Gutenstein,
Alex Pasal,
3. Shares are
also traded on the Tel Aviv Stock Exchange.
Until the end of June 2008, PCH was fully owned by SCAILEX CORP. LTD.
By 1.7.2008 a transaction was finalized, where Ilan Ben-Dov (via companies he controls), who
owned 36% in PCH via SCAILEX, took full
control in SCAILEX and in
parallel SCAILEX sold its 36% in PCH to IPE, in consideration of
NIS 1.144 billion.
Another move concerns the ownership structure of IPE:
ALDER Group, owned by Leonid Navzelin, holds 25% in MODGAL, which controls IPE.
According to the move, Leonid Navzelin will sell his shares in MODGAL,
therefore will not be in the controlling nucleolus of PCH, and MODGAL will be
owned by the existing shareholders (David Federman will
hold 50%, Jacob Gutenstein -25% and Alex Pasal – 25%). Mr. Navzelin will receive
an option of 15% as financial investor in IPE.
In July 2008, an agreement was signed
according to which subject will acquire from IPE 50% in CARMEL OLEFINS LTD., reaching 100%,
in a shares swap transaction: IPE will receive in return 20.53% of subject's
shares valued at
NIS 1.23 billion. Upon the completion of the transaction, subject will sell its
12.3% stake in IPE, in consideration of US$ 40 million.
Hence, after the completion of the transaction, subject will be held as
follows:
1.
ISRAEL
CORPORATION LTD., 35%,
2.
IPE, 33%,
The public,
32%.
DIRECTORS
1. Yossi Rosen,
Chairman,
2. Uzi Netanel,
3. Ms. Dafna
Schwartz,
4. Yachin Cohen,
5. Avisar Paz,
6. Ran Croll,
7. Ms. Nehama
Ronen,
8. Uri Slonim.
GENERAL MANAGER
Yashar
Ben-Mordechai.
BUSINESS
Oil refiners -
dealing in refining, production and marketing of crude oil and its products
according to a franchise received to build, operate and maintain installations
and auxiliary plants for refining oils and minerals.
Subject
operates in 3 divisions/ sector: Refinery, Trade and Petrochemical.
The Haifa
refinery (the sole one after the Ashdod refinery was sold during 2006), is
capable of producing 180,000 barrels per day, or 9 million tons of crude oil.
75% of the
products are intended for the local market, rest is for export.
89%
of sales are to the local market, to all oil companies (main ones are PAZ OIL,
DELEK GROUP, SONOL ISRAEL and DOR ALON), and 11% are for export.
95% of purchases are imports.
Among local
suppliers: TELDOR WIRES AND CABLES, LAMICO, APPLIED CHEM, SIG INDUSTRIES, LEAD
CONTROL, MARLOV, INTERSHIVOOK CO., FCON MANUFACTURING AND CONTRACTING DAROM,
ELCON MAMAB, etc.
Operating from
an owned large compound on an area of 1,800,000 sq. meters in Hahistadruth
Avenue, "Refineries Area", Haifa Bay, Haifa. Also operating from rented offices in Azrieli Center, Tel Aviv.
Having 707
employees, as well as 155 temporary and/or part-time employees and further 64
employees posted at subsidiary CARMEL OLEFINS.
MEANS
Consolidated
B/S shows:
US$ (thousands)
31.12.2007 31.03.2008
ASSETS
Current assets:
Cash and cash equivalents 259,325 41,858
Derivatives & investments in fair value 119,548 285,775
Customers 394,470 469,185
Other debtors 84,029 121,628
Income tax 10,153 26,004
Stock 1,042,545 1,161,466
1,910,070 2,105,916
Investments and long term loans 147,717 207,876
Fixed assets, net 978,412 1,005,136
Intangible assets and deferred expenses ___22,924 ___22,140
3,059,123 3,341,068
========= =========
LIABILITIES
Current liabilities 889,456 1,132,224
Long term liabilities 1,369,864 1,406,201
Equity __779,803 __802,643
3,059,123 3,341,068
========= =========
Current market
value US$ 1,393.5 million.
In November
2007, subject published a prospectus offering bonds to the public, raising
total of NIS 1,816 million.
In the end of
April 2008, subject published a draft prospectus to the public, offering
shares, bonds and options.
In the
beginning of 2008 subject's Board decided to invest US$ 1.1 billion, of which
US$ 850 million intended for expansion and amelioration of the refinery
facilities for crude oil. The rest of the sum will be dedicated for the
environment.
There are no
charges registered on the company's assets.
ANNUAL SALES
Consolidated Statement of
Income
NIS
(thousands)
Year ended on the 31.12
2005 2006 2007
Income 25,755,629 26,952,222 21,339,364
Gross profit 2,475,759 1,733,311 1,495,651
Operating profit 2,141,644 1,391,264 1,081,772
Profit before tax income 1,920,797 2,799,014 914,386
Net profit 1,442,331 2,003,033 692,566
========= ========= =========
Notes
1)
2006 income
statement figures include the one-time profit from realizing the sale of the
Ashdod refinery during 2006.
2)
Apart from the 1Q08 subject reports are presented in US$.
Consolidated
income for the first 3 months of 2008 were US$ 1,885,696,000, making a gross
profit of US$ 41,035,000, an operating profit of US$ 15,835,000 and a net
income of US$ 2,093,000.
1stQ08 income
represents 74% increase comparing to the parallel period in 2007, which is
mainly due to the sharp rise in oil prices, and general increase in sales.
Subject ended
1stQ08 with US$ 5.9 million loss before tax income, attributed to higher costs,
also due to the operation of new facilities. It ended with a net profit after a
tax relief of US$ 8 million (ended with US$ 11.34 million net profit in
1stQ07).
OTHER COMPANIES
Among subject's
subsidiaries:
GADOT
BIOCHEMICAL INDUSTRIES LTD., 23.15%, biochemical acids and salts manufacturing,
a
public limited company, shares are traded on the
Tel Aviv Stock Exchange, current market value US$ 27.47 million.
BASIC
LUBRICANTS HAIFA LTD., 50%, lubricant oil manufacturing.
ISRAEL
PETROCHEMICAL ENTERPRISES LTD. (IPE),
12.3%, a
public limited company, shares are traded on the
Tel Aviv Stock Exchange, current market value US$ 151.6 million. Holds 50% in CARMEL
OLEFINS LTD., manufacturers and marketers of raw materials for the plastic and petrochemical industries.
GADIV
PETROCHEMICAL INDUSTRIES LTD., 100%, aromatic solvent products manufacturing.
UNITED OIL
EXPORT CO. LTD., 25%, ships refueling.
TANKER SERVICES
LTD., 25%, operating leased tankers.
PAMA (PITUACH
MASHABEI ENERGIE) LTD. 25%, energy resources development.
BANKERS
Bank Leumi LeIsrael Ltd., Central Branch (No. 800), Tel Aviv.
Bank Hapoalim
Ltd., Central
Branch (No. 600), Tel Aviv.
Israel Discount
Bank Ltd., Main Branch (No. 010), Tel Aviv.
The First
International Bank of Israel Ltd., Haifa Bay Branch (No. 004), Haifa.
CHARACTER AND REPUTATION
There are
several lawsuits against subject, including environmental related ones, though
none of them seem to be significant.
Apart from
that, nothing unfavorable learned.
Subject was
declared as a monopoly in its field by the Commissioner for Trade Restrictions.
Subject is
considered the largest industrial company in Israel. In past decade subject is
ranked 5th largest exporter and in 1998 the Export Institute granted subject
the "outstanding exporter" award for exporting oil for US$ 3 billion
in the previous ten years.
ISRAEL CORP., subject's main shareholder, is Israel's largest holding
company. Current market value US$ 12.1 billion.
Both the OFER BROS.
and the FEDERMAN Groups are considered to be among the largest investment and
industrial groups in Israel.
In January
2002, Israel government decided to privatize subject by issuing parts of its
shares for trading on the Tel Aviv Stock Exchange and to sell the control (51%)
to strategic investors. As part of
the plan, all land and equipment will be leased to subject for 49 years, paying
the government a fee of US$ 3-12 million per year.
Following a bid
published by the State for the Ashdod Refineries (the oil refinery situated in
Ashdod), in August 2006 and in September 2006 PAZ OIL LTD. headed by Tzadik
Bino Group, won the bid, in consideration of NIS 3.5 billion.
In February 2007 the State sold its shares (100%) in
subject, in consideration of US$1.57 billion. The shares were offered to the
public through the Tel Aviv Stock Exchange. A group of investors
acquired the control in subject (see above SHAREHOLDERS). The Swiss GLENCORE Group held 20% of PCH (and 80% by SCAILEX).
In November 2007, the State did not
authorize the participation of the GLENCORE Group in the control of
subject, since GLENCORE is an international concern which has
interests in Arab states.
In March 2008, SCAILEX signed an agreement with GLENCORE, to acquire
their stake (20%) in PCH, in consideration of US$ 57.2 million, and PCH reached
100% in SCAILEX.
In May 2007
subject reported that its 50% subsidiary CARMEL OLEFINS LTD., did not win the
tender for the control in the Turkish petrochemical companies PETKIM, a bid it
took part in jointly with a Turkish partner (the winning bid was of US$ 2
billion).
In July 2007,
it was reported that subject is preparing to enter the marketing oil and petrol
products directly to institutional clients, competing with the 4 controlling
oil/petrol vendors: PAZ OIL, DELEK GROUP, SONOL ISRAEL and DOR ALON.
That is seen as
the initial step towards becoming the 5th main actor in the petrol
stations market, in which subject is entitled to reach up to 7.5% of the market
share, according to the regulations set forth by the government.
In August 2007,
subject's Board approved a US$ 50 million investment for the upgrade of the
largest refinery facility of crude oil, designed -by 2009- to increase
production and improve utilization.
In November
2007, the Board also decided on a strategic plan, designed to achieve higher
growth rate within next years, expand lines of activities and improve
competitiveness, while improving environmental and safety aspects. Estimated
volume of the plan is US$ 1.1 billion (US$ 270 million for environmental and
safety).
In November 2007, subsidiary GADIV signed a memorandum
of intent for the acquisition of 50% of a Chinese company, manufacturers of
solvents, for
US$ 33.5 million.
As part of the Group's expansion strategy,
in January 2008, 50% subsidiary
CARMEL OLEFINS signed an agreement to acquire 49% of a Dutch petrochemical company,
DOMO POLYPROPYLENE BV according to a company value of € 40 million, and an
option to purchase the reminder of shares for € 10 million until the end of
2016.
In January 2008, it was reported that subject signed
annual contracts with local oil
companies SONOL ISRAEL and DOR ALON, for selling oil in volumes of hundred
millions with each. Agreement was also signed with PAZ, although it owns the
rival ASHDOD REFINERIES.
In April 2008, a strategic move started for the merger of 50% subsidiary
CARMEL OLEFINS into subject
(after subject will reach 100% - see SHAREHOLDERS above). The purpose of the
deal is to exploit synergy effects in the Group.
In July 2008, subject signed an agreement to acquire 31.25% of MERCURY
ISRAEL, providers of fueling services for aircrafts in the Ben Gurion
International Airport, in consideration of NIS 2.705 million. MERCURY controls
50% of fueling services in Israel's main international gateway. The major
shareholder in MERCURY is MERCURY AIR GROUP of the USA.
SUMMARY
Good for trade engagements.
Maximum unsecured
credit recommended up to several million US$.
FOREIGN EXCHANGE
RATES
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Currency |
Unit
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Indian Rupees |
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US Dollar |
1 |
Rs.42.78 |
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UK Pound |
1 |
Rs.85.51 |
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Euro |
1 |
Rs.67.90 |
RATING
EXPLANATIONS
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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>86 |
Aaa |
Possesses an extremely sound financial base with the strongest
capability for timely payment of interest and principal sums |
Unlimited |
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71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
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56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
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41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
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26-40 |
B |
Unfavourable & favourable factors carry similar weight in credit consideration.
Capability to overcome financial difficulties seems comparatively below
average. |
Small |
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11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
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<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
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NR |
In view of the lack of information, we have no basis upon which to
recommend credit dealings |
No Rating |
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This score serves as a reference to assess SC’s credit risk
and to set the amount of credit to be extended. It is calculated from a
composite of weighted scores obtained from each of the major sections of this
report. The assessed factors and their relative weights (as indicated through
%) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment
record (10%)
Credit history
(10%) Market trend
(10%) Operational
size (10%)