New propane industry player looks to build off acquisition

Photo courtesy of Meritum Energy Holdings

Two propane industry executives launched Meritum Energy Holdings earlier this year in San Antonio, positioning it to acquire, own and operate propane and natural gas liquids (NGL)-related assets throughout the United States.

Christopher Hill and Robert Chalmers entered the propane industry with JP Energy Partners – Hill as the co-founder in 2010 and Chalmers as senior vice president of corporate/business development-NGL. The two decided to branch off and begin anew with Meritum, Hill serving as president and CEO and Chalmers as executive vice president and CFO.

Meritum closed on its first acquisition, Pico Petroleum in south Texas, this past summer and rebranded it Pico Propane and Fuels. Anthony Kusenberger was part of the Pico family and will continue to run the company as the vice president of operations for Meritum. He’s also tasked with helping Meritum branch into other markets and business segments. Brent Grider, controller, is the other member of Meritum’s executive team.

LP Gas Magazine sat down with Hill last month for a question-and-answer session while industry members gathered in New Orleans for the National Propane Gas Association’s fall board meeting.

LP Gas: Can you provide us with a little background on the formation of Meritum Energy Holdings and what led you to pursue this new venture?

Hill: We like this industry. We feel there are opportunities in this industry. We’re a private, well-capitalized propane company capable of taking on growth initiatives and being a player in autogas and motor fuel. When we started JP Energy Partners, that was our mindset. Rob and I ran the propane side of JP Energy Partners, and we feel like there are a lot of opportunities [in propane]. When we started in 2010, we were new to the industry. We dove in headfirst. We developed some nice relationships in the industry and got an understanding of the industry. We got to look at a lot of different companies, and we got a feel for strengths and weaknesses. We were very much aligned in our thinking of industry opportunities, so we decided to go do it ourselves.

LP Gas: You mention your interest in autogas and motor fuel. Can you tell us how Meritum envisions entering this market segment?

Hill: There’s been quite a bit of effort from folks in the industry with autogas, and there’s a fair amount of progress being made in pushing that ball down the field. If we put the right focus on sales and spreading the message and supporting that segment, we can get some traction there. We will just try to push on that effort through sales efforts and being committed to it. Putting capital work in that area is the biggest thing we can do because we do think there are opportunities there. It feels like we’re scratching the surface with some of the technology out there.

LP Gas: Can you describe Meritum’s business model and the type of companies you’re seeking as part of your growth initiative?

Hill: We would like to find good, solid growth opportunities, whether through acquisitions or organic growth. We’re looking for quality companies, well-run companies with good employees. We would love to find companies that have more of a non-heating demand, but we also know there are not a lot of these. If we are going to buy a company, we want to know we can overlay that onto it and have an ability to service and grow nontraditional uses – overlaying sales and growth initiatives to diversify gallons in that manner. Hopefully with additional capital and the benefits of being part of a larger company [which we can provide], we have opportunities to take a company and expand our footprint with it.

We would like to steadily grow [Meritum] into a nice size company. We’re not necessarily geographically limited. Because of what’s in our backyard, our focus is there (Texas) initially. We don’t have a set [process of] “Here’s how every deal has to be done.” It’s on a case-by-case basis on how we attack it.

LP Gas: What kind of growth initiatives of nontraditional uses are you referring to?

Hill: That just comes with some of the newer initiatives out there – going back to motor fuels, stationary engines, lawn mowers, forklifts – where you are not cannibalizing industry players. Hopefully you are out there driving new demand for the industry. We would try not to be totally dependent on residential heating-degree demand and try to balance our portfolio demand to be commercial and industrial – autogas, mower gas, those types of things.

LP Gas: What’s been the most challenging part of this new venture for you?

Hill: Raising money, forming the company and doing the acquisition of Pico all at once. Now we have a back-office structure and we hired the financing and accounting side of it.

LP Gas: What message does Meritum have for the propane industry?

Hill: The biggest message is we truly believe in the industry and we want to support it. We’re extremely committed to doing it right and being in it long term.

LP Gas: How would you describe the health and current state of the propane industry?

Hill: It seems the ship is headed in the right direction. There are some pretty smart, quality people driving the ship in the direction it should go. You always wish things could get executed faster than they do, but the direction is good. Focusing on the part of the industry for growth like motor fuels is the right approach.

LP Gas: Who are some of the industry members whom you admire and have served as role models during your time in propane?

Hill: I’ve had an admiration for Stuart Weidie (president and CEO of Blossman Gas). Guys like that think outside the box. They’re not just sitting still; they’re out looking for opportunities to change the industry. I admire that about them. They put their money where their mouth is.