As lately as November, the publicity-shy proprietor of Prax Group needed traders to know that his $10bn challenger firm was quick turning into a “formidable drive” within the vitality trade.
“Twenty-five years on from after we began, we’re a a lot larger, stronger, higher enterprise in all types of the way,” founder and chief government Sanjeev Kumar Soosaipillai mentioned within the introduction to Prax’s shiny annual report.
These ambitions got here crashing down this week when the sprawling firm’s mother or father entity, and its Lindsey oil refinery in north-east England, plunged into insolvency, placing greater than 400 jobs in danger.
The transfer provoked a fierce backlash from the UK authorities, which demanded an investigation into Prax’s “rich proprietor”, whose conduct left authorities “with little or no time to behave”.
The collapse of the proprietor of the Lindsey refinery — which produces a few tenth of the UK’s gas and is considered one of solely 5 such amenities left within the nation — is a cautionary story of an organization that grew too massive too quick, say insiders, and of a vital trade that has been neglected by authorities.
“Prax didn’t have the proper individuals in place to handle a danger as massive as a completely owned refinery,” mentioned an individual aware of Prax’s operations. The individual additionally mentioned that the group run by Soosaipillai and his spouse Arani — who began out with a single petrol station — lacked the monetary heft to handle such a cash-hungry enterprise.
UK authorities officers have been knowledgeable of the business difficulties at Lindsey on the finish of April and vitality secretary Ed Miliband met Soosaipillai in mid-Could to debate how the federal government might present assist. But Prax was nonetheless insisting till final week that the ability on the river Humber was not vulnerable to closure, in keeping with UK under-secretary for vitality Michael Shanks.
Industry executives aware of Prax described an organization that was “a bit smoke and mirrors”, struggling to steadiness its books for a number of years, even because it accomplished acquisition after acquisition.
“There are only a few people who find themselves shocked this occurred,” mentioned a senior commodity trade government. “Why was Prax, who owned a refinery that was struggling, all the time on the bid for fancy belongings in different jurisdictions? It by no means made sense.”
Winston Sanjeev Kumar Soosaipillai — who goes by Sanjeev — met Arani on the College of Kent, the place they each studied accountancy. The Sri Lankan-born pair, then nonetheless of their twenties, purchased their first filling station in 1999 close to St Albans, north of London.
Over the subsequent decade, they bought their properties and mortgaged the homes of members of the family to assist purchase extra retailers and ultimately a storage website in east London. In 2015, they accomplished a transformative deal, buying struggling Harvest Vitality and its community of UK forecourts for $22.6mn.
4 years later, Prax brokered an settlement to function petrol stations for TotalEnergies beneath the French main’s model. It was a relationship that left the UK firm in a powerful place when Complete determined to promote the Lindsey facility in 2020 amid a collapse in oil costs through the coronavirus pandemic.
Prax swooped, paying $167.6mn in a deal that additionally gave it management of the Fina oil pipeline, which runs by means of the east of England. It was an enormous acquisition however, inside a yr, Prax had revalued the refinery belongings in its accounts at $667.8mn, reserving a $500mn acquire primarily based on “synergies” with the remainder of its enterprise and improved refining margins — a transfer that instantly raised eyebrows within the trade.
“In impact, Prax was saying it might run the refinery higher than the a lot bigger Complete,” mentioned one trade government. It was “one of many massive pink flags” within the firm’s operations, the individual added.
Refining is a high-volume enterprise with typically skinny margins. Lindsey can course of as much as 113,000 barrels a day of oil, which is purchased from a provider and processed earlier than being bought on to clients. Lindsey is provided by commodities buying and selling firm Glencore beneath a deal signed final yr.
At present costs, meaning Prax requires entry to an estimated $400mn of working capital to maintain the ability working. Prax’s group turnover ballooned from $3bn in 2020 to greater than $10bn in 2024.
Sustaining enough liquidity is essential to any refinery’s success, and this turned tougher for Prax because it continued to broaden. In 2023, Prax introduced the acquisitions of a North Sea oil producer, a European petrol station community and a minority stake in a refinery in South Africa.
However even because the offers continued, contained in the enterprise executives have been involved. In autumn 2023, Deloitte seconded a companion, David Sharman, to work immediately with Soosaipillai for a number of months as a part of an train often called Undertaking King, in keeping with individuals aware of the contract.
Referred to internally by some executives as mission “money is king”, the train was meant to “scale back prices, streamline processes, improve efficiencies and improve our effectiveness”, Soosaipillai wrote within the 2024 annual report.
“There have been a number of phases [of Project King] as issues bought extra determined,” one of many individuals mentioned.
Across the identical time, Prax modified its accountant from KPMG to the lesser-known PKF Littlejohn, firm filings show. KPMG and Deloitte declined to remark, whereas PKF didn’t reply.
Within the yr ending February 2024, Prax’s mother or father firm State Oil Ltd and the refinery’s working unit Prax Lindsey Oil Refinery Ltd reported losses after tax of $28.7mn and £40mn, respectively. Regardless of the losses, State Oil paid a dividend of $5.2mn to the Soosaipillai household, the accounts revealed in November 2024 show.
Sanjeev and Arani Soosaipillai every personal 40 per cent of State Oil, with the remaining 20 per cent held by two trusts, one for every of their daughters, in keeping with company information and an individual aware of the construction.
Though UK refineries face challenges starting from carbon prices to competitors from bigger overseas rivals, the sector has been performing moderately properly, and Lindsey’s collapse was not inevitable. “It’s not like margins have instantly collapsed,” mentioned Alan Gelder, refining skilled at Wooden Mackenzie.
Nonetheless, a scarcity of refining experience on Prax’s senior management workforce contributed to operational and business mis-steps that exacerbated Lindsey and the broader group’s liquidity issues, one of many individuals aware of the corporate’s operations mentioned. Somewhat than depend on costly financial institution credit score amenities, Soosaipillai most well-liked to offer counterparties with cross-group ensures usually from State Oil, the individual added.
Such ensures are one cause that the mother or father firm and a number of other subsidiaries, together with Lindsey, Prax Petroleum, Harvest Vitality and Harvest Vitality Aviation, have all entered administration on the identical time.
Prax’s UK and European retail enterprise, Axis Logistics, and its upstream and worldwide operations are all excluded from the insolvency course of, in keeping with a press release on Prax’s web site.
Glencore’s provide settlement provides it safety over among the oil on website at Lindsey and a possible declare over among the entities concerned, in keeping with individuals aware of the scenario. Glencore mentioned it was working with stakeholders to assist “a secure and accountable end result for the refinery”.
Sanjeev and Arani Soosaipillai, who hardly ever give interviews, didn’t reply to an emailed request for remark. Neither they nor their firm has issued a press release since State Oil entered insolvency.
“I wouldn’t be shocked if he’s heartbroken and dealing his you-know-what off to salvage something from this enterprise,” mentioned one one that has labored with Soosaipillai.
“That is his life,” the individual added. “What for you and me is respiration, for him is Prax.”
