I have profiled Somerset Energy Refinery in the past, updated the profile and interviewed Michael Grunberg, the man who bought the refinery and brought it out of bankruptcy. This morning, I opened my email box to see an announcement about the sale of the business. It has been roughly 18 months since the initial purchase, spurred by Mr. Grunberg’s desire for a diversified investment outside of commercial real estate.
I don’t have an inside scoop on the sale but I can share with you a couple of video links that were included in my email. (Using Social Media for the sale is a great stride forward to this small town company.)
http://vimeo.com/9729170 (23 minutes)
The vimeo video demonstrates the investments made in the company, cleaning, repairing and renewing the equipment to profit. When I interviewed Mr. Grunberg in December 2008, he insisted that technology and efficiency were keys to profitability. In the theme of that mantra, Mr. Grunberg has been quoted as saying he invested $20M in buying and upgrading the refinery.
The refinery closed in February 2010 according to an IStockAnalyst reproduction of a Lexington Herald-Leader article.. Mr. Grunberg is selling the refinery for a quoted sticker price of $12 to $14M. The problem leading to the sell of the refinery was not sales, a problem that haunted the refinery in the past. The major business problem that a buyer will face is supply. I speculate that due to the evening out of oil prices overall, small refineries such as Somerset Energy, no longer have small oil producers seeking alternatives that would keep their transportation costs down.
If you buy into Mr. Grunberg’s statements on the video, his investment has taken the old refinery from the stagnant days of the 80’s into the cutting edge of the 21st century. The refinery, is ready for profit, if they can get the supplies of oil needed for refining. One might blame Marathon who seems to be working to retain the majority of oil supply, even those that have to drive by Somerset KY to get to Ashland. It’s an interesting business situation and one that will take political savvy and salesmanship to overcome.
It’s sad for me, a Somerset native, to see this long-standing company shut down once again. The impact on employment and good gas supplies is the immediately noticeable impact of this closure.