OIL giant Sinopec Corp. unveiled a plan late Sunday to sell a US$17.5 billion stake in its retail business, marking the country’s biggest privatization push since President Xi Jinping came to power almost two years ago.

    The sale is a reflection of the government’s drive to restructure the country’s many sprawling State-owned enterprises. PetroChina, the nation’s No. 1 energy producer, has divested part of its pipeline business, raising billions of dollars from domestic institutional investors.

    The sale also highlights Sinopec’s hope that outside investors would be a catalyst for growth and reform at its currently low-margin retail unit. But some analysts say a lack of retail names on the investor list is lowering their expectations of a quick turnaround. The presence of private equity firms also presents a risk in which they may exit the business when Sinopec lists the subsidiary in a couple of years.

    Sinopec’s retail unit will issue new shares to a group of 25 largely deep-pocketed financial companies like insurers and funds and raise 107.1 billion yuan (US$17.5 billion), the company said in a filing with the Hong Kong and Shanghai exchanges.

    The investors will get a combined 29.99 percent stake in the unit, which comprises a wholesale business, more than 30,000 petrol stations, over 23,000 convenience stores, as well as oil-product pipelines and storage facilities. Each investor would not hold a stake exceeding 2.8 percent.

    Besides capital, the investors are expected to bring in “strength and vitality” that will help reform and grow the retail unit, Sinopec chairman Fu Chengyu said in a statement.

    Sinopec will use the US$17.5 billion from the sale to optimize its fuel retail business, boost non-fuel sales and pay down debts owed to parent company, Chai Zhiming, deputy chief executive of the retail unit, told Reuters in a telephone interview yesterday.

    Sinopec is looking for expertise and ideas to boost its non-fuel businesses which include convenience stores and services such as fast food and car washes. Unlike the West, where non-fuel revenue can account for more than half of a filling station’s profits, over 99 percent of Sinopec’s retail sales come from petrol.

    (SD-Agencies)