Ashley: Hi, I’m Ashley Johnson and this is The EnergyMakes Show. Today we are joined by Tommy San Miguel with SGR Energy. Thank you so much for joining me today, Tommy.
Tommy: I’m happy to be here. Thanks for having me.
Ashley: So, tell me more about SGR Energy today.
Tommy: Today. Well, we are currently one of the fastest growing refined products companies in the US. We specialize in blending fuel for power generation and sell on the East Coast and in the Caribbean. We’re expanding into Panama and Central America and heading towards Asia.
Tommy: Well, thank you.
Ashley: That’s really exciting. How long have you been doing this now?
Tommy: Now I’m going to date myself a little bit. I’ve been doing this since 1990. I started in the industry working for kind of one of the pioneers in our business back in 1990 at the very bottom of the industry driving a tank truck. I kind of worked my way up and that gentleman was kind enough to develop me, and so I worked for him and his son for 20 years and started SGR in 2011.
Ashley: Tell me, I know SGR has been changing like crazy the last few years, especially, and you have some really ambitious goals. Why don’t you tell me a little bit more about what those goals are?
Tommy: It goes back to the gentleman I mentioned a minute ago, David Kramer, who was kind of a pioneer in our industry. He helped a company in town go from just a handful of folks to the largest private blender of heavy fuels in the US in about seven or eight years, and so they grew rapidly. My goal with the company has always been to duplicate what my mentor did but on a global scale. So, our goal is to be the largest heavy fuels blender in the world in the next ten years as well as diversifying to other refined products.
I made a decision a couple of years ago; we had gone with some investment banking firms, were not able to get the kind of terms we were looking for from the big funds, and so we were able to put a deal together with a hedge fund for some trade finance and then we decided to do a private offering. We assembled a team to do that, and between the credit facility for trade finance as well as the capital that were raised, we were able to expand. In 2016 we were able to grow our revenues by 400% and duplicate the same thing in 2017. So, we were able to grow quite a bit. It’s changing, we’re expanding, we’re doing larger cargos, and couldn’t be more excited. It’s very busy but we’ve been very blessed.
Ashley: Now, I heard rumor that you want to go public by 2020. Is that correct?
Tommy: Sometime in 2020 we are looking to go public. That’s part of that growth. In order to become the largest private blender of heavy fuels we have to raise a lot of money. The public markets are the quickest way, but in order to do that we understand that Wall Street is not going to get excited about a trading/blending company. We’ve got to put some fixed assets, some terminalling and some logistics assets on our balance sheet. We’re working hard to do that and that’s really what we’re raising capital for. We’re a cash positive company, and we have the depth facility, so we’re not looking to raise money to buy and sell oil with or to pay my salary or anything like that. We are just looking to raise capital to acquire some assets. We’re growing rapidly, a lot of exciting things happening with the company.
Ashley: Tell me, what makes your process different than what’s available right now?
Tommy: It goes back to a couple things. It’s part of why David was so successful in the ‘80s because he was the absolute best at what could best be describe as alternative blending of heavy fuels. He could find barrels where there were no barrels and also find blend barrels of cleaner burning product. That was able to help them grow like they did and that’s who taught me the business. I learned from him, the very best, I was very fortunate in that way. I’ve gotten better at my craft over the last six years, but it starts with how we buy our product, the different types of blend stocks. We have the capacity to blend stocks that our competitors don’t have.
Ashley: I know there’s some environmental regulations that are supposed to be taking place, I think in 2020, right?
Tommy: That’s correct. If you go back far enough you can maybe remember or have heard of, they used to have leaded gasoline. The environmentalists, it was a big push to go to an unleaded gasoline. After that, diesel used to have like two thousand parts per million of sulfur. Then, they lowered that sulfur level to 500 and then we came out with low sulfur diesel. About ten years later they lowered it down to 15ppm, which created an ultra-low sulfur diesel. They have basically changed those two primary fuels to a cleaner burning fuel and now they’re focused on our fuel. So, regulators, environmental regulators from around the world have come together with the IMO and they’ve created lower fuel standards globally for ships. A big use for our fuel is bunker fuel, which is essentially the gasoline of the oceans.
Where today we burn anywhere from a 2.5% to a 3.5% sulfur, by 2020 we have to get down to a half of a percent. So, it’s a substantial decrease in sulfur which is going to have a huge impact on the global economies because you have—almost everything that we consume is imported from China, or from India, or wherever it may be from. That comes across on a ship. One of the biggest expenses for a ship owner is fuel. So, it’s going to be a pretty substantial hit, and so, but our company, we’ve always been focused on a cleaner burning fuel. We already currently blend some fuels that are on spec with 2020 standards. So, we’re preparing ourselves for that, and our proprietary blending technology gives us a competitive advantage with that.
Ashley: Tell me what other exciting things are going on at SGR? You’re building a facility, I know you’ve got some other things in the plans?
Tommy: Yes. We broke ground on an 18-acre, 250,000-barrel, proprietary blending facility just north of Houston, in Leggett, Texas, where we will do 90% of our proprietary blending in the US at that facility. It’ll be the highest EBITDA producer in the company, we’re very excited about that. It will have 250,000-barrels of storage on the first phase of it. It will be rail and truck, in and out, possibly pipeline, as well. Once we have that facility up and running we’ll build similar facilities around the world, so we’re excited. As I mentioned earlier, we’re actively looking for terminalling and logistics assets. We’ve currently identified four terminalling assets; three in the US; one in Central America that we would like to acquire. We are aggressively going after assets to get onto our balance sheet to grow the company.
Ashley: Well, thank you so much for joining me today. I really appreciate the time to spend with us. This is Tommy San Miguel, CEO of SGR Energy, and this is The EnergyMakers Show.
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