The Group

Origins

On June 2nd 1938, in S. Quirico, Genoa Edoardo Garrone established a company authorised to trade in petroleum products. From the three initials of Edoardo Refinery Garrone, placed in the symbol of a dice (from “dado”, Italian for dice and an affectionate diminutive for Edoardo), the ERG logo was born. 

Activities began in the period after the war in a pioneeristic manner: the first oil products were obtained from low-cost raw materials, from the dregs of oil tankers which arrived in the port of Genoa and had to rid themselves of the residue for maintenance reasons. It was a phase which did not last long: the 350 tonnes of 1947, with a staff of 20 people, become 200,000 tonnes in 1952, when the employees were more than 100.

1950

The leap forward came in 1952 with the first important processing contract with British Petroleum. In 1958 BP entered into the Italian market and signed a new ten-year processing agreement with ERG, which also included the purchase of 200 service stations. BP also became a shareholder in ERG and offered an important contribution to the formation of ERG management. 

Oil consumption grew at a steady pace, Italy was at the centre of Mediterranean oil traffic, from the oil-producing countries to the markets of Continental Europe, via the Suez Canal. The capacity of the San Quirico refinery rose every year – 1.5 Mton/a in 1960, 2.3 Mton/a in 1961, 4.0 Mton/a in 1962 – and the business also became more sophisticated. ERG was no longer a family-run business, but rather a modern organisational structure which in 1961 employed more than 600 people.

1960

In 1963 processing was at full blast with a capacity of 6.5 Mton/a. The traffic of the road tankers was intense both in Genoa and on the main motorway going South, which still only had one lane. A large engineering project was therefore planned, to transfer the consignments of oil products destined for North-Western Italy, the area with the greatest economic and industrial development, to the other side of the Apennines, via a system of oil pipelines. Edoardo Garrone, who died prematurely in 1963, did not live to see the completion of this project. He was replaced at the chairmanship of ERG by his son Riccardo. The site at Arquata Scrivia, for many years the main oil logistics structure in Italy, was completed in 1967: more than 300 km of pipelines, 800.000 mc of storage, and loading capacity of more than 1000 road tankers per day. 

The big boom came to an end and the dynamics of the economy began to slow down, but in the second half of the sixties oil consumption continued to grow, it had become the primary, undisputed energy source, favoured because of its wide availability, low prices and easy transportation. Italy, as well as being one of the best oil markets, held a strategic position, between the Middle East and Central-Northern Europe, which had not yet found its oil. The prospect is therefore one of further growth for the national refining industry; but at the site at S. Quirico there is no more room for further plants.

1970

Thus it was that in 1971, in Priolo Gargallo (Syracuse), in an area which already had a high concentration of chemical and petrochemical industries, the ISAB project was born (standing for Sicilian Asphalt and Bitumen Industry): a refinery of 10 Mton/a, with a production aimed at the international market.

The scenario changed dramatically in the period going from the commencement of work in Priolo in 1972 to the production start up in December 1975: the first oil shock made economic parameters at the basis of the investment come unstuck. The ISAB adventure, the first refinery with a “total ecological content”, built in compliance with the main principles of energy saving and energy conservation, with products with a high environmental quality, destined for more demanding markets (unleaded gasoline, gas oil with a minimum sulphur content) therefore began in the midst of a global energy crisis.

The second oil crisis, which began in 1979, pushed the price of crude oil up to $35 per barrel. Consumption did not grow but its structure changed radically: ever more fuels, ever fewer combustibles.

The season of reorganisation of the European refining industry began, which also suffered at the hands of the strong competition for finished products which came from Russia and the new refineries built on the shores of the Middle East and North Africa. Anyone with a valid refining structure had to ensure he had the right market outlets.

1980

This was a turning point for ERG: on the industrial side the decision was made to close the Genoa refinery (the decision became definitive in 1988), and at the same time to purchase the majority stake in ISAB. The other strategic choice involved downstream integration. In 1984 ERG bought retail outlets from ELF Italiana  (780 outlets) and immediately afterwards, in 1985, from Chevron Oil Italiana (1700 retail outlets, plus wholesale structures, shareholdings in the refineries at Trecate and Rome, the depot and lubricant plant at Savona). These new plants were added to the existing small network in the North-West and ERG thus acquired 5% of the retail fuel market. The new trademark with three rampant panthers was launched network-wide. ERG Petroli was founded, to manage the retail and wholesale commercial activities.

1990

In 1993 ERG signed a partnership agreement with Edison Mission Energy, to construct a gasification-cogeneration plant using the oil residues from the ISAB refinery. ISAB Energy is the name of the joint venture, which benefited from project financing covering 90% of the investment of approximately 2000 billion lire (just over 1 billion euro). In the summer of 1996 the construction of the plant began, entrusted to the joint Consortium Snamprogetti-Foster Wheeler. 

ERG thereby entered into a new phase: its horizons began to widen beyond the specific oil sector, its core business became energy as a whole, in view of the full liberalisation of the gas and electricity markets which was to be carried out in Europe. And with its strategy of steady development ERG decided to float on the Stock Exchange, and was extraordinarily successful: in October 1997 ERG shares were allowed to be listed on the Telematic System of the Italian Stock Exchange. Requests poured in from Italian savers, the exceeded supply 26 times over, while the shares of institutional investors were 6 times more than the quota reserved for them. 1,115 employees, 70% of staff, become company Shareholders.

^{Alessandro Garrone (CEO) and Edoardo Garrone (Chairman)}

from 2000 to 2004

In April 2001, the restructuring of the Telematic Share Market (MTA) of the Italian Stock Exchange divided the list into four distinct segments: ERG was amongst the first 20 Companies included in the STAR segment (“Segmento Titoli con Alti Requisiti” – Segment for Shares with High Requisites), which was formed to highlight the companies which satisfy specific quality requisites, including the fundamental requisites transparency and timeliness of information.

The ISAB Energy plant officially began production in April 2000, with a capacity of 512 MW, producing 4 billion Kwh, equivalent to 1.5% of national consumption. Commencement of production represents the Group’s official entry into the electricity market. To confirm this multi-energy vocation ERG decided to change its logo. The “ripple” was born: infinite energy emanating from a single centre. In the meantime another important development project was being prepared in Priolo, with the mythological name of Arethusa. The agreement was formalised in Spring 2002, between ERG and ENI, to unite two large refineries: the ISAB refinery, which has been declared a “supersite” by sector analysts, due to the high conversion capacity of gas oil and a production of 11Mton, and the former Agip refinery (8Mton), with a high conversion capacity for gasoline and integrated with chemical and petrochemical activities in the Syracuse area.

In October 2002, ERG Raffinerie Mediterranee was founded (72% ERG, 28% ENI), with the objective of integrating the two refineries, which strongly complement each other, to realise one of the first Supersites in the world, characterised by high flexibility and efficiency and capable of satisfying the new environmental standards well ahead of time.

ERG Raffinerie Mediterranee, dedicated mainly to the international cargo market, is one of the three companies forming the new structure of the ERG Group.  The other two are: ERG Petroli – for supply, refining, logistics and marketing aimed at the national market, also present in Switzerland and in Spain – and ERG Power & Gas which, implementing the mission of ISAB Energy, operates in the markets of electricity, natural gas, and renewable energy.

At the end of 2002 Alessandro Garrone was nominated Chief Executive Officer of ERG. In 2003 Riccardo Garrone left the chairmanship of ERG after forty years, replaced by Edoardo Garrone, his eldest son. 

The year 2004 saw the creation of the Edoardo Garrone Foundation, as a natural development of the involvement on the part of the ERG Group and the Garrone and Mondini families in the social and cultural field.
The Foundation’s main activities concern the organisation of seminars and conferences and the performance and publishing of studies and research. Its purpose is to effectively contribute to the dissemination, enjoyment and understanding of culture, art and science, as well as to actively cooperate in ethical and solidarity-inspired projects.

^{Edoardo Garrone and Alessandro Garrone sign the agreement with Lukoil                 Alessandro Garrone and Michel Bénézit (President of Refining and Marketing for Total) sign the agreement}

From 2005 to present days

ERG’s “multi–energy” strategy and its commitment to alternative energy saw a further enhancement in 2005 with the establishment of Ionio Gas S.r.l., a 50-50 joint venture between ERG Power & Gas S.p.A. and Shell Energy Italia S.r.l. for the construction and management of a terminal to receive and regasify Liquified Natural Gas at the ISAB Impianti Nord refinery in Priolo. 

In 2006, ERG acquired a 51.33% equity interest in Enertad S.p.A., a listed company that operates in the sector of electricity generation from renewable sources; in 2007 the stake held was increased to 68.38%. The acquisition of the Enertad shareholding constituted a decisive step within the scope of the strategies pursued by ERG aimed at enhancing and consolidating its position in the field of renewable energy.

In May 2008, the partial demerger of ERG Power & Gas paved the way for integration within Enertad of the Group’s operations in the renewable energy sector; as a result of this transaction, ERG achieved control of 77.4% of Enertad’s share capital.
Coinciding with acquisition of the ERG Power & Gas renewable energy assets, Enertad changed its company name to ERG Renew, effectively marking the completion of the process of integration and reorganisation whereby ERG Renew was to become the ERG Group company dedicated to the development of activities in the field of power generation using renewable sources. 

2008 was the year of the agreement with LUKOIL, one of the most momentous agreements signed in the history of the Group which, via the creation of a “Newco” ISAB Srl (51% ERG Raffinerie Mediterranee and 49% LUKOIL), led to the formation of a strong partnership in coastal refining activities.

The agreement, announced on 24 June 2008 and concluded on 1 December 2008, provided for assignment to the Newco of the ERG Raffinerie Mediterranee division comprising all assets of the ISAB Refinery in Priolo.

This important joint venture confirms the group’s strategy, which has featured in the past and continues to feature agreements with major international partners who have always represented significant opportunities for development and growth.

Totally in keeping with a multi-energy strategy oriented towards optimising the capital invested in the various sectors of activity, this transaction guaranteed financial resources that will allow the group to consolidate its equity structure, ensuring the flexibility required to be able to take advantage of possible new opportunities for development in its different areas of operation, both in Italy and abroad.

The partnership with LUKOIL, one of the world’s leading integrated companies in the oil and gas sector, will enhance the plants’ management skills implying major advantages for the refinery’s competitiveness and efficiency, in addition to offering potential benefits in terms of synergies and access to new markets.

On January 31th 2011 ERG S.p.A.'s Board of Directors approved the exercise of the put option on 11% of ISAB S.r.l. Following the sale, LUKOIL  owns 60% of ISAB and ERG 40%. 

On January  31th 2012 the Board of Directors of ERG S.p.A. approved the exercise of aput option on 20% of ISAB S.r.l., valued at 400 million Euro (excluding inventory). Following this transaction, LUKOIL will own 80% of ISAB and ERG 20%. The transaction closing is expected to take place during the second quarter of 2012. ERG will continue to be represented on the Board of Directors of ISAB and on the management committees, while the Operating Processing Agreement has been temporary amended to be consistent with the new role of ERG in ISAB.

In January 2010, Total and ERG have signed an agreement to create a joint venture in the Italian marketing and refining business.
Created through the merger of Total Italia and ERG Petroli, the joint venture has been called TotalErg (51% ERG - 49% Total).

TotalErg is the third largest Italian operator in the oil product distribution and marketing sector with a Retail network of around 3,400 service stations (market share of about 12%) and fuel sales amounting to 4.4 million m3/year.
Sales of fuel and specialties (lubricants, LPG and bitumens) in the Wholesale sector total 3 million tonnes per year, with significant market shares.
TotalErg is also active in the refining sector through Raffineria di Roma (wholly-owned) and Raffineria Sarpom, Trecate, Novara (26% stake), with an overall processing capacity of approximately 116,000 barrels per day.
TotalErg uses a logistics structure comprising the Savona coastal deposit, where a facility for the blending of lubricants is also in operation, the San Martino deposit in Trecate, the De.Co. deposit connected with Raffineria di Roma and the SIGEMI logistics system, in which it holds a stake of 26%.
TotalErg optimizes its industrial assets in this segment with a priority focus on achieving excellence in its industrial, environmental and safety performance.

During 2010, it was also completed a corporate reorganisation process designed to shorten the chain of control, via the merger of the ERG Raffinerie Mediterranee and ERG Power & Gas sub-holding companies in ERG SpA.
This restructuring permits greater organisational and decision-making efficiency, endowing the Group with an organisation structured in business units, more flexible and consistent.

On 20 May 2011, ERG Renew and LUKOIL-Ecoenergo signed an agreement for the creation of a 50-50 joint venture, LUKErg Renew, which is to be based in Vienna.
The transaction comes within the scope of a Memorandum of Understanding between ERG Renew and LUKOIL (see the Press Release dated 12 July 2010) for cooperation in the market of renewable energy sources in the countries of Eastern Europe and in Russia.
The joint venture will initially focus its operations on Bulgaria and Romania, followed by Ukraine and Russia, developing both organically and through the pursuit of acquisition opportunities.

In June 2011, the take-over bid (which was started in December 2010) was concluded for the shares, which were not owned by ERG Renew; the purpose of the delisting is to benefit from flexibility in financial, organisational and management terms that is more suitable and effective for carrying out the strategic plan and to achieve and exceed, more rapidly, the current investment and market positioning objectives, through organic growth both along internal lines and external lines, also through possible acquisitions.

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