By NEIL HARTNELL
Tribune Business Editor
The Bahamas Petroleum Retailers Association’s vice-president yesterday said he is “very, very concerned” by a dispute that has left one Esso dealer fearing he has no choice but to “give them back their station”.
Vasco Bastian, himself an Esso dealer, told Tribune Business that all the chain’s operators were asking whether they will be hit with monthly rent increases similar to the $11,200 hike imposed on Paul Hepburn, operator of the Oakes Field gas station by the six-legged roundabout where University and JFK Drives connect.
Mr Hepburn yesterday told Tribune Business he had received no warning about the increase, which was imposed for February’s rental payment that is due this week. Documents seen by this newspaper show the Oakes Field rental rate, with VAT stripped out, increasing by more than one-third or 34 percent from $32,750 in January to $43,950 - an $11,200 rise.
However, Valentino Hanna, general manager for Sol Petroleum Bahamas, subsequently explained that February’s rent invoice also now incorporates the monthly electricity bill - which January’s did not. With the Oakes Field station’s Bahamas Power & Light (BPL) for February standing at $5,707, this means that the actual cost increase faced by Mr Hepburn is $5,493 as he previously paid the electricity bill separately.
That latter, figure, though, still represents a 16.8 percent increase on January’s rent. Mr Hanna said the extra charge was to finance Sol Petroleum Bahamas investment in the installation of solar panels at Oakes Field, and Mr Hepburn yesterday revealed his contract with the petroleum products wholesaler allows it to pass the costs of “any major investment” on to gas station operators if it exceeds $50,000.
Taking out the electricity bill, the net increase in Mr Hepburn’s rent is from $32,750 in January to $38,243 in February. This, though, still represents a significant, or material, increase of greater than 10 percent and comes at a time when petroleum dealers are complaining that fixed price-controlled margins of 54 cents for gasoline and diesel, respectively, leave them unable to cover and absorb multiple cost increases.
Mr Hanna, in an e-mail exchange seen by Tribune Business, urged Mr Hepburn to meet with himself and Sol Petroleum Bahamas to resolve his concerns. “We will be happy to discuss all of the details of this matter with you, in person, at your convenience,” he wrote.
“Please contact either Earla Rahming or myself to let us know when you can be available and where you would prefer to meet. Also, please note that this is the final communication that we will respond to that includes parties external to our contractual arrangement.” When contacted by this newspaper subsequently, Mr Hanna said he was about to go into a meeting at the Prime Minister’s Office and could not talk. Efforts to reach him later were not successful.
Mr Hepburn, meanwhile, told this newspaper he was presently not in the mood to meet Mr Hanna. “I’m not ready for that yet. I’m still very angry,” he said. “I don’t think I’m going to have one in person. I don’t think I’m ready for that yet. I’m still too irate to speak to him in person. I still have to calm down some for that to happen.
“He wrote me, texted me saying I could have easily resolved this matter by calling him.... On the reverse, he could have told me it [the rental increase] was coming and why it was coming. He could have given me that level of respect. I don’t think he did. There was no warning.”
Mr Hepburn, who also operates the Esso gas station at Blue Hill Road and Faith Avenue, also questioned the timing of the rental increase given that dealers were still trying to recover financially from the COVID-19 pandemic and are grappling with an inflexible, price-controlled model that is pushing them into loss-making territory.
“It’s so unfair,” he argued. “He [Mr Hanna] doesn’t see it that way. He thinks it’s justified. That’s why he needs to answer. Is this the right time to be doing something like that. I’m part of a BPRA (Bahamas Petroleum Retailers Association) chat group, and most of the people think it’s unconscionable and ridiculous. It’s unprecedented and ridiculously high.
“I looked at my numbers for 2022. If I don’t have any increase in the margins I will be showing a loss at the end of the year. I’d be at a loss. I will try and see how long I can manage it and see of a margin increase will help, but other than that I will have to give them back their station [Oakes Field]. Whatever is losing money will have to go back.
“Right now they’re putting Oakes Field in a losing position with that high rent. Who do you think will take a station where you have to pay $50,000 a month rent? Once you drill down, no one’s going to want that station.” Mr Hepburn said the solar panel installation was designed to reduce the Oakes Field gas station’s reliance on BPL by switching to renewables, and help Sol Petroleum to access carbon credits, but the transfer has not happened yet.
Oakes Field is the only Esso gas station where solar panels have been installed to-date, which is likely why other operators have not seen a similar increase in their rental rates. “The other stations don’t have that issue yet because I’m the only one with solar panels,” Mr Hepburn said, adding of the rent increase: “It really makes you look at retirement. It’s very stressful.
“We’re seen to be in a position of making money. Because of all the activity they assume we’re making a ton, and they have the right to jack the rent up any time, jack the employees’ wages up any time; jack the cost of security up. BPL is going up and our margins stay fixed. You just cannot deal with that, particularly when you have the volatility of gas.
“When the price goes up, volumes contract. When it went to $7 per gallon last year business dries up. You get 50 percent of the volume you had before. You’re in a loss position and they’re increasing the rent. It’s vexing. I think it’s unconscionable. They don’t want me to make any money. They’re putting me in a loss position and think I’m making bundles. You cannot negotiate with them. Their position has always been: Take it or leave it.”
Mr Bastian told Tribune Business that he was willing to facilitate a meeting between Mr Hanna and Mr Hepburn so that the two sides can seek to resolve their differences internally away from the public spotlight. After that occurred, he said a meeting needed to be held between Sol Petroleum and all its dealers to determine if the wholesaler plans to roll-out solar energy at all the stations and seek to recover its investment from the operators - thereby adding further to their costs.
“Then we can all be abreast of what is going on and the direction that corporate wants to go,” he explained. “It opens up so many other conversations. If they make that investment and pass that investment on to the dealer using increased costs, what is the ultimate goal at the end of the day? What is the end game?
“Can the other dealers anticipate an increase? Will they have these increases across the chain? Is the timing right for it? Should it happen at all? Do they see this as the future of how this brand will look, and is this something the dealers have to absorb now or in two, three or years? Who will it benefit? Will it benefit Esso corporate alone, or will it benefit Esso dealers? Is it a project funded by Esso and we all have to pay for it? There are all sorts of questions.”