Connect with us

Business

Aegean Marine Petroleum Network under shareholder pressure

The Committee for Aegean Accountability expressed ‘severe concerns’ regarding shareholder value destruction caused by poor financial and operational management.

Admin

Published

on

5a3afe3f1a379 1513815615

The Committee for Aegean Accountability (CAA) on Wednesday delivered a letter to Yiannis Papanicolaou, Chairman of the Board at New York-listed Aegean Marine Petroleum Network (Aegean), identifying concerns.

CAA comprises of a group of shareholders collectively owning more than 12% of the outstanding shares of Aegean.

In short, the letter expressed severe concerns regarding the shareholder value destruction caused by poor financial and operational management.

It also highlighted problematic board conflicts and corporate governance deficiencies while signalling an intent to nominate four independent directors to be elected at Aegean’s 2018 annual meeting.

The full text of the letter is as follows:

December 20, 2017
Aegean Marine Petroleum Network Inc. 
Akti Kondyli 10 
185 45, Piraeus, Greece 
Attention: Mr. Yiannis Papanicolaou, Chairman of the Board

Dear Mr. Papanicolaou:

We are writing to inform you that a group of concerned and long-term shareholders representing more than 12% of the outstanding shares of Aegean Marine Petroleum Network Inc. ("Aegean Marine" or the "Company") have formed The Committee for Aegean Accountability (the "Committee").  We have made every effort in numerous private communications spanning the past eight months to engage in a productive dialogue with the board of directors (the "Board") to remedy the chronic failures in corporate governance, financial management and operations that have impaired shareholder value for far too long. It has unfortunately become clear that the Board is more concerned with entrenching itself and management rather than working with us in good faith regarding the changes required to improve the Company's governance and performance. We were both surprised and disappointed by your recent statement that you are considering reducing the Board to four members from its existing size of seven, which would severely disenfranchise shareholders and suppress their ability to seek due representation on the Board. We are therefore left with little choice but to publicly express our concerns and intention to nominate four highly qualified director candidates for election at the Company's 2018 annual meeting of shareholders (the "2018 Annual Meeting").

IMPAIRMENT OF SHAREHOLDER VALUE
We have been shareholders in Aegean Marine for several years, over which time the share price has dramatically underperformed any relevant comparison. In addition, since becoming public in 2006 shares have declined by 75%, underperforming the Russel 2000 Index by more than 200%. The valuation of the Company has also reached an all-time low in relation to its net assets, trading at less than 0.3x tangible book value and well below a conservative estimate of liquidation value. Aegean Marine has chronically traded at steeply discounted multiples of cash flow and net asset value since at least 2010, driven by persistent concerns about corporate governance and management competence due to extensive related party transactions and value destructive capital expenditure projects.

CORPORATE GOVERNANCE: FROM BAD TO WORSE
Since its origins as a public company, Aegean Marine's corporate governance has been troubling. The Company was majority owned and controlled by its founder Mr. Melissanidis who, according to the Company's October 25, 2007 registration statement, "has been subject to a number of proceedings, including criminal cases," some of which involved "sham bunkering transactions intended to avoid customs duties and taxes" for which he was indicted but later acquitted. In addition, the Company engaged in various related party transactions with entities controlled by the founder. In acknowledgement of these potential conflicts, the Company sought to mitigate them at the time of the IPO by limiting the founder's influence per the "Framework Agreement" (F-1/A ex. 10.30 filed 11/3/06). This had the effect of precluding the founder from either joining the seven member Board or naming directors that would serve as Board Chairman or Chairman of the Audit and Nominating Committees. In addition, the Company's principal executive offices responsible for all financial and control functions were to be maintained in the U.S.

Given this provenance of already weak corporate governance, it is stunning that shareholders today find themselves with even less aligned representation on the Board. The present shareholder base is comprised nearly entirely of U.S. holders and the founder no longer retains any ownership stake whatsoever (more on this below), yet shareholders are represented by only four seated directors, three of whom were appointed by the founder at the time of the IPO and shortly thereafter. Mr. Fokas is one of these original board members, as well as the Company's General Counsel, and continues to have close ties to the founder, recently acting as the deputy chairman of the Greek gambling monopoly (OPAP) which is partly owned by Mr. Melissanidis. Furthermore, you rightly pointed out in your recent correspondence with us that the majority of current Board members have been with the Company since the IPO, and no new board members have been added since 2009. Considering the value destruction shareholders have endured over the past decade, we hardly view this as a positive.

Notwithstanding the complete turnover of Aegean Marine's shareholder base, the related party transactions persist as the Company still conducts significant business with entities controlled by the founder such as Aegean Oil. In addition, not only are the Company's executive functions, including financial and control, no longer based in the U.S., they are actually housed in the very same offices in Piraeus as the founder's other entities. Incredibly, our review of the Aegean Oil website and corporate magazine revealed that even today Aegean Marine is very much considered to be a subsidiary or sister company despite zero common ownership. But most concerning is the fact pattern related to the transaction last year in which the Company purchased the remaining stake owned by Mr. Melissanidis for $100MM at $8.81 per share. Aegean Marine's use of cash for this transaction caused the company to violate its borrowing base certificate only a few months later, and the subsequent liquidity crunch was cured by a dilutive convertible bond offering which drove the share price down 16%. Within nine months of the transaction the share price had declined by 48%, and today it sits 54% lower.

Finally, per the most recent proxy voting guidelines on director accountability provided by Institutional Shareholder Services ("ISS"), Aegean Marine's governance structure includes seven out of the eight listed "problematic provisions" that inform voting recommendations.

The Company's governance structure and Board composition are artifacts of its origins, when its founder exerted control and influence due to his majority economic stake. While even maintaining that status quo would have been entirely inappropriate given the Company's present ownership, in fact shareholder representation on the Board has degraded and inherent conflicts of interest have grown.

CHANGE IS NEEDED NOW
We have already identified and proposed the addition of highly qualified Board candidates with expertise spanning global physical bunkering markets, strategic management, fuel distribution operations, financing and capital markets. Not only will these candidates restore accountability at the Company, their skillsets are particularly well-suited to the challenges and opportunities the Company faces. This includes improving the financing structure and reducing costs of capital, rationalizing the fixed asset base, instilling capital discipline, and effectively positioning for the significant industry changes prompted by IMO 2020 regulations expected to take effect only two years from now.

The financing structure and financial management of Aegean Marine desperately require change.  The Company's inefficiency in accessing its cheapest sources of funds, the borrowing base facilities, has led to a reliance on sources of capital that are much higher cost and are now effectively inaccessible.  Harmonizing commercial and financing decisions will enable qualifying borrowing base collateral at closer to stated advance rates of 80-95 cents on the dollar compared to the 50-55 currently achieved. This could generate potentially hundreds of millions of dollars of low cost liquidity that can be used to retire high cost convertible bonds and shares, or to expand volumes and successfully manage the higher fuel prices expected with IMO 2020.

The Company's capital expenditure projects have destroyed an immense amount of shareholder value. For example, had Aegean Marine simply not constructed the Fujairah terminal, we believe the share price would be well more than double its present level based on the current enterprise value and cash flow valuation multiples. Not only does capital discipline need to be instilled to avoid such calamities, but the current sprawling fixed asset base should be opportunistically rationalized.  Creating an internal entity to manage the Company's logistics assets and charge market rates within the organization will inform "own vs. lease" decisions. Members of management have even described ports in which the cost of operating the Company's owned vessels is millions of dollars higher than that of chartering third party barges. In the context of the Company's $570MM of fixed assets and exceedingly high cost of capital, the opportunity for accretive asset sales is significant.

Finally, we expect IMO 2020 will dramatically increase the complexity of the marine fuel logistics industry and provide opportunities to leverage Aegean Marine's extensive network into improved financial returns. Accordingly, repositioning the asset base ahead of this change is of critical importance. As you know, one of our recommended director candidates is arguably more qualified than anyone in the world to guide these efforts.

The Committee's Schedule 13D filing and notice to nominate four director candidates for election to the Board at the 2018 Annual Meeting will be forthcoming, in accordance with applicable securities laws and the Company's Bylaws. As always, we remain willing to discuss these issues with you at any time. Rest assured, however, we will take whatever actions we may deem necessary to ensure that the best interests of all shareholders remain paramount. 

Sincerely,

The Committee for Aegean Accountability

About the Committee for Aegean Accountability
The Committee for Aegean Accountability is a group of five long-term shareholders collectively owning more than 12% of the outstanding shares of the Company and seeking to unlock value on behalf of all shareholders through enhanced corporate governance practices and Board refreshment.

The Committee, led by Tyler Baron, has retained Olshan Frome Wolosky LLP as its legal advisor in connection with its engagement and discussions with the Company.

Investor Contact: 
Tyler Baron
The Committee for Aegean Accountability 
[email protected]

Legal Contact: 
Andrew M. Freedman 
Olshan Frome Wolosky LLP 
[email protected]

Source: The Committee for Aegean Accountability

Published on the Manifold Times:
21 December, 2017
8:20 am Singapore time

Other Aegean news:

Local suppliers question Aegean Marine Petroleum’s exit of Singapore physical market

Continue Reading

Legal

Helmsman on Inter-Pacific Petroleum legal battle: When ignorance meets fraud

Lester Ho, Associate Director of law firm Helmsman shared his timely key takeaways on the recent case of Goh Jin Hian against defunct Singapore bunker supplier Inter-Pacific Petroleum.

Admin

Published

on

By

Lester Ho Helmsman

Lester Ho, Associate Director of multi-disciplinary law firm Helmsman LLC shared his timely key takeaways on the recent case of Goh Jin Hian v Inter-Pacific Petroleum when the Appellate Division of the High Court in Singapore overturned the High Court’s finding that Mr Goh’s breach had caused IPP to incur the losses:

The collapse of a company often prompts a search for blame, especially where the downfall stems from deliberate misconduct such as fraud that appears avoidable in hindsight. Unsurprisingly, a company’s directors are frequently perceived as the root of the problem and become prime suspects in the inevitable witch hunt for accountability. The recent case of Goh Jin Hian v Inter-Pacific Petroleum Pte Ltd (in liquidation) [2025] SGHC(A) 7 is a timely reminder of a director’s duties as well as the legal risks in the event of breach.

The downfall of Inter-Pacific Petroleum Pte Ltd (“IPP”) is well-documented. The Maritime Port Authority of Singapore suspended IPP’s bunker craft operator licence after discovering that the mass flow meter of a bunker tanker chartered by IPP had been tampered with. Concerns raised by IPP’s banks in relation to its business led its non-executive director, Mr Goh Jin Hian, to discover that it was heavily indebted to the banks. It was also discovered that the facilities had been used on sham sale and purchase transactions.

IPP was subsequently placed in compulsory liquidation, and Mr Goh was sued for breach of his director’s duties. It was alleged that the sham transactions could have been prevented had Mr Goh discharged his duties and that he was therefore responsible for IPP’s losses. At first instance, the High Court found that Mr Goh had breached his duty of care and ordered him to compensate IPP for approximately US$146 million in losses (Inter-Pacific Petroleum Pte Ltd (in liquidation) v Goh Jin Hian [2024] SGHC 178). Among other things, the High Court found that Mr Goh was in breach because he was entirely ignorant of IPP’s cargo trading business.

The Appellate Division of the High Court upheld the finding that Mr Goh had breached his duty for having been unaware of IPP’s cargo trading business. However, it overturned the High Court’s finding that Mr Goh’s breach had caused IPP to incur the losses. The Appellate Division found that IPP failed to prove that Mr Goh would have uncovered the sham transactions even if he had discharged his duty. Accordingly, Mr Goh was absolved of his liability to compensate IPP.

There are two broad takeaways from the decision.

The first takeaway is that every director, both executive and non-executive, is held to a minimum standard of care. This standard requires directors to take reasonable steps to put themselves in a position where they can guide and monitor the management of the company. Put simply, ignorance of a company’s business is no defence, even for non-executive directors that are not involved in everyday operations. Accordingly, although Mr Goh was a non-executive director, the fact that he was unaware that IPP was carrying on the business of cargo trading meant that he was in breach of his duties.

It may be surprising that a director could be entirely unaware of an important part of a company’s business. But the reality is that modern day companies have become commercial behemoths with complex and layered operations that makes it all too easy for directors (especially non-executive directors) to delegate oversight over critical business decisions and lose visibility of what their companies do. It is therefore important for directors, regardless of their formal titles, to ensure that there is a robust chain of reporting and command such that they have sufficient knowledge of the company’s operations to discharge their duties.

The second is that, while the law imposes high standards on directors, it does not demand unrealistic standards. As noted, the Appellate Division accepted that Mr Goh had breached his duties for having been unaware of IPP’s cargo trading business. However, it was not persuaded that, even if Mr Goh had discharged his duties and had been properly informed of IPP’s activities, the sham transactions could have been prevented. IPP was affected by what the Appellate Division considered a “deep-seated fraud” that had gone undetected even by IPP’s auditors. In the circumstances, it was far from clear that Mr Goh could have prevented the loss even if he had discharged his duty.

However, just because the law does not expect directors to be superhuman does mean that directors can afford to be complacent. Directors would still do well to take reasonable and diligent steps to ensure that they have a good grasp of the company’s operations and engage competent professionals (e.g., auditors) to help surface risks that they may otherwise miss. In a sense, Mr Goh avoided liability not because his breach was minor, but because the extent of the fraud perpetrated meant that the gravity of his breach cannot be said to have caused the loss. In other words, a less sophisticated or extensive fraud might have yielded a drastically different outcome – directors should take heed.

A timeline organised list of events preceding the current development of Inter-Pacific Petroleum has been recorded by Manifold Times below:

Related: Singapore: Ex-Director of Inter-Pacific Petroleum wins appeal against former company

Related: Singapore: Ex-Director of Inter-Pacific Petroleum appeals High Court decision
Related: Singapore: Former auditors of Inter-Pacific Petroleum undergo private oral examination at court
Related: Singapore: Civil trial between Inter-Pacific Petroleum and Dr Goh Jin Hian begins
Related: Former Singapore Director of Inter-Pacific Petroleum sued for USD 156 million
Related: Inter-Pacific Petroleum creditors authorised to fund lawsuit against former Director
Related: New Silkroutes under investigation over possible breach of Securities and Futures Act
Related: Judicial Managers considering to take former Singapore Director of Inter-Pacific Petroleum to court
Related: Singapore: Inter-Pacific Group receives winding up order from High Court
Related: Singapore: Inter-Pacific Group files for winding up application at High Court
Related: MPA revokes Inter-Pacific Petroleum Pte Ltd bunker supplier licence
Related: Co-heads of Trade and Commodities Finance for Asia-Pacific leave SocGen
Related: Inter-Pacific Group, Inter-Pacific Petroleum to hold creditors’ meet
Related: NewOcean detains Singapore-flagged bunker tanker “Pacific Energy 28”
Related: SocGen lawsuit against NewOcean Petroleum dropped, party to counterclaim
Related: MPA revokes Inter-Pacific Petroleum bunker craft operator licence
Related: Magnets on MFMs: Trial starts for former bunker clerk of “Consort Justice
Related: First suspect charged over MFM tampering in landmark case
Related: With nearly $180 million of debt, IPP proposes interim judicial management
Related: Inter-Pacific Group, Inter-Pacific Petroleum under judicial management
Related: Magnets on MFMs: “Consort Justice” crew pleads ‘not guilty’ to tampering charge
Related: IPP responds to temporary suspension of bunker craft operator licence
Related: MPA temporarily suspends IPP bunker craft operator licence
Related: Singapore: Bunker Cargo officer, crew face charges over alleged MFM tampering

 

Photo credit: Helmsman
Published: 13 June, 2025

Continue Reading

Alternative Fuels

China’s SDARI receives AiPs for alternative-fuelled ships including ammonia bunker vessel

CSSC’s SDARI obtained Approval in Principle (AiP) certificates from classification societies ABS, RINA and LR for four vessel designs including a 50,000 cubic metre ammonia bunkering vessel.

Admin

Published

on

By

China’s SDARI receives AiPs for alternative-fuelled ships including ammonia bunker vessel

China State Shipbuilding Corporation’s (CSSC) Shanghai Merchant Ship Design and Research Institute (SDARI) recently obtained Approval in Principle (AiP) certificates from several classification societies for four vessel designs. 

Among the four is a 50,000 cubic metre (m3) ammonia bunkering vessel, which received AiP certificate from American Bureau of Shipping (ABS). 

It integrates liquid ammonia transportation and bunkering functions and can meet the long-distance transportation needs of liquefied gas goods such as liquefied petroleum gas (LPG) and liquid ammonia. 

The ship is equipped with three IMO Type A independent liquid cargo tanks, and uses zero-carbon ammonia fuel to drive the main engine and generator, meeting the IMO greenhouse gas emission reduction strategy and actively responding to the latest greenhouse gas intensity (GFI) requirements of the 83rd meeting of the IMO Marine Environment Protection Committee (MEPC 83). 

The entire ship is equipped with two independent 1,000 m3 deck liquid ammonia storage tanks, taking into account the ammonia fuel endurance requirements under multi-cargo loading and unloading, significantly improving operational economy and flexibility. 

In response to the needs of bunkering operations, it is specially equipped with a retractable bow thruster, side thruster and adjustable propellers to meet ABS’ DPS-1 notation and adapt to the complex port environment of bunkering operations. 

China’s SDARI receives AiPs for alternative-fuelled ships including ammonia bunker vessel

Meanwhile, a dual-fuel LNG/hydrogen-powered Ultramax bulker design and a 30,000 GT Roll-On/Roll-Off Passenger (ROPAX) ship designed to sail in the Mediterranean Sea received AiP certificates from RINA. 

SDARI also received AiP from Lloyd’s Register (LR) for a 113,000 dwt ammonia dual-fuel liquid cargo ship. The optimised propulsion system, specially configured with an ammonia dual-fuel power system and a wind-assisted propulsion system, is expected to save more than 10% energy, especially at low speeds. 

 

Photo credit: Shanghai Merchant Ship Design and Research Institute
Published: 12 June, 2025

Continue Reading

Alternative Fuels

GCMD-BCG survey: 77% of shipowners, operators view net zero as high strategic priority

Survey also found the use of bio-blended bunker fuels has more than doubled to 46% and methanol use has increased from 3% to 6% but uptake of more nascent technologies such as ammonia remains limited.

Admin

Published

on

By

GCMD-BCG survey: 77% of shipowners, operators view net zero as high strategic priority

The Global Centre for Maritime Decarbonisation (GCMD) on Wednesday (11 June) said a survey found 77% of shipowners and operators now consider achieving net zero a high priority in their strategy, up from 73% two years ago.

This was among the findings of the second edition of the Global Maritime Decarbonisation Survey, jointly conducted by GCMD and Boston Consulting Group (BCG) between October 2024 and February 2025.

The survey gathered 114 responses from shipowners and operators across a range of vessel types, fleet sizes, and regions. While the survey was conducted before the International Maritime Organization’s (IMO) MEPC 83 session in April, its findings already reflected sustained commitment across the industry. The outcomes of MEPC 83—introducing new regulatory targets and incentives—are expected to reinforce these ambitions and further accelerate momentum.

Survey results show that 60% of respondents have now set net-zero targets (up from 54%), while the use of bio-blended fuels has more than doubled to 46%, and methanol use has increased from 3% to 6%. However, uptake of more nascent technologies—such as ammonia, wind-assisted propulsion systems, solar panels, super-light ships, and air lubrication—remains limited.

The survey also reflects the industry’s desire for policies and regulations to create a level playing field. Nearly three-quarters of respondents identified either compliance measures or financial incentives as the most important policy objectives. A level playing field will ensure that early adopters are not competitively disadvantaged on cost and stakeholders with limited resources can benefit from financial support to overcome economic barriers.

The survey also gathered insights from key bunkering ports, whose support is critical for maritime decarbonisation. Most surveyed ports have roadmaps and dedicated teams focused on initiatives to facilitate maritime decarbonisation, and all of them, namely Port of Antwerp-Bruges, Port of Long Beach, Port of New York and New Jersey, Port of Rotterdam, and Port of Singapore, offer green incentives. 

A significant concern for ports, however, is the lack of demand certainty from shipping companies for both low-carbon fuels and Onboard Carbon Capture Systems (OCCS). This ‘chicken-and-egg’ dilemma hinders ports to take on the investment decision to develop the requisite infrastructure, though the recently introduced GHG pricing mechanism is expected to strengthen demand signals for low-carbon fuels.

Dr Sanjay C Kuttan, Chief Strategy Officer of GCMD, said, “Positive developments in maritime policy, especially from the IMO, which further tighten limits on GHG emissions, along with the increased ambitions voiced by survey respondents, are encouraging signals. Greater cooperation with the ports and pertinent stakeholders across the various value chains will be required to address challenges across the broader ecosystem. With the right investments and collaborative actions, the maritime industry can chart a course to a future where sustainable decarbonisation and commercial success can co-exist.

Anand Veeraraghavan, Managing Director and Senior Partner of BCG, said, “It is encouraging to see that even in the face of global uncertainties, the maritime industry’s decarbonisation ambitions remain intact and steadfast. The recent MEPC outcomes mark a pivotal step forward, sharpening demand signals with incentives for exceeding compliance goals and penalty mechanisms for shortfalls. Now is the time for the industry—both ships and ports—to build on this momentum.

Note: The second edition of the GCMD–BCG Global Maritime Decarbonisation Survey report can be viewed here

 

Photo credit: Lukas Blazek on Unsplash
Published: 12 June, 2025

Continue Reading
Advertisement

OUR INDUSTRY PARTNERS



Trending