The past 12 months has seen an unprecedented period of wholesale fuel price volatility, largely owning to global pricing issues associated with the Russia-Ukraine conflict and a relatively tight supply-demand balance following the Covid-19 pandemic. During this time, ACAPMA members have reported significant cash flow challenges with many highlighting the growing opportunity cost associated with the need to lock up scarce working capital in the bank guarantees needed to accommodate fuel supply agreements.
These issues resulted in ACAPMA re-examining the Petrol bonds market given the relatively ‘patchy’ nature of the market and the limited number of products currently available in the marketplace.
“We concluded that there would likely be some industry benefit in exploring the option of releasing a new Petrolbond product under the banner of ACAPMA’s insurance partnership with the Marsh McLennan Group”, said ACAPMA CEO Mark McKenzie.
“Petrolbonds can be used in lieu of a bank guarantee for fuel transactions. Unlike bank guarantees, businesses are typically not required to provide collateral for a Petrolbond meaning that there is less demand on working capital – a Petrolbond is an insurance product that indemnifies the fuel seller in the event of payment default”, said Mark.
The other principal benefit of using a Petrolbond in lieu of a bank guarantee is that petrol bonds generally don’t impact the borrowing covenants (or gearing ratios) of a fuel business, whilst still providing the fuel seller with the surety needed to guard against customer default.
Petrolbonds are widely accepted in the market with businesses such as Ampol, Chevron, Viva Energy, Liberty and Z-Energy (in New Zealand).
“ACAPMA is pleased to advise that Marsh McLennan has finalised work on its’ Petrolbonds offering and the product is immediately available for fuel businesses in Australia and New Zealand”, said Mark.
“In addition to the Petrolbond product and noting continuing pressure on the working capital of fuel retail businesses, Marsh McLennan has also recently released a Leasebond product for our industry”.
While Leasebonds are more generally known in industries like construction, Marsh McLennan have developed a product that is specifically tailored to the needs of fuel retail businesses. This product can be used as an alternative to providing a bank guarantee for a new lease or lease renewal, thereby freeing up working capital for more productive use.
To learn more about Marsh’s Petrolbond and Leasebond products, or to compare the pricing and coverage of your existing product, simply contact one of the specialist members of the Marsh McLennan team below:
National Manager ACAPMA
Herman Cabral
E herman.cabral@marsh.com
M 0499 302 169
NSW
Damien Brien
E damien.brien@marshadvantage.com
M 0498 871 464
W.A.
Ursula De Bruyn
E ursula.debruyn@marshadvantage.com
M 0427 179 624
S.A.
Nicole Dienelt
E Nicole.a.dienelt@marshadvage.com
M 0410 423 675
QLD
Ed Watson
E ed.watson@marshadvantage.com
M 0414 797 389
Far North QLD
Rachel Accantio
E rachel.accatino@marshadvantage.com
M 0402 889 015
Source: https://acapmag.com.au/2023/03/new-petrol-bond-and-lease-bond-products-available-now/.
