Grangemouth analysis: Who would want to buy plant?

IF THE petrochemical plant and, potentially, the refinery, close, likely buyers could come from two groups – Europe’s integrated oil and gas majors such as the French firm Total and Italy’s ENI, or petrochemical specialists such as Germany’s BASF or Wacker, Finland’s Neste, Belgium’s Solvay or the US-headquartered Huntsman Corporation.

'Grangemouth is not commercially viable as things stand'. Picture: Ian Rutherford

But it is hard to see why another firm might want to buy the beleaguered plant when Ineos will have spent a long time considering all the options, including selling it off. If disposing of the facility was a realistic prospect, Ineos would have taken steps to avoid alienating the workforce and weakening its bargaining power.

The bottom line is, Grangemouth is not commercially viable as things stand: a fact that has been underlined by recent events – Ineos would be sending out a very different message to potential purchasers, not advertising the fact the facility has become a millstone around the company’s neck. It might be argued, however, that the shutdown of the refinery, only the second in its 40-year history, and the public spat with Unite, whose 2008 strike caused the previous shutdown, have not weakened Ineos’s position when it comes to the government, or governments.

Although any loans or grants would need to satisfy EU guidelines on state assistance, the firm is certainly doing a good job at scaring the politicians.

As it stands, PetroChina, which already owns 50 per cent of the Grangemouth facility, looks like the only real contender for a possible sale.

Although the company would face the same financial challenges as any other, an acquisition could form part of a canny strategic move with an eye on the longer term.

• Douglas McNeill is investment director at Charles Stanley stockbrokers.