Viva Energy, Australia’s largest sharemarket float since Medibank in 2014, can trace its origins to an unlikely punt made by a Swiss oil trader on the run-down, loss-making Geelong refinery in Victoria.

The decision by Viva’s owner, commodities giant Vitol, to pay $3 billion for the refinery and a vast petrol station network was a high-risk strategy. Nearly half of Australia’s refining capacity had shut down in the three years before as company business models crumbled in the face of cheaper imports from giant refineries in Asia.

But on the eve of the fuel company’s $4.9 billion debut on the Australian Stock Exchange, Viva chief executive Scott Wyatt said it had proved to be the right call. The refinery, facing closure when Viva bought it in 2014, is now profitable and a strong contributor to Viva’s earnings thanks to a string of expansions and upgrades.

“You need to take a long-term view on refining in Australia,” Mr Wyatt told The Australian. “It’s the one part of our business that has volatility because of refining margins. So you need to be careful not to take too many short-term actions based on what is happening in the market at the time.”

That pragmatism about the long term and willingness to invest in a fast-changing fuel and convenience market has enabled Viva to lock in $2.65bn of investor support, split between cornerstone and retail investors, with the company issuing shares at $2.50, albeit at the bottom end of its price range.

“Our investors set a really tight range and we’re very happy with where we’ve landed,” said Mr Wyatt. “It’s always about getting the right balance between the quality of investors and the right price in the market and we’re positioned to start life as a public company with the right sort of value and the right sort of investors to take this business forward.”

Retail investors make up 22 per cent of the register while cornerstone investors took $1.2bn of stock, with the rest sold to other institutions in the past few days. Vitol and its partners will retain 45 per cent of the company and have pledged to remain long-term holders of the stock.

The price for the deal — which equates to about 6.5 times Viva’s underlying earnings before interest, tax, depreciation and amortisation — immediately drew comparisons with listed rival Caltex, which trades at about 7.5 times its EBITDA.

However, Mr Wyatt played down any direct comparison between the two energy operators.

“The downstream sector is a highly competitive marketplace, but we very much focus on our strategies and what we’re trying to achieve in our business.”

Caltex urged caution in drawing an immediate comparison between the two operators, given their different assets and strategies.

“Clearly Viva is not exactly the same type of company we are,” Caltex chief executive Julian Segal told The Australian. “Viva is a big producer and wholesaler of fuel, but they don’t have any retail business to speak of because that is run by Coles.”

The Caltex boss said it was “a good thing” for Australian sharemarket investors to have greater access to listed players in the fuel market.

“One of the issues that we’ve always had at Caltex is that we’re the only quoted, listed company of our sort,” said Mr Segal. “It’s always very difficult for analysts when they don’t have a comparison. It will give analysts and shareholders a much better handle on how to compare.”

A third listed player may also appear next year after Woolworths confirmed it was mulling a potential initial public offering of its petrol refining business, following the collapse of its planned service stations sale to BP.

Woolworths said last week that 125 Caltex sites would be added to its 638-site network of petrol stations, with the retailer also starting a long-term wholesale food supply deal to more than 700 Caltex convenience stores.

Mr Segal said the Woolworths float would also get good support if it proceeded.

Extracted from The Australian