Tesoro agrees to buy 4 gas stations on Garden Island
Kauai Petroleum Co. has agreed to sell its four company-owned gas stations, a storage facility at Nawiliwili Harbor and trucking operations to San Antonio-based Tesoro Corp., which operates Hawaii's largest refinery.
Kauai Petroleum, founded in 1948, is a supplier for Union 76. With the deal, Tesoro would be making its first entry into the Kauai market. The company has 33 branded stations on Oahu, Maui and the Big Island. Thirty of those are company operated and three are run by independent dealers.
"I'm glad we're being acquired by a major oil company," Kauai Petroleum General Manager Baltazar Manibog said yesterday. "Part of the reason why the owners wanted to sell is the margin on fuel as a (supplier) is diminishing. To keep up with the changes in the petroleum industry, you have to have more resources and deeper pockets, and we're just a small company."
Kauai Petroleum has nine full-time employees and nine part-timers, according to Manibog.
"They'll offer employment to our present employees they want to retain," he said.
Tesoro, which operates six refineries in the western United States and has more than 475 branded gas stations, said it was interested in Kauai Petroleum because it allows Tesoro to expand and capitalize on its operations in the state.
"Since ... Kauai is the fourth-largest fuel market in Hawaii and has the fastest-growing jet-fuel demand, we believe this acquisition will provide another strategic outlet for our gasoline and jet-fuel production from our (94,000-barrel-a-day) Kapolei facility," said Bruce Smith, chairman, president and chief executive of Tesoro.
Tesoro said it expects to complete its due-diligence review of Kauai Petroleum's assets within 30 days. The acquisition needs to be approved by Kauai Petroleum's three dozen shareholders before it can close.
Manibog said he was confident a majority of shareholders would approve the deal, and Tesoro said it expected the sale to close by the end of next month.
Kauai Petroleum has been hurt by the state gas-cap law that went into effect Sept. 1. The law linked the price of fuel in Hawaii to prices on the mainland and limited the margin that goes from the refinery to the service station.
However, state lawmakers voted this week to indefinitely suspend the gas cap law and allow gasoline companies to charge whatever the market will bear. Gov. Linda Lingle yesterday signed the legislation to suspend the cap, effective immediately.
"With the gas cap and all the changes in the petroleum industry, and the increased government regulations, the owners of the company decided that we should just exit the petroleum industry," Manibog said. "When the gas cap went into effect, I did lose some accounts. And when you lose accounts, your volume decreases."