HELPE reviews existing operations with an eye to improving returns

Greece’s biggest refiner, Hellenic Petroleum (HELPE), in which the State remains the chief shareholder, is reviewing existing holdings and activities as part of a rationalization effort designed to boost the group’s competitiveness, according to reports. The recently installed management in HELPE, with Efthymios Christodoulou as president and Petros Kavoulakos as managing director, has inherited a broad portfolio of activities, which it has found lagging in terms of the return on capital employed that would have made the group truly strong and competitive. The new management is against the old strategy of «investment for its own sake,» Kavoulakos says. HELPE’s return on capital employed now stands at 7 percent and has set a target of 10 percent, which would bring it up to the level of other corporations of similar size. In this framework, all investments, old and new, are coming under extensive review, which does not preclude the possibility that some of them may even have to be shed. The most problematic ones appear to be in the Balkan neighborhood, particularly the OKTA refinery in the Former Yugoslav Republic of Macedonia (FYROM) which has developed into a lossmaker. The Montenegrin subsidiary also presents problems. The review, which also concerns domestic operations, also includes the possible diversification of investment into sectors showing high returns and having a strategic interest. Power production is one, and HELPE is currently building its first plant, with a 400-megawatt (MW) capacity, in Thessaloniki and is considering another. Priority is being given to hydrocarbon exploration and production and expansion of activity in natural gas. HELPE has a 35 percent stake in the Public Gas Corporation (DEPA) and Christodoulou has said the group is exploring the possibility of cooperating with Spain’s Gas Natural, which is expected to be DEPA’s strategic investor. But HELPE’s interest in possible partnerships in the natural gas domain does not stop at the Spanish company, officials indicate. A basic point of reference in the new management’s strategy is a reduction in operating expenses – which have been rising steeply – but without any plans for lowering staff numbers, either through dismissals or voluntary retirement schemes. Christodoulou is categorical. «High operating costs do not mean dismissals,» he says, but adds that «something has to be done.» He says the mentality that prevails in the group is a big problem. «For many years, some viewed the group as a machine that prints and issues money, and this will have to stop,» he says. In all, improving the group’s operating expenses and the return on capital employed are seen as issues of top priority for setting the group on a healthy financial footing and improving its profitability, which is always affected by the level of international refining margins – an extremely volatile exogenous factor. HELPE’s labor unions last week mobilized against the government’s sale of an 8.2 percent stake to the Latsis group’s Paneuropean Oil & Industrial Holdings, which thus increased its total share to over 33 percent. Management reacted by describing the 48-hour strike, which ended on Sunday, as illegal, abusive, causing large economic losses to the corporation and damaging its credibility.

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