Companies hoping to sell gas stations struggle to find buyers

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The road to an all electric-vehicle future may still be a decade or more away, but the move away from gas-powered cars is already imperilling a staple for road-trippers and a profitable business for small-time owners and chains alike: the gas station.

While individual stations are still attractive to entrepreneurs looking to be sole proprietors, companies hoping to sell large retail gas networks are struggling to find buyers. Hundreds of locations across Canada from big-name companies such as Suncor, Irving and Parkland are up for sale with no one so much as kicking the tires.

As electric-vehicle mandates – such as Canada’s commitment to having all new vehicles be battery-powered by 2035 – advance around the world, there are predictions that 80 per cent of the global fuel retail network as it exists today will be unprofitable roughly a decade from now.

Suncor Inc. SU-T faced that reality in 2022, when it failed to find an acceptable price for its Petro-Canada network, deciding to retain the chain in defiance of an activist investor’s demand for a sale. Irving Oil has had its nearly 1,000 refuelling stations across the East Coast on the auction block for almost a year. Most recently, Parkland Corp. PKI-T has brought in some big guns to assist with selling 157 gas stations spread across six provinces.

Their challenge, as Suncor and Irving have already learned, will be finding a buyer who sees a long-term strategic rationale in owning services designed for a technology in decline. Certainly many gas stations will remain in use long after 2035 as older combustion-based cars will still be on the roads, but the days of retail gasoline being a growth business are already long gone.

Calgary-based Parkland said last week it is working with Colliers Canada and NRC Realty & Capital Advisors LLC to search for buyers. The Parkland stations, which operate under various brands including Chevron, Ultramar, Pioneer, Fas Gas as well as the On the Run convenience store chain, were first put up for sale in February.

Those sites “no longer fit our long-term strategic objectives,” Parkland said in a statement. The company, which owns 800 gas stations across Canada, is committed to selling $500-million in assets by the end of 2025.

When Suncor gave up trying to sell its Petro-Canada chain, then-interim chief executive Kris Smith said two-thirds of the 17 global industry players the company approached about a possible deal passed. The remaining third offered to purchase only a portion of the network or offered a lowball price, Mr. Smith said, noting Suncor anticipated gasoline demand to fall by as much as 25 per cent over the next two decades.

Irving, as a privately-held company, is under no obligation to publicly disclose any progress it may or may not be making on the strategic review it announced last June. In fact, University of New Brunswick economist Rob Moir told The Globe and Mail in October that the company’s decision to publicly announce the review itself represented an increased effort to find potential buyers.

Nate Heywood, an energy infrastructure analyst for ATB Capital Markets, said part of buyer hesitation is because the most likely acquirers of large numbers of gas stations – those with large networks of their own – are “focused more on being convenience store providers.” That means putting whatever money they have into improving the size and quality of the stores attached to the stations they already own, as opposed to spending capital buying more stations that would then require costly upgrades.

The idea now, Mr. Heywood said in an interview from Calgary, is to make existing stations an attractive place for EV drivers to stop and rest for the 20 to 30 minutes it takes for their vehicles to charge. Suncor, for example, installed an off-leash fenced dog park at its Cookstown Petro-Canada location in 2022, which is located along one of the most common routes drivers from the Greater Toronto Area take to reach Muskoka cottage country.

“Positioning for the EV transition has been a consideration” for potential buyers as well, Mr. Heywood said. “They want to see how that plays out and how the economics work in terms of certain locations and what geographies and markets work best for electric-vehicle charging.”

While some locations near highway rest stops like Cookstown are ideally suited for conversion to EV charging stations, urban gas stations, which will have to compete with home-based chargers and the increasing number of charging stations in parking lots and office buildings, will find it much harder to stay financially viable.

Already, the urban gas station is starting to disappear in some cities, despite the shift to EVs still being in its earliest stages. The 2017 sale of a Chevron station in Vancouver left the city’s downtown core with only a single place to gas up – an Imperial Oil-owned site at the corner of Burrard and Davie Streets – while other cities such as Kelowna have recently proposed banning the construction of new gas stations within city limits.

Insatiable demand for land to build housing has also contributed to the demise of gas stations located in downtown cores. Real estate developers are able to offer generous prices for urban gas stations because they are often located in areas zoned for high-density residences.

The Chevron station in downtown Vancouver that sold in 2017, for example, was most recently assessed to be worth $29.5-million. Anthem Properties ended up paying $72-million for the property, with plans to build a 33-storey condominium tower on the lot.

The total number of retail gasoline stations across Canada peaked at roughly 20,000 in the late 1980s, before falling nearly 40 per cent between 1988 and 2008, according to the National Retail Petroleum Site Census, published annually by Kalibrate Technologies Ltd. Since then, the number has stayed relatively flat, hovering around the 12,000 level.

Even for those gas stations located in places EV drivers would consider convenient to stop and charge (and maybe even buy a snack from the attached convenience store, which is where those businesses make most of their profits), installing the type of fast chargers that can fill a battery from zero to 80 per cent inside of 30 minutes is an expensive proposition.

According to ChargePoint Inc., which installs and manages EV chargers at different kinds of commercial properties, the hardware and software requirements for a single fast charger starts at US$50,000. Factoring in the costs of labour, permits and adding more electrical capacity to the site usually doubles that total.

And that is for a single charging station. But just as most gas stations have more than one pump, conversions to service EV drivers will typically involve multiple chargers.

Parkland, for its part, appears to have accepted the relatively low likelihood of finding a single buyer for all 157 locations it has up for sale. In a statement, Colliers and NRC said they have invited “convenience store operators, small business owners and entrepreneurs” to bid on single or multiple sites either online or by calling a toll-free phone number.

Parkland has said each location will be packaged with long-term fuel supply agreements in hopes of appealing to “experienced, entrepreneurial operators.”