* Private equity group enters JV with trading house Vitol
* Will own refining and storage in Switzerland and Germany
* Europe faces refining sector rationalisation through
By Georgina Prodhan and Ron Bousso
VIENNA, Dec 19 (Reuters) - Private equity giant Carlyle
Group made a surprise foray into Europe's struggling
refining sector by teaming up with Swiss trading house Vitol
to co-own refining, storage and distribution assets
in Switzerland and Germany.
Carlyle, which has $185 billion globally under management,
and Vitol, the world's largest oil trader, launched on Thursday
a 50/50 venture Varo Energy, which bought 45 percent in
Germany's 260,000 barrels per day Bayernoil refinery from
Austrian group OMV.
Varo already owns the 68,000 bpd Swiss refinery Cressier and
storage facilities in the port of Antwerp and Germany.
"Carlyle is committed to the creation of this major new
midstream energy business in North-West Europe. It offers an
exciting opportunity to combine our international oil and gas
experience with the resources we have available in Carlyle's
global energy platform," Marcel van Poecke, Managing Director
and Head of Carlyle International Energy Partners (CIEP), said.
Van Poecke previously ran AtlasInvest, an investment holding
company, which had a minority stake in Varo Energy venture with
Vitol. The stake was bought out by Carlyle. The cost of the
deals was not disclosed. Van Poecke was also one of the early
founders of independent refiner Petroplus, which went bankrupt
two years ago because of heavy debt and low profit.
The bankruptcy marked a steep downturn in the fortunes of
Europe's refining sector. At least a further 10 percent of
Europe's 15 million barrels per day refining capacity is
expected to close by 2020 due to weak demand and increased
competition with modern U.S., Asian and Russian plants.
However, signs are growing that hedge funds and private
equity are entering some struggling sectors - like shipping -
betting valuations have reached their bottom.
"I have a feeling the low asset values and anticipation of
forthcoming rationalisation and capacity closures suggest
opportunities for those with deeper pockets prepared to stay the
course," said Stephen George from KBC consultancy.
"We have said for some time that we thought private equity,
and groups like Carlyle in particular, were likely to be looking
for opportunities," he added.
Vitol made a foray into refining last year through the
purchase of Cressier and rival Gunvor also bought refineries.
Vitol's chief Ian Taylor has said that even though refining
assets could be loss-making at the moment, they offer
flexibility that trading divisions requires.
"This transaction will enable Varo Energy to benefit from
the synergies of consolidation and an extensive storage and
distribution network," Taylor said on Thursday.
George from KBC said he believed both Cressier and Bayernoil
had geographical advantages in Swiss and German markets, which
are usually short products.
"Also, Bayernoil helps Varo to build some critical mass in
the region and possibly to create some trading plays between
refineries in the region," he said.
Earlier this year, Carlyle, which invests in sectors ranging
from aerospace and defence to media and telecoms, made its first
$200 million investment in oil and gas exploration company
Discover Exploration in New Zealand.
"It was a great chance to buy one of the best refineries in
Europe at an attractive price from a motivated seller," a
Carlyle spokeswoman said.
The Bayernoil sale completes OMV's plans to reduce annual
capacity by around 20 percent to around 350,000 bpd with the aim
of raising 1 billion euros by the end of 2014.
OMV said it expected the Bayernoil deal to close next year,
subject to the non-exercise or waiver of pre-emption rights by
the existing co-shareholders, and merger clearance.
"I will be interested to see if there are any pre-emptions
here - it will depend on the price agreed with Varo. If it's
relatively low, it might tempt one of the other existing
partners to up its stake," said George.
OMV will continue to operate three refineries in Schwechat,
Austria, Burghausen, Germany and Petrobrazi, Romania.
"The filling station business in Germany remains an
important business area for OMV. Therefore, the transaction with
Varo Energy contains contractual arrangements for the future
supply of the OMV retail stations in Germany," it said.