August 3, 2021

Cepsa: the challenge of combining investment and dividend | Economy

Cepsa: the challenge of combining investment and dividend | Economy



We are committed to the execution of the IPO, going to be listed on the Spanish stock market, as a natural and strategic step for Cepsa, which will provide better access to the capital markets to support its financial flexibility. " Musabbeh Al Kaabi, current CEO of the oil company on behalf of Mubadala and future president of Cepsa when he is quoting, was commissioned to put the operation in luck.

Then came the details of the IPO, collected in the issuance prospectus that was sent to the National Securities Market Commission (CNMV), in which the sovereign fund of the emirate of Abu Dhabi will enter an "approximate amount" of 2.322 million euros if, as it is taken for granted, it places among institutional investors 28.75% of the capital of its Spanish subsidiary. This would leave Mubadala with 71.25%, enough to keep sending. The placement will be made between national and international institutional investors (it is expected that there is no investor with more than 5%) and the company is given until October 16 to close it with the intention of listing on October 18.

One of the diaphanous messages sent to potential investors is that the company is committed to continue taking strategic decisions both in Spain and abroad (Asia, Africa and America) to grow in size. "The success of our strategy depends in part on our ability to grow through acquisitions, investments and joint ventures. [joint venture]", Says the company in the placement brochure.

The challenge, in short, is to combine investments and dividends. On the one hand, Cepsa intends to approach an ambitious investment plan, which continues to be more than a continuity of the one already underway. Its objective is to strengthen the exploration and production area and become strong in petrochemicals. In that sense, it has already invested 1.3 billion in exploration in Abu Dhabi, and plans to allocate another 900 million in the San Roque refinery (Cádiz) to produce lighter products with less carbon. In addition, it will invest another 450 million in various actions in petrochemicals.

And, on the other, Cepsa proposes a no less ambitious dividend policy. One of the attractions of the plan in its return to the parquet floor is the route it intends to give to the shareholder remuneration: 450 million charged to the 2019 fiscal year; by 2020 it will rise to 475 million and, at least, increase by 5% in 2021 (almost 500 million) to then apply a progressive policy. The distribution of the dividend will be paid 50% in December of the corresponding year and another 50% in June of the following year. In addition, it is committed to satisfy 160 million as a final dividend of 2018 that would be paid in June 2019. The company maintains that the dividends will not necessarily be linked to performance or profitability and may be paid with a charge to benefits or any type of free reserves. provision.

Sale of Medgaz

Before returning to the parquet, it will have sold Mubadala its share of 42.09% of

Medgaz, the company that manages the gas pipeline linking Algeria with Spain, for 500 million, which will be used for this investment / dividend combination. The agreement provides that if Mubadala leaves Cepsa, the pipeline returns to the Spanish firm.

The case is that the offer has appeal. As also the price band (between 13.1 and 15.1 euros per share). Mubadala, and analysts estimate, has been conservative when valuing the company (between 7,010 and 8,080 million) when in the market it had even been valued at almost 15,000 million. Perhaps an exaggerated projection ignited by the rise in the price of oil, which in recent times has exceeded $ 84 a barrel.

Market sources consider that the pricing of the company in the placement is reasonable because, given the need to offer an attractive price for the investor and not to back it up with an excessive one, we must add the 3.2 billion debt that the group carries. This means that the total value of Cepsa is between 10,200 and 11,300 million, more consistent with the fork that the company itself had managed. So things, the new Cepsa star in the largest IPO since 2015 without exceeding Aena. In addition, its capitalization (those 8,000 million) would place it in the middle of the Ibex 35 table (although at the moment it will not be in the index).

Mubadala has designed the operation taking into account that between 2018 and 2022 expected that the growth of GDP in Europe remains around 2%. It also expects oil demand to rise by almost two million barrels per day in 2018, with some deceleration in 2019. Its forecast is that the price of crude oil will average around 70 dollars in this period. On the other hand, it estimates that the demand for fuel for road transport in Europe increases from 7.1 million barrels per day in 2017 to 7.4 million in 2022. At the same time, they recognize that the increase in fuel efficiency and the introduction of the electric vehicle reduce the growth of demand for transport, with a negative impact of 5% in 2030.

Estimates may vary over time. The company recognizes the existence of risks of various kinds that could lead to the company not being able to support investments: currency exchange or interest rates; fluctuations in the price of crude oil, natural gas and derivative products; margin reduction, and political constraints, are some of them.

Global presence

20 countries. The company has 10,243 employees and operations in 20 countries on four continents of exploration and production (E & P), refining, petrochemicals and marketing.

Refine. The company has three refineries in Spain: San Roque (Cádiz), Palos (Huelva) and Tenerife, with a refining capacity of 483,000 barrels per day, 31% of the total for Spain, the second after Repsol.

Alliance. The emirate of Abu Dhabi, through IPIC first and then Mubadala, entered Cepsa in the early nineties of the twentieth century and maintained around 11% until 2011, when it acquired 100%.

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