Essar plans to lease sites from forecourt operators to meet its ambitious plans to operate from 100s of locations across the UK in the next six years.
Essar currently operates 70 sites, 65 of which are run by dealers, with the remaining five leased from owners under an arrangement that it launched just over a year ago. It now wants to roll out that lease model at scale.
The initiative will give forecourt owners a monthly income over a guaranteed 15 to 20 years and a reprieve or exit from their business if they want to retire, invest elsewhere, or delay developing their sites themselves.
The property owners will have the security of dealing with a global group which owns a refinery in Stanlow and is committed to investment. The recently rebranded EET Fuels side of the business is planning to make its Stanlow refinery the UK’s first low carbon process refinery.
In some cases, Essar says it would consider keeping the owner on to run the business, but says the more common model would be to have contract managers to run the sites and to employ site managers and staff.
The initiative gives Essar the opportunity to expand into the UK forecourt retail sector at pace without the capital outlay of purchasing sites, although it says it will invest in and develop the forecourts to benefit local neighbourhoods.
At the end of the lease agreement the owner of the site will be under no obligation to renew with another contract, giving the opportunity to potentially walk away with a site that has been developed and will have appreciated in value, says Essar.
Essar plans to expand from its traditional heartland around the Stanlow refinery in the North West and the Midlands, where the group has an equity stake in terminals at Kingsbury and Northampton.
Phillip Brodie, head of retail acquisitions at Essar, says that the company recognises that demand for forecourts is high. “We offer three principal points of value to forecourt operators to lease their sites: a good competitive monthly rental return, and that will be secure, long-term income; backed by the Stanlow refinery; from a business that is well set up to make speedy decisions.”
He adds: “We are bringing a proposition which is unique to the marketplace and we are seeing a lot of interest from dealers for the lease offer, with a strong pipeline of additional sites coming through in the next few months.
“At the moment our current mix of sites is 85% dealers and 15% lease sites, but we see this switching to 80-85% lease and 15% dealer sites. So the growth we see coming will be through our lease business.”
Currently Essar has arrangements with Morrisons Daily, Londis and Spar at its leased sites, but says it is avoiding an “identikit” approach and will consider the merits of every fascia before choosing one for a particular site.
Underpinning its mission to be “Driving community convenience” it will also look at the needs of each neighbourhood before deciding on which food to go and coffee brands to include, whether to have seated restaurant areas, and whether to install services such as laundry, Amazon parcel lockers, jet washing and even electric vehicle charging. “Some oil companies stick with one brand across all the estate because they want economies of scale. We are approaching things differently and are looking to serve our communities,” says Brodie.
“We will be taking on a mix of both community and transient sites. We want to be part of the community and are working with different partners to see which ones work in specific areas,” he adds.
Technology will have an important role to play. Automated fuel ordering, electronic shelf edge labelling and self-service checkouts will be the norm. There are also plans to introduce a pay at pump facility. The sites will benefit from differentiated fuel grades such as super diesel, Essar 99 and AdBlue fuel being available from the pump, as seen at the Essar flagship Lea Gate Service Station site in Preston, which opened last summer.
Brodie believes that EET Fuels’ green credentials will help attract forecourt operators to its business proposition and motorists to its sites. It has been investing heavily to be the world’s first decarbonised refinery by 2030, removing two million tonnes of CO2 emissions a year, by using hydrogen to run its refinery. It will also have enough capacity to supply major industrial plants in the North West. “That means something to the dealer and the travelling motorist,” he says.
Its sister company EET Hydrogen is at the forefront of the low carbon hydrogen economy in the UK. It is the first industrial producer of hydrogen at scale to decarbonise a refinery, and heavy industry in the North West. “The next fence we are approaching for hydrogen is for HGVs. Hydrogen will be a key player in the fuel mix requirement for the transport sector going forward,” says Brodie.
The Stanlow refinery was re-branded from Essar Oil (UK) to Essar Energy Transition Fuels (EET Fuels) this year to reflect its transition to net zero. Essar retail forecourt sites keep the Essar branding and there are no plans to change this in the foreseeable future.
