Company Quick10K Filing
Quick10K
Aegean Marine Petroleum Network
20-F 2016-12-31 Annual: 2016-12-31
20-F 2015-12-31 Annual: 2015-12-31
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LCA Landcadia 708
RASP Rasna Therapeutics 127
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PKPL Park Place Energy 6
ACMC American Church Mortgage 4
BCTCV Boston Capital Tax Credit Fund V 0
ARGQ Argentum 47 0
CNCG Concierge Technologies 0
GFA Gafisa 0
ANW 2016-12-31
Item 17 Item 18
Part I
Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on The Company
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholders and Related Party Transactions
Item 8. Financial Information
Item 9. Offer and The Listing
Item 10. Additional Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other Than Equity Securities
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accounting Fees and Services
Item 16D. Exemptions From Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities By The Issuer and Affiliated Purchases
Item 16F. Change in Registrant's Certifying Accountant
Item 16G. Corporate Governance
Item 16H. Mine Safety Disclosure
Part III
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
EX-2.5 d7462542_ex2-5.htm
EX-4.3 d7463592_ex4-3.htm
EX-4.47 d7455061_ex4-47.htm
EX-4.51 d7454968_ex4-51.htm
EX-4.56 d7455013_ex4-56.htm
EX-4.58 d7454995_ex4-58.htm
EX-4.59 d7131050_ex4-59.htm
EX-4.60 d7494128_ex4-60.htm
EX-8.1 d7463601_ex8-1.htm
EX-12.1 d7462542_ex12-1.htm
EX-12.2 d7462542_ex12-2.htm
EX-13.1 d7462542_ex13-1.htm
EX-13.2 d7462542_ex13-2.htm

Aegean Marine Petroleum Network Earnings 2016-12-31

ANW 20F Annual Report

Balance SheetIncome StatementCash Flow

20-F 1 d7489625_20-f.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 20-F

(Mark One)

[  ]
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
   
OR
   
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the fiscal year ended December 31, 2016
   
OR
   
[  ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the transition period from _________________ to _________________
   
OR
   
[  ]
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
Date of event requiring this shell company report _________________

Commission file number 001-33179

AEGEAN MARINE PETROLEUM NETWORK INC.
(Exact name of Registrant as specified in its charter)
 
(Translation of Registrant's name into English)
 
The Republic of the Marshall Islands
(Jurisdiction of incorporation or organization)
 
10 Akti Kondili, 185 45 Piraeus, Greece
(Address of principal executive offices)
 
E. Nikolas Tavlarios, Tel: (212) 430-1098, investor@ampni.com,
299 Park Avenue, New York, New York 10171
(Name, Telephone, E-mail and/or Facsimile, and address of Company Contact Person)

Securities registered or to be registered pursuant to section 12(b) of the Act.

Title of each class
 
Name of each exchange on which registered
Common stock, par value $0.01 per share
 
New York Stock Exchange
Preferred stock purchase rights
 
 
New York Stock Exchange
     

Securities registered or to be registered pursuant to section 12(g) of the Act.

NONE
(Title of class)
 
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

NONE
(Title of class)



Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report.

As of December 31, 2016, there were 39,403,822 shares of common stock, par value $0.01 per share, outstanding.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes
   
No
X

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes
   
No
X

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes
X
 
No
 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes
X
 
No
 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.  See the definitions of "large accelerated filer" and "accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

 
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
Emerging Growth Company
 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. 

† The term "new or revised financial accounting standard" refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

X
 
U.S. GAAP
   
International Financial Reporting Standards as issued by the international Accounting Standards Board
   
Other

If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

 
Item 17
   
Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes
   
No
X


PART I
3
     
ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
3
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
3
ITEM 3.
KEY INFORMATION
3
ITEM 4.
INFORMATION ON THE COMPANY
24
ITEM 4A.
UNRESOLVED STAFF COMMENTS
42
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
42
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
65
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
68
ITEM 8.
FINANCIAL INFORMATION
72
ITEM 9.
OFFER AND THE LISTING
74
ITEM 10.
ADDITIONAL INFORMATION
75
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
85
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
86
     
PART II
87
     
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
87
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
87
ITEM 15.
CONTROLS AND PROCEDURES
87
ITEM 16A.
AUDIT COMMITTEE FINANCIAL EXPERT
88
ITEM 16B.
CODE OF ETHICS
88
ITEM 16C.
PRINCIPAL ACCOUNTING FEES AND SERVICES
89
ITEM 16D.
EXEMPTIONS FROM LISTING STANDARDS FOR AUDIT COMMITTEES
89
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASES
89
ITEM 16F.
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
90
ITEM 16G.
CORPORATE GOVERNANCE
90
ITEM 16H.
MINE SAFETY DISCLOSURE
90
     
PART III
91
     
ITEM 17.
FINANCIAL STATEMENTS
91
ITEM 18.
FINANCIAL STATEMENTS
91
ITEM 19.
EXHIBITS
91



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Matters discussed in this report may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts.
We desire to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are including this cautionary statement in connection with this safe harbor legislation. This report and any other written or oral statements made by us or on our behalf may include forward-looking statements, which reflect our current views with respect to future events and financial performance. When used in this report, the words "anticipate," "believe," "expect," "intend," "estimate," "forecast," "project," "plan," "potential," "may," "will," "should," and similar expressions identify forward-looking statements.
The forward-looking statements in this report are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third-parties. Important assumptions relating to the forward-looking statements include, among other things, assumptions regarding demand for our products, the cost and availability of refined marine fuel from suppliers, pricing levels, the timing and cost of capital expenditures, competitive conditions, and general economic conditions. These assumptions could prove inaccurate. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies that are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections.
In addition to these assumptions and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:
·
the strength of the world economies and currencies;
·
general market conditions, including conditions in the shipping or the marine fuel supply industries;
·
our future operating or financial results;
·
the availability of financing and refinancing;
·
material disruptions in the availability or supply of crude oil or refined petroleum products;
·
changes in the market price of petroleum, including the volatility of spot pricing;
·
our future, pending or recent acquisitions, business strategy, areas of possible expansion, and expected capital spending or operating and maintenance expenses;
·
our ability to manage our growth;
·
our ability to successfully identify, consummate, integrate, and realize the expected benefits from acquisitions;
·
our ability to maintain our business in light of our proposed business and location expansion;
·
planned capital expenditures and availability of capital resources to fund capital expenditures;
·
our future payment of dividends and the availability of cash for payment of dividends, including the ability of our subsidiaries to dividend or distribute cash to us;
·
the outcome of legal, tax or regulatory proceedings to which we may become a party;
·
our ability to attract and retain our key suppliers and key customers;
·
our contracts and licenses with governmental entities remaining in full force and effect;
1


·
increased levels of competition within our industry;
·
compliance or lack of compliance with various environmental, tax, safety and other applicable laws and regulations;
·
our ability to collect accounts receivable;
·
changes in political, economic or regulatory conditions in the markets in which we operate, and the world in general;
·
corruption, piracy, militant activities, political instability, terrorism, and ethnic unrest in locations where we may operate;
·
our level of indebtedness;
·
the failure of counterparties to fully perform their contracts with us;
·
our ability to attract and retain senior management and other key employees;
·
our failure to hedge certain financial risks associated with our business;
·
uninsured losses; our ability to maintain our current tax treatment;
·
effects of new products and new technology in our industry;
·
our ability to comply with the restrictive and other covenants in our financing arrangements;
·
our levels of operating and maintenance costs;
·
increases in interest rates;
·
adequacy of insurance coverage; and
·
other important factors described from time to time in our filings with the U.S. Securities and Exchange Commission, or the SEC.
These factors and the other risk factors described in this report are not necessarily all of the important factors that could cause actual results or developments to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. These forward-looking statements are not guarantees of our future performance, and actual results and developments may vary materially from those projected in the forward-looking statements. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. We undertake no obligation, and specifically decline any obligation, except as required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

2


PART I
ITEM 1.          IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2.          OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3.          KEY INFORMATION
Throughout this report, all references to "we," "our," "us" and the "Company" refer to Aegean Marine Petroleum Network Inc. and its subsidiaries. We use the term deadweight ton, or dwt, in describing the size of vessels. Dwt, expressed in metric tons, each of which is equivalent to 1,000 kilograms, refers to the maximum weight of cargo and supplies that a vessel can carry. Unless otherwise indicated, all references to "dollars" and "$" in this report are to, and amounts are presented in, U.S. dollars.
A.
Selected Financial Data
The following tables set forth our selected historical consolidated financial information and other data as of and for the periods indicated, which has been derived from our historical consolidated financial statements. The selected consolidated financial and other data set forth below should be read in conjunction with "Item 5. Operating and Financial Review and Prospects" and our consolidated financial statements, together with the notes thereto, which are included herein. The selected consolidated financial data as of December 31, 2016 and 2015 and each of the three years ended December 31, 2016, 2015 and 2014 is derived from our audited consolidated financial statements and notes thereto included elsewhere in this Form 20-F, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. Our selected consolidated financial data as of December 31, 2014, 2013 and 2012 and for each of the two years ended December 31, 2013 and 2012 is derived from our consolidated financial statements not included herein and reflect the retrospective application of the change in accounting principle for deferred finance costs and the revision of the financial statements to account for a provision for withholding taxes, related to income tax.
3


   
For the year ended December 31,
 
   
2016
   
2015
   
2014
   
2013
   
2012
 
   
(in thousands of U.S. dollars, except for share and per share data which are presented in U.S. dollars)
 
REVENUES:
                             
Revenues—third-parties
   
4,055,557
     
4,211,596
     
6,625,244
     
6,303,105
     
7,207,813
 
Revenues—related companies
   
20,662
     
20,058
     
36,557
     
31,624
     
51,147
 
Total Revenues
   
4,076,219
     
4,231,654
     
6,661,801
     
6,334,729
     
7,258,960
 
                                         
COST OF REVENUES:
                                       
Cost of revenues—third-parties
   
3,658,681
     
3,762,688
     
5,971,819
     
5,621,408
     
6,496,327
 
Cost of revenues—related companies
   
64,054
     
137,137
     
352,888
     
427,329
     
459,984
 
Total Cost of Revenues
   
3,722,735
     
3,899,825
     
6,324,707
     
6,048,737
     
6,956,311
 
                                         
GROSS PROFIT
   
353,484
     
331,829
     
337,094
     
285,992
     
302,649
 
                                         
OPERATING EXPENSES:
                                       
Selling and distribution
   
202,266
     
205,078
     
220,830
     
201,597
     
210,236
 
General and administrative
   
49,757
     
43,318
     
38,099
     
29,727
     
29,897
 
Amortization of intangible assets
   
1,070
     
1,421
     
3,323
     
1,603
     
1,505
 
Loss on sale of vessels, net
   
6,312
     
130
     
12,864
     
4,312
     
5,966
 
Impairment charge
   
-
     
5,308
     
4,062
     
-
     
-
 
Total operating expenses
   
259,405
     
255,255
     
279,178
     
237,239
     
247,604
 
                                         
Operating income
   
94,079
     
76,574
     
57,916
     
48,753
     
55,045
 
                                         
OTHER INCOME/(EXPENSE):
                                       
Interest and finance costs
   
(36,499
)
   
(37,608
)
   
(33,898
)
   
(28,073
)
   
(31,192
)
Interest income
   
251
     
52
     
117
     
75
     
123
 
Gain on sale of subsidiary, net
   
-
     
-
     
-
     
4,174
     
-
 
Foreign exchange (losses)/gains, net
   
(1,544
)
   
308
     
(6,032
)
   
1,123
     
3,786
 
Other expenses
   
-
     
-
     
-
     
-
     
(1,191
)
   Total other expenses
   
(37,792
)
   
(37,248
)
   
(39,813
)
   
(22,701
)
   
(28,474
)
Income before income taxes
   
56,287
     
39,326
     
18,103
     
26,052
     
26,571
 
                                         
Income taxes(1)
   
(4,358
)
   
(4,485
)
   
(1,964
)
   
(1,122
)
   
(4,122
)
                                         
Net income
   
51,929
     
34,841
     
16,139
     
24,930
     
22,449
 
                                         
Net Income/(loss) attributable to non-controlling interest
   
58
     
-
     
49
     
(33
)
   
2,372
 
                                         
Net Income attributable to AMPNI shareholders
   
51,871
     
34,841
     
16,090
     
24,963
     
20,077
 
                                         
Basic and diluted earnings per common share
   
1.11
     
0.71
     
0.34
     
0.53
     
0.44
 
Weighted average number of shares, basic
   
43,480,131
     
47,271,582
     
46,271,716
     
45,667,249
     
45,473,360
 
Weighted average number of shares, diluted
   
43,480,131
     
47,271,582
     
46,271,716
     
45,667,249
     
45,473,360
 
Dividends declared and paid per share
   
0.08
     
0.08
     
0.05
     
0.04
     
0.04
 

4


   
As of and for the Year Ended December 31,
 
   
2016
   
2015
   
2014
   
2013
   
2012
 
                               
   
(in thousands of U.S. dollars, unless otherwise stated)
 
Balance Sheet and Cash Flow Data:
                             
Cash and cash equivalents
   
93,836
     
139,314
     
129,551
     
62,575
     
77,246
 
Total assets(2)
   
1,600,933
     
1,450,011
     
1,484,414
     
1,610,200
     
1,431,270
 
Total debt(2)
   
817,631
     
710,015
     
736,979
     
777,332
     
652,713
 
Total liabilities(2)
   
1,011,342
     
833,124
     
920,598
     
1,068,554
     
926,752
 
Common stock
   
414
     
514
     
502
     
492
     
486
 
Number of shares outstanding
   
39,403,822
     
49,410,853
     
48,271,353
     
47,272,020
     
46,581,399
 
Total AMPNI stockholders' equity
   
589,533
     
616,887
     
563,816
     
541,355
     
500,666
 
Net cash (used in)/provided by operating activities
   
(47,615
)
   
49,727
     
182,206
     
40,583
     
123,519
 
Net cash used in investing activities
   
(3,788
)
   
(7,614
)
   
(59,494
)
   
(181,821
)
   
(58,162
)
Net cash provided by/(used in) financing activities
   
5,763
     
(28,254
)
   
(50,280
)
   
125,978
     
(57,127
)
                                         
Other Financial Data:
                                       
Gross spread on marine petroleum products(3)
   
326,100
     
302,052
     
304,545
     
256,724
     
268,804
 
Gross spread on lubricants(3)
   
3,671
     
5,210
     
2,948
     
3,914
     
3,077
 
Gross spread on marine fuel(3)
   
322,429
     
296,842
     
301,597
     
252,810
     
265,727
 
Gross spread per metric ton of marine fuel sold (in U.S. dollars)(3)
   
19.5
     
22.0
     
26.6
     
25.4
     
25.0
 
EBITDA(4)
   
125,610
     
110,806
     
82,019
     
83,231
     
86,448
 
                                         
Operating Data:
                                       
Sales volume of marine fuel (metric tons)(5)
   
16,519,079
     
13,482,478
     
11,332,385
     
9,941,061
     
10,620,864
 
Number of markets served, end of year(6)
   
28
     
31
     
29
     
27
     
20
 
Number of owned and operated bunkering vessels, end of year(7)
   
45.0
     
49.0
     
48.0
     
51.0
     
56.0
 
Average number of owned and operated bunkering vessels(7)(8)
   
47.1
     
48.8
     
50.2
     
53.8
     
57.9
 
Special purpose vessels, end of year(9)
   
1.0
     
1.0
     
1.0
     
1.0
     
1.0
 
Number of operating storage facilities, end of year(10)
   
13.0
     
12.0
     
14.0
     
14.0
     
8.0
 

5


(1)
The amount has been revised to account for a provision for withholding taxes, related to income tax, for the years ended December 31, 2015, 2014 and 2013. Refer to Note 1 to the consolidated financial statements included herein.
(2)
The total assets, total debt and total liabilities presented in this table have been updated to reflect the adoption of ASU 2015-03. Refer to Note 1 to the consolidated financial statements.
(3)
Gross spread on marine petroleum products (a Non-U.S. GAAP measure) represents the margin that we generate on sales of marine fuel and lubricants. Gross spread on marine fuel represents the margin that we generate on sales of various classifications of marine fuel oil, or MFO, and marine gas oil, or MGO. Gross spread on lubricants represents the margin that we generate on sales of lubricants. We calculate the gross spreads by subtracting from the sales of the respective marine petroleum product the cost of the marine petroleum product sold. For arrangements in which we physically supply marine petroleum products using our bunkering tankers, costs of marine petroleum products sold represent amounts paid by us for marine petroleum products sold in the relevant reporting period. For arrangements in which marine petroleum products are purchased from our related company, Aegean Oil S.A., or Aegean Oil, cost of marine petroleum products sold represents the total amount paid by us to the physical supplier for marine petroleum products and their delivery to our customers. Gross spread per metric ton of marine fuel sold represents the margins we generate per metric ton of marine fuel sold. We calculate gross spread per metric ton of marine fuel sold by dividing the gross spread on marine fuel by the sales volume of marine fuel. Marine fuel sales do not include sales of lubricants. For arrangements in which we purchase cargos for our floating storage facilities, cargo transportation costs are either included in the purchase price of marine fuels that we paid to the supplier or to a third-party transportation provider. For more information, please see "Item 5. Operating and Financial Review and Prospects—A. Operating Results—Factors Affecting our Results of Operations—Gross spread on marine petroleum products and gross spread per metric ton of marine fuel sold."
The following table reconciles our gross spread on marine petroleum products sold to the most directly comparable U.S. GAAP measure, gross profit, for all periods presented:
 
For the Year Ended
December 31,
 
 
2016
   
2015
   
2014
   
2013
   
2012
 
                             
 
(in thousands of U.S. dollars, unless otherwise stated)
 
Gross profit
   
353,484
     
331,829
     
337,094
     
285,992
     
302,649
 
Less: Voyage revenues
   
26,870
     
28,780
     
30,410
     
25,049
     
22,726
 
Less: Other revenues
   
52,707
     
47,372
     
40,393
     
27,214
     
27,794
 
Add: Cost of voyage revenues
   
14,974
     
14,827
     
14,729
     
16,202
     
15,136
 
Add: Cost of other revenues
   
37,219
     
31,548
     
23,525
     
6,793
     
1,539
 
Gross spread on marine petroleum products
   
326,100
     
302,052
     
304,545
     
256,724
     
268,804
 
(4)
EBITDA (a Non-U.S. GAAP measure) presents net income before interest, taxes, depreciation and amortization. EBITDA does not represent and should not be considered as an alternative to net income, operating income or any other indicator of our performance, as determined by U.S. GAAP, and our calculation of EBITDA may not be comparable to that reported by other companies. EBITDA is included herein because it is a basis upon which we assess our performance. The following table reconciles net income, the most directly comparable U.S. GAAP measure, to EBITDA for the periods presented:
   
For the Year Ended
December 31,
 
   
2016
   
2015
   
2014
   
2013
   
2012
 
   
(in thousands of U.S. dollars, unless otherwise stated)
 
Net income attributable to AMPNI shareholders
   
51,871
     
34,841
     
16,090
     
24,963
     
20,077
 
                                         
Add: Net financing cost
   
36,248
     
37,556
     
33,781
     
27,998
     
31,069
 
Add: Income taxes
   
4,358
     
4,485
     
1,964
     
1,122
     
4,122
 
Add: Depreciation and amortization
   
33,133
     
33,924
     
30,184
     
29,148
     
31,180
 
                                         
EBITDA
   
125,610
     
110,806
     
82,019
     
83,231
     
86,448
 
(5)
The sales volume of marine fuel is the volume of sales of MFO, MDO and MGO for the relevant period and is denominated in metric tons. We do not utilize the sales volume of lubricants as an indicator.
(6)
The number of markets served is an indicator of the geographical distribution of our operations and affects both the amount of revenues and expenses that we record during a given period. The number of markets served includes our operations in Greece (Piraeus and Patra), Gibraltar, United Arab Emirates (Fujairah, Khor Fakkan, and Dubai), Northern Europe (the Antwerp-Rotterdam-Amsterdam region, or the ARA region, and Belgium), Jamaica, Singapore, Canada (Vancouver, and Montreal until January 2017), United Kingdom (Portland until September 2015 and French Atlantic), Southern Caribbean (Trinidad and Tobago), Morocco (Tanger-Med), Canary Islands (Las Palmas and Tenerife), Panama (until June 2014), Hong Kong (from September 2012 until June 2013), Spain (Barcelona, beginning in April 2013 until November 2016, and Algeciras, beginning in August 2013 until June 2016), the U.S. East and West Coasts (beginning in December 2013 and December 2014, respectively), the Gulf of Mexico (beginning in December 2014), Germany (beginning in January 2015), Russia (beginning in January 2015), Brazil (beginning in January 2016), and South Africa (beginning in March 2016).
6


(7)
Bunkering vessels include both bunkering tankers and barges. This data does not include our special purpose vessel, the Aegean Orion, a 550-dwt tanker, which is based in Greece.
(8)
Average number of operating bunkering vessels is the number of operating bunkering vessels in our fleet for the relevant period, as measured by the sum of the number of days each bunkering vessel was used as a part of our fleet during the period divided by the cumulative number of calendar days in the period multiplied by the number of operating bunkering vessels at the end of the period. This figure does not take into account non-operating days due to either scheduled or unscheduled maintenance.
(9)
This figure includes our special purpose vessel, the Aegean Orion, which is based in Greece.
(10)
This figure includes our Aframax tanker the Leader (sold in September 2014), our Panamax tanker the Aeolos (sold in February 2013), and the single hull bunkering barge the Tapuit (sold in March 2015). We had an on-land storage facility in Portland (United Kingdom) until its closure in September 2015. We also had an on-land storage facility in Barcelona, Spain, where we ended operations in November 2016. We currently own two barges, the Mediterranean and Umnenga, which operate as floating storage facilities in Greece and South Africa, respectively, and operate on-land storage facilities in the Canary Islands, United Arab Emirates, Morocco, the United States, and Germany. The ownership of storage facilities allows us to mitigate risk of supply shortages. Generally, storage costs are included in the price of refined marine fuel quoted by local suppliers. We expect that the ownership of storage facilities will allow us to convert the variable costs of a storage fee mark-up per metric ton quoted by suppliers into fixed costs of operating our own storage facilities, thus enabling us to spread larger sales volumes over a fixed cost base and to decrease our marine petroleum products costs.
B.
Capitalization and Indebtedness
Not applicable.
C.
Reasons for the Offer and Use of Proceeds
Not applicable.
D.
Risk Factors
The following risks relate principally to the industry in which we operate and our business in general. The risks and uncertainties described below are not the only risks that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. Any of these risks may have a material adverse effect on our business, financial condition, results of operations and cash flows and the trading price of our securities could decline.
Risk Factors Relating to Our Company
A renewed contraction or worsening of the global credit markets and economic conditions and the resulting volatility in the financial markets could have a material adverse impact on our ability to obtain sufficient funds to grow or effectively manage our growth.
A principal focus of our strategy is to grow by expanding our business. Our future growth depends, in part, on our ability to obtain financing for our existing and new operations and business lines. In recent years, global financial markets have experienced volatility following contraction, deleveraging and reduced liquidity in the global credit markets. In addition, a number of major financial institutions have experienced serious financial difficulties and, in some cases, have entered into bankruptcy proceedings or are subject to regulatory enforcement actions. These difficulties have been compounded by a general decline in the willingness by banks and other financial institutions to extend credit and may adversely affect the financial institutions that may provide us with credit to support our working capital requirements. In addition, these difficulties may impair the ability of our lenders to continue to perform under their financing obligations to us, which could negatively impact our ability to fund current and future obligations. These economic factors may have a material adverse effect on our ability to expand our business.
Further, as a result of the ongoing economic downturn in Greece and the related austerity measures implemented by the Greek government in response to the sovereign debt crisis, our operations in Greece may be subjected to new regulations that may require us to incur new or additional compliance or other administrative costs and may require that we pay to the Greek government new taxes or other fees. In particular, a recently enacted social security reform is likely to require us to incur additional social security costs regarding our Greek-based personnel. Furthermore, changes in the Greek government and potential shifts in its policies may undermine Greece's political and economic stability, which may adversely affect our operations located in Greece. We also face the risk that strikes, work stoppages, civil unrest and violence within Greece may disrupt our shoreside operations located in Greece.
7


Our future growth depends on a number of additional factors, including our ability to:
·
increase our fleet of bunkering vessels and/or acquire additional land-based storage facilities;
·
identify suitable markets for expansion;
·
consummate vessel acquisitions at attractive prices, which may not be possible if asset prices rise too quickly;
·
integrate acquired vessels, or other assets or businesses successfully with our existing operations;
·
hire, train and retain qualified personnel to manage and operate our growing business and fleet;
·
improve our operating, financial and accounting systems and controls;
·
maintain or improve our credit control procedures;
·
obtain required financing for our existing and new operations;
obtain and maintain required governmental authorizations, licenses and permits for new and existing operations;
·
manage relationships with our customers and suppliers;
·
provide timely service at competitive prices; and
·
attract and retain customers.
A deficiency in any of these factors may negatively impact our ability to generate cash flow, raise money or effectively manage our growth. In addition, competition from other companies could reduce our expansion or acquisition opportunities, cause us to lose business opportunities, competitive advantages or customers or cause us to pay higher or charge lower prices than we might otherwise pay or charge. Competitive conditions in the markets that we may consider for future expansion may also be more adverse to us than those in markets served by our existing service centers, and any new markets that we may service may be less profitable than our existing markets.
We may not be in compliance with the covenants contained in our debt agreements.
Certain of our credit facilities, which are secured by mortgages on our vessels or other assets, require us to maintain specified financial ratios, mainly to ensure that the market value of the mortgaged vessels under the applicable credit facility, determined in accordance with the terms of that facility, does not fall below a certain percentage of the outstanding amount of the loan, which we refer to as a security value. In addition, certain of our credit facilities require us to satisfy certain other financial covenants. In general, these financial covenants require us to maintain, among other things, (i) a minimum market value adjusted net worth or book net worth; (ii) a minimum current ratio; (iii) a minimum amount of liquidity and a minimum liquidity ratio; (iv) a maximum ratio of total liabilities to total assets; and (v) a minimum working capital. We have in the past obtained waivers from compliance with one or more of these covenants.
A breach of any of these, or other, covenants in our debt agreements would prevent us from borrowing additional money under our credit facilities and could constitute an event of default under our debt agreements, which, unless cured within the grace period set forth under the credit facility, if applicable, or waived or modified by our lenders, may provide our lenders with the right to, among other things, require us to post additional collateral, enhance our equity and liquidity, increase our interest payments, pay down our indebtedness to a level where we are in compliance with our loan covenants, sell vessels in our fleet and accelerate our indebtedness and foreclose their liens on our vessels and the other assets securing the credit facilities, which would impair our ability to continue to conduct our business. In the past, we have not been in compliance with some of the financial covenants in our credit facilities and have obtained waivers from our lenders for such non-compliance.
Furthermore, certain of our debt agreements contain cross-default provisions that may be triggered by a default under one of our other debt agreements. A cross-default provision means that a default on one loan would result in a default on certain of our other loans. The occurrence of any event of default, or our inability to obtain a waiver from our lenders in the event of a default, could result in certain or all of our indebtedness being accelerated or the foreclosure of the liens on our vessels by our lenders as described above. If our secured indebtedness is accelerated in full or in part, it would be very difficult in the current financing environment for us to refinance our debt or obtain additional financing and we could lose our vessels and other assets securing our credit facilities if our lenders foreclose their liens, which would adversely affect our ability to conduct our business.
Moreover, in connection with any waivers of or amendments to our credit facilities that we have obtained, or may obtain in the future, our lenders may impose additional operating and financial restrictions on us or modify the terms of our existing credit facilities. These restrictions may further restrict our ability to, among other things, pay dividends, make capital expenditures or incur additional indebtedness, including through the issuance of guarantees. Our lenders may also require the payment of additional fees, require prepayment of a portion of our indebtedness to them, accelerate the amortization schedule for our indebtedness and increase the interest rates they charge us on our outstanding indebtedness. See "Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources."
8


In addition, under the terms of our credit facilities, our payment of dividends or other payments to shareholders as well as our subsidiaries' payment of dividends to us is subject to no event of default. See "Item 8. Financial Information—Dividend Policy."
As of December 31, 2016, we were in compliance with all of the financial covenants contained in our credit facilities.
Restrictive covenants in our credit facilities impose operating restrictions on us that limit our corporate activities, which could negatively affect our growth and cause our financial performance to suffer.
Our credit facilities contain covenants that impose operating restrictions on us. Such restrictions affect, and in many respects limit or prohibit, among other things, our ability to pay dividends, incur additional indebtedness, create liens, sell assets, or engage in mergers or acquisitions. These restrictions could limit our ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise restrict corporate activities. These restrictions could adversely affect our ability to finance our future operations or capital needs or to engage in other business activities which will be in our interest.
Our ability to comply with covenants and restrictions contained in our credit facilities may be affected by events beyond our control, including prevailing economic, financial and industry conditions. If market or other economic conditions worsen, we may fail to comply with these covenants. If we breach any of the restrictions, covenants or ratios in our credit facilities, our obligations may become immediately due and payable, and the lenders' commitment, if any, to make further loans may terminate. A default under any of our credit facilities could also result in foreclosure on any of our vessels and other assets securing the related loans. The occurrence of any of these events could have a material adverse effect on our business, results of operations, cash flows, financial condition and ability to pay dividends.
In addition, our discretion is limited because we may need to obtain the consent from our lenders in order to engage in certain corporate actions. Our lenders' interests may be different from ours, and we may not be able to obtain our lenders' consent when needed or at all. This may prevent us from taking actions that are in our security holders' best interest.
We may not have the ability to raise the funds necessary to pay interest on our 4.00% Convertible Unsecured Senior Notes due 2018 or 4.25% Convertible Unsecured Senior Notes due 2021, to repurchase each set of notes upon a fundamental change or to settle conversions of each set of notes in cash, as applicable. We may also be restricted from satisfying our obligations upon the occurrence of a fundamental change.
Our 4.00% Convertible Unsecured Senior Notes due 2018 and 4.25% Convertible Unsecured Senior Notes due 2021 bear interest semiannually at a rate of 4.00% per year and 4.25% per year, respectively. In addition, in certain circumstances, we are obligated to pay additional interest or special interest on each set of notes. If a fundamental change occurs, holders of each set of notes may require us to repurchase all or a portion of their notes in cash. The terms of our credit facilities may also restrict our ability to repurchase all or a portion of each set of notes upon a fundamental change in certain circumstances. The occurrence of certain events that constitute a fundamental change also constitute an event of default under some of our credit agreements. Furthermore, upon conversion of any notes, unless we elect (or are required) to deliver solely shares of our common stock to settle the conversion (excluding cash in lieu of delivering fractional shares of our common stock), we must make cash payments in respect of the notes. Any of the cash payments described above could be significant, and we may not have enough available cash or be able to obtain financing so that we can make such payments when due. If we fail to pay interest on either set of notes, repurchase either set of notes when required or deliver the consideration due upon conversion, we will be in default under the indenture which governs such set of notes.
In the event the conditional conversion feature of either our 4.00% Convertible Unsecured Senior Notes due 2018 and/or 4.25% Convertible Unsecured Senior Notes due 2021 is triggered, holders of such notes will be entitled to convert such notes at any time during specified periods at their option. Even if holders do not elect to convert their notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
9



An inability to obtain financing for our growth or to fund our future capital expenditures could negatively impact our results of operations and financial condition.
Our business strategy is based in part upon the expansion of our business to new, or within existing, markets. In order to fund future vessel acquisitions, expansion into new and existing markets and products, increased working capital levels, or capital expenditures, we will be required to use cash from operations, incur borrowings or raise capital through the sale of debt or equity securities in the public or private markets. Use of cash for the above described purposes would reduce cash available for dividend distributions to you. Our ability to obtain additional bank financing or access the capital markets for any future offerings may be significantly limited by the volatility in the global financial markets and the adverse changes in the global credit markets. These adverse market conditions and other contingencies and uncertainties are beyond our control. Our ability to obtain additional bank financing will also depend on our financial condition, which may be adversely affected by prevailing economic conditions.
Our failure to obtain funds for such purposes could impact our results of operations and financial condition. The issuance of additional equity securities would dilute your interest in us and reduce dividends payable to our shareholders. Even if we are successful in obtaining additional bank financing, paying debt service would limit cash available for working capital and increasing our indebtedness could have a material adverse effect on our business, results of operations, cash flows and financial condition.
In addition, we will incur significant maintenance costs for our fleet. Our vessels are generally required to be drydocked approximately every 30 to 60 months for major repairs and maintenance that cannot be performed while the vessels are operating, not including any unexpected repairs. We estimate the cost to drydock a vessel to be between $0.2 million and $1.2 million, depending on the size and condition of the vessel and the location of drydocking. In addition, as a result of the International Convention for the Control and Management of Vessels' Ballast Water and Sediments, or the BWM Convention, we may be required to make significant investments in ballast water management.  Please see "—We may be required to make significant investments in ballast water management which may have a material adverse effect on our future performance, results of operations, and financial position."
If we do not generate or reserve enough cash flow from operations to pay for our capital expenditures, we may need to incur additional indebtedness or enter into alternative financing arrangements, which may be on terms that are unfavorable to us.  If we are unable to fund our obligations or to secure financing, it would have a material adverse effect on our results of operations.
Business acquisition and co-operation opportunities may present increased risks and uncertainties, which if realized, could result in costs that outweigh the financial benefit of such opportunities.
As part of our growth strategy, we intend to explore acquisition and co-operation opportunities of marine fuel supply and complementary businesses. Business acquisitions and co-operation opportunities could expose us to additional business and operating risks and uncertainties, including:
·
the ability to effectively integrate and manage acquired businesses and assets;
·
the ability to realize our investment in the acquired businesses and assets;
·
the diversion of management's time and attention from other business concerns;
·
the risk of entering markets in which we may have no or limited direct prior experience;
·
the potential loss of key employees of the acquired businesses;
·
the risk that an acquisition could reduce our future earnings; and
·
exposure to unknown liabilities.

Growing any business by acquisition presents numerous risks, such as undisclosed liabilities and obligations, difficulty in obtaining additional qualified personnel, managing relationships with customers and suppliers and integrating newly acquired operations into existing infrastructures. For example, in December 2014, we filed a breach of contract claim against Hess Corporation (NYSE: HES), or Hess, for the breach of certain representations and warranties in connection with our acquisition of its East Coast bunkering business. The case is still pending as of the date of this annual report. For additional information, please see "Item 8.A. Financial Information—Consolidated Statements and Other Financial Information—Legal Proceedings."
10


Our management may not properly evaluate the risks inherent in any particular transaction. In addition, the expansion of our business may impose significant additional responsibilities on our management and staff, and may necessitate that we increase the number of personnel. We cannot give any assurance that we will be successful in executing our growth plans or that we will not incur significant expenses and losses in connection with our future growth.
In addition, the terms of our credit facilities may also restrict our ability to expand or contract our business. In the current economic and regulatory climate, it may be especially difficult to assess the risks involved in a particular transaction due to uncertainty in government responses to market volatility and the contracted credit markets.
Furthermore, future acquisitions could result in the incurrence of substantial additional indebtedness and other expenses. Future acquisitions may also result in potentially dilutive issuances of equity securities and may affect the market price of our common shares. Difficulties encountered with acquisitions may have a material adverse effect on our business, financial condition and results of operations.
Purchasing and operating secondhand vessels may expose us to increased operating risks because of the quality of those vessels and the lack of builders' or sellers' warranty protection.
Our fleet renewal and expansion strategy includes the acquisition of secondhand vessels as well as newbuildings. Unlike newbuildings, secondhand vessels typically do not carry warranties with respect to their condition. Our inspections of secondhand vessels would normally not provide us with as much knowledge of its condition as we would possess if the vessel had been built for us and operated by us throughout its life. Repairs and maintenance costs for secondhand vessels may be more substantial than for vessels we have operated since they were built. These costs could decrease our profits and reduce our liquidity.
Material weaknesses in our disclosure controls and procedures and internal control over financial reporting could negatively affect shareholder and customer confidence towards our financial reporting and other aspects of our business.
Our disclosure controls and procedures are designed to ensure that material financial and non-financial information that we prepare for public disclosure is recorded, processed, summarized and reported in a timely manner, and that it is accumulated and communicated to our management, including our President and Principal Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding such disclosure. Because there are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including our internal control over financial reporting, controls and procedures may not prevent or detect misstatements. Our management, with the participation of our President and Principal Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures and concluded that as of December 31, 2016, the Company maintained, in all material respects, effective internal control over financial reporting.
However, a determination that there are material weaknesses in the effectiveness of our material controls and procedures would reduce our ability to obtain financing or could increase the cost of any financing we obtain and require additional expenditures to comply with applicable requirements.
Due to the lack of diversification in our lines of business, adverse developments in the marine fuel supply business would negatively impact our results of operations and financial condition.
We rely primarily on the revenues generated from our business of physical supply and marketing of refined marine fuel and lubricants to end customers. Due to the lack of diversification in our line of business, an adverse development in our marine fuel supply business would have a significant impact on our business, financial condition and results of operations.
The market value of our vessels may fluctuate significantly, and we may incur impairment charges or incur losses when we sell vessels following a decline in their market value.
The fair market value of the vessels that we currently own or may acquire in the future may increase or decrease depending on a number of factors, including general economic and market conditions affecting the international marine fuel supply industry, including competition from other marine fuel supply companies, types, sizes and ages of our vessels, supply and demand for bunkering tankers, costs of newbuildings and governmental or other regulations. If we sell any vessel when vessel prices have fallen and before we have recorded an impairment charge to our financial statements, the sale may be at less than the vessel's carrying amount on our financial statements, resulting in a loss. Such loss could adversely affect our financial condition, results of operations and our ability to pay dividends to our shareholders.
11


Furthermore, we evaluate the carrying amounts of our vessels to determine if events have occurred that would require an impairment of their carrying amounts. The recoverable amount of vessels is reviewed when events and changes in circumstances indicate that the carrying amount of the assets might not be recovered. The review for potential impairment indicators and projection of future cash flows related to the vessels is complex and requires us to make various estimates. Some of these items have been historically volatile. If the recoverable amount is less than the carrying amount of the vessel, the vessel is deemed impaired. The carrying values of our vessels may not represent their fair market value at any point in time because the new market prices of secondhand vessels tend to fluctuate with, among other things, the cost of newbuildings. Any impairment charges incurred could negatively affect our financial condition and operating results.
We may experience impairment of the value of long-lived assets.
The value of our long-lived assets can become impaired, as indicated by factors such as changes in our stock price, book value or market capitalization, and the past and anticipated operating performance and cash flows of operations. We test for impairment, whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.  Please see "Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting Policies—Impairment of Long-lived Assets."
If we are unable to comply with existing or modified environmental laws and regulations relating to our fuel storage facilities, we would be exposed to significant compliance costs and liabilities.
Our operations involving the transportation and storage of fuel are subject to stringent laws and regulations governing the discharge of materials into the environment, otherwise relating to protection of the environment, operational safety and related matters. Compliance with these laws and regulations increases our overall cost of business, including our capital costs to maintain and upgrade equipment and facilities, or claims for damages to property or persons resulting from our operations. Failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties, the imposition of investigatory and remedial liabilities, and the issuance of injunctions that may restrict or prohibit our operations or even claims of damages to property or persons resulting from our operations. The laws and regulations applicable to our operations are subject to change, and compliance with current and future laws and regulations may have a material effect on our results of operations or earnings. A discharge of hazardous materials into the environment could, to the extent such event is not insured, subject us to substantial expense, including both the cost to comply with applicable laws and regulations and liability to private parties for personal injury or property damage.
We are subject to certain risks with respect to our counterparties on contracts, including, without limitation, our bunker supply and sale agreements, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.
We have entered into, and in the normal course of our business we expect to continue to enter into, various contracts, including, without limitation, bunker supply and sale agreements. Such agreements subject us to counterparty risks. The ability and willingness of each of our counterparties to perform its obligations under a contract with us will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime and offshore industries, fluctuations in the price of oil, the overall financial condition of the counterparty. In addition, we are also subject to the risk that we could be held accountable for the failure of these counterparties to comply with the laws and regulations applicable to them.
Furthermore, with respect to our bunker supply and sale agreements, during periods of decreased fuel prices, our customers may seek to renegotiate the terms of their bunker supply and sale agreements or avoid their obligations under those contracts altogether. If our customers fail to meet their obligations to us or attempt to renegotiate their agreements with us, it may be difficult to secure substitute arrangements, and any new arrangements we secure may be at lower rates. As a result, we could sustain significant losses which could have a material adverse effect on our business, financial condition, results of operations and cash flows, as well as our ability to pay dividends on our common shares and interest on our debt securities and comply with covenants in our credit facilities.
Most of our customers are not obligated to continue to contract our services and if some of our key customers reduce or terminate their purchases, our results of operations would decrease.
Generally, we have not derived a significant amount of revenue from written volume commitments from our key customers or any other understandings with our key customers that relate to future purchases. Purchases by our key customers could be reduced or terminated at any time. A substantial reduction or a termination of purchases by any of our key customers could decrease our results of operations.
12


We extend trade credit to most of our customers and our financial position and results of operations may diminish if we are unable to collect accounts receivable.
We extend trade credit to most of our customers. Our success in attracting business has been due, in part, to our willingness to extend trade credit on an unsecured basis to our customers. As of December 31, 2016, 83 of our customers, representing 15% of our total customers, had outstanding balances with us of at least $1 million under the lines of credit that we have extended to them. Our credit procedures and policies do not fully eliminate customer credit risk. The adverse changes in world credit markets over the last several years may cause these numbers to increase if our customers cannot borrow money and are illiquid. We may not be able to collect on the outstanding balances of our customers if any of our customers enter bankruptcy proceedings. For example, we currently have $6.4 million receivables outstanding, of which $1.4 million is secured, from O.W. Bunker AS and certain of its subsidiaries, which we refer to collectively as O.W. Bunker, which filed for bankruptcy protection in November 2014, which may not be recoverable. For more information, please see "Item 8.A. Financial Information—Consolidated Statements and Other Financial Information—Legal Proceedings."
Losses due to nonpayment by our customers, if significant, would diminish our financial position and results of operations.
We depend on a number of key suppliers, which makes us susceptible to supply shortages or price fluctuations that could diminish our operating results.
We currently purchase refined marine petroleum products from a number of key suppliers. If our relationship with any of our key suppliers terminates or if any of our key suppliers suffers a disruption in production, we may not be able to obtain a sufficient quantity of refined marine fuel and lubricants on acceptable terms and without interruption in our business. We may experience difficulties and delays in obtaining marine fuel from alternative sources of supply. Any interruption or delay in the supply of marine fuel, or the inability to obtain fuel from alternate sources at acceptable prices and within a reasonable amount of time, would impair our ability to meet scheduled deliveries to our customers and could cause customers to cancel orders, which would weaken our financial condition and reduce our results of operations.
The refined marine fuel that we purchase from our suppliers may fail to meet the contractual specifications that we have agreed to supply to our customers and, as a result, we could lose business from those customers and be subject to claims or other liabilities.
If the refined marine fuel that we purchase from our suppliers fails to meet the specifications we have contractually agreed to supply to our customers, we could be subject to claims or other liabilities. In addition, our relationship with our customers may be adversely affected or we could lose our customers. Our insurance policies that protect us against most of the risks involved in the conduct of our business may not be adequate and we may not have any recourse against our suppliers for marine fuel that fails to meet agreed specifications. The loss of customers and increased liabilities would reduce our earnings and could have a material adverse effect on our business, weaken our financial condition and reduce our results of operations.
If Aegean Oil or third-party physical suppliers fail to provide services to us and our customers as agreed, we would be subject to customer claims which could negatively affect our business and results of operations.
We have contracted with Aegean Oil to provide various services to our customers in Greece, including fueling of vessels in port and at sea. Aegean Oil is a related company owned and controlled by members of the family of Mr. Dimitris Melisanidis, our founder, former head of corporate development and former major shareholder.  In connection with our marine fuel trading activities, from time to time, we contract with other third-party physical suppliers to deliver marine fuel to our customers in markets where we do not have service centers. The failure of Aegean Oil or any other third-party physical supplier to perform these services in accordance with the terms we have agreed with them and our customers could affect our relationships with our customers and subject us to claims and other liabilities which could harm our business or negatively affect our financial results. If Aegean Oil or any third-party physical suppliers fails to perform its obligations to us, you will not have any recourse directly against Aegean Oil or the third-party physical suppliers.
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Agreements between us and Aegean Oil or other related entities may be more favorable or less favorable than agreements that we could obtain from unaffiliated third-parties.
The marine fuel service supply agreement and other agreements we have with Aegean Oil, one of our largest suppliers of marine petroleum products, as well as other agreements we have with related entities, have been made in the context of an affiliated relationship. Aegean Oil and other of its affiliated entities are owned and controlled by members of Mr. Melisanidis' family. Mr. Melisanidis has also historically been involved with our related companies and had a leadership role with respect to the promotion of their products and services. The negotiation of the marine fuel service supply agreement and our other contractual arrangements may have resulted in prices and other terms that are more favorable or less favorable to us than terms we might have obtained in arm's-length negotiations with unaffiliated third-parties for similar services because at the time of the negotiations, Mr. Melisanidis was a major shareholder of us through his ownership of certain entities he controls.  Moreover, Aegean Oil and other affiliated entities remain our related companies, and we remain subject to similar risks in future business dealings with these parties. Please see "Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions."
We are vulnerable to price fluctuations of marine fuel, which may result in the reduced value of our inventory and cause us to suffer financial loss.
Due to the nature of our business, we may increase the volume of our marine fuel inventories. Depending upon the price and price movement of refined marine fuel, our marine fuel inventories may subject us to a risk of financial loss.
Furthermore, marine fuel prices have been volatile in the recent past and may continue to be volatile in the future due to factors outside of our control. These factors include, among others, global economic conditions, changes in global crude oil prices, expected and actual supply and demand for marine fuel, political conditions, laws and regulations related to environmental matters (including those mandating or incentivizing alternative energy sources or otherwise addressing global climate change), changes in pricing or production controls by the Organization of the Petroleum Exporting Countries, technological advances affecting energy consumption and supply, energy conservation efforts, price and availability of alternative energy sources, and the weather.
Although we conservatively manage risks related to such fluctuations, we have no control over the changing market value of our inventory, and pricing terms with our suppliers and customers and hedges by way of oil futures or other instruments, that we have entered, or will enter into, may not adequately protect us in the event of a substantial downward movement in the price of marine fuel. Please see "—Changes in the market price of petroleum may increase our credit losses, reduce our liquidity and decrease our profitability" and "Item 11. Quantitative and Qualitative Disclosures about Market Risk."
Our business and our customers' businesses are vulnerable to currency exchange fluctuations, which could negatively affect our results of operations and cash flows and reduce our profitability.
Generally, in all of our service centers, we invoice our customers for the sale and delivery of marine petroleum products in U.S. dollars. Many of our customers are foreign customers and may be required to obtain U.S. dollars to pay for our products and services. A rapid depreciation or devaluation in a currency affecting our customers could have an adverse effect on our customers' operations and their ability to convert local currency to U.S. dollars to make required payments to us. This would in turn result in credit losses for us, which would reduce our results of operations and cash flows.
Should we enter certain markets where payments and receipts are denominated in local currency or should either the international oil and gas markets or the international shipping markets change their base currency from the U.S. dollar to another international currency such as the Euro, the impact on our dollar-denominated consolidated statements of income may be significant.
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Due to the minimal historic impact of foreign exchange fluctuations on our operations, it is our policy to not enter into hedging arrangements in respect of our foreign currency exposures related to our sales and purchases. However, we currently hedge our exposure on loan repayments denominated in foreign currencies.
Please see "Item 11. Quantitative and Qualitative Disclosures about Market Risk."
Failure to comply with anti-bribery laws could have a material adverse effect on our business, financial condition and results of operations, including as a result of criminal, civil and employment sanctions as well as negative publicity.
Our operations are subject to various anti-bribery laws, including the U.K. Bribery Act 2010 and the U.S. Foreign Corrupt Practices Act of 1977. Our employees and/or third parties acting as agents for us could engage in fraudulent behavior against us on their own or others' initiative, making them act against our interests. Such actions could include, entering into agreements with our competitors limiting free competition, document fraud, port bribes, fraudulent commission agreements, facilitation payments and bribes to get access to exclusive business. Whether intentional or not, such actions could potentially put us at risk for both legal liabilities and reputational harm.
We may be unable to attract and retain key personnel, which could interrupt our business and limit our growth.
Our success depends to a significant degree upon the abilities and efforts of our management team and our ability to hire and retain key members of our management team. The loss of any of these individuals, or our inability to attract and retain qualified personnel, could adversely affect our business prospects and financial condition. Difficulty in hiring and retaining key personnel could negatively impact our results of operations and financial condition. We do not, nor do we intend to, maintain "key man" life insurance on any of our officers or our board members, including Mr. Peter C. Georgiopoulos, the Chairman of our board of directors. We believe that Mr. Georgiopoulos is an important member of our board of directors and that the loss of his services or involvement in our business would have a material adverse effect on our Company. We have entered into employment agreements with Mr. E. Nikolas Tavlarios, our President and Mr. Spyros Gianniotis, our Chief Financial Officer.
As we expand our business, we may not be able to recruit suitable employees and crew for our vessels, which may limit our growth and cause our financial performance to suffer.
As we expand our business, we will need to recruit suitable crew, shoreside, administrative and management personnel. We may not be able to continue to hire suitable employees as we expand our vessel fleet. If we are unable to recruit suitable employees and crews, we may not be able to provide our services to customers, our growth may be limited and our financial performance may suffer.
A portion of our employees are covered by national collective bargaining agreements, which set minimum standards for employment, and any industrial action or other labor unrest could disrupt our business.
A portion of our employees from Greece, the Philippines, Romania, Singapore, Russia, the United States, Belgium and Spain are covered by national collective bargaining agreements, which set minimum standards for employment. Industrial action or other labor unrest could disrupt our business. If not resolved in a timely and cost-effective manner, such industrial action or other labor unrest could prevent or hinder our operations from being carried out normally and could disrupt our business and reduce our results of operations and cash flows.
We are a holding company, and are dependent primarily on the ability of our operating subsidiaries to distribute funds to us in order to satisfy our financial and other obligations and to make dividend payments.
We are a holding company and we have no significant assets other than the equity interests in our subsidiaries. As a result, our ability to satisfy our financial and other obligations and to pay dividends depends primarily on the performance of our operating subsidiaries and their ability to distribute funds to us. If we are unable to obtain funds from our operating subsidiaries, we will not be able to pay dividends unless we obtain funds from other sources. We may not be able to obtain the necessary funds from other sources on terms acceptable to us.
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We cannot guarantee that our board of directors will declare dividends.
Our board of directors may, in its sole discretion, from time to time, declare and pay cash dividends in accordance with our organizational documents, provisions of our debt agreements and applicable law. Our board of directors makes determinations regarding the payment of dividends in its sole discretion, and there is no guarantee that we will continue to pay dividends in the future.
While we currently intend to pay regular cash dividends on a quarterly basis, the markets in which we operate are volatile and we cannot predict with certainty the amount of cash, if any, that will be available for distribution as dividends in any period. We may also incur expenses or liabilities or be subject to other circumstances in the future that reduce or eliminate the amount of cash that we have available for distribution as dividends, including as a result of the risks described herein. We will make dividend payments to our shareholders only if our board of directors, acting in its sole discretion, determines that payments of dividends would be in our best interest and in compliance with relevant legal and contractual requirements. The principal business factors that our board of directors expects to consider when determining the timing and amount of dividend payments will be our earnings, financial condition and cash requirements at the time.
U.S. investors in our Company could suffer adverse tax consequences if we are characterized as a passive foreign investment company.
If, for any taxable year, our passive income or our assets that produce or are held for production of passive income exceed levels provided by law, we may be characterized as a "passive foreign investment company," or a PFIC, for U.S. federal income tax purposes. This characterization could result in adverse U.S. tax consequences to our U.S. shareholders. If we are classified as a PFIC, a U.S. shareholder of our common stock could be subject to increased U.S. federal income tax liability upon the sale or other disposition of our common stock or upon the receipt of amounts treated as "excess distributions." Under these rules, the excess distribution and any gain upon a sale of our common stock would be allocated ratably over the U.S. shareholder's holding period for the common stock, and the amount allocated to the current taxable year and any taxable year prior to the first taxable year in which we were a PFIC would be taxed as ordinary income in the current taxable year. The amounts allocated to each of the other taxable years would be subject to tax at the highest marginal rates on ordinary income in effect for the applicable class of taxpayer for that year, and an interest charge for the deemed tax deferral benefit would be imposed on the resulting tax liability as if such tax liability had been due with respect to each such other taxable year. In addition, shareholders of a PFIC may not receive a "step-up" in tax basis on common stock acquired from a decedent. U.S. shareholders should consult with their own U.S. tax advisors with respect to the U.S. tax consequences of investing in our common stock as well as the specific application of the "excess distribution" rule and other rules discussed in this paragraph.
We presently believe that we are not a PFIC and do not anticipate becoming a PFIC. This is, however, a factual determination made on an annual basis based on our activities, income and assets, among other factors, and is subject to change. For a discussion of how we might be characterized as a PFIC and related U.S. federal tax income consequences, please see "Item 10. Additional Information—E. Taxation—U.S. Federal Income Taxation of U.S. Holders—Passive Foreign Investment Company."
If we become subject to tax in the jurisdictions in which we operate, our net income and cash flow would decrease.
Our business is affected by taxes imposed on the purchase and sale of refined marine petroleum products in various jurisdictions in which we operate from time to time. These taxes include income, sales, excise, goods and services taxes, value-added taxes and other taxes. We currently do not pay a significant amount of tax, including withholding taxes, in any jurisdiction in which we operate. As a result of changes in our operations, tax laws or the application by tax authorities of these laws or our failure to comply with tax laws, we may become liable for an increased amount of tax in any jurisdiction. An increased liability for taxes would decrease our net income and cash flow.
Our insurance policies may not be adequate to cover our losses and because we obtain some of our insurance policies through protection and indemnity associations, we may be subject to calls in amounts based not only on our own claim records, but also the claim records of other members of the protection and indemnity associations, which could expose us to additional expenses.
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We carry insurance policies to protect us against most of the accident-related risks involved in the conduct of our business, including marine hull and machinery insurance, protection and indemnity insurance, which includes pollution risks, crew insurance, and war risk insurance. We may not be adequately insured to cover losses from our operational risks. Additionally, our insurers may refuse to pay particular claims and our insurance policies may be voidable by the insurers if we take, or fail to take, certain action, such as failing to maintain certification of our vessels with applicable maritime regulatory organizations. Any significant uninsured or under-insured loss or liability could have a material adverse effect on our business, results of operations, cash flows and financial condition. In addition, we may not be able to obtain adequate insurance coverage at reasonable rates in the future during adverse insurance market conditions.
We may also be subject to calls or premiums in amounts based not only on our claim records but also the claim records of other members of the protection and indemnity associations through which we receive insurance coverage for tort liability, including pollution-related liability. Our payment of these calls could result in significant expense to us, which could have a material adverse effect on our results of operations, cash flows and financial condition. Moreover, the protection and indemnity associations and other insurance providers reserve the right to make changes in insurance coverage with little or no advance notice.
Maritime claimants could arrest our vessels, which could disrupt our cash flow.
Crew members, suppliers of goods and services to a vessel and other parties may be entitled to a maritime lien against that vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels could interrupt our cash flows and require us to pay a significant amount of money to have the arrest lifted. In addition, in some jurisdictions under the "sister ship" theory of liability, a claimant may arrest both the vessel that is subject to the claimant's maritime lien and any "associated" vessel, which is any vessel owned or controlled by the same owner. Claimants could try to assert "sister ship" liability against one vessel in our fleet for claims relating to another vessel in our fleet.
Terrorist attacks, piracy, and international hostilities have previously affected the shipping industry, and any future attacks could negatively impact our results of operations and financial condition.
We conduct our marine fuel supply operations worldwide, and our business, results of operations, cash flows and financial condition could suffer by changing economic, political and government conditions in the countries and regions where our vessels are employed or registered. Moreover, we operate in a sector of the economy that is likely to be adversely impacted by the effects of political instability, terrorist or other attacks, war, piracy, or international hostilities, and any restrictive governmental actions that may result in response to such activity.
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, the Arabian Sea, the Red Sea, the Gulf of Aden off the coast of Somalia, the Indian Ocean and the Gulf of Guinea.  Sea piracy incidents continue to occur, particularly in the Gulf of Aden and the South China Sea. We may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, detention hijacking, involving the hostile detention of a vessel, as a result of an act of piracy against our vessels, or an increase in cost, or unavailability of insurance for our vessels, could have a material adverse impact on our business, financial condition, and results of operations.
Information technology failures and data security breaches, including as a result of cybersecurity attacks, could negatively impact our results of operations and financial condition, subject us to increased operating costs, and expose us to litigation.
We rely on our computer systems and network infrastructure across our operations. Despite our implementation of security and back-up measures, all of our technology systems are vulnerable to damage, disability or failures due to physical theft, fire, power loss, telecommunications failure, operational error, or other catastrophic events. Our technology systems are also subject to cybersecurity attacks including malware, other malicious software, phishing email attacks, attempts to gain unauthorized access to our data, the unauthorized release, corruption or loss of our data, loss or damage to our data delivery systems, and other electronic security breaches. Due to the large number of transactions that run through our systems each day, significant system down-time or slow-down could have a material impact on our ability to conduct business, process and record transactions, as well as make operational and financial decisions. In addition, as we continue to grow the volume of transactions in our businesses, our existing IT systems infrastructure, applications and related functionality may be unable to effectively support a larger scale operation, which can cause the information being processed to be unreliable and impact our decision-making or damage our reputation with customers.
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Furthermore, despite our efforts to ensure the integrity of our systems and prevent future cybersecurity attacks, it is possible that our business, financial and other systems could be compromised, especially because such attacks can originate from a wide variety of sources including persons involved in organized crime or associated with external service providers. Those parties may also attempt to fraudulently induce employees, customers or other users of our systems to disclose sensitive information in order to gain access to our data or use electronic means to induce the company to enter into fraudulent transactions. Past and future occurrences of such attacks could damage our reputation and our ability to conduct our business, impact our credit and risk exposure decisions, cause us to lose customers or revenues, subject us to litigation and require us to incur significant expense to address and remediate or otherwise resolve these issues, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
The chairman of our board of directors owns a significant portion of our outstanding common shares, which may limit your ability to influence our actions, and they may not act in the best interests of our other shareholders.
Mr. Georgiopoulos, the chairman of our board of directors, currently owns 13.7% of our outstanding shares of common stock. Accordingly, Mr. Georgiopoulos has the power to exert influence over our actions, including the election of our directors, the adoption or amendment of provisions in our amended and restated articles of incorporation and bylaws and approval of possible mergers, amalgamations, control transactions and other significant corporate transactions. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control, merger, consolidation, takeover or other business combination. This concentration of ownership could also discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which could in turn have an adverse effect on the market price of our shares. So long as Mr. Georgiopoulos continues to own a significant amount of our equity, even though such amount represents less than 50% of our voting power, he will continue to be able to exercise considerable influence over our decisions. For further discussion, please see "Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions." Mr. Georgiopoulos may not necessarily act in accordance with the best interests of other shareholders. To the extent that conflicts of interests may arise, Mr. Georgiopoulos may vote in a manner adverse to us or to you or other holders of our securities.
Some of our directors are affiliated with other companies, which could result in conflicts of interest that may not be resolved in our favor.
Some of our directors also serve as directors of other public companies and are employees or have investments in companies in industries related to ours. In particular, Mr. Georgiopoulos, the chairman of our board of directors, is also the chairman of the board of directors and chief executive officer of Gener8 Maritime, Inc., or Gener8. Also, Mr. John Tavlarios is the Chief Operating Officer of Gener8. As such, Gener8 may be deemed one of our affiliates for United States securities laws purposes.
To the extent that the other entities with which our directors may be affiliated compete with us for business opportunities, prospects or financial resources, or participate in ventures in which we may participate, our directors may face actual or apparent conflicts of interest in connection with decisions that could have different implications for us and the other companies. These decisions may relate to corporate opportunities, corporate strategies, potential acquisitions of businesses, intercompany agreements, competition, the issuance or disposition of securities, the election of new or additional directors and other matters. Such potential conflicts may delay or limit the opportunities available to us, and it is possible that conflicts may be resolved in a manner adverse to us.
As a foreign private issuer, we are exempt from certain New York Stock Exchange corporate governance requirements applicable to U.S. domestic companies. As a result, our corporate governance practices may not have the same protections afforded to investors of companies that are subject to all of the New York Stock Exchange governance requirements.
We are a "foreign private issuer" within the meaning of the New York Stock Exchange, or NYSE, corporate governance standards. Under NYSE rules, a foreign private issuer may elect to comply with the practice of its home country and not to comply with certain NYSE corporate governance requirements, including the requirements that:
·
a majority of the board of directors be independent directors;
·
both a nominating and corporate governance and a compensation committee be established and composed entirely of independent directors and each committee has a written charter addressing its purpose and responsibilities;
·
an annual performance evaluation of the nominating and corporate governance and compensation committees be undertaken;
·
non-management directors meet in regular executive sessions without members of management in attendance;
·
a company has corporate governance guidelines or a code of ethics; and
·
an audit committee consists of a minimum of three independent directors.
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We believe that our corporate governance practices are in compliance with the applicable NYSE rules and are not prohibited by the laws of the Republic of the Marshall Islands. For a list of the corporate governance practices followed by us in lieu of the corporate governance rules applicable to U.S. domestic companies, please see "Item 16G – Corporate Governance" below.
Anti-takeover provisions in our organizational documents could have the effect of discouraging, delaying or preventing a merger, amalgamation or acquisition, which could reduce the market price of our common shares.
Several provisions of our articles of incorporation and our bylaws could make it difficult for our shareholders to change the composition of our board of directors in any one year, preventing them from changing the composition of management. In addition, the same provisions may discourage, delay or prevent a merger or acquisition that shareholders may consider favorable.
These provisions include:
·
authorizing our board of directors to issue "blank check" preferred stock without shareholder approval;
·
providing for a classified board of directors with staggered, three-year terms;
·
prohibiting cumulative voting in the election of directors;
·
authorizing the removal of directors only for cause and only upon the affirmative vote of the holders of at least 70% of the outstanding shares of our capital stock entitled to vote for the directors;
·
prohibiting shareholder action by written consent unless the written consent is signed by all shareholders entitled to vote on the action;
·
limiting the persons who may call special meetings of shareholders; and
·
establishing advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted on by shareholders at shareholder meetings.

In addition, we have entered into a shareholders rights agreement that makes it more difficult for a third-party to acquire us without the support of our board of directors. See "Item 10. Additional Information—B. Memorandum and Articles of Association—Stockholders Rights Agreement." These anti-takeover provisions could substantially impede the ability of public shareholders to benefit from a change in control and, as a result, may reduce the market price of our common stock and the ability of our shareholders to realize any potential change of control premium.
We and many of our subsidiaries are incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate law, and as a result, shareholders may have fewer rights and protections under Marshall Islands law than under a typical jurisdiction in the United States.
Our corporate affairs are governed by our amended and restated articles of incorporation and bylaws and by the Marshall Islands Business Corporations Act, or the BCA. The provisions of the BCA resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Marshall Islands interpreting the BCA. The rights and fiduciary responsibilities of directors under the law of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in the United States. The rights of shareholders of companies incorporated in the Marshall Islands may differ from the rights of shareholders of companies incorporated in the United States. The BCA provides that it is to be interpreted according to the laws of the State of Delaware and other states with substantially similar legislative provisions. However, there have been few, if any, court cases interpreting the BCA in the Marshall Islands and Marshall Islands courts may not reach the same conclusions as United States courts. Thus, you may have more difficulty protecting your interests in the face of actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction that has developed a relatively more substantial body of case law.
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We may be subject to litigation, arbitration and other proceedings that could have an adverse effect on our business.
We may be, from time to time, involved in various litigation matters arising in the ordinary course of business, or otherwise. These matters may include, among other things, contract disputes, personal injury claims, environmental matters, governmental claims for taxes or duties, securities, or maritime matters. The potential costs to resolve any claim or other litigation matter, or a combination of these, may have a material adverse effect on us because of potential negative outcomes, the costs associated with asserting our claims or defending such lawsuits, and the diversion of management's attention to these matters.
Please see "Item 8.A Financial Information—Consolidated Statements and Other Financial Information—Legal Proceedings" for a description of our litigation matters.
Risk Factors Relating to Our Industry
Adverse economic conditions in the shipping industry may reduce the demand for our products and services and negatively affect our results of operations and financial condition.
Our business is focused on the physical supply, marketing and trading of refined marine fuel and marine lubricants to the shipping industry. The shipping industry has historically been materially adversely affected by negative economic conditions that may have an adverse effect on our customers, which may reduce the demand for our products and services and negatively affect our results of operations and financial condition.
In addition, any political instability, terrorist activity, piracy activity or military action that disrupts shipping operations will adversely affect our customers. Any adverse conditions in the shipping industry may reduce the demand for our products and services and negatively affect our results of operations and financial condition.
Material disruptions in the availability or supply of oil may reduce the supply of our products and have a material impact on our operating results, revenues and costs.
The success of our business depends on our ability to purchase, sell and deliver marine petroleum products to our customers. Material disruptions in the availability or supply of oil may have an adverse effect on our suppliers. In addition, any political instability, natural disasters, terrorist activity, piracy, military action or other similar conditions may disrupt the availability or supply of oil and consequently decrease the supply of refined marine fuel. Decreased availability or supply of marine fuel may reduce our operating results, revenues and results of operations.
Changes in the market price of petroleum may increase our credit losses, reduce our liquidity and decrease our profitability.
Unanticipated changes in the price of oil and gas, to the extent not hedged, may negatively affect our business. A rapid decline in fuel prices could decrease our profitability because if we were to purchase inventory when fuel prices are high without having a corresponding sales contract in place, we may not be able to resell it at a profit. Conversely, increases in fuel prices can adversely affect our customers' businesses, and consequently increase our credit losses. Increases in fuel prices could also affect the credit limits extended to us by our suppliers and our working capital requirements, potentially affecting our liquidity and profitability. In addition, increases in oil prices will make it more difficult for our customers to operate and could reduce demand for our services. Please see "—We are subject to certain risks with respect to our counterparties on contracts, including, without limitation, our bunker supply and sale agreements, and failure of such counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows."
In the highly competitive marine fuel supply industry, we may not be able to successfully compete for customers with new entrants or established companies with greater resources, which would negatively affect our financial condition and our ability to expand our business.
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We are subject to aggressive competition in all aspects of our business. Our competitors are numerous, ranging from large multinational corporations, which have significantly greater capital resources than us, to relatively small and specialized firms. In addition to competing with fuel resellers, such as World Fuel Services Corporation and Chemoil Corporation, we also compete with the major oil producers, such as BP Marine Limited, Royal Dutch Shell plc, Marine Products Corp. and Exxon Mobil Corporation, that market fuel directly to large commercial shipping companies. We also compete with physical suppliers of marine fuel products, such as CEPSA (Gibraltar) Ltd. and Fujairah National Bunkering Co. LLC, for business from traders and brokers as well as end customers. We may not be able to successfully compete for customers because of increased competition from the major oil producers, or our suppliers who may choose to market directly to large as well as smaller shipping companies, or to provide less advantageous price and credit terms to us. Also, due in part to the highly fragmented market, competitors with greater resources could enter the marine fuel supply industry and operate larger fleets of bunkering tankers through consolidations or acquisitions and may be able to offer better terms than we are able to offer to our customers.
Our operations are subject to extensive environmental laws and regulations, the violation of which could result in liabilities, fines or penalties and changes of which may require increased capital expenditures and other costs necessary to operate and maintain our vessels.
We are subject to various environmental laws and regulations dealing with the handling of fuel and fuel products. We currently store fuel inventories on our bunkering tankers and storage facilities and we may, in the future, maintain fuel inventories at several other locations in fixed or floating storage facilities. Our operations involve the risks of fuel spillage or seepage, environmental damage, and hazardous waste disposal, among other things. If we are involved in a spill or other accident involving hazardous substances, if there are releases of fuel and fuel products we own, or if we are found to be in violation of environmental laws or regulations, we could be subject to liabilities that could have a materially adverse effect on our business and operating results. We are also subject to possible claims by customers, employees and others who may be injured by a fuel spill, exposure to fuel, or other accidents. If we should fail to comply with applicable environmental regulations, we could be subject to substantial fines or penalties and to civil or criminal liability.
In particular, our operations are subject to numerous laws and regulations in the form of international conventions, national, state and local laws and national and international regulations in force in the jurisdictions in which our vessels operate or are registered, which can significantly affect the ownership and operation of our vessels. These regulations include, but are not limited to, E.U. regulations, the United Kingdom's Environmental Protection Act 1990, or U.K. EPA, the United Kingdom's Water Resources Act 1991, as amended, or WRA, the Pollution Prevention and Control (England and Wales) Regulations 2010, or the Regulations, and regulations of the United Nations' International Maritime Organization, or the IMO, including, the International Convention for the Prevention of Pollution from Ships of 1973 (as from time to time and generally referred to as MARPOL), including designation of Emission Control Areas thereunder, the International Convention on Civil Liability for Bunker Oil Pollution Damage the IMO International Convention for the Safety of Life at Sea of 1974 and the International Convention on Load Lines of 1966. In the U.S., we face the risk of liability under the U.S. Oil Pollution Act of 1990, or the OPA, the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, the U.S. Clean Air Act, as amended by the Clean Air Act Amendments of 1977 and 1990, the U.S. Clean Water Act, and the U.S. Maritime Transportation Security Act of 2002, or the MTSA. We refer you to the discussion in the section of this report entitled "Environmental and Other Regulations" for a description of environmental laws and regulations that affect our business.
Recent action by the IMO's Maritime Safety Committee and U.S. agencies indicate that cybersecurity regulations for the maritime industry are likely to be further developed in the near future in an attempt to combat cybersecurity threats. This might cause companies to cultivate additional procedures for monitoring cybersecurity, which could require additional expenses and/or capital expenditures. However, the impact of such regulations is hard to predict at this time.
A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations. Some environmental laws often impose strict liability for remediation of spills and releases of oil and hazardous substances, which could subject us to liability without regard to whether we were negligent or at fault. An oil spill could result in significant liability, including fines, penalties, criminal liability and remediation costs for natural resource damages as well as third-party damages. We are required to satisfy insurance and financial responsibility requirements for potential oil (including marine fuel) spills and other pollution incidents. Our insurance policies covering certain environmental risks may not be sufficient to cover all such risks and any claim may have a material adverse effect on our business, results of operations, cash flows and financial condition.
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Compliance with applicable laws, regulations and standards, where applicable, may require us to make additional capital expenditures for the installation of costly equipment or operational changes and may affect the resale value or useful lives of our vessels. In order to satisfy these requirements, we may, from time to time, be required to take our vessels out of service for extended periods of time, with corresponding losses of revenues. We may also incur additional costs in order to comply with other existing and future regulatory obligations, including costs relating to air emissions, maintenance and inspection, development and implementation of emergency procedures and insurance coverage or other financial assurance of our ability to address pollution incidents. For example, as discussed elsewhere in this annual report, the BWM Convention aims to prevent the spread of harmful aquatic organisms from one region to another, by establishing standards and procedures for the management and control of ships' ballast water and sediments. The BWM Convention calls for a phased introduction of mandatory ballast water exchange requirements to be replaced in time with mandatory concentration limits. In order to comply with these living organism limits, vessel owners may have to install expensive ballast water treatment systems or make port facility disposal arrangements and modify existing vessels to accommodate those systems. The BWM Convention enters into force on September 8, 2017 and vessel owners must demonstrate compliance with the BWM Convention at each vessel's first International Oil Pollution Prevention survey occurring after such date. These costs could reduce our results of operations and cash flows and weaken our financial condition. Also, in the future, market conditions may not justify these expenditures or enable us to operate some or all of our vessels profitably during the remainder of their economic lives.
We may be required to make significant investments in ballast water management which may have a material adverse effect on our future performance, results of operations, and financial position.
The BWM Convention aims to prevent the spread of harmful aquatic organisms from one region to another, by establishing standards and procedures for the management and control of ships' ballast water and sediments. The BWM Convention calls for a phased introduction of mandatory ballast water exchange requirements to be replaced in time with mandatory concentration limits. The BWM Convention was ratified in September 2016 and enters in force in September 2017. The BWM convention requires that ballast water treatment systems be installed on vessels at the first renewal survey following its entry into force. Investments in ballast water treatment may have a material adverse effect on our future performance, results of operations, cash flows and financial position. For further information on these requirements, please see "Our operations are subject to extensive environmental laws and regulations, the violation of which could result in liabilities, fines or penalties and changes of which may require increased capital expenditures and other costs necessary to operate and maintain our vessels."
Our operations have inherent risks that could negatively impact our results of operations and financial condition.
Operating bunkering vessels and marine fuel storage facilities involves inherent risks that could negatively impact our results of operations and financial condition. Our vessels and fuel oils that they carry are at risk of being damaged or lost because of events such as marine disasters, bad weather, mechanical failures, human error, war, terrorism, piracy and other circumstances or events. All of these hazards can result in death or injury to persons, loss of revenues or property, environmental damage, higher insurance rates, damage to our customer relationships, delays or rerouting. Although we maintain insurance to mitigate these costs, there can be no assurance that our insurance would be sufficient to cover the liabilities we may incur as a result of the occurrence of one or more of these events.
If our vessels suffer damage, they may need to be repaired. The costs of vessel repairs are unpredictable and can be substantial. We may have to pay repair costs that our insurance policies do not cover. The loss of earnings while these vessels are being repaired, as well as the actual cost of these repairs, would decrease our results of operations. If one of our vessels were involved in an accident with the potential risk of environmental contamination, the resulting media coverage could have a material adverse effect on our business, our results of operations and cash flows and weaken our financial condition.
Risk Factors Relating to Our Common Shares
Future sales of our common shares could cause the market price of our common stock to decline.
The market price of our common stock could decline due to the issuance and, or the announcements of proposed sales, of a large number of common stock in the market, including sales of common stock by our large shareholders, or the issuance of common shares upon the conversion of our 4.00% Convertible Unsecured Senior Notes due 2018 and/or our 4.25% Convertible Unsecured Senior Notes due 2021, or the perception that these sales or issuances could occur. These sales or issuances, or the perception that these sales or issuances could occur, could also make it more difficult or impossible for us to sell equity securities in the future at a time and price that we deem appropriate to raise funds through future offerings of common stock.
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Our amended and restated articles of incorporation authorize our board of directors to, among other things, issue additional shares of common or preferred stock or securities convertible or exchangeable into equity securities, without shareholder approval. We may issue such additional equity or convertible securities to raise additional capital. The issuance of any additional shares of common or preferred stock or convertible securities could be substantially dilutive to our shareholders, including having the following effects:
·
our existing shareholders' proportionate ownership interest in us will decrease;
·
the amount of cash available for dividends payable on the shares of our common stock may decrease;
·
the relative voting strength of each previously outstanding common share may be diminished; and
·
the market price of the shares of our common stock may decline.
Moreover, to the extent that we issue restricted stock units, stock appreciation rights, options or warrants to purchase our common shares in the future and those stock appreciation rights, options or warrants are exercised or as the restricted stock units vest, our shareholders may experience further dilution. Holders of shares of our common stock have no preemptive rights that entitle such holders to purchase their pro rata share of any offering of shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders.
Our share price may be highly volatile, which could lead to a further loss of all or part of an investor's investment and there may not be a continuing public market for you to resell our common stock.
Since 2008, the stock market has experienced extreme price and volume fluctuations. This volatility has often been unrelated to the operating performance of particular companies. The market price of our shares of common stock fluctuated substantially during 2016, trading at a high of $13.10 in December 2016 and a low of $5.21 in July 2016, and recently closing at $10.40 on May 12, 2017. If the volatility in the market continues or worsens, it could have a further adverse effect on the market price of our shares of common stock, regardless of our operating performance, and an active and liquid public market for our shares of common stock may not continue.
The trading price of our common stock may be highly volatile and could be subject to fluctuations in response to a number of factors beyond our control. Some of those factors are:
·
fluctuations in interest rates;
·
fluctuations in the availability or the price of oil;
·
fluctuations in foreign currency exchange rates;
·
announcements by us or our competitors;
·
changes in our relationships with customers or suppliers;
·
changes in governmental regulation of the fuel industry;
·
changes in United States or foreign tax laws;
·
actual or anticipated fluctuations in our operating results from period to period;
·
changes in financial estimates or recommendations by securities analysts;
·
changes in accounting principles;
·
a general or industry-specific decline in the demand for, and price of, our shares of common stock resulting from capital market conditions independent of our operating performance;
·
the loss of any of our key management personnel; and
·
our failure to successfully implement our business plan.

In recent years, the stock market has experienced significant price and volume fluctuations. These fluctuations may be unrelated to the operating performance of particular companies. These broad market fluctuations may cause declines in the market price of our common stock. The price of our common stock could fluctuate based upon factors that have little or nothing to do with us or our performance, and those fluctuations could materially reduce our common stock price.
You may not be able to sell your shares of our common stock in the future at the price that you paid for them or at all.
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ITEM 4.          INFORMATION ON THE COMPANY
A.
History and Development of the Company
Aegean Marine Petroleum Network Inc. is a Marshall Islands holding company incorporated on June 6, 2005 under the BCA. On December 13, 2006, we consummated our initial public offering of 14,375,000 shares of our common stock. On January 27, 2010, we completed a public offering of an additional 4,491,900 shares of our common stock. On May 19, 2010, we acquired from Leveret International Inc., or Leveret, in a private transaction 1,000,000 shares of our common stock. On October 23, 2013, we issued and sold $86.3 million aggregate principal amount of our 4.00% Convertible Unsecured Senior Notes due 2018, and on January 16, 2015, we sold an additional $48.3 million of our 4.00% Convertible Unsecured Senior Notes due 2018. On September 15, 2016, we repurchased 11,303,031 of our common shares that were beneficially owned by our then founder and head of corporate development, Mr. Dimitris Melisanidis. On December 19, 2016 and January 11, 2017, we issued and sold $150.0 million and $22.5 million, respectively, of our aggregate principal amount of our 4.25% Convertible Unsecured Senior Notes due 2021.
For more information on the development of our business, see "—B. Business Overview" below.
We maintain our principal marketing and operating offices at 10, Akti Kondili, 185 45 Piraeus, Greece. Our telephone number at that address is +30 (210) 458-6200. We also have an executive office to oversee our financial and other reporting functions in the United States at 299 Park Avenue, 2nd Floor, New York, New York, 10171. Our telephone number at that address is (212) 430-1098.
B.
Business Overview
We are an international marine fuel logistics company that markets and physically supplies refined marine fuel and lubricants to vessels in port, at sea and on rivers and currently have a global presence in 29 markets. As a physical supplier, we procure marine fuel from refineries, major oil producers and other sources and resell and deliver these fuels from our bunkering vessels to a broad base of end users. With service centers in Northern Europe, the United Arab Emirates, the U.S. East and West Coasts, Singapore, Gibraltar, the Canary Islands, Greece, Morocco, Canada, Jamaica, Trinidad and Tobago, Gulf of Mexico, Germany, and South Africa, we believe that we are one of a limited number of independent physical suppliers that owns and operates a fleet of bunkering vessels and conducts physical supply operations in multiple jurisdictions. As of the date of this annual report, we own and operate a fleet of 45 bunkering vessels, all of which are constructed with double hulls and one single hull special purpose vehicle, and we charter-in 15 bunkering vessels, all of which are constructed with double hulls, with an aggregate carrying capacity of approximately 292,400 dwt.
In some markets, we have deployed floating storage facilities which enable us to maintain more efficient refueling operations, have more reliable access to a supply of bunker fuel and deliver a higher quality service to our customers. We own and operate one single hull special purpose vessel, the Aegean Orion, a 550 dwt tanker, which is based in Greece and operate two vessels as floating storage facilities with a cargo carrying capacity of approximately 86,800 dwt.
We also operate 10 land-based storage facilities, of which we own one and have exclusive use of one, with an aggregate storage capacity of approximately 1,075,000 cubic meters. We operate land-based storage facilities in the United States, Morocco, Canary Islands, and Germany, where we store marine fuel in terminals with storage capacity of approximately 293,000, 218,000, 79,000, and 20,000 cubic meters, respectively. In addition, we, through our wholly owned subsidiary, Aegean Oil Terminal Corporation, own and operate a land-based storage facility in Fujairah, United Arab Emirates, with storage capacity of 465,000 cubic meters, representing 43.3% of our aggregate storage capacity. We may also consider the construction of land-based storage facilities in other areas depending on market prospects and availability of financing.
We provide fueling services to virtually all types of ocean-going and many types of coastal vessels, such as oil tankers, containerships, drybulk carriers, cruise ships, reefers, LNG/LPG carriers, car carriers and ferries. Our customers include a diverse group of ocean-going and coastal ship operators and marine fuel traders, brokers and other end-users of marine fuel and lubricants.
We provide our customers with services that require sophisticated logistical operations designed to meet their strict fuel quality and delivery scheduling needs. We believe that our extensive experience, management systems and software systems allow us to meet our customers' specific requirements when they purchase and take delivery of marine fuels and lubricants around the world. This, together with the capital-intensive nature of our industry and the limited available shipyard capacity for new vessel construction, represents a significant barrier to the entry of competitors. We have devoted our efforts to building a global brand and believe that our customers recognize our brand as representing high quality service and products at each of our locations around the world. We perform our technical ship operations in-house, which helps us maintain high levels of customer service.
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Throughout our history, we have expanded our business and marine fuel delivery capabilities through strategic alliances, select business and vessel acquisitions, and the establishment of new service centers. In December 2013, we acquired the U.S. East Coast bunkering business of Hess, including 238,000 cubic meters of leased tank storage in the ports of New York, Philadelphia, Baltimore, Norfolk and Charleston. This acquisition marked our entrance into supplying U.S. customers and has increased our exposure to U.S. clients worldwide, including leading cruise lines. In December 2014, we entered into an agreement to acquire 28,567 metric tons of marine fuel and assume a storage contract for approximately 55,000 cubic meters with Vopak Terminal in Los Angeles, California at an auction of the assets of O.W. Bunker. This acquisition has given us access to the ports of Los Angeles, Long Beach and San Diego, key trade hubs between North America and Asia. Also in December 2014, we commenced fuel supply operations in the Gulf of Mexico (in U.S. territorial waters).
In January 2015, we launched physical supply operations in Hamburg, Germany and assumed time charter in contracts for two modern bunkering barges that were previously under charter to O.W. Bunker, together with approximately 20,000 cubic meters of onshore storage capacity, and commenced marketing operations in Russia dedicated to sales and marketing of marine petroleum products across all Russian ports.
In January 2016, we commenced bunker trading operations in South America from our new office in Rio de Janeiro, Brazil. In March 2016, we commenced physical supply operations in South Africa's Algoa Bay.
In January 2017, we launched a new service center in Rostock, Germany to serve German Baltic Sea ports and Southern Scandinavian ports.
We currently have a global presence in 29 markets and over 60 ports, including Northern Europe and the Antwerp-Rotterdam-Amsterdam region, or the ARA region, the United Arab Emirates, the U.S. East and West Coasts, Singapore, Gibraltar, the Canary Islands, Greece, Morocco, Canada, Jamaica, Trinidad and Tobago, Gulf of Mexico (in U.S. territorial waters), Germany, Russia, South America, and South Africa. We plan to continue to grow our business during the next several years and to pursue select expansion opportunities as a means of expanding our service.
In addition to our bunkering operations described above, we market and distribute marine lubricants under the Alfa Marine Lubricants brand. Alfa Marine Lubricants are currently available in most of our markets. We view this business as complementary to our business of marketing and delivering marine fuel. We plan to expand the distribution of marine lubricants throughout our service centers and other bunkering ports worldwide.
Primary Markets Served
The following discussion provides an overview of the markets in which we conduct our physical supply operations and trading activities.
Our Physical Supply Operations
Greece
We currently service our customers in Greece through our related company, Aegean Oil, in Piraeus, Patras, and other parts of Greece. We currently operate six double hull tankers, one single hull special purpose vessel, the Aegean Orion, a 550 dwt tanker, and a floating storage facility, the Mediterranean, a double hull barge, in Greece.
Aegean Oil has a license, which we, as a non-Greek company, are not qualified to obtain, to operate as a physical supplier of refined marine petroleum products in Greece. Aegean Oil's license to operate as a physical supplier of refined marine petroleum products allows it to operate not only in Piraeus and Patras but in all ports in Greece, including Thessaloniki and Crete. We purchase our fuel mainly from Hellenic Refinery (ELPE) and Motor Oil Hellas. We store fuel in our floating storage facility, the Mediterranean. As we expand our business, we may elect to service our customers in other Greek ports and seek a larger share of the total Greek market for supply of marine petroleum products. We support our operations in Greece from our office in Piraeus, which we lease.
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Gibraltar
We possess a license issued by the Bunkering Superintendent of the Port of Gibraltar to act as a physical supplier of marine petroleum products in Gibraltar. We currently operate six double hull bunkering tankers in Gibraltar. We purchase our fuel in Gibraltar from a variety of different suppliers, including Preem Tupras Co., Glencore plc and Galp Energia SGPS S.A. We store our fuel in a leased storage facility in Tangiers, near the port of Tanger-Med. We support our bunkering operations from our office in Gibraltar, which we lease.
United Arab Emirates
We possess a license issued by Sharjah Economic Development Department to act as a physical supplier of marine petroleum products in the port area of Fujairah. We purchase our fuel in Fujairah from a variety of different suppliers including the Vitol Group and the Bahrain Petroleum Company (Bapco).
We have a 25-year lease agreement with the Municipality of Fujairah, which may be automatically renewed for an additional 25 years, pursuant to which we built a land-based storage facility with capacity of 465,000 cubic meters, which was completed in the fourth quarter of 2014. We currently operate four double hull bunkering tankers in this region, which we service using our Fujairah Storage Facility. We currently lease to third parties over 300,000 cubic meters of this facility. We support our bunkering operations from two offices in Fujairah, Dubai and Khor Fakkan, which we lease.
Jamaica
We are authorized by the Port Authority of Jamaica to act as a physical supplier of marine petroleum products in Jamaica. We service our customers in the ports of Kingston, Montego Bay and Ocho Rios, Jamaica, and may elect to service our customers in other locations in Jamaica. We operate two double hull tankers in Jamaica. We have entered into a long-term supply contract to purchase fuel from the state refinery, Petrojam Limited. We support our bunkering operations from our office in Kingston, which we lease. We also own property, which we may use to construct a land-based storage facility of approximately 80,000 cubic meters.
Singapore
We possess a license issued by the Maritime and Port Authority of Singapore to act as a physical supplier of marine petroleum products in the port of Singapore. We currently operate two double hull bunkering tankers in Singapore and we also have short-term chartering agreements with third-parties for some of these vessels. We purchase our fuel in Singapore from a variety of different suppliers, including Petrochina Ltd, BP Singapore Pte. Ltd., Shell Singapore and Exxon Mobil Corporation. We support our bunkering operations from our office in Singapore, which we lease.
Northern Europe and the ARA region
We possess a license issued by the Belgian Federal Ministry of Finance to trade and supply marine petroleum products offshore and in ports. We deliver fuel offshore and service over 45 ports located throughout Northern Europe, including the North and Irish Sea, the French Atlantic, the English Channel and the St. George Channel. Aegean North West Europe NV, or ANWE, also services the ports of Antwerp, Rotterdam and Amsterdam and also the surrounding ports of Ghent, Zeebruges, Flushing, Terneuzen and Sluiskil, Moerdijk and Ijmuiden. We currently operate 16 double hull bunkering tankers in Northern Europe and the ARA region. We purchase our fuel in Northern Europe from a variety of different suppliers. We support our bunkering operations in Northern Europe from our office near Antwerp, which we own.
Vancouver, Canada
We possess a license issued by the City of Vancouver. We trade and supply marine petroleum products off the coast and in the port of Vancouver. We operate two double hull non self-propelled bunkering barges in the port of Vancouver. We purchase our fuel in Vancouver from a variety of different suppliers, including Esso (Imperial Oil), which also engages in supply operations in the port. We support our bunkering operations in this region from our office in Vancouver, which we lease.
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Trinidad and Tobago
We possess a license issued by the Republic of Trinidad and Tobago to act as a physical supplier of marine petroleum products in the area of Port of Spain in Trinidad and Tobago. We currently operate two double hull bunkering tankers in Trinidad and Tobago. We purchase our fuel in Trinidad and Tobago from a major supplier, Petrotrin Company. We support our bunkering operations here from our office in Port of Spain, which we lease.
Morocco
We possess a license issued by the Agence Spéciale Tanger-Mediterranée to act as a physical supplier of marine petroleum products off the coast of Morocco and in the port of Tanger-Med. We currently serve this service center with our Gibraltar-based bunkering tankers and operate a land-based storage facility in Tangiers, near the port of Tanger-Med, with approximately 218,000 cubic meters capacity. We purchase our fuel in Morocco mainly from Preem Tupras Co., Glencore plc and Galp Energia SGPS S.A. We were selected by Horizon Tangiers Terminal S.A., a special purpose consortium, as the exclusive bunkering company for the new port in Tanger-Med. Since July 2012, we store our fuel at the leased tanks in the Tanger-Med area under this appointment, the duration of which is 25 years. We currently support our bunkering operations here from our office in Gibraltar, which we lease.
Las Palmas and Tenerife
In June 2010, we acquired the assets and operations of the Shell Las Palmas terminal in the Canary Islands. The Shell Las Palmas terminal occupies an area of approximately 20,000 square meters, providing bunkering services for a diverse group of ship operators primarily along major trans-Atlantic seaborne trade routes. The terminal includes a lubricants plant, dedicated land-based storage facilities with approximately 65,000 metric tons capacity as well as on-site blending facilities to mix all grades of fuel oils and distillates. In addition, we lease approximately 16,000 cubic meters capacity from BP España S.A.U. in its adjacent terminal. In June 2011, we also commenced physical supply of operations in Tenerife, which we support from our Las Palmas service center.
We possess a license issued by the Canary Islands Ministry of Development to act as a physical supplier of marine petroleum products offshore and in the ports of Las Palmas and Tenerife. We currently operate two double hull bunkering tankers in Las Palmas. We purchase our fuel from a variety of different suppliers, including Preem Tupras Co., Galaxy Oil Ltd and Galp Energia SGPS S.A. We support our operations in the Canary Islands from our office in Las Palmas, which we lease.
Panama
We currently do not have any vessels operating in Panama; however, we may conduct fuel trading in the area. We support our operations in Panama from our offices in New York.
Spain
In August 2012, we signed a definitive agreement with Meroil, a Barcelona-based oil and energy logistics company which operates the largest Spanish coastline terminal for petroleum products in the Port of Barcelona, Spain, to secure onshore fuel oil storage capacity in that terminal. From April 2013 until November 2016, we conducted physical supply operations in Barcelona. From August 2013 until June 2016, we also conducted physical supply operations in Algeciras, Spain. We still have a license from the Port Authority of Algeciras to act as a physical supplier of marine petroleum products in the port.
U.S. East Coast
In December 2013, upon our acquisition of the U.S. East Coast bunkering business from Hess, we commenced operations in the U.S. East Coast. We conduct bunkering operations in this region, and have approximately 238,000 cubic meters of leased tank storage. We supply the heavily trafficked ports of New York, Philadelphia, Baltimore, Norfolk and Charleston. We have a license from the states in the U.S. where we operate. We use third-party barges to deliver our products in the area. We purchase our fuel in the region from a variety of different suppliers, including PMI Trading Ltd, or PMI Trading. We support our U.S. East Coast operations from our office in New York, which we lease.
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U.S. West Coast
In December 2014, we acquired 28,567 metric tons of marine fuel and assumed a storage contract for approximately 55,000 cubic meters with Vopak Terminal in Los Angeles, California at an auction of the assets of O.W. Bunker. This acquisition has given us access to the ports of Los Angeles, Long Beach, and San Diego, key trade hubs between North America and Asia. We have a license from California and we operate two double hull bunkering tanker in the area. We purchase our fuel in the region from a variety of different suppliers, including PMI Trading. We support our U.S. West Coast operations from our office in New York, which we lease.
Gulf of Mexico
In December 2014, we assumed the contracts for two ocean-going bunkering tankers previously under charter to O.W. Bunker. With these specialized tankers and their highly trained personnel in place, we service the specific needs of vessels transiting the Gulf of Mexico (in U.S. territorial waters). We have a license from the states in the U.S. in which we operate and we purchase our fuel in the region from NuStar Supply and Trading LLC. We support our Gulf of Mexico operations from our office in Piraeus, which we lease.
Germany
In January 2015, we launched physical supply operations in Germany and assumed contracts for two modern bunkering barges in Germany that were also previously under charter to O.W. Bunker, together with approximately 20,000 cubic meters of onshore storage capacity. We have a license from the local tax authorities and we purchase our fuel in the region from a variety of different suppliers, including Aral AG, Raffinerie Heide GmbH, and  Blue Ocean Mineralol GmbH. We support our operations from our office in Hamburg, which we lease.  In January 2017, we launched a new service center in Rostock, Germany (through our acquisition of OBAST Bunkering & Trading GmbH, or OBAST, a physical bunker supplier and cargo oil trader) that services German Baltic Sea ports and Scandinavian ports.
South Africa
In March 2016, we commenced physical supply operations in South Africa's Algoa Bay, near Port Elizabeth and Coega Port. We have secured permission from the South African Maritime Safety Authority to deliver bunkers and perform ship-to-ship transfers in Algoa Bay and obtained bunkering licenses from Transnet National Ports Authority in Port Elizabeth and Coega. We currently operate three double hull bunkering tanker and one floating storage facility in the area. We purchase our fuel in the region from various suppliers including Trafigura and the Vitol Group. We support our operations from our office in Port Elizabeth, which we lease.
Our Trading Operations (Russia, South America and other regions)
In February 2015, we launched bunker trading operations in St. Petersburg, Russia. We support our operations in this region from our office in St. Petersburg, Russia, which we lease.
In January 2016, we launched bunker trading operations in South America. We support our operations in this region from our office in Rio de Janeiro, Brazil, which we lease.
We also have significant trading activity in Greece, China, Singapore, Korea and other worldwide areas and we support our services from our offices in Piraeus, Greece, and Singapore, which we lease.
Sales and Marketing
Most of our marketing, sales, ship-management and other related functions are performed at our main offices in Piraeus, Greece. We also market products and services from our offices in New York (the United States), Vancouver (Canada), Singapore, Antwerp (Belgium), St. Petersburg (Russia), Hamburg (Germany) and Rio de Janeiro (Brazil). Our sales force interacts with our established customers and markets our fuel sales and services to large commercial shipping companies and foreign governments. We believe our level of customer service, years of experience in the industry, and reputation for reliability are significant factors in retaining our customers and attracting new customers. Our sales and marketing approach is designed to create awareness of the benefits and advantages of our fuel sales and services. We are active in industry trade shows and other available public forums.
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Administrative Offices
Cyprus
We maintain an administrative office in Cyprus, which we lease. Our office in Cyprus is responsible for, among other things, certain invoicing functions of our principal operating subsidiary, Aegean Marine Petroleum S.A., or AMP.
New York, United States
We maintain an executive office in New York, United States to oversee our financial and other reporting functions.
Customers
We market marine fuel and related services to a broad and diversified base of customers. During the years ended December 31, 2016, 2015 and 2014, none of our customers accounted for more than 10% of our total revenues. Our customers serviced during the past three years include Greek-owned commercial shipping companies, such as Blue Star Ferries, Neptune Line Shipping and ENESEL S.A., other international shipping companies, such as A.P. Moller and Royal Caribbean Cruises Ltd., fuel traders and brokers, such as World Fuel Services Corporation, and oil majors, such as Exxon Mobil Corporation.
Suppliers
We purchase our marine fuel and lubricants from refineries, oil majors or other select suppliers around the world. In the years ended December 31, 2016, 2015 and 2014, we purchased marine petroleum products of approximately $63.9 million, $136.7 million, and $348.6 million, respectively, or approximately 2% to 7% of our total purchases of marine petroleum products, from our related companies, Aegean Oil and Melco S.A., or Melco. The majority of our cost of marine petroleum products during the years ended December 31, 2016, 2015 and 2014 were made from unrelated third-party suppliers and totaled $3,606.7 million, $3,716.7 million and $5,937.9 million, respectively, or approximately 93% to 98% of our total cost of marine petroleum products. Our cost of fuel is generally tied to spot pricing, market-based formulas or is governmentally controlled. We are usually extended trade credit from our suppliers for our fuel purchases, which are generally required to be secured by standby letters of credit or letters of guarantee.
Competition
We compete with marine fuel traders and brokers, such as World Fuel Services Corporation and Chemoil Corporation, and major oil producers, such as BP Marine Limited, Royal Dutch Shell plc, Marine Products Corp. and ExxonMobil Marine Fuel, for services and end customers. We also compete with physical suppliers of marine fuel products, such as CEPSA (Gibraltar) Ltd. and Fujairah National Bunkering Co. LLC, for business from traders and brokers as well as end customers. Our competitors include both large corporations and small, specialized firms. Some of our competitors are larger than we are and have substantially greater financial and other resources than we do. Some of our suppliers also compete against us.
Environmental and Other Regulations
Government regulations and laws significantly affect the ownership and operation of our tankers and marine fuel facilities. We are subject to various international conventions, laws and regulations in force in the countries in which our fuel facilities are located, and where our vessels may operate or are registered. Compliance with such laws, regulations and other requirements entails expenses, including vessel modification and implementation of certain operating procedures.
A variety of governments, quasi-governmental and private organizations subject our tankers to both scheduled and unscheduled inspections. These organizations include the local port authorities, national authorities, harbor masters or equivalent, classification societies, flag state and charterers, particularly terminal operators and oil companies. Some of these entities require us to obtain permits, licenses and certificates and approvals for the operation of our tankers and marine fuel facilities. Our failure to maintain necessary permits, licenses, certificates or approvals could require us to incur substantial costs or temporarily suspend operation of our marine fuel terminal or one or more of the vessels in our fleet.
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We believe that the heightened levels of environmental and quality concerns among insurance underwriters, regulators and charterers have led to greater inspection and safety requirements on all vessels and may accelerate the scrapping of older vessels throughout the industry. Increasing environmental concerns have created a demand for tankers that conform to the stricter environmental standards. We are required to maintain operating standards for all of our vessels emphasizing operational safety, quality maintenance, continuous training of our officers and crews and compliance with applicable local, national and international environmental laws and regulations. We believe that the operation of our vessels will be in substantial compliance with applicable environmental laws and regulations and that our vessels have all material permits, licenses, certificates or other authorizations necessary for the conduct of our operations; however changes in such laws and regulations, such as the 2010 Deepwater Horizon oil spill or future serious marine incidents, may impact our resale value or useful lives of our tankers. In addition, a future serious marine incident that results in significant oil pollution, release of hazardous substances, loss of life, or otherwise causes significant adverse environmental impact could result in additional legislation, regulation, or other requirements that could negatively affect our profitability.
International Maritime Organization
The IMO has adopted the International Convention for the Prevention of Marine Pollution from Ships, 1973, as modified by the Protocol of 1978 relating thereto, collectively referred to as MARPOL 73/78 and herein as MARPOL. MARPOL entered into force on October 2, 1983. It has been adopted by over 150 nations, including many of the jurisdictions in which our vessels operate. MARPOL sets forth pollution-prevention requirements applicable to drybulk carriers, among other vessels, and is broken into six Annexes, each of which regulates a different source of pollution. Annex I relates to oil leakage or spilling; Annexes II and III relate to harmful substances carried, in bulk, in liquid or packaged form, respectively; Annexes IV and V relate to sewage and garbage management, respectively; and Annex VI, lastly, relates to air emissions. Annex VI was separately adopted by the IMO in September of 1997.
Our vessels are subject to regulatory requirements imposed by the IMO, including the phase-out of single hull tankers.
In 1992, MARPOL was amended to make it mandatory for tankers of 5,000 dwt and more ordered after July 6, 1993 to be fitted with double hulls, or an alternative design approved by the IMO. Following the Erika incident off the coast of France in December 1999, the IMO took steps to accelerate the phase-out of single hull tankers. In April 2001, the IMO adopted a revised phase-out schedule for single hull tankers, which became effective in September 2003.
As a result of the oil spill in November 2002 relating to the loss of the MT Prestige, which was owned by a company not affiliated with us, in December 2003, the Marine Environmental Protection Committee of the IMO, or MEPC, adopted additional amendments to Annex I of the MARPOL Convention, which amendments became effective in April 2005. The amendment revised existing regulation 13G (now regulation 20) accelerating the phase-out of single hull oil tankers and adopted a new regulation 13H (now regulation 21) aimed at the prevention of oil pollution from oil tankers carrying heavy grade oil as cargo. Under the revised regulations, single hull oil tankers exceeding 5,000 tons deadweight were required to be phased out (or to meet certain other limited exceptions) no later than April 5, 2005 or the anniversary of the date of delivery of the ship on the date or in the year specified in the following table:
Category of Oil Tankers
 
Date or Year for Phase Out
Category 1—oil tankers of 20,000 dwt and above carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as cargo, and of 30,000 dwt and above carrying other oils, which do not comply with the requirements for protectively located segregated ballast tanks
 
April 5, 2005 for ships delivered on April 5, 1982 or earlier; or 2005 for ships delivered after April 5, 1982
     
Category 2—oil tankers of 20,000 dwt and above carrying crude oil, fuel oil, heavy diesel oil or lubricating oil as cargo, and of 30,000 dwt and above carrying other oils, which do comply with the protectively located segregated ballast tank requirements
 
April 5, 2005 for ships delivered on April 5, 1977 or earlier; 2005 for ships delivered after April 5, 1977 but before January 1, 1978
     
Category 3—oil tankers of more than 5,000 dwt but less than the tonnage specified for Category 1 and 2 tankers
 
Anniversary date in 2006 for ships delivered in 1978 and 1979
Anniversary date in 2007 for ships delivered in 1980 and 1981
Anniversary date in 2008 for ships delivered in 1982
Anniversary date in 2009 for ships delivered in 1983
Anniversary date in 2010 for ships delivered in 1984 or later
 
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Under the revised regulations, a flag state may permit continued operation of certain Category 2 or 3 tankers beyond the phase-out date set forth above. The regulations also enable a flag state to allow for some newer single hull oil tankers registered in its country that conform to certain technical specifications to continue operating until the earlier of the anniversary of the date of delivery of the vessel in 2015 or the date on which the vessel reaches 25 years after the date of its delivery. As described below, certain Category 2 and 3 tankers fitted only with double bottoms or double sides may also be allowed by the flag state to continue operations until their 25th anniversary of delivery. Port states are however permitted to deny entry to such tankers, if the tankers are also operating beyond the anniversary of the date of their delivery in 2015.
The December 2003 amendments to Annex I of the MARPOL convention, discussed above, adopted regulation 21 on the prevention of oil pollution from oil tankers carrying heavy grade oil as cargo, or HGO, which includes most grades of marine fuel. The new regulation requires, with certain limited exceptions, that single hull oil tankers of 5,000 dwt and above comply with regulation 13F of Annex 1 (setting out a number of requirements aimed at the prevention of oil pollution in the event of collision or stranding) after April 5, 2005, and that single hull oil tankers of 600 dwt and above but less than 5,000 dwt comply with regulation 13F(7)(a) of Annex 1 (requiring certain modifications to smaller tankers in order to prevent pollution in the event of collision or stranding) no later than the anniversary of their delivery in 2008.
Under regulation 21, HGO means any of the following:
·
crude oils having a density at 15°C higher than 900 kg/m3;
·
fuel oils having either a density at 15°C higher than 900 kg/m3 or a kinematic viscosity at 50°C higher than 180 mm2/s; or
·
bitumen, tar and their emulsions.
Under regulation 21, the flag state may allow continued operation of oil tankers of 5,000 dwt and above, carrying crude oil with a density at 15°C higher than 900 kg/m3 but lower than 945 kg/m3, that conform to certain technical specifications and where, in the opinion of such flag state, the ship is fit to continue such operation, having regard to the size, age, operational area and structural conditions of the ship and provided that the continued operation shall not go beyond the date on which the ship reaches 25 years after the date of its delivery.
The flag state may also allow continued operation of a single hull oil tanker of 600 dwt and above but less than 5,000 dwt, carrying HGO as cargo, if, in the opinion of such flag state, the ship is fit to continue such operation, having regard to the size, age, operational area and structural conditions of the ship, provided that the operation shall not go beyond the date on which the ship reaches 25 years after the date of its delivery.
The flag state may also exempt an oil tanker of 600 dwt and above carrying HGO as cargo if the ship is either engaged in voyages exclusively within an area under the flag state's jurisdiction, or if the ship is engaged in voyages exclusively within an area under the jurisdiction of another party to the MARPOL Convention, provided that party agrees. The same applies to vessels operating as floating storage units of HGO.
Any port state, however, can deny entry of single hull tankers carrying HGO which have been allowed to continue operation under the exemptions mentioned above, into the ports or offshore terminals under the port state's jurisdiction, or deny ship-to-ship transfer of HGO in areas under its jurisdiction except when such transfer is necessary for the purpose of securing the safety of a ship or saving life at sea.
In October 2004, the MEPC adopted a unified interpretation of regulation 13G that clarified the delivery date for converted tankers. Under the interpretation, where an oil tanker has undergone a major conversion that has resulted in the replacement of the forebody, including the entire cargo carrying section, the major conversion completion date shall be deemed to be the date of delivery of the ship, provided that:
·
the oil tanker conversion was completed before July 6, 1996;
·
the conversion included the replacement of the entire cargo section and fore-body and the tanker complies with all the relevant provisions of MARPOL Convention applicable at the date of completion of the major conversion; and
·
the original delivery date of the oil tanker will apply when considering the 15 years of age threshold relating to the first technical specifications survey to be completed in accordance.

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Revised Annex I to the MARPOL Convention entered into force in January 2007 and has undergone various minor amendments since then. Revised Annex I incorporates various amendments adopted since the MARPOL Convention entered into force in 1983, including the amendments to regulation 13G (regulation 20) and newly adopted regulation 13H (regulation 21). Revised Annex I also imposes construction requirements for oil tankers delivered on or after January 1, 2010. A further amendment to revised Annex I includes an amendment to the definition of HGO that will broaden the scope of regulation 21. On August 1, 2007 regulation 12A (an amendment to Annex I) came into force requiring fuel oil tanks to be located inside the double hull in all ships with an aggregate oil fuel capacity of 600m3 and above which are delivered on or after August 1, 2010, including ships for which the building contract is entered into on or after August 1, 2007 or, in the absence of a contract, for which the keel is laid on or after February 1, 2008. Non-compliance with the ISM Code or with other IMO regulations may subject a shipowner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in denial of access to, or detention in, some ports including United States and E.U. ports.
Air Emissions
In September of 1997, the IMO adopted Annex VI to MARPOL to address air pollution.  Effective May 2005, Annex VI sets limits on nitrogen oxide emissions from ships whose diesel engines were constructed (or underwent major conversions) on or after January 1, 2000. It also prohibits "deliberate emissions" of "ozone depleting substances," defined to include certain halons and chlorofluorocarbons. "Deliberate emissions" are not limited to times when the ship is at sea; they can for example include discharges occurring in the course of the ship's repair and maintenance. Emissions of "volatile organic compounds" from certain tankers, and the shipboard incineration (from incinerators installed after January 1, 2000) of certain substances (such as polychlorinated biphenyls) are also prohibited. Annex VI also includes a global cap on the sulfur content of fuel oil and allows for special areas to be established with more stringent controls on sulphur emissions, known as Emission Control Areas, or ECAs (see below).
Annex VI seeks to further reduce air pollution by, among other things, implementing a progressive reduction of the amount of sulphur contained in any fuel oil used on board ships.  As of January 1, 2012, the amended Annex VI requires that fuel oil contain no more than 3.50% sulfur.  On October 27, 2016, at MEPC's 70th session, or MEPC 70, MEPC announced its decisions concerning the implementation of regulations mandating a reduction in sulfur emissions from the current 3.50% to 0.50% as of the beginning of 2020 rather than pushing the deadline back to 2025. By 2020 ships will now have to either remove sulfur from emissions through the use of emission scrubbers or buy fuel with low sulfur content. Our vessels consume a regulated amount of bunker fuels sulphur content as per IMO Annex VI and EU Directive requirements. In addition, as per EU Directive 2005/33/EC, we have established a plan to modify and upgrade our vessels' machinery to ensure operation on low-sulphur fuels.
Sulfur content standards are even stricter within certain ECAs. As of January 1, 2015, all vessels operating within ECAs worldwide, which includes the North Sea, the Baltic Sea, and the English Channel, must comply with 0.10% sulfur requirements.  Amended Annex VI establishes procedures for designating new ECAs.  The Baltic Sea and the North Sea have been so designated. On August 1, 2012, certain coastal areas of North America were designated ECAs, and effective January 1, 2014, the applicable areas of the United States Caribbean Sea were designated ECAs.  Ocean-going vessels in these areas will be subject to stringent emissions controls and may cause us to incur additional costs. If other ECAs are approved by the IMO or other new or more stringent requirements relating to emissions from marine diesel engines or port operations by vessels are adopted by the U.S. Environmental Protection Agency, or the EPA, or the states where we operate, compliance with these regulations could entail significant capital expenditures, or operational changes, or otherwise increase the costs of our operations.
As of January 1, 2013, all ships must comply with mandatory requirements by MEPC in July 2011 related to greenhouse gas emissions. Under those measures, by 2025 all new ships built will be 30% more energy efficient than those built in 2014.  All ships are required to follow the Ship Energy Efficiency Management Plan.  Now the minimum energy efficiency levels per capacity mile, outlined in the Energy Efficiency Design Index, apply to all new ships.  These requirements could cause us to incur additional compliance costs.
Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation.  At MEPC 70, MEPC approved the North Sea and Baltic Sea as ECAs for nitrogen oxides, effective January 1, 2021. It is expected that these areas will be formally designated after draft amendments are presented at MEPC's next session.  The EPA promulgated equivalent (and in some senses stricter) emissions standards in late 2009.
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With effect from January 1, 2010, the Directive 2005/33/EC of the European Parliament and of the Council of July 6, 2005, amending Directive 1999/32/EC came into force. The objective of the directive is to reduce emission of sulfur dioxide and particulate matter caused by the combustion of certain petroleum derived fuels. The directive imposes limits on the sulfur content of such fuels as a condition of their use within a Member State territory. The maximum sulfur content for marine fuels used by inland waterway vessels and ships at berth in ports in EU countries after January 1, 2010, is 0.10% by mass.
Safety Requirements
The IMO also adopted the International Convention for the Safety of Life at Sea, or the SOLAS Convention, and the International Convention on Load Lines, or the LL Convention, which impose a variety of standards that regulate the design and operational features of ships. The IMO periodically revises the SOLAS Convention and LL Convention standards. The May 2012 SOLAS Convention amendments entered into force as of January 1, 2014. Additionally, the May 2013 SOLAS Convention amendments, pertaining to emergency drills, entered into force in January 2015. The Convention on Limitation for Maritime Claims of 1976, as amended, had amendments that went into effect on June 8, 2015. The amendments alter the limits of liability for a loss of life or personal injury claim and a property claim against ship owners.
The operation of our ships is also affected by the requirements set forth in Chapter IX of the SOLAS Convention, which sets forth the IMO's International Management Code for the Safe Operation of Ships and Pollution Prevention, or the ISM Code. The ISM Code requires ship owners and bareboat charterers to develop and maintain an extensive "Safety Management System" that includes the adoption of a safety and environmental protection policy setting forth instructions and procedures for safe operation and describing procedures for dealing with emergencies.
The ISM Code requires that vessel operators obtain a safety management certificate, or SMC, for each vessel they operate. This certificate evidences compliance by a vessel's operators with the ISM Code requirements for a safety management system, or SMS. No vessel can obtain an SMC under the ISM Code unless its manager has been awarded a document of compliance, or DOC, issued in most instances by the vessel's flag state. We believe that we have all material requisite documents of compliance for our offices and safety management certificates for vessels in our fleet for which the certificates are required by the IMO. We renew these documents of compliance and safety management certificates as required.
Non-compliance with the ISM Code and other IMO regulations may subject the shipowner or bareboat charterer to increased liability, may lead to decreases in available insurance coverage for affected vessels and may result in the denial of access to, or detention in, some ports.
Oil Pollution Liability
The IMO has negotiated international conventions that impose liability for oil pollution in international waters and a signatory's territorial waters. Additional or new conventions, laws and regulations may be adopted which could limit our ability to do business and which could have a material adverse effect on our business and results of operations.
For example, the IMO has adopted the International Convention on Civil Liability for Oil Pollution Damage of 1969, as amended by different Protocol in 1976, 1984, and 1992, and amended in 2000, or the CLC. Under the CLC and depending on whether the country in which the damage results is a party to the 1992 Protocol to the CLC, a vessel's registered owner is strictly liable for pollution damage caused in the territorial waters of a contracting state by discharge of persistent oil, subject to certain exceptions. The 1992 Protocol changed certain limits on liability, expressed using the International Monetary Fund currency unit of Special Drawing Rights. The limits on liability have since been amended so that compensation limits on liability were raised. The right to limit liability is forfeited under the CLC where the spill is caused by the shipowner's personal fault and under the 1992 Protocol where the spill is caused by the shipowner's personal act or omission by intentional or reckless conduct where the shipowner knew pollution damage would probably result.  The CLC requires ships covered by it to maintain insurance covering the liability of the owner in a sum equivalent to an owner's liability for a single incident. We believe that our insurance will cover the liability under the plan adopted by the IMO.
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The IMO adopted the International Convention on Civil Liability for Bunker Oil Pollution Damage, or the Bunker Convention, to impose strict liability on shipowners for pollution damage in jurisdictional waters of ratifying states caused by discharges of bunker fuel. The Bunker Convention requires registered owners of ships over 1,000 gross tons to maintain insurance for pollution damage in an amount equal to the limits of liability under the applicable national or international limitation regime (but not exceeding the amount calculated in accordance with the Convention on Limitation of Liability for Maritime Claims of 1976, as amended). With respect to non-ratifying states, liability for spills or releases of oil carried as fuel in ship's bunkers typically is determined by the national or other domestic laws in the jurisdiction where the events or damages occur.
In addition, the IMO adopted an International Convention for the Control and Management of Ships' Ballast Water and Sediments, or the BWM Convention, in February 2004. The BWM Convention's implementing regulations call for a phased introduction of mandatory ballast water exchange requirements to be replaced in time with mandatory concentration limits. All ships will also have to carry a ballast water record book and an International Ballast Water Management Certificate.  The BWM Convention enters into force 12 months after the date on which no less than 30 states, and the combined merchant fleets of which constitute no less than 35% of the gross tonnage of the world's merchant shipping, have either signed it without reservation as to ratification, acceptance or approval, or have deposited the requisite instruments of ratification, acceptance, approval or accession. The process to verify global tonnage figures to assess the BWM Convention's entry into force has been completed.  On September 8, 2016, this threshold was met (with 52 countries making up 35.14%).  Thus, the BWM Convention enters into force on September 8, 2017. Many of the implementation dates originally written into the BWM Convention have already passed, so that once the BWM Convention enters into force, the period for installation of mandatory ballast water exchange requirements would be extremely short, with several thousand ships a year needing to install ballast water management systems, or BWMS. For this reason, on December 4, 2013, the IMO Assembly passed a resolution revising the application dates of the BWM Convention so that they are triggered by the entry into force date and not the original dates in the BWM Convention. This in effect makes all vessels constructed before the entry into force date 'existing' vessels, and allows for the installation of a BWMS on such vessels at the first renewal survey following entry into force. The MEPC adopted updated "guidelines for approval of ballast water management systems (G8)" at MEPC 70. Upon entry into force of the BWM Convention, mid-ocean ballast water exchange would become mandatory for our vessels. The USCG recently approved certain ballast water treatment systems.  Given this fact, the cost of compliance for ocean carriers could be significant and the costs of ballast water treatments may be material. However, many countries already regulate the discharge of ballast water carried by vessels from country to country to prevent the introduction of invasive and harmful species via such discharges. The United States, for example, requires vessels entering its waters from another country to conduct mid-ocean ballast exchange, or undertake some alternate measure, and to comply with certain reporting requirements. Given the USCG's recent approval of certain ballast water treatment systems, it is difficult to predict the overall impact on compliance and on our operations.
The IMO continues to review and introduce new regulations.  It is difficult to accurately predict what additional regulations, if any, may be passed by the IMO in the future and what effect, if any, such regulations might have on our operations.
European Union Restrictions
In October 2009, the E.U. amended directive 2005/33/EC to impose criminal sanctions for illicit ship-source discharges of polluting substances, including minor discharges, if committed with intent, recklessly or with serious negligence and the discharges individually or in the aggregate result in deterioration of the quality of water.  Aiding and abetting the discharge of a polluting substance may also lead to criminal penalties.  Member States were required to enact laws or regulations to comply with the directive by the end of 2010.  Criminal liability for pollution may result in substantial penalties or fines and increased civil liability claims.
The E.U. has adopted several regulations and directives requiring, among other things, more frequent inspections of high-risk ships, as determined by type, age, and flag as well as the number of times the ship has been detained. The E.U. also adopted and then extended a ban on substandard ships and enacted a minimum ban period and a definitive ban for repeated offenses.  The regulation also provided the E.U. with greater authority and control over classification societies, by imposing more requirements on classification societies and providing for fines or penalty payments for organizations that failed to comply.
Greenhouse Gas Regulation
Currently, the emissions of greenhouse gases from international shipping are not subject to the Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force in 2005 and pursuant to which adopting countries have been required to implement national programs to reduce greenhouse gas emissions. The 2015 United Nations Convention on Climate Change Conference in Paris resulted in the Paris Agreement, which entered into force on November 4, 2016.  The Paris Agreement does not directly limit greenhouse gas emissions from ships.
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As of January 1, 2013, all new ships must comply with two new sets of mandatory requirements, which were adopted by MEPC in July 2011, in part to address greenhouse gas emissions from ships. Currently operating ships will be required to develop Ship Energy Efficiency Management Plans, and minimum energy efficiency levels per capacity mile will apply to new ships. Our vessels comply with these requirements, and we have regular inspections performed by our personnel to ensure continued compliance. The MEPC is also considering market-based mechanisms to reduce greenhouse gas emissions from ships. The E.U. has proposed legislation that would require the monitoring and reporting of greenhouse gas emissions from marine vessels. In April 2013, the European Parliament rejected proposed changes to the E.U. Emissions Law regarding carbon trading. In April 2015, a regulation was adopted requiring that large ships (over 5,000 gross tons) calling at European ports from January 2018 collect and publish data on carbon dioxide omissions. In June 2013 the European Commission developed a strategy to integrate maritime emissions into the overall E.U. strategy to reduced greenhouse gas emissions. For 2020, the E.U. made a unilateral commitment to reduce overall greenhouse gas emissions from its member states by 20% of 1990 levels. The E.U. also committed to reduce its emissions by 20% under the Kyoto Protocol's second period, from 2013 to 2020. In December 2013, the E.U. environmental ministers discussed draft rules to implement monitoring and reporting of carbon dioxide emissions from ships.
In the United States, the EPA has issued a finding that greenhouse gases endanger the public health and safety and has adopted regulations to limit greenhouse gas emissions from certain mobile sources and proposed regulations to limit greenhouse gases from large stationary sources. Although the mobile source emissions regulations do not apply to greenhouse gas emissions from vessels, such regulation of vessels is foreseeable, and the EPA has received petitions from the California Attorney General and various environmental groups seeking such regulation. Moreover, in the U.S. individual states can also enact environmental regulations. For example, California introduced caps for greenhouse gas emissions and, in the end of 2016, signaled it may take additional actions regarding climate change. Any passage of climate control legislation or other regulatory initiatives by the IMO, the E.U., the U.S. or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol or Paris Agreement, that restrict emissions of greenhouse gases could require us to make significant financial expenditures, including capital expenditures to upgrade our vessels, which we cannot predict with certainty at this time.
International Labour Organization
The International Labour Organization, or the ILO, is a specialized agency of the United Nations with headquarters in Geneva, Switzerland. The ILO has adopted the Maritime Labor Convention 2006, or MLC 2006. A Maritime Labor Certificate and a Declaration of Maritime Labor Compliance will be required to ensure compliance with the MLC 2006 for all ships above 500 gross tons in international trade. The MLC 2006 entered into force on August 20, 2013. Amendments to the MLC 2006 were adopted in 2014 and 2016. MLC 2006 requires us to develop new procedures to ensure full compliance with its requirements.
The U.S. Oil Pollution Act of 1990 and Comprehensive Environmental Response, Compensation and Liability Act
The U.S. Oil Pollution Act of 1990, or OPA, established an extensive regulatory and liability regime for the protection and cleanup of the environment from oil spills. OPA affects all "owners and operators" whose vessels trade in the United States, its territories and possessions or whose vessels operate in United States waters, which includes the United States' territorial sea and its 200 nautical mile exclusive economic zone. The United States has also enacted the Comprehensive Environmental Response, Compensation and Liability Act, or CERCLA, which applies to the discharge of hazardous substances other than oil, except in limited circumstances, whether on land or at sea. OPA and CERCLA both define "owner and operator" "in the case of a vessel, as any person owning, operating or chartering by demise, the vessel." Although OPA is primarily directed at oil tankers, it also applies to non-tanker ships with respect to the fuel oil, or bunkers, used to power such ships. CERCLA also applies to our operations.
Under OPA, vessel owners and operators are "responsible parties" and are jointly, severally and strictly liable (unless the spill results solely from the act or omission of a third party, an act of God or an act of war) for all containment and clean-up costs and other damages arising from discharges or threatened discharges of oil from their vessels. OPA defines these other damages broadly to include:
·
injury to, destruction or loss of, or loss of use of, natural resources and the costs of assessment thereof;
·
injury to, or economic losses resulting from, the destruction of real and personal property;
·
net loss of taxes, royalties, rents, fees or net profit revenues resulting from injury, destruction or loss of real or personal property, or natural resources;
·
loss of subsistence use of natural resources that are injured, destroyed or lost;
·
lost profits or impairment of earning capacity due to injury, destruction or loss of real or personal property or natural resources; and
·
net cost of increased or additional public services necessitated by removal activities following a discharge of oil, such as protection from fire, safety or health hazards.
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OPA contains statutory caps on liability and damages; such caps do not apply to direct cleanup costs. Effective December 21, 2015, the U.S. Coast Guard has adjusted the limits of OPA liability for non-tanker vessels to the greater of $1,100 per gross ton or $939,800. OPA limits the liability depending on the structure and size of the vessel; but for all tankers, other than single-hull tank vessels, over 3,000 gross tons liability is limited to the greater of $2,200 per gross ton or $18,796,800. These limits are subject to periodic adjustment for inflation. These limits of liability do not apply if an incident was proximately caused by the violation of an applicable U.S. federal safety, construction or operating regulation by a responsible party (or its agent, employee or a person acting pursuant to a contractual relationship), or a responsible party's gross negligence or willful misconduct.  The limitation on liability similarly does not apply if the responsible party fails or refuses to (i) report the incident where the responsibility party knows or has reason to know of the incident; (ii) reasonably cooperate and assist as requested in connection with oil removal activities; or (iii) without sufficient cause, comply with an order issued under the Federal Water Pollution Act (Section 311 (c), (e)) or the Intervention on the High Seas Act.
The 2010 Deepwater Horizon oil spill in the Gulf of Mexico may also result in additional regulatory initiatives or statutes, including the raising of liability caps under OPA.  For example, on August 15, 2012, the U.S. Bureau of Safety and Economic Enforcement, or the BSEE, issued a final drilling safety rule for offshore oil and gas operations that strengthens the requirements for safety equipment, well control systems, and blowout prevention practices. In December 2015, the BSEE announced a new pilot inspection program for offshore facilities. Furthermore, in April 2015, it was announced that new regulations are expected to be imposed in the United States regarding offshore oil and gas drilling and the BSEE announced a new Well Control Rule in April 2016. Compliance with any new requirements of OPA may substantially impact our cost of operations or require us to incur additional expenses to comply with any new regulatory initiatives or statutes.
CERCLA contains a similar liability regime whereby owners and operators of vessels are liable for cleanup, removal and remedial costs, as well as damage for injury to, or destruction or loss of, natural resources, including the reasonable costs associated with assessing same, and health assessments or health effects studies. There is no liability if the discharge of a hazardous substance results solely from the act or omission of a third party, an act of God or an act of war. Liability under CERCLA is limited to the greater of $300 per gross ton or $5 million for vessels carrying a hazardous substance as cargo and the greater of $300 per gross ton or $500,000 for any other vessel. These limits do not apply (rendering the responsible person liable for the total cost of response and damages) if the release or threat of release of a hazardous substance resulted from willful misconduct or negligence, or the primary cause of the release was a violation of applicable safety, construction or operating standards or regulations. The limitation on liability also does not apply if the responsible person fails or refused to provide all reasonable cooperation and assistance as requested in connection with response activities where the vessel is subject to OPA.
OPA and CERCLA both require owners and operators of vessels to establish and maintain with the U.S. Coast Guard evidence of financial responsibility sufficient to meet the maximum amount of liability to which the particular responsible person may be subject. Vessel owners and operators may satisfy their financial responsibility obligations by providing a proof of insurance, a surety bond, qualification as a self-insurer or a guarantee. We plan to comply with the U.S. Coast Guard's financial responsibility regulations by providing a certificate of responsibility evidencing sufficient self-insurance.
OPA specifically permits individual states to impose their own liability regimes with regard to oil pollution incidents occurring within their boundaries, provided they accept, at a minimum, the levels of liability established under OPA.  Some states have enacted legislation providing for unlimited liability for oil spills. In some cases, states, which have enacted such legislation, have not yet issued implementing regulations defining vessels owners' responsibilities under these laws. We intend to comply with all applicable state regulations in the ports where our vessels call. We believe that we are in substantial compliance with all applicable existing state requirements. In addition, we intend to comply with all future applicable state regulations in the ports where our vessels call.
Other Environmental Initiatives
The U.S. Clean Water Act, or CWA, prohibits the discharge of oil or hazardous substances in U.S. navigable waters unless authorized by a duly-issued permit or exemption, and imposes strict liability in the form of penalties for any unauthorized discharges. The CWA also imposes substantial liability for the costs of removal, remediation and damages and complements the remedies available under OPA and CERCLA. In addition, many U.S. states that border a navigable waterway have enacted environmental pollution laws that impose strict liability on a person for removal costs and damages resulting from a discharge of oil or a release of a hazardous substance. These laws may be more stringent than U.S. federal law. The EPA and USCG have enacted rules relating to ballast water discharge, compliance with which requires the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, or otherwise restrict our vessels from entering United States waters.
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The EPA regulates the discharge of ballast and bilge water and other substances in United States waters under the CWA. The EPA regulations require vessels 79 feet in length or longer (other than commercial fishing vessels and recreational vessels) comply with a permit that regulates ballast water discharges and other discharges incidental to the normal operation of certain vessels within United States waters—the Vessel General Permit for Discharges Incidental to the Normal Operation of Vessels, or VGP. For a new vessel delivered to an owner or operator after September 19, 2009 to be covered by the VGP, the owner must submit a Notice of Intent at least 30 days before the vessel operates in United States waters. In March 2013, the EPA re-issued the VGP for another five years, and the new VGP took effect in December 2013. The 2013 VGP focuses on authorizing discharges incidental to operations of commercial vessels and the contains ballast water discharge limits for most vessels to reduce the risk of invasive species in United States waters, more stringent requirements for exhaust gas scrubbers and the use of environmentally acceptable lubricants.
U.S. Coast Guard regulations adopted and proposed for adoption under the U.S. National Invasive Species Act, or NISA, also impose mandatory ballast water management practices for all vessels equipped with ballast water tanks entering or operating in United States waters, which require the installation of equipment on our vessels to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures, or otherwise restrict our vessels from entering United States waters. The U.S. Coast Guard must approve any technology before it is placed on a vessel.
However, as of January 1, 2014, vessels became technically subject to the phasing-in of these standards. The USCG approved first approved this technology in 2016.  The USCG has previously provided waivers to vessels that could not install the as-yet unapproved technology and vessels now requiring a waiver will need to show that they cannot install approved technology. The EPA, on the other hand, has taken a different approach to enforcing ballast discharge standards under the VGP. In December 2013, the EPA issued an enforcement response policy in connection with the new VGP in which the EPA indicated that it would take into account the reasons why vessels do not have the requisite technology installed, but will not grant any waivers.
It should also be noted that in October 2015, the Second Circuit Court of Appeals issued a ruling that directed the EPA to redraft the sections of the 2013 VGP that address ballast water. However, the Second Circuit stated that 2013 VGP will remains in effect until the EPA issues a new VGP. In the fall of 2016, sources reported that the EPA indicated it was working on a new VGP. It presently remains unclear how the ballast water requirements set forth by the EPA, the USCG, and BWM Convention, some of which are in effect and some which are pending, will co-exist.
The U.S. Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990, or the CAA, requires the EPA to promulgate standards applicable to emissions of volatile organic compounds and other air contaminants. Our vessels are subject to vapor control and recovery requirements for certain cargoes when loading, unloading, ballasting, cleaning and conducting other operations in regulated port areas. Our vessels that operate in such port areas with restricted cargoes are equipped with vapor recovery systems that satisfy these requirements. The CAA also requires states to draft State Implementation Plans, or SIPs, designed to attain national health-based air quality standards in primarily major metropolitan and/or industrial areas. Several SIPs regulate emissions resulting from vessel loading and unloading operations by requiring the installation of vapor control equipment. As indicated above, our vessels operating in covered port areas are already equipped with vapor recovery systems that satisfy these existing requirements.
However, compliance with future EPA and U.S. Coast Guard regulations could require the installation of certain engineering equipment and water treatment systems to treat ballast water before it is discharged or the implementation of other port facility disposal arrangements or procedures at potentially substantial cost, or may otherwise restrict our vessels from entering U.S. waters.
Vessel Security Regulations
Since the terrorist attacks of September 11, 2001, there have been a variety of initiatives intended to enhance vessel security. In December 2002, amendments to the SOLAS Convention created a new chapter of the convention dealing specifically with maritime security. The new Chapter XI-2 became effective in July 2004 and imposes various detailed security obligations on vessels and port authorities, and mandates compliance with the ISPS Code. The ISPS Code is designed to enhance the security of ports and ships against terrorism.
To trade internationally, a vessel must attain an International Ship Security Certificate, or ISSC, from a recognized security organization approved by the vessel's flag state. The following are among the various requirements, some of which are found in SOLAS:
·
on-board installation of automatic identification systems to provide a means for the automatic transmission of safety-related information from among similarly equipped ships and shore stations, including information on a ship's identity, position, course, speed and navigational status;
·
on-board installation of ship security alert systems, which do not sound on the vessel but only alert the authorities on shore;
·
the development of vessel security plans;
·
ship identification number to be permanently marked on a vessel's hull;
·
a continuous synopsis record kept onboard showing a vessel's history, including the name of the ship, the state whose flag the ship is entitled to fly, the date on which the ship was registered with that state, the ship's identification number, the port at which the ship is registered and the name of the registered owner(s) and their registered address; and
·
compliance with flag state security certification requirements.
37



Ships operating without a valid certificate may be detained at port until it obtains an ISSC, or it may be expelled from port, or refused entry at port.

Inspection by Classification Societies
Our tankers have been certified as being "in-class" by Lloyds Register of DNV-GL, American Bureau of Shipping, and Bureau Veritas, all of which are members of the International Association of Classification Societies, or the IACS. In December 2013, the IACS adopted new harmonized Common Structure Rules that align with IMO goal standards, which apply to oil tankers and bulk carriers constructed on or after July 1, 2015. Generally, the regulations of vessel registries accepted by international lenders in the shipping industry require that an ocean-going vessel's hull and machinery be evaluated by a classification society authorized by the country of registry. The classification society certifies that the vessel has been built and maintained in accordance with the rules of the classification society and complies with applicable rules and regulations of the vessel's country of registry and the international conventions of which that country is a member. Each vessel is inspected by a surveyor of the classification society in three surveys of varying frequency and thoroughness: every year for the annual survey, every two to three years for intermediate surveys and every four to five years for special surveys. Should any defects be found, the classification surveyor generally issues a notation or recommendation for appropriate repairs, which have to be made by the shipowner within the time limit prescribed. Vessels may be required, as part of the annual and intermediate survey process, to be drydocked for inspection of the underwater portions of the vessel and for necessary repair stemming from the inspection. Special surveys always require drydocking.
Risk of Loss and Insurance Coverage
General
The operation of any tanker vessel involves risks such as mechanical failure, physical damage, collision, property loss, inventory loss or damage and business interruption due to political circumstances in foreign countries, hostilities and labor strikes. In addition, there is always an inherent possibility of marine disaster, including oil spills and other environmental mishaps, and the liabilities arising from owning and operating vessels in international trade. While we believe that our present insurance coverage is adequate, not all risks can be insured against, and there can be no guarantee that any specific claim will be paid, or that we will always be able to obtain adequate insurance coverage at reasonable rates.
Hull and Machinery and War Risk Insurance
We have obtained marine hull and machinery and war risk insurance policies, which provide coverage for the risk of actual or constructive total loss, for all our vessels. Each of our vessels is covered for at least its fair market value.
We have also obtained increased value insurance policies for all of our vessels. Under the increased value insurance, we will be able to recover the sum insured under the policy in addition to the sum insured under our hull and machinery policy in the event of the total loss of the vessel.
Protection and Indemnity Insurance
Protection and indemnity insurance policies, which cover our third-party liabilities in connection with our shipping activities, are provided by mutual protection and indemnity associations, or P&I Associations. These insurance policies cover third-party liability and other related expenses of injury or death of crew, passengers and other third-parties, loss or damage to cargo, claims arising from collisions with other vessels, damage to other third-party property, pollution arising from oil or other substances, and salvage, towing and other related costs, including wreck removal. Protection and indemnity insurance policies are a form of mutual indemnity insurance policies, extended by protection and indemnity mutual associations, or "clubs." Subject to the "capping" of exposure discussed below, our coverage, except for pollution, is unlimited.
Our current protection and indemnity insurance coverage for pollution is up to $1.0 billion per vessel per incident. The P&I Associations that compose the International Group insure approximately 90% of the world's commercial tonnage and have entered into a pooling agreement to reinsure each association's liabilities. As a member of a P&I Association that is a member of the International Group, we are subject to calls payable to the associations based on our claim records as well as the claim records of all other members of the individual associations, and members of the International Group.
Trademarks and Licenses
We have entered into a trademark license agreement with Aegean Oil pursuant to which Aegean Oil has granted us a non-transferable, non-exclusive, perpetual (subject to termination for material breach), world-wide, royalty-free right and license to use certain trademarks related to the Aegean logo and "Aegean Marine Petroleum" in connection with marine fuel supply services.
Seasonality
Our business is not seasonal.
38


C.
Organizational Structure
Aegean Marine Petroleum Network Inc. is a Marshall Islands holding company and we transact our bunkering business primarily through AMP, a wholly-owned subsidiary incorporated in Liberia, and operate in various markets through Aegean Bunkering Gibraltar Ltd., Aegean Bunkering Jamaica Ltd., Aegean Bunkering (Singapore) Pte. Ltd.,  Aegean North West Europe NV, ICS Petroleum Ltd., Aegean Bunkering Combustibles Las Palmas S.A., Aegean Bunkering (Morocco) SRL, Aegean Bunkering Trinidad Ltd.,, Aegean Bunkering (USA) LLC, Aegean Bunkering Germany and Aegean Petroleum BD&M GmbH, Aegean BD&M Neva, Aegean Petroleo Ltd. separate wholly-owned subsidiaries incorporated in Gibraltar, Jamaica, Singapore, Belgium, British Columbia (Canada), Canary Islands, Morocco, Trinidad and Tobago, the United States, Germany, Russia, South America, respectively, and Aegean Marine Petroleum LLC, a controlled subsidiary incorporated in the United Arab Emirates, which is 51% owned by a local nominee. Aegean Bunkering Marine Services Pty Ltd is incorporated in South Africa and is a 74% owned and controlled subsidiary. We provide the management of our bunkering tankers through Aegean Bunkering Services Inc., or ABS, a wholly-owned subsidiary incorporated in the Marshall Islands, and Aegean Management Services M.C., a wholly owned-subsidiary incorporated in Greece. We provide the marketing and administrative services for our operations through Aegean Oil (USA), LLC and AMPN USA, LLC, our wholly-owned subsidiaries formed in Delaware and the United States. We hold certain of our subsidiaries through Aegean Holdings S.A. and Aegean Investments S.A., our wholly-owned subsidiaries incorporated in the Marshall Islands, and we hold our vessel-owning subsidiaries through Aegean Shipholdings Inc., a wholly-owned subsidiary incorporated in the Marshall Islands. Our wholly-owned subsidiaries, AMPNI Investments Ltd. and AMPNI Holdings Ltd., are incorporated in Cyprus and hold our acquisitions in Belgium, Las Palmas, U.S.A., Germany and Russia.
Currently, we own our vessels through separate wholly-owned subsidiaries listed in the following table:
Vessel-owning Subsidiary
Country of Incorporation
Vessel Name
Aegean Rose Maritime Company
Greece
Aegean Rose
Aegean Tiffany Maritime Company
Greece
Aegean Tiffany
Aegean Breeze Maritime Company
Greece
Aegean Breeze I
Aegean Gas Maritime Company
Greece
Mediterranean
Milos Shipping (Pte.) Ltd.
Singapore
Milos
Serifos Shipping (Pte.) Ltd.
Singapore
Serifos
Kithnos Maritime Inc.
Marshall Islands
Kithnos
Amorgos Maritime Inc.
Marshall Islands
Amorgos
Kimolos Maritime Inc.
Marshall Islands
Kimolos
Tinos Marine Inc.
Marshall Islands
Syros
Mykonos I Maritime Ltd.
Cyprus
Mykonos
Santorini I Maritime Ltd.
Cyprus
Santorini
Paros Maritime Inc.
Marshall Islands
Paros I
Tempest Shiptrade Ltd
Marshall Islands
Naxos
Eton Marine Ltd.
Liberia
Patmos
Tasman Seaways Inc.
Liberia
Kalymnos
Aegean Maistros Maritime Company
Greece
Aegean Orion
Aegean Ship III Maritime Company
Greece
Aegean III
Aegean Ship VIII Maritime Company
Greece
Aegean VIII
Aegean Ace Maritime Company
Greece
Aegean Ace
Paxoi Marine S.A.
Liberia
Paxoi
Kerkyra Marine S.A.
Liberia
Kerkyra
Ithaki Marine S.A.
Liberia
Ithaki
Cephallonia Marine S.A.
Liberia
Kefalonia
ICS Petroleum Ltd.
British Columbia (Canada)
PT22
Zakynthos Marine S.A.
Liberia
Zakynthos
Andros Marine Ltd.
Cyprus
Andros
Ios Marine Inc.
Liberia
Lefkas
Dilos Marine Inc.
Liberia
Dilos
Ios Shipping Ltd.
Malta
Ios I
Kythira Marine S.A.
Liberia
Kythira
Benmore Services S.A.
Liberia
Nisyros
Sealand Navigation Inc.
Marshall Islands
Karpathos
Santon Limited
Liberia
Leros
Kassos Navigation S.A.
Liberia
Kassos
Aegean Barges NV
Belgium
Colorado
Aegean Barges NV
Belgium
New Jersey
Symi Navigation S.A.
Liberia
Symi
Aegean North West Europe NV
Belgium
Willem SR(1)
Aegean Barges NV
Belgium
Texas
Seatra BVBA
Belgium
Montana
Sifnos Marine Inc.
Liberia
Anafi
Aegean VII Shipping Ltd
Malta
Sikinos
Tilos Shipping (Pte) Ltd
Singapore
Tilos
Halki Navigation S.A.
Liberia
Halki
Aegean North West Europe NV
Belgium
Florida(1)
ICS Petroleum Ltd.
British Columbia (Canada)
PT40
Aegean Tanking S.A.
Liberia
Umnenga
____________
(1) 10% ownership interest.

39

D.
Property, Plants and Equipment
Real Property
The following table presents certain information relating to our leased and owned properties as of May 12, 2017. We consider our properties to be suitable and adequate for our present needs.
Location
Principal Use
Leased or Owned
Lease Expiration Date
Piraeus, Greece
Business coordination center and ship-management office
Leased
March 2023
Fujairah, U.A.E.
Administrative and operations office
Leased
October 2058
Dubai, U.A.E.
Administrative and operations office
Leased
July 2017
Khor Fakkan, U.A.E.
Administrative and operations office
Leased
December 2018
Gibraltar
Administrative and operations office
Leased
April 2040
Kingston, Jamaica
Administrative office and land
Owned
-
Singapore
Administrative and operations office
Leased
June 2017
Antwerp, Belgium
Administrative and operations office
Owned
-
Edgewater, New Jersey, U.S.A.
Property leased to third-party
Owned
-
New York, New York, U.S.A.
Administrative and operations office
Leased
December 2017
Connecticut, New York, U.S.A.
Administrative and operations office
Leased
January 2018
Nicosia, Cyprus
Administrative office
Leased
June 2017
Vancouver, Canada
Administrative and operations office
Leased
June 2017
Port of Spain, Trinidad
Administrative and operations office
Leased
March 2018
Las Palmas, Canary Islands
Administrative and operations office and storage facility
Leased
December 2027
Tangiers, Morocco
Storage facility
Leased
November 2031
Fujairah, United Arab Emirates
Storage facility
Leased
October 2058
Los Angeles, California, U.S.A.
Storage facility
Leased
April 2021
Hamburg, Germany
Storage facility and operations office
Leased
December 2019
Rostock, Germany
Administrative and operations office
Leased
June 2021
St. Petersburg, Russia
Administrative and operations office
Leased
June 2017
Rio de Janeiro, Brazil
Administrative and operations office
Leased
August 2018
Port Elizabeth, South Africa
Administrative and operations office
Leased
June 2018

40

Our Fleet
The following table lists our fleet as of May 12, 2017.
Name
Double Hull
Flag
Build
Dwt
 
Bunkering Tankers:
         
Symi
Yes
Liberia
2012
 
6,270
 
Halki
Yes
Gibraltar
2011
 
6,256
 
Sikinos
Yes
Malta
2011
 
4,595
 
Anafi
Yes
Gibraltar
2011
 
4,584
 
Tilos
Yes
Singapore
2011
 
6,263
 
Eva Schulte*
Yes
Singapore
2010
 
16,621
 
Dilos
Yes
Liberia
2010
 
4,593
 
Ios I
Yes
Malta
2010
 
4,620
 
Kythira
Yes
Liberia
2010
 
6,314
 
Nisyros
Yes
Gibraltar
2010
 
6,312
 
Karpathos
Yes
Greece
2010
 
6,247
 
Leros
Yes
Panama
2010
 
6,311
 
Kassos
Yes
Gibraltar
2010
 
6,256
 
Lefkas
Yes
South Africa
2010
 
6,321
 
Andros
Yes
Gibraltar
2010
 
4,605
 
Zakynthos
Yes
Gibraltar
2010
 
6,303
 
Naxos
Yes
Greece
2009
 
4,626
 
Kerkyra
Yes
Panama
2009
 
6,290
 
Paxoi
Yes
Liberia
2009
 
6,310
 
Kalymnos
Yes
Liberia
2009
 
6,283
 
Kefalonia
Yes
Liberia
2009
 
6,272
 
Ithaki
Yes
Liberia
2009
 
6,272
 
Syros
Yes
Greece
2008
 
4,596
 
Patmos
Yes
Liberia
2008
 
6,262
 
Paros I
Yes
Liberia
2008
 
4,629
 
Mykonos
Yes
Gibraltar
2008
 
4,626
 
Santorini
Yes
Gibraltar
2008
 
4,629
 
Kimolos
Yes
Liberia
2008
 
4,664
 
Bonaire Trader*
Yes
Liberia
2007
 
11,255
 
Kithnos
Yes
Malta
2007
 
4,626
 
Amorgos
Yes
Gibraltar
2007
 
4,664
 
Serifos
Yes
Singapore
2007
 
4,664
 
Milos
Yes
Singapore
2007
 
4,626
 
Aegean Tiffany
Yes
Greece
2004
 
2,747
 
Aegean Breeze I
Yes
Greece
2004
 
2,747
 
Aegean Ace
Yes
Greece
1992
 
1,615
 
Aegean III
Yes
Greece
1990
 
2,973
 
Aegean VIII
Yes
Greece
1990
 
2,973
 
Aegean Rose
Yes
Greece
1988
 
4,935
 
Antonie*
Yes
Netherlands
1988
 
2,237
 
David Fanning*
Yes
U.S.A.
2008
 
5,369
 
Webb Moffett*
Yes
U.S.A.
2009
 
8,864
 
Annika*
Yes
Germany
2012
 
1,646
 
41



In-Land Waterway Bunkering Tankers:
           
Pascale*
Yes
Belgium
2015
   
2,200
 
Strauss*
Yes
Belgium
2014
   
4,050
 
Beryl*
Yes
Luxemburg
2014
   
2,468
 
Florida
Yes
Belgium
2011
   
1,533
 
Montana
Yes
Belgium
2011
   
4,319
 
Mozart*
Yes
Belgium
2011
   
2,799
 
Alaska*
Yes
Netherlands
2010
   
3,778
 
Onyx*
Yes
Luxemburg
2010
   
2,979
 
Willem Sr.
Yes
Netherlands
2006
   
3,180
 
New Jersey
Yes
Belgium
2006
   
4,100
 
Alexia*
Yes
Belgium
2005
   
3,550
 
Beethoven*
Yes
Belgium
2005
   
3,179
 
Tanzanite*
Yes
Belgium
2004
   
4,068
 
Colorado
Yes
Belgium
2004
   
5,578
 
Texas
Yes
Belgium
2003
   
4,165
 
               
Bunkering Barges:
             
PT40
Yes
Canada
2014
   
4,222
 
PT22
Yes
Canada
2001
   
2,315
 
               
Special Purpose Vessel:
             
Aegean Orion
No
Greece
1991
   
550
 
               
Floating Storage Facility:
             
Umnenga
Yes
Liberia
1993
   
66,895
 
Mediterranean
Yes
Greece
1982
   
19,894
 

*Chartered in by us from a third party.
We have positioned our bunkering tankers across our existing service centers and review vessel positioning on a periodic basis and reposition our vessels among our existing or new service centers to optimize their deployment. Our vessels operate within or outside the territorial waters of each geographical location and, under international law, usually fall under the jurisdiction of the country of the flag they carry. Generally, our bunkering tankers, unlike our bunkering barges, are not permanently located within any particular territorial waters and we are free to use all of our bunkering tankers in any geographical location. We have positioned one of our bunkering tankers in Greece, which we use as a floating storage facility, and we have positioned our 550 dwt tanker, the Aegean Orion, as a special purpose vessel in Greece.
In addition, we operate land-based storage facilities in the United States, Morocco, Canary Islands, and Germany, where we store marine fuel in terminals with storage capacity of approximately 293,000, 218,000, 79,000, and 20,000 cubic meters, respectively. In addition, we, through our wholly owned subsidiary, Aegean Oil Terminal Corporation, own and operate a land-based storage facility in Fujairah, United Arab Emirates, with storage capacity of 465,000 cubic meters, representing 43.3% of our aggregate storage capacity. We may also consider the construction of land-based storage facilities in other areas depending on market prospects and the availability of financing.
ITEM 4A.          UNRESOLVED STAFF COMMENTS
None.
ITEM 5.          OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following management's discussion and analysis of the results of our operations and financial condition should be read in conjunction with the consolidated financial statements and the notes to those statements included elsewhere in this annual report.  This discussion includes forward-looking statements that involve risks and uncertainties.  Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, such as those set forth in "Item 3. Key Information—D. Risk Factors" and elsewhere in this report.
42


A.
Operating Results
General
We are an international marine fuel logistics company that markets and physically supplies refined marine fuel and lubricants to vessels in port, at sea and on rivers. As a physical supplier, we purchase marine fuel from refineries, major oil producers and other sources and resell and deliver such fuel, using our bunkering tankers, to a broad base of end users of marine fuels and lubricants.
We sell marine petroleum products to customers primarily at a margin over PLATTS prices (benchmark market prices). PLATTS prices are quoted daily by region and by terms of delivery. We have not had a significant number of long-term written agreements with customers. Under a typical sales contract, a customer requests that we quote a fixed price per metric ton for the sale and delivery of a specified volume and classification of marine fuel on a given date. The customer requests a quotation several days prior to the delivery date. We generally do not quote prices for periods in excess of one week. Once an agreement has been made with a customer, we are deemed to be bound to deliver the specified quantity and classification of marine fuel at the quoted fixed price on the specified delivery date to an identified vessel at a named location. We remain responsible for securing the supply of marine fuel from the supplier and delivering the marine fuel to the customer's vessel.
We purchase marine petroleum products from reputable suppliers under either long-term supply contracts or on the spot markets at a margin over PLATTS prices. Except for our service centers in Gibraltar, the United Arab Emirates, Las Palmas, the U.S. East and West Coasts, Germany, and South Africa, we generally take deliveries of the products on the day of, or a few days prior to, the delivery of the products to our customer's vessel. In Gibraltar, the United Arab Emirates, Las Palmas, the U.S. East and West Coasts, Germany, and South Africa, we utilize our owned or leased storage facilities to generally take deliveries of products more than one but less than two weeks prior to delivery of the products to our customers. The cost of our marine fuel purchases is generally fixed at the date of our agreement, which is prior to the loading from the supplier's premises. Generally, under our long-term supply contracts, the supplier undertakes to supply us with a minimum quantity of marine fuel per month, subject to the agreed quantity as per our contract. Price calculations vary from supplier to supplier in terms of the supplier's margins, the referenced PLATTS prices and the calculation of the average PLATTS price. Depending on the agreement with each supplier, the referenced PLATTS price could be the spot price or an average price over a specified period.
We deliver marine petroleum products to our customers mainly through our bunkering vessels. We are responsible for paying our tankers' operating expenses, including the cost of crewing, insuring, repairing and maintaining the vessel, spares and consumable stores, tonnage taxes and other vessel-related expenses. Our bunkering tankers are not used for the transportation of petroleum products across oceans. Accordingly, a significant portion of our vessel operating expenses are fixed or semi-variable (e.g., a bunkering tanker's insurance costs, crew wages and certain other costs are incurred irrespective of the number of sales deliveries it makes during a period) and, as a group, represent the most significant operating expense for us other than the cost of the marine petroleum products to be sold to our customers.
We incur overhead costs to support our operations. In general, the logistics of purchasing marine fuel from suppliers and selling and delivering the fuel to customers are managed and coordinated by employees at our marketing and operating office in Greece, employees at our local service centers and the crews of our bunkering tankers.
Factors Affecting Our Results of Operations
We believe that the important measures for analyzing trends in our results of operations consist of the following:
·
Sales volume of marine fuel. We define the sales volume of marine fuel as the volume of sales of various classifications of MFO, MDO, and MGO, for the relevant period, measured in metric tons. The sales volume of marine fuel is an indicator of the size of our operations as it affects both the sales and the cost of marine petroleum products recorded during a given period. Sales volume of marine fuel does not include the sales volume of lubricants due to insignificant volumes for all periods presented.
·
Gross spread on marine petroleum products and gross spread per metric ton of marine fuel sold. Gross spread on marine petroleum products represents the margin that we generate on sales of marine fuel and lubricants. Gross spread on marine fuel represents the margin that we generate on sales of various classifications of MFO or MGO. Gross spread on lubricants represents the margin that we generate on sales of lubricants. We calculate the gross spreads by subtracting from the sales of the respective marine petroleum product the cost of the marine petroleum product sold. For arrangements in which we physically supply marine petroleum products using our bunkering tankers, costs of marine petroleum products sold represent amounts paid by us for marine petroleum products sold in the relevant reporting period. For arrangements in which marine petroleum products are purchased from our related company, Aegean Oil, cost of marine petroleum products sold represents the total amount paid by us to the physical supplier for marine petroleum products and their delivery to our customers. Gross spread per metric ton of marine fuel sold represents the margins we generate per metric ton of marine fuel sold. We calculate gross spread per metric ton of marine fuel sold by dividing the gross spread on marine fuel by the sales volume of marine fuel. Marine fuel sales do not include sales of lubricants. For arrangements in which we purchase cargos for our floating storage facilities, cargo transportation costs are either included in the purchase price of marine fuels that we paid to the supplier or to a third-party transportation provider.
43

The following table reflects the calculation of gross spread per metric ton of marine fuel sold for the periods presented:
 
For the Year Ended
December 31,
 
                     
 
2016
 
2015
 
2014
 
2013
 
2012
 
                     
 
(in thousands of U.S. dollars, unless otherwise stated)
 
                     
Sales of marine petroleum products
   
3,996,642
     
4,155,502
     
6,590,998
     
6,282,466
     
7,208,440
 
Less: Cost of marine petroleum products sold
   
3,670,542
     
3,853,450
     
6,286,453
     
6,025,742
     
6,939,636
 
Gross spread on marine petroleum products
   
326,100
     
302,052
     
304,545
     
256,724
     
268,804
 
Less: Gross spread on lubricants
   
3,671
     
5,210
     
2,948
     
3,914
     
3,077
 
Gross spread on marine fuel
   
322,429
     
296,842
     
301,597
     
252,810
     
265,727
 
                                         
Sales volume of marine fuel (metric tons)
   
16,519,079
     
13,482,478
     
11,332,385
     
9,941,061
     
10,620,864
 
                                         
Gross spread per metric ton of marine fuel sold (in U.S. dollars)
   
19.5
     
22.0
     
26.6
     
25.4
     
25.0
 

The following table reconciles our gross spread on marine petroleum products sold to the most directly comparable U.S. GAAP measure, gross profit, for all periods presented:
 
For the Year Ended
December 31,
 
 
2016
   
2015
   
2014
   
2013
   
2012
 
                             
 
(in thousands of U.S. dollars, unless otherwise stated)
 
Gross spread on marine petroleum products
   
326,100
     
302,052
     
304,545
     
256,724
     
268,804
 
Add: Voyage revenues
   
26,870
     
28,780
     
30,410
     
25,049
     
22,726
 
Add: Other revenues
   
52,707
     
47,372
     
40,393
     
27,214
     
27,794
 
Less: Cost of voyage revenues
   
14,974
     
14,827
     
14,729
     
16,202
     
15,136
 
Less: Cost of other revenues
   
37,219
     
31,548
     
23,525
     
6,793
     
1,539
 
Gross profit
   
353,484
     
331,829
     
337,094
     
285,992
     
302,649
 

The amount that we have to pay for marine petroleum products to fulfill a customer order has been the primary variable in determining the prices quoted to customers. Therefore, we evaluate gross spread per metric ton of marine fuel sold and gross spread on marine petroleum products in pricing individual transactions and in long-term strategic pricing decisions. We actively monitor our pricing and sourcing strategies in order to optimize our gross spread on marine petroleum products.
44


Gross spread on marine petroleum products (including gross spread on marine fuel sold and gross spread on lubricants) and gross spread per metric ton of marine fuel sold should not be considered as alternatives to gross profit, operating income, net income or other U.S. GAAP measures and may not be comparable to similarly titled measures of other companies. Gross spread on marine petroleum products and gross spread per metric ton of marine fuel sold do not reflect certain direct and indirect costs of delivering marine petroleum products to our customers (such as crew salaries, vessel depreciation, storage costs, hire charges, other vessel operating expenses and overhead costs) or other costs of doing business.
For all the periods presented, we purchased marine petroleum products in Greece from our related company, Aegean Oil, which is a physical supplier in Greece. The cost of these marine petroleum products was contractually calculated based on Aegean Oil's actual cost of these products plus a margin. For further discussion on our relationship with Aegean Oil, please refer to "Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Aegean Oil S.A."
·
EBITDA represents net income before interest, taxes, depreciation and amortization. EBITDA does not represent and should not be considered as an alternative to net income, operating income or any other indicator of the Company's performance, as determined by U.S. GAAP, and our calculation of EBITDA may not be comparable to that reported by other companies. EBITDA is included herein because it is a basis upon which we assess our performance. The following table reconciles net income, the most directly comparable U.S. GAAP measure, to EBITDA for the periods presented:
   
For the Year Ended
December 31,
 
   
2016
   
2015
   
2014
   
2013
   
2012
 
   
(in thousands of U.S. dollars, unless otherwise stated)
 
Net income attributable to AMPNI shareholders
   
51,871
     
34,841
     
16,090
     
24,963
     
20,077
 
                                         
Add: Net financing cost
   
36,248
     
37,556
     
33,781
     
27,998
     
31,069
 
Add: Income taxes(1)
   
4,358
     
4,485
     
1,964
     
1,122
     
4,122
 
Add: Depreciation and amortization
   
33,133
     
33,924
     
30,184
     
29,148
     
31,180
 
                                         
EBITDA
   
125,610
     
110,806
     
82,019
     
83,231
     
86,448
 

(1) The amount has been revised to account for a provision for withholding taxes, related to income tax. Refer to Note 1 to the consolidated financial statements included herein.
·
Number of markets served.  The number of markets served is an indicator of the geographical distribution of our operations and affects both the amount of revenues and expenses that we record during a given period. The number of markets served includes our operations in the Greece (Piraeus and Patra), Gibraltar, United Arab Emirates (Fujairah, Khor Fakkan, and Dubai), Northern Europe (the ARA region and Belgium), Jamaica, Singapore, Canada (Vancouver, and Montreal until January 2017), United Kingdom (Portland until September 2015 and French Atlantic), Southern Caribbean (Trinidad and Tobago), Morocco (Tanger-Med), Canary Islands (Las Palmas and Tenerife beginning in June 2011), Panama (until June 2014), Hong Kong (from September 2012 until June 2013), Spain (Barcelona, beginning in April 2013 until November 2016, and Algeciras, beginning in August 2013 until June 2016), the U.S. East and West Coasts (beginning in December 2013 and December 2014, respectively), the Gulf of Mexico (beginning in December 2014), Germany (beginning in Hamburg in January 2015 and Rostock in January 2017), Russia (beginning in February 2015), South America (beginning in January 2016) and South Africa (beginning in March 2016).
·
Average number of operating bunkering vessels. Average number of operating bunkering vessels is the number of operating bunkering vessels in our fleet for the relevant period, as measured by the sum of the number of days each bunkering vessel was used as a part of our fleet during the period divided by the cumulative number of calendar days in the period multiplied by the number of operating bunkering vessels at the end of the period. This figure does not take into account non-operating days due to either scheduled or unscheduled maintenance. The average number of operating bunkering vessels is an indicator of the size of our fleet and operations and affects both the amount of revenues and expenses that we record during a given period.
45


The following table reflects our sales volume of marine fuel, gross spread on marine petroleum products, gross spread per metric ton of marine fuel sold, number of service centers and average number of operating bunkering vessels for the periods indicated:
 
Year Ended December 31,
 
 
2016
 
2015
 
2014
 
             
Sales volume of marine fuel (metric tons)
   
16,519,079
     
13,482,478
     
11,332,385
 
Gross spread on marine petroleum products (in thousands of U.S. dollars)
   
326,100
     
302,052
     
304,545
 
Gross spread per metric ton of marine fuel sold (in U.S. dollars)
   
19.5
     
22.0
     
26.6
 
Number of markets served, end of year
   
28
     
31
     
29.0
 
Average number of owned and operated bunkering vessels
   
47.1
     
48.8
     
50.2
 

Sales of Marine Petroleum Products and Gross Spread on Marine Petroleum Products
Our sales of marine petroleum products and gross spread on marine petroleum products consist of the sales revenue and gross spread that we generate on sales of marine fuel and lubricants.
Our sales of marine petroleum products are driven primarily by the number of our service centers, the number of operating bunkering tankers in our fleet, our sales prices and our credit terms and credit control process. The cost of marine petroleum products sold is driven primarily by availability of marine petroleum products, our purchasing methods, supplier cost prices and credit terms and our internal quality control processes. These drivers, in turn, are affected by a number of factors, including:
·
our entrance into new markets;
·
our purchasing methods of marine petroleum products;
·
our marketing strategy;
·
our vessel acquisitions and disposals;
·
PLATTS prices;
·
conditions in the international shipping and the marine fuel supply industries;
·
regulation of the marine fuel supply industry;
·
regulation of the tanker industry;
·
levels of supply of and demand for marine petroleum products;
·
levels of competition; and
·
other factors affecting our industry.
We sell and deliver marine petroleum products to a broad and diversified customer base, including international commercial shipping companies, governments and marine fuel traders and brokers. For the years ended December 31, 2016, 2015 and 2014, none of our customers accounted for more than 10% of our total revenues.
The commercial shipping industry generally purchases marine fuel on a spot basis and historically we have not had any long-term sales volume contracts with customers. On March 1, 2006, however, we entered into a long-term contract to supply minimum quantities of fuel at fixed prices to a commercial customer in Jamaica, which is scheduled to expire on December 31, 2018. As we expand our global network and increase our geographical coverage, we expect some of our customers to enter into long-term sales volume contracts.
In addition to our physical supply operations, from time to time, we may act as a trader, generally in locations where we do not have service centers. This business involves activities whereby we contract with third-party physical suppliers to sell us marine fuel and deliver the marine fuel to a customer in the relevant location. Accordingly, our trading activities do not involve our physical possession of marine fuel and require less complex logistical operations and infrastructure. As such, we typically earn a significantly lower gross spread from our trading activities than from our physical supply activities.
46


We purchase and take delivery of marine petroleum products from various suppliers under long-term volume contracts or on the spot market. Long-term supply contracts from third-parties allow us to minimize our exposure to supply shortages. In general, at each of our service centers except for Gibraltar, Morocco, the United Arab Emirates, the Canary Islands, the U.S. East and West Coasts, Germany and South Africa, we purchase from local supply sources.
Our cost of marine petroleum products includes purchases from related companies. In Greece, we purchase marine petroleum products from our related company Aegean Oil, which charges us its actual cost of the marine petroleum products plus a margin, pursuant to a supply contract that currently expires on December 31, 2016 and is renewable annually. For further discussion of our marine petroleum products purchases from Aegean Oil, please refer to the section of this annual report entitled "Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Aegean Oil S.A."
The following table reflects our cost of marine petroleum products sold, including the cargo transportation cost, incurred from third-party suppliers and from our related company suppliers for the periods indicated.
 
Year Ended December 31,
 
 
2016
   
2015
   
2014
 
 
(in thousands of U.S. dollars)
 
Third-party suppliers
   
3,606,668
     
3,716,726
     
5,934,927
 
Related company suppliers
   
63,874
     
136,724
     
351,526
 
Total
   
3,670,542
     
3,853,450
     
6,286,453
 

We seek to increase our sales of marine petroleum products and our gross spread on marine petroleum products on an integrated basis, through expansion into new markets, acquisitions of double hull bunkering tankers and the diversification and further optimization of purchasing methods. Our gross spread on marine petroleum products differs for each of our service centers, reflecting the different competitive conditions that exist in the markets served by them. Factors affecting competitive conditions in a market that we service include customer demand, availability of supplies and the strength and number of competitors that operate in the market. We believe that for any new service centers that we may establish, gross spread on marine petroleum products may be lower than for our existing service centers. We also believe that the competitive conditions in the markets served by our existing service centers may generally be more favorable to us than those in other markets that we may consider for future expansion.
Voyage Revenues
Our voyage revenues, included in our total revenues, are primarily derived from the employment of our vessels the Naxos and the Karpathos, under contracts with Aegean VIII, a company owned and controlled by relatives of Mr. Dimitris Melisanidis, our founder, former head of corporate development and former major shareholder. During the years ended December 31, 2016, 2015, and 2014, we recorded revenue of $5.3 million, $5.3 million, and $3.4 million, respectively, in aggregate under these contracts.
Four of our vessels, the Aegean III, the Aegean VIII, the Aegean Tiffany, and the Aegean Breeze I, are employed under a contract with an unaffiliated third-party for the distribution of refined marine petroleum products to Greek ports. During the years ended December 31, 2016, 2015 and 2014, we recognized $2.2 million, $2.3 million and $2.7 million, respectively, of revenue under this contract.
Two of our vessels, the Amorgos and the Karpathos, were employed under contracts with Aegean V, a company owned and controlled by relatives of Mr. Melisanidis. During the years ended December 31, 2016, 2015 and 2014, we recorded revenue of $0, $0, and $1.8 million, respectively, under these contracts, which expired during 2014.
During the year ended December 31, 2016, 2015, and 2014, several of our vessels were employed under contracts with Aegean Oil, a company owned and controlled by relatives of Mr. Melisanidis. During the years ended December 31, 2016, 2015, and 2014, we recorded aggregate revenue of $5.9 million, $2.7 million, and $0, respectively, under these contracts.
During the years ended December 31, 2016, 2015 and 2014, the Aegean III, the Aegean VIII, the Aegean Tiffany, and the Aegean Breeze I, were employed under contracts with Hellenic Environmental Center, a company owned and controlled by relatives of Mr. Melisanidis and recorded revenue of $0.1 million, $0.1 million and $0.1 million, respectively.
47


Our voyage revenues are also derived from the employment of our vessels under charter agreements and the employment of our bunkering tankers under contracts with other unaffiliated third parties. During the years ended December 31, 2016, 2015 and 2014, we recorded revenue of $13.4 million, $18.4 million and $22.4 million, respectively, under these contracts.
Please also refer to the table in Note 16 to our consolidated financial statements included herein for more information.
Other Revenues
Other revenues, included in our total revenues, consist of brokerage and agency fees, throughput fees, demurrages and storage fees. These revenues are recognized when services are performed and collectability is reasonably assured. Please also refer to the table in Note 16 to our consolidated financial statements included herein.
Cost of Revenues
Cost of marine petroleum products consists of purchase costs of marine petroleum products and direct receiving costs of marine petroleum products, as described above. Cost of voyage revenues consists of voyage expenses and vessel operating expenses attributable to the voyage revenue we earn from the chartering out of our vessels. These costs include salaries and wages of the crew, depreciation and other operating expenses of the vessels such as repairs, maintenance, stores, spare parts, insurance, consumables and bunkers consumption. Cost of other revenues consists of direct costs of incurring other revenues.
Selling and Distribution expenses
We separately present the selling and distribution expenses due to its individual significance to perform our operations. These expenses generally represent indirect expenses incurred for selling and distribution and related to the delivery of the products and services to the customers.
The selling and distribution expenses mainly consist of the following:
·
salaries of our traders and shoreside personnel responsible for operation of our vessels and the distribution and supervision of our marine petroleum products and lubricant products;
·
salaries and wages of the shipboard personnel, mainly under short-term contracts, of the owned vessels used for the delivery of the marine petroleum products to the end customer using these vessels;
·
depreciation and amortization of dry-docking costs and other operating expenses of the owned vessels (such as repair, maintenance, stores, spare parts, insurance, consumables) and bunkers consumption of the owned vessels used for the delivery of the marine petroleum products to the end customer using these vessels;
·
vessel hire charges related to the hiring of third-party vessels used for the delivery of the marine petroleum products to the end customer;
·
storage costs, which mainly consist of the expenses of our floating storage facilities and our owned and leased on-land storage facilities;
·
bad debt provision, which has remained low in the past several years due to our effective credit control process and we expect it will remain at low levels; and
·
other costs, which mainly consist of port expenses, brokerage fees, laboratory analysis expenses, advertising expenses, supervising, inspections and survey costs.
We employ salaried employees at our offices in Greece, New York, Belgium, Singapore and Germany, where most of our sales and marketing, operations and technical departments are located, and at each of our service centers. We maintain a minimal number of salaried employees at our service centers, where we typically employ a local operations manager and staff to support the logistical aspects of our operations.
The cost of our vessels depreciates on a straight-line basis over the expected useful life of each vessel. We follow the deferral method of accounting for drydocking costs under which actual costs incurred are deferred and amortized on a straight-line basis over the period through the date the next drydocking is scheduled.
48


Our selling and distribution costs have been reduced over the past three years by selling our older or single hull vessels, which we assessed to be non-essential for our business. During the year ended December 31, 2016, our selling and distribution costs decreased due to the effects of the decrease in marine fuel prices on our bunker consumption.
General and administrative expenses
We separately present the general and administrative expenses, which mainly consist of the salaries and wages of the management and the general directors, the office administrative, legal, accounting and finance personnel, the depreciation of the office property, equipment and other fixed assets and the general office expenses, legal, auditing and professional fees, communal charges, travel expenses, maintenance of our property, rent and utilities. During the year ended December 31, 2016, our general and administrative expenses have increased due to the expansion of our business into new service centers.
Interest and Finance Costs
We have historically incurred interest expense and financing costs in connection with long-term debt to partially finance the acquisitions of our vessels and other non-current assets and in connection with short-term bank borrowings obtained for working capital purposes and business acquisitions. We capitalize interest incurred during the construction periods for financing our investments in bunkering vessels and storage facilities We have incurred and expect to continue incurring interest expense and financing costs under our existing credit facilities used to finance the construction of our bunkering tankers and our other senior secured credit facilities and convertible senior notes. We expect that interest and finance costs will increase further due to increased drawdowns under our credit facilities to finance our operations and capital expenditures.
Income Taxes
We are incorporated in the Marshall Islands. Under Marshall Islands law, we are not subject to tax on income or capital gains. Under the laws of the countries of incorporation of our vessel-owning subsidiaries and our subsidiaries that operate service centers and the laws of the countries of our vessels' registration, our vessel-owning companies are generally not subject to tax on our income that is characterized as shipping income.
Income taxes have been provided for based upon the tax laws and rates in effect in the countries in which our operations are conducted and income is earned. There is no expected relationship between the provision for/or benefit from income taxes and income or loss before income taxes because the countries in which we operate have taxation regimes that vary not only with respect to the nominal rate, but also in terms of the availability of deductions, credits and other benefits. Variations also arise because income earned and taxed in any particular country or countries may fluctuate from year to year. Deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of our assets and liabilities using the applicable jurisdictional tax rates in effect at the year end. A valuation allowance for deferred tax assets is recorded when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized.
Our corporate income tax exposure is in taxable jurisdictions, such as Gibraltar, Jamaica, Singapore, Belgium, the United States, Canada and Germany.
Our business is affected by taxes imposed on the purchase and sale of marine petroleum products in various jurisdictions in which we operate from time to time. These taxes include income, sales, excise, goods and services taxes, value-added taxes and other taxes. Other than in the United States, Canada and Belgium, we do not pay a material amount of tax in any jurisdiction in which we operate. For the years ended December 31, 2016, 2015, and 2014, our income tax amounted to $4.4 million, $4.5 million, and $2.0 million. The income tax amounts are mainly attributable to our United States, Canadian and Belgian operations.
Results of Operations
Year ended December 31, 2016 compared to the year ended December 31, 2015
49


The following table compares our results of operations for the years ended December 31:
 
                       
(in thousands of U.S. dollars unless otherwise stated)
 
2016
   
2015
   
Increase /(Decrease)
   
Percent Change
 
Sales of marine petroleum products
 
$
3,996,642
   
$
4,155,502
   
$
(158,860
)
   
3.8
%
Cost of sales of marine petroleum products
   
3,670,542
     
3,853,450
     
(182,908
)
   
4.7
%
Gross spread on marine petroleum products
   
326,100
     
302,052
     
24,048
     
7.9
%
                                 
Voyage revenues
   
26,870
     
28,780
     
(1,910
)
   
(6.6
)%
Cost of voyage revenues
   
14,974
     
14,827
     
147
     
1.0
%
Gross profit from voyage revenues
   
11,896
     
13,953
     
(2,057
)
   
(14.7
)%
                                 
Other revenues
   
52,707
     
47,372
     
5,335
     
11.2
%
Cost of other revenues
   
37,219
     
31,548
     
5,671
     
18.0
%
Gross profit from other revenues
   
15,488
     
15,824
     
(336
)
   
(2.1
)%
                                 
Gross profit
   
353,484
     
331,829
     
21,655
     
6.5
%
                                 
Selling and distribution
   
202,266
     
205,078
     
(2,812
)
   
(1.4
)%
General and administrative
   
49,757
     
43,318
     
6,439
     
14.9
%
Interest and finance costs
   
36,499
     
37,608
     
(1,109
)
   
(2.9
)%
Income taxes(1)
   
4,358
     
4,485
     
(127
)
   
(2.8
)%
(2) The amounts have been revised to account for a provision for withholding taxes related to income tax for the year ended December 31, 2015. Refer to Note 1 to the consolidated financial statements
Sales of Marine Petroleum Products.  Sales of marine petroleum products decreased by $158.9 million, or 3.8%, to $3,996.6 million for the year ended December 31, 2016, compared to $4,155.5 million for the year ended December 31, 2015. The decrease was primarily attributable to a decrease of $877.0 million related to a drop in the price of marine fuel and a decrease of $9.4 million in lubricants sales, which was partially offset by an increase of $727.5 million attributable to an increase in marine fuel sales volume. Sales volume of marine fuel increased by 3,036,601 metric tons, or 22.5%, to 16,519,079 metric tons for the year ended December 31, 2016, compared to 13,482,478 metric tons for the year ended December 31, 2015, due to our expansion into new markets.
Voyage Revenues. Voyage revenues decreased by $1.9 million, or 6.6%, to $26.9 million for the year ended December 31, 2016, compared to $28.8 million for the year ended December 31, 2015. The decrease was attributable to the expiration of the charter out of our leased vessel, the Charleston.
Other Revenues. Other revenues increased by $5.3 million, or 11.2%, to $52.7 million for the year ended December 31, 2016, compared to $47.4 million for the year ended December 31, 2015. The increase in other revenues for the year ended December 31, 2016, was attributable to the storage revenue we received from our facility in Fujairah.
Revenues from related companies. Revenues from related companies included in the sales of marine petroleum products and voyage revenues for the year ended December 31, 2016 were $9.2 million and $11.3 million, respectively, compared to $11.7 million and $8.2 million, respectively, for the year ended December 31, 2015. Voyage revenues from related companies increased mainly due to revenues of $4.8 million under the 2015 contract with Aegean Oil that is effective since July 2015.
50



Cost of revenue. The cost of sales of marine petroleum products decreased by $183.0 million, or 4.7%, to $3,670.5 million for the year ended December 31, 2016, compared to $3,853.5 million for the year ended December 31, 2015. The decrease in the cost of marine petroleum products was attributable to the decrease in the price of marine fuel. The cost of purchases from related parties included in the cost of sales of marine petroleum products decreased by $72.8 million, or 53.3%, to $63.9 million for the year ended December 31, 2016 due to the price decline, compared to $136.7 million for the year ended December 31, 2015. The cost of voyage and other revenues for the year ended December 31, 2016 increased by $5.8 million, or 12.5%, to $52.2 million for the year ended December 31, 2016 due to costs related to our storage facility in Fujairah, compared to $46.4 million for the year ended December 31, 2015.
Gross Profit and Gross Spread on Marine Petroleum Products. Gross spread on marine petroleum products increased by $24.0 million, or 7.9%, to $326.1 million for the year ended December 31, 2016, compared to $302.1 million for the year ended December 31, 2015. The contribution of the gross profit on voyage and other revenues for the year ended December 31, 2016 was $11.9 million and $15.5 million, respectively, compared to $14.0 million and $15.8 million respectively, for the year ended December 31, 2015. Our gross spread per metric ton of marine fuel sold during the year ended December 31, 2016 decreased by $2.5, or 11.4%, to $19.5, compared to $22.0 for the year ended December 31, 2015. Gross spreads per metric ton do not generally increase or decrease proportionately with the price of marine fuel. Accordingly, gross spread on marine petroleum products, as a percentage of total revenues, for the year ended December 31, 2016, increased to 8.0%, from 7.1%, for the year ended December 31, 2015. Gross spread on marine petroleum products and gross spread per metric ton of marine fuel sold are non-U.S. GAAP measures and should not be considered as alternatives to operating income, net income or other U.S. GAAP measures and may not be comparable to similarly titled measures of other companies. Please see "—Factors Affecting Our Results of Operations" for a reconciliation of gross spread on marine petroleum products to the most directly comparable U.S. GAAP measure.
Selling and Distribution. Selling and distribution expenses decreased by $2.8 million, or 1.4%, to $202.3 million for the year ended Decembe