Shell to Sell Schwedt Refinery Stake to Prax Group

Shell said on Friday it had agreed to sell its 37.5% stake in the PCK Schwedt oil refinery, which supplies most of Berlin's fuel, to Britain's Prax Group, attempting to draw a line under its co-ownership of an asset majority-owned by Russia's Rosneft.

Shell (SHEL.L) restarted efforts to sell the stake earlier this year after the German government put the local units of Rosneft (ROSN.MM), which owns 54.17% of the refinery, under trusteeship in the wake of Russia's invasion of Ukraine.

Rosneft remains the legal owner of the stake, but was stripped of its ability to exert control.

Shell said the planned sale of its stake was part of efforts to reduce its global network of refineries to core sites that are integrated with its trading hubs and chemicals activities.

It expects the deal to close in the first half of 2024, pending regulatory clearance and pre-emption rights by Rosneft and Italy's Eni (ENI.MI), which owns 8.33% in PCK Schwedt.

Privately-owned Prax, which describes itself as a "British multinational, independent global energy conglomerate," has been on a buying spree in 2023 which has included Hurricane Energy, the OIL! petrol station network, as well as a minority stake in a refinery joint venture in South Africa.

Owned by its founders -- CEO Sanjeev Kumar Soosaipillai and executive board member Arani Kumar Soosaipillai -- and their family trusts, Prax said it made core profit (EBITDA) of $147.6 million on sales of $10.5 billion in the year to Feb. 28, 2023, up from $77.2 million and $9.9 billion the previous year.

PRE-EMPTIVE RIGHT

Sanjeev Kumar Soosaipillai said in a statement that the deal marked another key milestone as Prax looks "to diversify geographically and enhance our European market presence."

Prax, whose founders started out buying a single petrol station in 1999 when in their twenties, did not reply to a request for comment on whether it might also be interested in Rosneft's stake.

Rosneft, which had previously exercised its pre-emptive right when Shell tried to sell its Schwedt stake to Vienna-based Alcmene in 2021, was not available for comment.

Law firm Malmendier Legal, which represents Rosneft's interests in Germany, said that Shell would now have to inform Rosneft of "the pre-emption situation," adding: "Rosneft has already signalled its interest in the past."

A spokesperson for Germany's Economy Ministry declined to comment on Shell's move, saying the sale to Prax showed that PCK Schwedt was perceived as an interesting company and acted as a stable player on the market.

Eni declined to comment when asked whether it was willing to exercise its pre-emptive right.

Berlin in September extended the trusteeship of Rosneft's stake in the refinery due to the lack of progress in talks with the Russian oil firm over how its exit from Germany's fourth-largest refinery could be arranged, sources said at the time.

At the same time, Poland was pushing Germany to force Rosneft out to clear the way for investors like Polish refiner PKN Orlen (PKN.WA), which had expressed interest.

(Reporting by Christoph Steitz and Riham Alkousaa; Additional reporting by Vera Eckert, Christian Kraemer, Vladimir Soldatkin and Francesca Landini; Editing by Miranda Murray, Mark Potter and Alexander Smith)