The second day of gasworld’s ‘Industrial Gases Adding Value to End-Users’ conference got off to a fantastic start, with speakers Iraj Ghorbani, CEO of Delvar Afzar, Linde Lefevre, Branch Manager of Air Liquide in Abu Dhabi, and John Raquet, Managing Director of Spiritus Group, giving insightful presentations on a range of topics.
Iraj Ghorbani gave delegates an interesting introduction to the industrial gases industry in Iran, focusing on its potential as a region and outlining the opportunities arising there.
“The Iranian industrial gases businesses has shown strong growth over the past few years and looks to be growing rapidly over the next 10 years, the Iranian market has essentially grown by an average rate of 10% per year,” he commented.
“The National Iranian Oil Company is considering nitrogen injection in the reservoirs to enhance oil recovery. A sizeable market for a nitrogen plant to provide nitrogen is rapidly growing in the region. There is huge potential here,” he continued.
Linda Lefevre introduced her audience to Air Liquide’s operations in Abu Dhabi, specifically focusing on the make vs buy conundrum gas companies often have to face.
“The supply of high volumes of industrial gases is done ‘over the fence’, this concerns large volumes of industrial gases and energy solutions. Pipeline networks of large on-site plants are designed, constructed, owned and operated by the supplier. These are long term contracts, based on mutual trust and mutual confidence, 15 to 20 year contracts,” she explained.
Looking at the other side of the coin she added, “Why should a customer outsource? Capital investment optimisation – industrial gas production is highly capital intensive for producing such molecules, and more and more we see the customers concentrating on their core business, and outsourcing avoids investing in non-core businesses. There is shared risk in terms of investment, construction and ownership – the customer sees this method as a way of sharing his risk.”
John Raquet was the last speaker of the first session, entitled, ‘Driving Business Opportunity’. He gave delegates an overview of M&A activity, looking at the mergers and acquisitions that have taken place in our industry in recent years, and giving helpful advice concerning the planning a gas company must undertake to be successful in these processes.
“Since 2000, there has been approx 414bn (net) of gas acquisitions made in our industry, just with the top tier players, obviously along the way this includes AGA, Messer and BOC acquisitions and divestments. More acquisitions have taken place at the tier two level, so the likes of SOL in Italy, SIAD in Italy and Messer. The last big deal you’ll recall was when Linde acquired BOC, they paid $17bn at a 10.9 x multiple of EDBITDA, and had to divest a number of businesses due to anti-trust,” he started.
“If you are a gas company here in the Middle East or elsewhere, what do you need to have to hand before you start entering into discussions?” He asked, “Well it is preferred to have a five year set of audited accounts, you need a business or investment plan to justify future cash flow, you need a set of Management Reports, you need to provide access to the management team, you may need to provide a data room – now that’s a task in itself. Generally you need to have an advisor to help you, it could be a bank, it could be a lawyer, it could be both.”
Unfortunately, during the question and answer session a delegate was taken ill, and the conference was put on hold until more was known about his condition.
On receiving the devastating news that the delegate had sadly passed away, the gasworld team decided to bring the conference proceedings to an end, as a mark of respect.
Gasworld will make a further statement in due course.