20-F 1 d1281845_20-f.htm d1281845_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, 2011

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, Piraeus 185 45 Athens, Greece 

(Address of principal executive offices)

 
E. Nikolas Tavlarios, Tel: (212) 763-5665, investor@ampni.com,
299 Park Avenue, 2nd Floor, 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)
* Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission.

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.

46,229,231 shares of common stock, par value $0.01 per share.

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  
   
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  o
Accelerated filer  x
Non-accelerated filer  o
 
 
 
 

 
 
 
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
         

 
 

 



 
TABLE OF CONTENTS
 
 
PART I
   
 
ITEM 1 - IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
1
 
ITEM 2 - OFFER STATISTICS AND EXPECTED TIMETABLE
1
 
ITEM 3 - KEY INFORMATION
1
 
ITEM 4 - INFORMATION ON THE COMPANY
21
 
ITEM 4A – UNRESOLVED STAFF COMMENTS
42
 
ITEM 5 - OPERATING AND FINANCIAL REVIEW AND PROSPECTS
42
 
ITEM 6 - DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
73
 
ITEM 7 - MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
79
 
ITEM 8 - FINANCIAL INFORMATION
82
 
ITEM 9 - THE OFFER AND LISTING
84
 
ITEM 10 - ADDITIONAL INFORMATION
85
 
ITEM 11 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
91
 
ITEM 12 - DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
92
PART II
   
 
ITEM 13 - DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
93
 
ITEM 14 - MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
93
 
ITEM 15 - CONTROLS AND PROCEDURES
93
 
ITEM 16A- AUDIT COMMITTEE FINANCIAL EXPERT
94
 
ITEM 16B- CODE OF ETHICS
94
 
ITEM 16C- PRINCIPAL ACCOUNTANT FEES AND RELATED SERVICES
95
 
ITEM 16D- EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEE
95
 
ITEM 16E- PURCHASES OF EQUITY SECURITIES BY ISSUER AND AFFILIATES.
95
 
ITEM 16F- CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT.
95
 
ITEM 16G- CORPORATE GOVERNANCE.
95
 
ITEM 16H MINE SAFETY DISCLOSURE
95
PART III
   
 
ITEM 17 - FINANCIAL STATEMENTS
96
 
ITEM 18 - FINANCIAL STATEMENTS
96
 
ITEM 19 – EXHIBITS
96
 
INDEX TO FINANCIAL STATEMENTS
F-1
 
 
 
 

 
 
 
 
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.
 
Aegean Marine Petroleum Network Inc., or the Company, desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is 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," "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 which 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: our future operating or financial results; our future payment of dividends and the availability of cash for payment of dividends; our ability to retain and attract senior management and other key employees; our ability to manage growth; our ability to maintain our business in light of our proposed business and location expansion; our ability to obtain double hull bunkering tankers given the scarcity of such vessels in general; the outcome of legal, tax or regulatory proceedings to which we may become a party; adverse conditions in the shipping or the marine fuel supply industries; our ability to retain our key suppliers and key customers; our contracts and licenses with governmental entities remaining in full force and effect; 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; increased levels of competition; compliance or lack of compliance with various environmental and other applicable laws and regulations; our ability to collect accounts receivable; changes in the political, economic or regulatory conditions in the markets in which we operate, and the world in general; our future, pending or recent acquisitions, business strategy, areas of possible expansion, and expected capital spending or operating expenses; our failure to hedge certain financial risks associated with our business; uninsured losses; our ability to maintain our current tax treatment; our failure to comply with restrictions in our credit agreements; increases in interest rates; and other important factors described from time to time in our U.S. Securities and Exchange Commission filings.
 

 
 

 
 
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
 
Please note:  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
   
For the year ended December, 31
 
   
2007
   
2008
   
2009
   
2010
   
2011
 
                               
   
(in thousands of US dollars, except for share and per share data which are presented in U.S. dollars)
 
REVENUES:
                             
Revenues - third parties
    1,338,168       2,767,086       2,456,435       4,925,637       6,910,348  
Revenues - related companies
    14,705       10,886       14,525       45,998       55,117  
Total Revenues
    1,352,873       2,777,972       2,470,960       4,971,635       6,965,465  
                                         
COST OF REVENUES
                                       
Cost of revenues - third parties
    1,100,349       2,256,712       2,013,723       4,440,733       6,284,179  
Cost of revenues - related companies
    159,943       351,532       267,767       303,620       404,988  
Total Cost of Revenues
    1,260,292       2,608,244       2,281,490       4,744,353       6,689,167  
                                         
GROSS PROFIT
    92,581       169,728       189,470       227,282       276,298  
                                         
OPERATING EXPENSES:
                                       
Selling and distribution
    50,075       95,860       109,483       155,412       192,846  
General and administrative
    14,349       21,406       24,553       27,503       29,806  
Amortization of intangible assets
    52       313       312       1,001       1,461  
(Gain)/Loss on sale of vessels, net
    (2,693 )     -       (4,094 )     1,540       8,682  
Total operating expenses
    61,783       117,579       130,254       185,456       232,795  
                                         
Operating income
    30,798       52,149       59,216       41,826       43,503  
                                         
OTHER INCOME/(EXPENSE):
                                       
Interest and finance costs
    (3,473 )     (12,377 )     (10,255 )     (17,351 )     (27,864 )
Interest Income
    1,990       501       46       31       57  
Foreign exchange gains/(losses), net
    (1,569 )     1,521       (329 )     (3,612 )     1,440  
      (3,052 )     (10,355 )     (10,538 )     (20,932 )     (26,367 )
                                         
Income before provision for income taxes
    27,746       41,794       48,678       20,894       17,136  
                                         
Income taxes
    (8 )     (1,879 )     (153 )     (2,161 )     (5,428 )
                                         
Net income
    27,738       39,915       48,525       18,733       11,708  
                                         
Net Income/(Loss) attributable to non-controlling interest
    -       -       -       -       1,480  
                                         
Net Income attributable to AMPNI shareholders
    27,738       39,915       48,525       18,733       10,228  
                                         
Basic earnings per common share
    0.65       0.94       1.13       0.40       0.22  
Diluted earnings per common share
    0.65       0.94       1.13       0.40       0.22  
Weighted average number of shares, basic
    42,417,111       42,497,450       42,579,187       46,295,973       45,979,761  
Weighted average number of shares, diluted
    42,505,704       42,625,801       42,644,448       46,445,499       45,979,761  
Dividends declared and paid per share
    0.04       0.04       0.04       0.04       0.04  
 
Our statements of income for the years ended December 31, 2007, 2008, 2009 and 2010 have been reclassified to conform to the analysis and presentation required for the implementation of a new reporting system for the Company.
 
 
 
1

 
 

   
As of and for the Year Ended
December 31,
 
   
2007
   
2008
   
2009
   
2010
   
2011
 
                               
     (in thousands of U.S. dollars, unless otherwise stated)  
Balance Sheet Data:
                             
Cash and cash equivalents
    1,967       46,927       54,841       86,499       68,582  
Total assets
    566,957       641,907       967,345       1,339,835       1,472,438  
Total debt
    208,031       253,621       401,037       624,698       706,916  
Total liabilities
    323,232       356,904       632,288       869,472       992,896  
Common stock
    425       425       430       477       482  
Number of shares outstanding
    42,461,428       42,543,608       43,009,303       46,709,420       46,229,231  
Total AMPNI stockholders' equity
    243,725       285,003       335,057       470,363       478,062  
                                         
Other Financial Data:
                                       
Gross spread on marine petroleum products (1)
    89,671       160,963       176,498       218,533       256,960  
Gross spread on lubricants(1)
    536       1,298       2,755       2,221       1,965  
Gross spread on marine fuel(1)
    89,135       159,665       173,743       216,312       254,995  
Gross spread per metric ton of marine fuel sold (U.S. dollars) (1)
    25.9       30.7       28.1       21.0       24.0  
EBITDA(2)
    38,826       70,227       80,565       66,112       73,791  
Net cash provided by (used in) operating activities
    (128,128 )     136,737       (61,353 )     (64,626 )     (44,865 )
Net cash (used in) investing activities
    (124,692 )     (135,667 )     (75,230 )     (169,003 )     (45,589 )
Net cash provided by financing activities
    172,362       43,890       144,497       265,287       73,169  
                                         
Operating Data:
                                       
Sales volume of marine fuel (metric tons) (3)
    3,437,269       5,200,256       6,192,755       10,308,210       10,646,271  
Number of markets served, end of period (4)
    6.0       11.0       14.0       16.0       19.0  
Number of operating bunkering vessels, end of period (5)
    17.0       30.0       38.0       52.0       58.0  
Average number of operating bunkering vessels (5)(6)
    13.5       22.7       33.7       48.1       56.3  
Specialty tankers, end of period
    -       1       -       -       -  
Special purpose vessels, end of period (7)
    -       1       1       1       1  
Number of owned storage facilities, end of period (8)
    2       4       3       8       8  

(1)
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 marine fuel oil, or MFO, or 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 represents 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.  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 paid separately by us to a third-party transportation provider. 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. The following table reflects the calculation of gross spread per metric ton of marine fuel sold for the periods presented:
 

 
2

 


 
   
For the Year Ended
December 31,
 
   
2007
   
2008
   
2009
   
2010
   
2011
 
                               
     (in thousands of U.S. dollars, unless otherwise stated)  
                               
Sales of marine petroleum products
    1,345,849       2,768,067       2,449,445       4,954,599       6,925,582  
Less: Cost of marine petroleum products sold
    1,256,178       2,607,104       2,272,947       4,736,066       6,668,622  
Gross spread on marine petroleum products
    89,671       160,963       176,498       218,533       256,960  
Less: Gross spread on lubricants
    536       1,298       2,755       2,221       1,965  
Gross spread on marine fuel
    89,135       159,665       173,743       216,312       254,995  
                                         
Sales volume of marine fuel (metric tons)
    3,437,269       5,200,256       6,192,755       10,308,210       10,646,271  
                                         
Gross spread per metric ton of marine fuel sold
(U.S. dollars)
    25.9       30.7       28.1       21.0       24.0  
                                         
 
The following table reconciles our gross spread on marine petroleum products to the most directly comparable United States generally accepted accounting principles, or U.S. GAAP, measure, gross profit, for all periods presented:

 
   
For the Year Ended
December 31,
 
   
2007
   
2008
   
2009
   
2010
   
2011
 
                               
     (in thousands of U.S. dollars)  
                               
Gross spread on marine petroleum products
    89,671       160,963       176,498       218,533       256,960  
Add: Voyage revenues
    5,758       1,379       9,044       7,261       22,775  
Add: Other revenues
    1,266       8,526       12,471       9,775       17,108  
Less: Cost of voyage revenues
    4,020       932       7,560       6,597       19,251  
Less: Cost of other revenues
    94       208       983       1,690       1,294  
Gross profit
    92,581       169,728       189,470       227,282       276,298  
                                         
 
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. We believe that this measure is important to investors because it is an effective intermediate performance measure of the strength of our operations.
 
Gross spread on marine petroleum products (including gross spread on marine fuel and gross spread on lubricants) and gross spread per metric ton of marine fuel sold 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. 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, other vessel operating expenses and overhead costs) or other costs of doing business.
 
For all 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 please refer to the section of this report entitled "Major Shareholders and Related Party Transactions."
 
 
 
3

 
 
(2)
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 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 the Company assesses its operating performance and because the Company believes that it presents useful information to investors regarding the Company's ability to service and/or incur indebtedness. The following table reconciles net income to EBITDA for the periods presented:
 
 
   
For the Year Ended
December 31,
 
   
2007
   
2008
   
2009
   
2010
   
2011
 
                               
     (in thousands of U.S. dollars)  
                               
Net income attributable to AMPNI shareholders
    27,738       39,915       48,525       18,733       10,228  
                                         
Add: Net financing cost
    1,483       11,876       10,209       17,320       27,807  
Add: Income taxes
    8       1,879       153       2,161       5,428  
Add: Depreciation and amortization
    9,597       16,557       21,678       27,898       30,328  
                                         
EBITDA
    38,826       70,227       80,565       66,112       73,791  
                                         

(3)
The sales volume of marine fuel is the volume of sales of MFO and MGO for the relevant period and is denominated in metric tons. We do not utilize the sales volume of lubricants as an indicator.
 
(4)
The number of markets served includes our operations at our service centers in the United Arab Emirates, Gibraltar, Jamaica, Singapore, Northern Europe (Belgium and the Netherlands), West Africa (Ghana), Vancouver (Canada), Portland (U.K.), Southern Caribbean (Trinidad and Tobago), Tangiers (Morocco), Las Palmas and Tenerife (Canary Islands), Cape Verde, Panama and Greece, where we conduct operations through our related company, Aegean Oil, as well as our trading operations in Montreal and Mexico. 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. We commenced physical supply operations in Northern Europe on October 9, 2007, in Ghana on January 15, 2008, in Portland (U.K.) on April 1, 2008, in Canada and Mexico on July 1, 2008, in Trinidad and Tobago on April 1, 2009, in Tangiers, Morocco on August 25, 2009, in Antwerp-Rotterdam-Amsterdam region on April 1, 2010 in Las Palmas on July 1, 2010, in Cape Verde on March 13, 2011, in Tenerife on June 4, 2011 and in Panama on August 1, 2011.
 
(5)
Bunkering vessels includes both bunkering tankers and barges. This data does not include our special purpose vessel, Orion, a 550 dwt tanker, which is based in Greece.
 
(6)
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.
 
(7)           This figure includes our special purpose vessel, Orion, based in Greece.
 
(8)
This figure includes our two Panamax tankers, Fos II and Aeolos and one Aframax tanker, Leader, used as floating storage facilities in Ghana, Gibraltar and the United Arab Emirates respectively. We used our Panamax tanker, the Ouranos, as a storage facility until October 2010. Additionally, our tanker, Aegean IX, was used as a floating storage facility in Jamaica until December 2009 when the vessel was sold. During 2010, we acquired two barges, the Mediterranean and the Tapuit, which operate as floating storage facilities in Greece and Northern Europe, respectively.  In November 2011, we chartered a product tanker, the Rio Luxembourg, which is used as a floating storage facility in Ghana. The Company has also on-land storage facilities in Portland (U.K.), Las Palmas (Canary Islands) and Panama.
 

 
4

 

 
 
The ownership of floating 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 floating 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 ones we face.  Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.  If any of the following risks occur, our business, financial condition, operating results and cash flows could be materially adversely affected and the trading price of our securities could decline.
 
Risk Factors Relating to Our Business
 
A renewed contraction or worsening of the global credit markets 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 extraordinary volatility following significant 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 recent and developing economic factors may have a material adverse effect on our ability to expand our business.
 
Our future growth depends on a number of additional factors, which also may be adversely affected in the current economic climate, including our ability to:
 
 
·
increase our fleet of bunkering vessels;
 
 
·
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 successfully with our existing operations;
 
 
·
hire, train and retain qualified personnel to manage and operate our growing business and fleet;
 

 
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·
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 the 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. Furthermore, competitive conditions in the markets that we may consider for future expansion may 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 financial covenants contained in certain of our credit facilities.
 
Certain of our credit facilities, which are secured by mortgages on our vessels, 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 and book net worth; (ii) a minimum current ratio; (iii) minimum free liquidity; and (iv) a maximum ratio of total liabilities to total assets.
 
A violation of any of these covenants constitutes an event of default under our credit facilities, which, unless cured within the grace period set forth under the credit facility, if applicable, or waived or modified by our lenders, provides 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, reclassify our indebtedness as current liabilities 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.
 
As of December 31, 2011, we were not in compliance with the leverage ratio covenant contained in certain of our credit facilities and related corporate guarantees, which requires us to maintain a ratio of total liabilities to total assets of not more than 0.65-to-one and, as such, have agreed with our lenders under the facilities to permanently amend the maximum leverage ratio requirement under the facilities and related guarantees not to be more than between 0.70-to-one and 0.75-to-one, applied as of December 31, 2011, subject to definitive documentation. In addition, as of March 31, 2012, we were not in compliance with the current ratio covenant contained in seven of our credit facilities and related corporate guarantees, which requires us to maintain a minimum current ratio of 1.15-to-one and, as such, have agreed with our lenders to reduce the minimum current ratio required under the facilities and related guarantees to between 1.10-to-one and 1.05-to-one until 2013, or the waiver period, subject to definitive documentation. See "Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Credit Facilities."
 
We cannot assure you we will enter into definitive documentation for the amendments of the covenant requirements described above and our lenders may not extend the amendments if we are not in compliance with the original covenants at the end of the waiver period. Accordingly, our lenders could accelerate certain of our indebtedness and foreclose their liens on our vessels and other assets securing the credit facilities, which would impair our ability to conduct our business and continue as a going concern.
 

 
6

 

 
In addition, under the terms of our credit facilities, our payment of dividends or other payments to shareholders is subject to no event of default. See "Item 8. Financial Information—Dividend Policy."
 
Furthermore, certain of our credit facilities contain a cross-default provision that may be triggered by a default under one of our other credit facilities. The breaches described above constituted events of default under the applicable credit facilities and, absent the agreements with our lenders discussed above, together with the cross-default provisions in certain of our credit facilities, could have resulted in the lenders requiring immediate repayment of certain of our loans. A cross-default provision means that a default on one loan would result in a default on certain other loans. Because of the presence of cross default provisions in certain of our credit facilities, the refusal of any one lender under our credit facilities to grant or extend a waiver could result in certain of our indebtedness being accelerated, even if our other lenders under our credit facilities have waived covenant defaults under the respective credit facilities. 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 additional waivers of or amendments to our credit facilities that we may obtain, 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. In addition, our lenders may 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.
 
Restrictive covenants in our credit facilities impose financial and other restrictions 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 and financing 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 do not improve or worsen, we may fail to comply with these covenants. If we breach any of the restrictions, covenants, ratios or tests 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. This may prevent us from taking actions that are in our shareholders' best interest.
 
If further emergency governmental measures are implemented in response to the economic downturn, that could have a material adverse impact on our results of operations, financial condition and cash flows
 
In response to the extraordinary volatility of the global financial markets and the adverse changes in the global credit markets, governments have implemented, and are continuing to implement, a broad variety of governmental action and new regulation of the financial markets. Securities and futures markets and the credit markets are subject to comprehensive statutes, regulations and other requirements. The SEC, other regulators, self-regulatory organizations and exchanges are authorized to take extraordinary actions in the event of market emergencies, and may effect changes in law or interpretations of existing laws. Changes to securities, tax, environmental, or other laws or regulations, could have a material adverse effect on our results of operations, financial condition or cash flows.
 
 
 
7

 
 
 
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
 
In order to fund future vessel acquisitions, new 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 additional equity securities. Use of cash from operations for those 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 that have occurred in recent years. The credit markets in the United States and elsewhere have experienced significant contraction, deleveraging and reduced liquidity.  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 the funds for future vessel acquisitions, new markets, products or capital expenditures could impact our results of operations and financial condition. The issuance of additional equity securities would dilute your interest in our Company and reduce dividends payable to you. 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.
 
Business acquisition opportunities may present increased risks and uncertainties, which if realized, could result in costs that outweigh the financial benefit of such acquisitions
 
As part of our growth strategy, we intend to explore acquisition opportunities of marine fuel supply and complementary businesses. This expansion could expose us to additional business and operating risks and uncertainties, including:
 
 
·
the ability to effectively integrate and manage acquired businesses;
 
 
·
the ability to realize our investment in the acquired businesses;
 
 
·
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.
 
Our management may not properly evaluate the risks inherent in any particular transaction. 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.
 

 
8

 

 
In addition, 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.
 
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 lines 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.
 
Because of the limited supply of secondhand double hull bunkering tankers, we may not be able to acquire secondhand double hull bunkering tankers on economically acceptable terms, which could impede our growth and negatively impact our results of operations and financial condition
 
Our ability to grow is in part dependent on our ability to expand our fleet through acquisitions of suitable secondhand double hull bunkering tankers. We believe that the availability of secondhand double hull bunkering tankers in the open market is limited. We may not be able to locate suitable secondhand tankers or negotiate acceptable purchase contracts with their owners or obtain financing for such acquisitions on economically acceptable terms. Our failure to locate and acquire suitable secondhand double hull bunkering tankers could limit the future growth of our business and have a material impact on our results of operations and financial condition.
 
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. Since December 2007, we have acquired 24 secondhand bunkering vessels, including barges.  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.
 
The market value of our vessels may decrease, which could cause us to incur losses if we decide to sell them following a decline in their market values
 
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 adjustment 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.
 
International authorities and flag states may delay implementation of the phase-out of single hull vessels, which may lessen the competitive advantage we hope to gain by acquiring double hull bunkering tankers
 
Our strategy involves capitalizing on the phase-out of single hull bunkering tankers under environmental protection laws and regulations, including, but not limited to, those promulgated by the European Union, or the EU, and the International Maritime Organization, or the IMO, the United Nations agency for maritime safety and the prevention of pollution by ships. Both the EU and the IMO required a phase-out of all single hull vessels by 2010, subject to certain exemptions. Under the IMO regulations, a flag state may allow single hull vessels conforming to certain technical specifications to continue to operate until the earliest of 2015 or the 25th anniversary of the vessel's delivery.
 

 
 
9

 

 
Our future success will depend, in part, on the timely and comprehensive implementation of the phase-out of single hull vessels. Any exemption or limitation in application of the environmental protection laws and regulations could limit our anticipated growth or other anticipated benefits because our strategy involves employing and acquiring secondhand double hull bunkering tankers.
 
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.
 
Most of our customers are not obligated to continue to employ us 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.
 
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, 2011, 111 of our customers had outstanding balances with us of at least $1.0 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 two 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. 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.
 

 
10

 
 

 
The refined marine fuel that we purchase from our suppliers may fail to meet the 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 agreed to supply to our customers, we could lose our customers and be subject to claims or other liabilities. 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 other 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 and Head of Corporate Development. Mr. Melisanidis may also be deemed a control person of Aegean Oil and other affiliated entities for U.S. securities law purposes, but Mr. Melisanidis disclaims such control. In connection with our limited 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 of the other third-party physical suppliers fails to perform its obligations to us, you will not have any recourse directly against Aegean Oil or the other third-party physical suppliers.
 
Agreements between us, Aegean Oil and other affiliated 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, our largest supplier of marine petroleum products, as well as other agreements we have with affiliated entities have been made in the context of an affiliated relationship. Aegean Oil and other affiliated entities are owned and controlled by members of Mr. Melisanidis' family. Mr. Melisanidis has also been involved historically 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, we were majority-owned by Leveret International Inc., or Leveret, a company controlled by Mr. Melisanidis. 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.
 
If we increase our marine fuel inventory, we will be more vulnerable to price fluctuations, 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. Pricing terms with our suppliers and customers and hedges by way of oil futures or other instruments, should we enter into them, may not adequately protect us in the event of a substantial downward movement in the price of marine fuel.
 
 
 
11

 
 
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 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.
 
We generate almost all of our revenues and incur the majority of our expenses in U.S. dollars. In the year ended December 31, 2011, we incurred not more than 1% of our operating expenses and general and administrative expenses in currencies other than the U.S. dollar—primarily the Euro, the British Pound, the UAE dirham, the Gibraltar pound, the Jamaican dollar and the Singapore dollar. Changes in the rates of exchange between these currencies and the U.S. dollar would lead to deviations from our budgeted operating expenses, which would affect our financial results. When translated into U.S. dollars, expenses incurred in currencies other than the U.S. dollar increase when the value of the U.S. dollar falls, which reduces our profitability.
 
The instability of the euro or the inability of countries to refinance their debts could have a material adverse effect on our revenue, profitability and financial position
 
As a result of the credit crisis in Europe, in particular in Greece, Italy, Ireland, Portugal and Spain, the European Commission created the European Financial Stability Facility, or the EFSF, and the European Financial Stability Mechanism, or the EFSM, to provide funding to Eurozone countries in financial difficulties that seek such support. In March 2011, the European Council agreed on the need for Eurozone countries to establish a permanent stability mechanism, the European Stability Mechanism, or the ESM, which will be activated by mutual agreement, to assume the role of the EFSF and the EFSM in providing external financial assistance to Eurozone countries after June 2013. Concerns persist regarding the debt burden of certain Eurozone countries and their ability to meet future financial obligations and the overall stability of the euro. An extended period of adverse development in the outlook for European countries could reduce the overall demand for oil and gas and for our services. These potential developments, or market perceptions concerning these and related issues, could affect our financial position, results of operations and cash flow.
 
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 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, and Mr. Dimitris Melisanidis, our founder and Head of Corporate Development. We believe that Mr. Georgiopoulos is an important member of our board of directors and Mr. Melisanidis is an important member of our management team and that the loss of the services or involvement in our business on the part of either or both of them would have a material adverse effect on our Company. We have entered into employment agreements with Mr. Melisanidis, Mr. E. Nikolas Tavlarios, our President and Mr. Spyros Gianniotis, our Chief Financial Officer.
 
As we expand our fleet, we may not be able to recruit suitable employees and crew for our tankers, which may limit our growth and cause our financial performance to suffer
 
As we expand our fleet, 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 fleet of tankers. 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.
 
 
 
 
12

 
 
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 and from the Philippines 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 we depend 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.
 
We may not achieve sufficient earnings to pay dividends to our shareholders
 
We currently intend to pay regular cash dividends on a quarterly basis. We will make such 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. 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.
 
 
 
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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
 
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
 
Terrorist attacks, such as the attack on the MT Limburg in October 2002, could adversely affect our operations since the continuing response of the international community to these attacks, as well as the threat of future terrorist attacks, continue to contribute to world economic instability and uncertainty in global financial markets. We conduct our marine fuel supply operations outside of the United States, 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.
 
Acts of piracy on ocean-going vessels have recently increased in frequency, which could adversely affect our business
 
Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea and in the Gulf of Aden off the coast of Somalia.  Sea piracy worldwide dropped slightly in 2011 for the first time in five years.  There were 45 vessels hijacked and 802 crew members taken hostage, as compared with 53 ships seized and 1,181 people taken hostage in 2010.  However, throughout 2008, 2009 and 2010, the frequency of piracy incidents against commercial shipping vessels increased significantly, particularly in the Gulf of Aden off the coast of Somalia.  If these piracy attacks result in regions in which our vessels are deployed being characterized by insurers as "war risk" zones, as the Gulf of Aden has been since May 2008, or Joint War Committee "war and strikes" listed areas, premiums payable for such coverage could increase significantly and such insurance coverage may be more difficult to obtain.  In addition, crew costs, due to employing onboard security guards, could increase in such circumstances.  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, results of operations.
 

 
 
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On July 16, 2011, the Aegean Star, one of our oil products tankers, was attacked and captured by pirates approximately 12.5 miles off the coast of Benin for a period of approximately two days.  Upon the pirates' departure from the vessel, our command and operation of the vessel resumed.  All crew members were safe and in good condition following the incident.
 
Our principal shareholders own a significant portion of our outstanding common shares, which may limit your ability to influence our actions, and may not act in the best interests of our other shareholders
 
Our principal shareholders, Mr. Melisanidis, our Head of Corporate Development, and Mr. Georgiopoulos, the Chairman of our board of directors, currently own approximately 22.2% and 10.4% of our outstanding shares of common stock, respectively. Accordingly, Messrs. Melisanidis and Georgiopoulos have the power to exert considerable influence over our actions, including the election of our directors, the adoption or amendment of provisions in our 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 Messrs. Melisanidis and Georgiopoulos continue to own a significant amount of our equity, even though such amount represents less than 50% of our voting power, they will continue to be able to exercise considerable influence over our decisions. In addition, Mr. Melisanidis and members of Mr. Melisanidis' family hold significant interest in our related companies and the interests of Mr. Melisanidis may not coincide with the interests of other holders of our common stock. For further discussion, please see "Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions." Messrs. Melisanidis and Georgiopoulos may not necessarily act in accordance with the best interests of other shareholders. To the extent that conflicts of interests may arise, Messrs. Melisanidis and Georgiopoulos may vote in a manner adverse to us or to you or other holders of our securities.
 
In addition, we have entered into an employment agreement with Mr. Melisanidis. The employment agreement restricts Mr. Melisanidis' ability to compete with us during the term of the employment agreement and 12 months following its termination. If we are unable to enforce such restrictions on Mr. Melisanidis against competing with us, any direct or indirect competition from Mr. Melisanidis could be particularly damaging to us.
 
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 Chairman of the board of directors of General Maritime Corporation, or General Maritime, and Genco Shipping & Trading Limited. Also, Mr. John Tavlarios and Mr. George Konomos, who serve as our directors, are also directors of General Maritime. Mr. Tavlarios is also an executive officer of General Maritime. As such, General Maritime 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.
 

 
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Our status as a foreign private issuer exempts us from certain of the corporate governance standards of the New York Stock Exchange, limiting the protections afforded to investors
 
We are a "foreign private issuer" within the meaning of the New York Stock Exchange, or NYSE, corporate governance standards. Under the 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.
 
We voluntarily comply with most of the NYSE rules. However, investors will not have the same protections afforded to shareholders of companies that are subject to all NYSE corporate governance requirements.
 
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.
 

 
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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 your ability to realize any potential change of control premium.
 
We are incorporated in the Marshall Islands, which does not have a well-developed body of corporate law and shareholders may have difficulty protecting their interests
 
Our corporate affairs are governed by our 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 the management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction which has developed a relatively more substantial body of case law.
 
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.
 
In 2011, a putative securities class action lawsuit was brought against us, the Chairman of our board of directors, and certain of our executives in the United States District Court for the Southern District of New York and a shareholder derivative action lawsuit was filed in the same court against us and our board of directors. Both cases have been voluntarily withdrawn by the respective plaintiffs.
 
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 and marketing of refined marine fuel and marine lubricants to the shipping industry. The shipping industry has been materially adversely affected by current economic conditions which 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.
 

 
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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 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.
 
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
 
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 that market fuel directly to large commercial shipping companies. 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.
 
 
 
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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, European Union regulations, the UK's Environmental Protection Act 1990, or EPA, the UK'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 IMO, including the International Convention for the Prevention of Pollution from Ships of 1975, the International Convention for the Prevention of Marine Pollution of 1973, the IMO International Convention for the Safety of Life at Sea of 1974 and the International Convention on Load Lines of 1966. To the extent our tankers operate in U.S. waters, however infrequent, 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 Water Act, and the U.S. Maritime Transportation Security Act of 2002.  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.
 
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.
 
Compliance with applicable laws, regulations and standards, 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. 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.
 
Our vessel operations have 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 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.
 
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 Stock
 
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 sales, 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 perception that these sales could occur. These sales, or the perception that these sales 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. 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 continue to 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 2011, closing at a high of $12.82 in January 2011 and a low of $3.73 in October 2011. If the volatility in the market continues or worsens, it could have a further adverse affect 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 market price of our common is due to a variety of factors, including:
 
 
·
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.
 

 
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 In 2011 and in January 2012, the trading price of our shares of common stock fell below $5.00. If the market price of our common stock again falls below and remains below $5.00 per share, under stock exchange rules, our stockholders will not be able to use such shares as collateral for borrowing in margin accounts. This inability to use our shares of common stock as collateral may depress demand as certain institutional investors are restricted from investing in shares priced below $5.00 and lead to sales of such shares creating downward pressure on and increased volatility in the market price of our shares of common stock.
 
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.
 
We may issue additional shares of common stock or other equity securities without your approval, which would dilute your ownership of your Interests and may depress the market price of our common stock
 
We may issue additional shares of common stock or other equity securities of equal or senior rank in the future in connection with, among other things, future vessel acquisitions, repayment of outstanding indebtedness or our equity incentive plan, without shareholder approval, in a number of circumstances.
 
Our issuance of additional shares of common stock or other equity securities of equal or senior rank would have 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.
 
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 September 29, 2005, Leveret, our then sole shareholder, contributed direct and indirect ownership of companies that conduct our business operations.  Prior to our initial public offering, we had 28,035,000 shares of common stock outstanding. On December 13, 2006, we consummated our initial public offering of an additional 14,375,000 shares of our common stock, which we refer to as the initial public offering.  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 in a private transaction 1,000,000 shares of our common stock.  On July 20, 2011, the Company's Board of Directors approved a share repurchase program for up to 2,000,000 shares of our common stock, of which the Company repurchased 967,639 shares as of December 31, 2011.
 
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, Piraeus 185 45 Athens, Greece. Our telephone number at that address is 011 30 (210) 458-6200. We also have an executive office to oversee our financial and other reporting functions in New York City at 299 Park Avenue, New York, New York 10171. Our telephone number at that address is (212) 763-5665.
 
B.           Business Overview
 
We are an independent physical supplier and marketer of refined marine fuel and lubricants.  We procure marine fuel from refineries and major oil producers and resell such marine fuel to a diversified customer base representing all segments of the shipping industry, including tankers, container ships, drybulk carriers, cruise ships, reefers, LNG/LPG, car carriers, ferries, marine fuel traders and brokers.  We serve the following markets: Greece, Gibraltar, the United Arab Emirates, or UAE, Jamaica, Singapore, Northern Europe, Antwerp-Rotterdam-Amsterdam, or ARA, Portland, United Kingdom, West Africa, Vancouver, Montreal, Mexico, Trinidad and Tobago, Las Palmas, Tenerife, Morocco, Cape Verde and Panama.
 
 
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We are one of the largest owners and operators of bunkering vessels.  As of April 11, 2012, we own a fleet of 61 bunkering vessels, 55 of which are double-hull, and we charter in nine bunkering vessels, four of which are double hull. Between 2007 and April 2012, we took delivery of 31 newbuilding double hull bunkering tankers and paid an aggregate of $349.1 million, as of April 11, 2012, in connection with the acquisition of these vessels. We may purchase additional newbuilding and secondhand vessels in the future.
 
We provide our customers with a service that requires sophisticated logistical operations designed to meet their strict fuel quality and delivery scheduling needs. We believe that our extensive experience, management systems and proprietary 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 manage our technical ship operations in-house, which helps us maintain high levels of customer service.
 
We intend to continue expanding our business and marine fuel delivery capabilities. In January 2008 and April 2008, we commenced operations in West Africa and the United Kingdom, respectively.  In July 2008, we acquired Canada-based marketer and physical supplier, ICS Petroleum Ltd., or ICS Petroleum, with operations in Vancouver, Montreal, and Mexico, and in June 2009, we commenced our physical operations in Trinidad and Tobago. In August 2009, we also commenced operations in Tanger-Med, Morocco. In January 2010, we entered into an agreement with companies owned and controlled by members of Mr. Melisanidis' family, for the purchase of property in Jamaica, to be used as a land-based storage facility. In April 2010, we acquired Verbeke Bunkering N.V., or Verbeke Bunkering, a leading physical supplier of marine fuel in the ARA region. Verbeke Bunkering operates a fleet of eighteen bunkering barges, of which eight are double hull, and provides marine fuel delivery services in port to a diverse group of ship operators as well as marine fuel traders, brokers and other users. Also in April 2010, we announced our plans to construct a new land-based storage facility in the UAE. In July 2010 and June 2011, we commenced our physical operations in the Shell Las Palmas terminal and in Tenerife, respectively, in the Canary Islands.  In March 2011, we commenced physical supply operations in Cape Verde, upon entering into a strategic co-operation with Enacol, an energy company based in Cape Verde. In August 2011, we were granted a concession to operate at the two ports, Balboa and Cristobal, located at each end of the Panama Canal and commenced operations of land-based storage facilities.
 
We plan to establish new service centers in other selected locations around the world during the next several years and to pursue acquisition opportunities as a means of expanding our service. In addition, as part of the expansion of our business, in April 2012, we signed a memorandum of understanding with China Changjiang Bunker Sinopec Co. Ltd., or CCBC, a state-owned bunker supply, pursuant to which we have agreed to establish a strategic alliance with CCBC that is expected to be effective in the second quarter of 2012, subject to the completion of definitive documentation. Under the terms of the agreement, CCBC will provide comprehensive marine fuel services to our customers in strategic ports in China, including all Changjiang River ports and certain coastal ports, including Nanjing, Zhenjiang, Yangzhou, Taizhou, Changzhou, Jiangyin, Nantong, Changshu, Zhangjiagang, Taiccang, Shanghai (excluding Yangshan), Ningbo, Tianjin, Qingdao (scheduled to open by the end of 2012) and Dalian. Under the agreement, we will be responsible for the supply and delivery of marine fuel to CCBC's customers in our network currently covering 19 countries throughout North America, South America, Central America, Europe, African and the Middle East.
 

 
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In certain 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 a double hull Panamax tanker, the Fos II, with a cargo-carrying capacity of approximately 68,000 dwt and two double hull Aframax tankers, the Leader and the Aeolos, with cargo-carrying capacities of approximately 84,000 dwt each, which operate as floating storage facilities in Ghana, Gibraltar and the United Arab Emirates, respectively. We also operate a barge, the Mediterranean, with a cargo-carrying capacity of approximately 19,900 dwt, and one single hull bunkering barge, the Tapuit, with a cargo-carrying capacity of approximately 2,500 dwt, which we use as floating storage facilities in Greece and Northern Europe, respectively. In addition, we own and operate one special purpose vessel, the Orion, a 550 dwt tanker, which is based in our Greek market. We have also chartered in a tanker, the Rio Luxembourg, which we use as a floating storage facility in Ghana. For information on the acquisition of the Mediterranean, please see "Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Purchase of Floating Storage Facilities."
 
Furthermore, we operate land-based storage facilities in Panama, the Canary Islands and the United Kingdom. In Panama, the Canary Islands and the United Kingdom, we store marine fuel in terminals with storage capacity of approximately 570,000, 65,000 and 40,000 cubic meters, respectively.  In addition, we plan to complete the construction of our new land-based storage facility in the UAE with storage capacity of 465,000 cubic meters over the next 18 months. We may also consider the construction a land-based storage facility in Jamaica with a storage capacity of 80,000 cubic meters, provided we are able to obtain adequate financing, as discussed below under "—Our Service Centers—Jamaica."
 
Our capital expenditures in connection with the establishment or the acquisition of the service centers, including bunkering vessels and the floating and land-based storage facilities, described above amounted to $197.7 million in the aggregate. In addition, we have outstanding payments of approximately $55.0 million in the aggregate outstanding as of April 11, 2012 in connection with the construction of the new land-based storage facility in the UAE, which is expected to be complete by the end of 2013. The payment of the outstanding contractual amounts in connection with the construction of this facility, which we intend to finance with borrowings under our revolving credit facility dated June 21, 2011, and the amendment thereto dated November 15, 2011, will be made with the process of the construction.
 
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 complimentary to our business of marketing and delivery marine fuel.  In February 2009, we entered into an agreement to join the Sealub Alliance Network, a group formed by Gulf Oil Marine Ltd., to collaborate in the marketing and distribution of marine lubricants.
 
Our Service Centers
 
Greece
 
We currently service our customers through our related company, Aegean Oil, in Piraeus, Patras, and other parts of 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. We currently operate eleven double hull tankers, one single hull special purpose vessel, the Orion, a 550 dwt tanker, and one floating storage facility, the Mediterranean, a double hull barge, in Greece.
 
We purchase our fuel from Hellenic Refinery (ELPE) and Motor Oil Hellas. We store fuel in our floating storage facility, the Mediterranean. We compete here against at least six other physical suppliers: Eko Abee., Sekavin S.A., Seka S.A., Jet Oil S.A., Eteka S.A. and Nova Bunkers S.A.
 
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. 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.
 

 
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We support our operations in Greece from our office in Piraeus, which we lease.
 
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 five double hull bunkering tankers and have positioned one floating storage facility, the Aeolos, a double hull Panamax tanker, in Gibraltar.
 
We purchase our fuel in Gibraltar from a variety of different suppliers including Repsol S.A., BP Oil International Ltd, Tupras Co, Gunvor S.A., Galp Energia SGPS S.A..and Lia Oil S.A. We store our fuel in our floating storage facility, the Aeolos. We currently compete here against four other physical suppliers, CESPA (Gibraltar) Ltd., Vemaoil Company Ltd., Bominflot of Gibraltar Ltd., and Peninsula Petroleum Ltd.
 
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 currently operate six double hull bunkering tankers and have also positioned one floating storage facility, the Leader, a double hull Aframax tanker, in the UAE.
 
We purchase our fuel in Fujairah from a variety of different suppliers including Vitol, Shell, BP Oil International Ltd and Bapco. We store our fuel in our floating storage facility, the Leader. We compete here against other physical suppliers, including ENOC Bunkering (Fujairah) LLC, Akron Trade and Transport, International Supply, and Oil Marketing & Trading Inc., and Chemoil.
 
We support our bunkering operations from two offices in Fujairah and Kohr Fakkan, which we lease.
 
In April 2010, we assumed from a related party controlled by members of Mr. Melisanidis' family, a 25-year terminal lease agreement, which includes an option for an additional 25 years, with the Municipality of Fujaraih, the United Arab Emirates, pursuant to which we are constructing a land-based storage facility with a capacity of 465,000 cubic meters. The estimated total cost of the facility is $105 million, of which we have approximately $55.0 million outstanding as of April 11, 2012, and we expect to complete the construction of the new facility and commence operations there within the next 18 months.
 
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 and one single hull bunkering tanker in Jamaica.
 
In Jamaica, we have a long-term contract to purchase our fuel from the state refinery, Petrojam Limited, which also engages in limited supply operations within the port. Until the fourth quarter of 2009, we used our single hull tanker, Aegean IX, as a floating storage facility in Jamaica.  In November 2009, we entered into an agreement with a third party purchaser to sell the Aegean IX, which was delivered in December 2009.
 
We support our bunkering operations from our office in Kingston, which we lease. We also own real property in Jamaica which we intend to use as a land-based storage facility.
 
In January 2010, we purchased a property in Jamaica from companies owned and controlled by members of Mr. Melisanidis' family, to be used as a land-based storage facility. The purchase price for the property, $9.8 million, was determined by the disinterested members of our board of directors to be no less than we could have obtained from a third party. We are currently holding this asset for strategic opportunity for purposes of either development or sale.
 

 
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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 nine 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 BP Singapore Pte. Ltd., Chemoil, Conoco-Phillips, Shell Singapore, Kuo Oil, and ExxonMobil. We compete here against other physical suppliers, including major oil producers, Global Energy Trading Pte. Ltd., Alliance Oil Trading, Searights Maritime Services Pte. Ltd., Equatorial Marine Fuel, Sentek Marine & Trading, Brightoil Petroleum and Chemoil International Pte Ltd.
 
We support our bunkering operations from our office in Singapore, which we lease.
 
Northern Europe (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. Through our subsidiary, Aegean Bunkers at Sea NV, or Aegean Bunkers at Sea, 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 Bunkers at Sea operates two double hull bunkering tankers in Northern Europe. Following our acquisition of the bunkering business of Verbeke, or the Verbeke Bunkering Business, we also service the ports of Antwerp, Rotterdam and Amsterdam and also the surrounding ports of Ghent, Zeebruges, Flushing, Terneuzen and Sluiskil, Moerdijk and Ijmuiden. Through the Verbeke Bunkering Business, we currently operate eighteen bunkering tankers, of which twelve are double hull and six are single hull bunkering tankers, and have positioned one single hull floating storage facility, the Tapuit, a single hull bunkering barge, in the ARA region.
 
We purchase our fuel in Northern Europe from a variety of different suppliers. When we conduct our operations in ports, we compete here against other physical suppliers, including Chemoil Europe BV, BP, Total, and ExxonMobil.
 
We support our bunkering operations in Northern Europe from our office near Antwerp, which we own.
 
West Africa
 
We possess a license from Ghana's National Petroleum Authority to act as a physical supplier of marine petroleum products both off the coast and in the ports of Ghana. We commenced physical supply operations in January 2008. We operate four double hull bunkering tankers and have positioned one of our floating storage facilities, the Fos II, a double hull Panamax tanker, and one floating storage facility that we have chartered from a third party, the Rio Luxembourg, a product tanker, in West Africa. We also intend to deploy in West Africa our newbuilding double hull bunkering tanker, Symi, which we took delivery of in April 2012.
 
We purchase our fuel in West Africa from a variety of different suppliers, including Repsol S.A., BP Oil International Ltd, Litasco, and store it in the floating storage facilities, the Fos II and the Rio Luxembourg. We compete here against other physical suppliers, including OW Bunkering, Addax Bunkering Services, Stena Oil, S.K. Shipping.
 
We support our bunkering operations from our office in Tema, Ghana, which we lease.
 

 
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United Kingdom
 
We own a marine fuel terminal infrastructure located in Portland Harbor. Our terminal is located near the southern access of the North Sea Emission Control Area, or ECA, and provides convenient access for commercial vessels to refuel. We store our marine fuel in land-based storage tanks, which we lease from Portland Port Limited. We commenced bunkering and terminal operations in April 2008. We operate one double hull bunkering tanker in the United Kingdom.
 
We purchase our fuel in the United Kingdom from a variety of different suppliers, including Total and Statoil. We compete here against other physical suppliers in other ports, including WFS (Falmouth).
 
We support our terminal and bunkering operations from our office in Portland, U.K., which we lease.
 
Vancouver
 
We trade and supply marine petroleum products off the coast and in the port of Vancouver.  We operate one double hull and two single hull 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 compete here against other physical suppliers, including major oil producers, Marine Petrobulk Ltd., Shell Canada, and Petro Canada.
 
We support our bunkering operations here from our office in Vancouver, which we lease.
 
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. We compete here against other physical suppliers, including Ventrin.
 
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, or the TMSA, 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.
 
We source our fuel in Morocco through our service center in Gibraltar. 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, which is expected to be completed in 2012. The duration of this appointment 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 63,000 metric tons capacity as well as on-site blending facilities to mix all grades of fuel oils and distillates.  In June 2011, we commenced physical supply of operations in Tenerife.
 

 
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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 three double hull bunkering tankers in Las Palmas.
 
We purchase our fuel from a variety of different suppliers, including Repsol S.A., Lia Oil S.A., and Galp Energia SGPS S.A. We mainly compete here against CEPSA, which is a physical supplier.
 
We support our operations in the Canary Islands from our office in Las Palmas, which we lease.
 
Cape Verde
 
In March 2011, we commenced physical supply operations in Cape Verde, an archipelago of ten islands located off the coast of West Africa, upon entering to a strategic co-operation agreement with Enacol S.A., or Enacol, a local energy company. Under the terms of the agreement with Enacol, we provide bunkering services from the port of Mindelo on the island of Sao Vicente and offshore. Enacol is responsible for providing fuel storage services. We initially deployed one double-hull bunkering tanker to Cape Verde, which we decided to redeploy to another market in March 2012 due to limited demand.
 
We continue to provide fuelling services to our customers in Cape Verde under the strategic co-operation agreement with Enacol.
 
Panama
 
In August 2011, we were granted a 20-year concession agreement from the Panama Maritime Authority to operate at the two ports, Balboa and Cristobal, located at each end of the Panama Canal and operate land-based storage facilities with approximately 570,000 cubic meters capacity. We deploy two double-hull bunkering tankers to the Panamanian ports to provide bunkering services.
 
We purchase our fuel from a variety of different suppliers, including PMI Trading Ltd and Glencore International plc. We mainly compete here against CEPSA, O.W. Bunker Ltd, Chevron and Chemoil Energy Ltd, which are physical suppliers.
 
We support our operations from our offices in Balboa and Cristobal, which we are part of the concession agreement assets.
 
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 City and Singapore. Following our acquisition of ICS Petroleum on July 1, 2008 and Verbeke Bunkering Business on April 1, 2010, we market products and services to Canadian and Mexican markets from our offices in Vancouver and Montreal, Canada and to the ARA region from our office in Antwerp, Belgium. 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 City
 
We maintain an executive office in New York City 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, 2009, 2010, and 2011, 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 year ended December 31, 2011, we purchased marine petroleum products of approximately $405.0 million, or approximately 6% of our total purchases of marine petroleum products from our related company, Aegean Oil. The majority of our purchases of marine petroleum products during the year ended December 31, 2011, were made from unrelated third-party suppliers and totaled $6,263.6 million, or approximately 94% of our total purchases 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, Shell, Marine Products and ExxonMobil Marine Fuel, for services and end customers. We also compete with physical suppliers of marine fuel products, such as CESPA (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 significant expense, including vessel modification and implementation of certain operating procedures.
 
 
 
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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.
 
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 or otherwise causes significant adverse environmental impact could result in additional legislation or regulation 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 accelerating the phase-out of single hull oil tankers and adopted a new regulation 13H 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:
 
 
 
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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
and
Category 3—oil tankers of 5,000 dwt and above but less than the tonnage specified for Category 1 and 2 tankers.
 
 
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
2006 for ships delivered in 1978 and 1979
2007 for ships delivered in 1980 and 1981
2008 for ships delivered in 1982
2009 for ships delivered in 1983
2010 for ships delivered in 1984 or later
     
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, whichever is the earlier date. 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.
 
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, whichever is the earlier date. 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 a new regulation 13H on the prevention of oil pollution from oil tankers carrying heavy grade oil as cargo ("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 13H, HGO means any of the following:
 
 
·
crude oils having a density at 15ºC higher than 900 kg/m3;
 
 
·
fuel oils having either a density at 15ºC higher than 900 kg/m3 or a kinematic viscosity at 50ºC higher than 180 mm2/s; or
 
 
·
bitumen, tar and their emulsions.
 

 
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Under the regulation 13H, the flag state may allow continued operation of oil tankers of 5,000 dwt and above, carrying crude oil with a density at 15ºC higher than 900 kg/m3 but lower than 945 kg/m3, that conform to certain technical specifications and where, in the opinion of the 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 the 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 fore-body, 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.
 
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 in the revised Annex) and newly adopted regulation 13H (regulation 21 in the revised Annex). 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 European Union ports.
 
 
 
 
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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 (PCBs)) are also prohibited.  Annex VI also includes a global cap on the sulfur content of fuel oil (see below).
 
The IMO's Maritime Environment Protection Committee, or MEPC, adopted amendments to Annex VI on October 10, 2008, which amendments were entered into force on July 1, 2010.  The amended 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.  By January 1, 2012, the amended Annex VI requires that fuel oil contain no more than 3.50% sulfur (from the current cap of 4.50%).  By January 1, 2020, sulfur content must not exceed 0.50%, subject to a feasibility review to be completed no later than 2018.
 
Sulfur content standards are even stricter within certain "Emission Control Areas" ("ECAs").  By July 1, 2010, ships operating within an ECA may not use fuel with sulfur content in excess of 1.0% (from 1.50%), which is further reduced to 0.10% on January 1, 2015.  Amended Annex VI establishes procedures for designating new ECAs.  Currently, the Baltic Sea and the North Sea have been so designated.  Effective August 1, 2012, certain coastal areas of North America will also be designated ECAs, as will (effective January 1, 2014), the United States Caribbean Sea.  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 EPA or the states where we operate, compliance with these regulations could entail significant capital expenditures or otherwise increase the costs of our operations.
 
Amended Annex VI also establishes new tiers of stringent nitrogen oxide emissions standards for new marine engines, depending on their date of installation.  The U.S. Environmental Protection Agency promulgated equivalent (and in some senses stricter) emissions standards in late 2009.
 
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.
 
The IMO also adopted the International Convention for the Safety of Life at Sea, or SOLAS, 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 and LL Convention standards.
 
The operation of our ships is also affected by the requirements set forth in Chapter IX of SOLAS, 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 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.
 

 
32

 

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 right to limit liability is forfeited under the CLC where the spill is caused by the shipowner's actual fault and under the 1992 Protocol where the spill is caused by the shipowner's intentional or reckless act or omission 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.
 
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. The BWM Convention will not become effective until 12 months after it has been adopted by 30 states, the combined merchant fleets of which represent not less than 35% of the gross tonnage of the world's merchant shipping. To date, there has not been sufficient adoption of this standard for it to take force.  However, Panama may adopt this standard in the relatively near future, which would be sufficient for it to take force.  Upon entry into force of the BWM Convention, mid-ocean ballast exchange would be mandatory. Vessels would be required to be equipped with a ballast water treatment system that meets mandatory concentration limits not later than the first intermediate or renewal survey, whichever occurs first, after the anniversary date of delivery of the vessel in 2014, for vessels with ballast water capacity of 1500-5000 cubic meters, or after such date in 2016, for vessels with ballast water capacity of greater than 5000 cubic meters. If mid-ocean ballast exchange or ballast water treatment requirements become mandatory, the cost of compliance could increase for ocean carriers. Although we do not believe that the costs of compliance with a mandatory mid-ocean ballast exchange would be material, it is difficult to predict the overall impact of such a requirement on our operations.
 
 
 
33

 
 
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 European Union amended a directive 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 European Union 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 European Union 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 European Union 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.
 
United Kingdom
 
Our marine fuel terminal operations involving the storage of fuel in the United Kingdom 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. In particular, we are subject to the United Kingdom's Environmental Protection Act 1990, or EPA, which generally concerns pollution of water (including the sea), land and air due to release of substances which are capable of causing harm to living organisms, and the United Kingdom's Water Resources Act 1991 (as amended by the Environment Act 1995), or WRA, which is directed primarily at water quality and quantity. In addition, the Pollution Prevention and Control (England and Wales) Regulations 2010, or the Regulations, implement integrated pollution prevention and control regimes. These regulations, applicable only to England and Wale and their territorial adjacent waters, cover pollution of water, land and air due to emissions which may be harmful to the environment or may result in damage to property or environment.
 
Under EPA, WRA and the Regulations, we may be subject, among other things, to administrative, civil and criminal penalties, the imposition of investigatory and remedial remedies and issuance of injunctions that may restrict or prohibit our United Kingdom operations or even claims of damages to property or persons resulting from our operations.
 
In addition, general health and safety regulations are applicable to our terminals to ensure the safety of our premises and related structures.
 
We believe that the operations of our marine fuel terminal are in substantial compliance with applicable United Kingdom environmental laws and regulations, and that we have all material permits, licenses, certificates and other authorizations necessary for the conduct of our operations. The laws and regulations are subject to change and we cannot provide any assurance that compliance with current and future laws will not have a material effect on our operations in the United Kingdom.
 
 
 
34

 
 
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. However, in July 2011 the MEPC adopted two new sets of mandatory requirements to address greenhouse gas emissions from ships that will enter into force in January 2013. 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. These requirements could cause us to incur additional compliance costs. The IMO is also considering the development of market-based mechanisms to reduce greenhouse gas emissions from ships. The European Union has indicated that it intends to propose an expansion of the existing European Union emissions trading scheme to include emissions of greenhouse gases from marine vessels, and in January 2012 the European Commission launched a public consultation on possible measures to reduce greenhouse gas 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 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 in recent years received petitions from the California Attorney General and various environmental groups seeking such regulation. Any passage of climate control legislation or other regulatory initiatives by the IMO, European Union, the U.S. or other countries where we operate, or any treaty adopted at the international level to succeed the Kyoto Protocol, that restrict emissions of greenhouse gases could require us to make significant financial expenditures which we cannot predict with certainty at this time.
 
International Labour Organization
 
The International Labour Organization (ILO) is a specialized agency of the UN with headquarters in Geneva, Switzerland. The ILO has adopted the Maritime Labor Convention 2006 (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 will enter into force one year after 30 countries with a minimum of 33% of the world's tonnage have ratified it. The MLC 2006 has not yet been ratified, but its ratification would require us to develop new procedures to ensure full compliance with its requirements.
 
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 SOLAS created a new chapter of the convention dealing specifically with maritime security.  The new Chapter V 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.  Amendments to SOLAS Chapter VII, made mandatory in 2004, apply to vessels transporting dangerous goods and require those vessels be in compliance with the International Maritime Dangerous Goods Code ("IMDG Code").
 
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.  Among the various requirements are:
 
 
·
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;
 
 
 
35

 
 
 
·
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.
 
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 Shipping Germanischer Lloyd, American Bureau of Shipping, Det Norske Veritas and Bureau Veritas, all of which are members of the International Association of Classification Societies. Generally, the regulations of vessel registries accepted by international lenders in the shipping industry require that an oceangoing 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 up to its fair market value.
 
We have also obtained increased value insurance policies for most 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. Increased value insurance policies also cover excess liabilities that are not recoverable in full by the hull and machinery policies by reason of under-insurance.
 
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.
 
 
36

 
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.
 
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 our service centers through Aegean Bunkering Gibraltar Ltd., Aegean Bunkering Jamaica Ltd., Aegean Bunkering (Singapore) Pte. Ltd., Aegean Bunkering (Ghana) Limited, Aegean Bunkers at Sea, Verbeke, ICS Petroleum, Portland Bunkers International Limited, Aegean Bunkering Combustibles Las Palmas S.A., Aegean Bunkering (Morocco) SRL, Aegean Bunkering Trinidad Ltd, Aegean Bunkering (C Verde) LDA and Aegean Bunkering (Panama) SA, separate wholly-owned subsidiaries incorporated in Gibraltar, Jamaica, Singapore, Ghana, Belgium, British Columbia (Canada) and under the laws of England and Wales, Canary Islands, Morocco, Trinidad and Tobago, Cape Verde, Morocco and Panama, respectively, and Aegean Marine Petroleum LLC, a controlled subsidiary incorporated in the UAE, which is 51% owned by a local nominee. 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, the United States, and I.C.S. Petroleum (Montreal) Ltd., our wholly-owned subsidiary incorporated in Canada. 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. Also, our wholly-owned subsidiary incorporated in Marshall Islands, Aegean Tankfarms Holdings, holds the 60% of Oil Terminal Consultancy Ltd, a company that owns the 92.5% of Aegean Oil Terminals (Panama) SA, which is incorporated in Panama. Our wholly-owned subsidiaries, AMPNI Investments Ltd and AMPNI Holdings Ltd, are incorporated in Cyprus and hold our acquisitions performed during 2010 in Belgium and Las Palmas.
 
 
 
37

 
 
Currently, we own our vessels through separate wholly-owned subsidiaries listed in the following table:
Vessel-owning Subsidiary
Country of Incorporation
Vessel Name or
Hull Number
Aegean Rose Maritime Company
Greece
Aegean Rose
Aegean Daisy Maritime Company
Greece
Aegean Daisy
Clyde I Shipping Corp.
Marshall Islands
Aegean Tulip
Aegean Tiffany Maritime Company
Greece
Aegean Tiffany
Aegean Breeze Maritime Company
Greece
Aegean Breeze I
Aegean X Maritime Inc.
Marshall Islands
Aegean X
Aegean Marine Petroleum LLC1
United Arab Emirates
Aegean Flower
Victory Sea Shipping S. A.
Liberia
Aeolos
Aegean Gas Maritime Company
Greece
Mediterranean
Mare Vision S.A.
Marshall Islands
Aegean XI
Milos I Maritime Inc.
Marshall Islands
Hope
Sea Breezer Marine S.A.
Marshall Islands
Aegean Princess
Milos Shipping (Pte.) Ltd.
Singapore
Milos
Pontos Navigation Inc.
Marshall Islands
Leader
Aegean Bunkers at Sea NV
Belgium
Sara
Aegean Tanking S.A.
Liberia
Fos II
Serifos Shipping (Pte.) Ltd.
Singapore
Serifos
Kithnos Maritime Inc.
Marshall Islands
Kithnos
Aegean Ostria Maritime Company
Greece
Amorgos
Kimolos Shipping (Pte.) Ltd.
Singapore
Kimolos
Syros I Maritime Inc.
Marshall Islands
Syros
Mykonos I Maritime Inc.
Marshall Islands
Mykonos
Santorini I Maritime Inc.
Marshall Islands
Santorini
Paros Shipping (Pte.) Ltd.
Singapore
Paros
Naxos Shipping (Pte.) Ltd.
Singapore
Naxos
Eton Marine Ltd.
Liberia
Patmos
Tasman Seaways Inc.
Liberia
Kalymnos
ICS Petroleum Ltd.
British Columbia (Canada)
PT36
West Coast Fuel Transport Ltd.
British Columbia (Canada)
PT25
Aegean Maistros Maritime Company
Greece
Aegean Orion
Aegean Ship III Maritime Company
Greece
Aegean III
Aegean Ship VIII Maritime Company
Greece
Aegean VIII
Aegean Ship XII Maritime Company
Greece
Aegean XII
Aegean Ace Maritime Company
Greece
Aegean Ace
Paxoi Marine S.A.
Liberia
Paxoi
Kerkyra Marine S.A.
Liberia
Kerkyra
Ithaki Shipping (Pte) Ltd.
Singapore
Ithaki
Cephallonia Marine S.A.
Liberia
Kefalonia
PT22 Shipping Co. Ltd.
British Columbia (Canada)
PT22
Silver Sea Shipping S.A.
Liberia
Aegean Star
AMP Maritime S.A.
Liberia
Aegean Champion
 Zakynthos Marine S.A.
Liberia
Zakynthos
Andros Marine Inc.
Liberia
Andros
Lefkas Shipping (Pte) Ltd.
Singapore
Lefkas
Dilos Marine Inc.
Liberia
Dilos
Ios Marine Inc.
Liberia
Ios
Kythira Marine S.A.
Liberia
Kythira
Benmore Services S.A.
Liberia
Nisyros
Sealand Navigation Inc.
Greece
Karpathos
Santon Limited
Liberia
Leros
Kassos Navigation S.A.
Liberia
Kassos
Aegean Barges NV
Belgium
Colorado
Aegean Barges NV
Belgium
Elbe
Aegean Barges NV
Belgium
Ellen
Verbeke Bunkering NV
Belgium
Willem SR(2)
Verbeke Bunkering NV
Belgium
Vigo
Verbeke Bunkering NV
Belgium
Steidamm
Jadaco BV
Belgium
Tapuit
Blatoma NV
Belgium
Texas
Seatra BVBA(3)
Belgium
Montana
Anafi Shipping (Pte) Ltd
Liberia
Anafi
Aegean VII Shipping Ltd
Liberia
Sikinos
Tilos Shipping (Pte) Ltd
Singapore
Tilos
Halki Navigation S.A.
Liberia
Halki
Verbeke Bunkering NV
Belgium
Florida(2)
Symi Navigation S.A.  Liberia  Symi 
____________ 
1 Aegean Marine Petroleum LLC is a controlled subsidiary which is 51% owned by a local nominee.
(2) 10% ownership interest.
(3) 50% ownership interest.
 
 
 
38

 
 
D.
Property, Plant and Equipment
 
Real Property
 
The following table presents certain information relating to our leased and owned properties as of April 11, 2012.  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
Portland, U.K.
Administrative and operations office and storage facility
Leased
October 2032
Fujairah, UAE
Administrative and operations office
Leased
December 2012
Khor Fakkan, UAE
Administrative and operations office
Leased
December 2012
Gibraltar
Administrative and operations office
Leased
April 2040
Kingston, Jamaica
Administrative office and land storage facility
Owned
-
Singapore
Administrative and operations office
Leased
September 2013
Antwerp, Belgium
Administrative and operations office
Owned
-
Edgewater, New Jersey, U.S.A.
Sales and marketing office
Owned
-
New York, New York, U.S. A.
Administrative office
Leased
April 2012
Nicosia, Cyprus
Administrative office
Leased
May 2012
Vancouver, Canada
Administrative and operations office
Leased
February 2016
Montreal, Canada
Sales and marketing office
Leased
January 2017
Tema, Ghana
Administrative and operations office
Leased
December 2012
Port of Spain, Trinidad
Administrative and operations office
Leased
April 2014
Las Palmas, Canary Islands
Administrative and operations office and storage facility
Leased
December 2027
Tangiers, Morocco
Storage Facility
Leased
July 2036*
Fujairah, the United Arab Emirates
Storage Facility
Leased
July 2036*
Sao Vicente, Cape Verde
Administrative and operations office
Leased
March 2012
Hong Kong
Administrative and operations office
Leased
August 2013
Cairo, Egypt
Administrative and operations office
Leased
May 2012
Panama
Administrative and operations office and storage facility
Leased
July 2031
* Lease expiration date is estimated based on the expected commencement date of the lease agreement.
 
 
 
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Fleet
 
The following table lists our fleet as of April 11, 2012:
 
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
Singapore
2011
4,584
Tilos
Yes
Singapore
2011
6,263
Dilos
Yes
Liberia
2010
4,593
Ios
Yes
Liberia
2010
4,620
Kythira
Yes
Liberia
2010
6,314
Nisyros
Yes
Liberia
2010
6,312
Karpathos
Yes
Liberia
2010
6,247
Leros
Yes
Liberia
2010
6,311
Kassos
Yes
Liberia
2010
6,256
Lefkas
Yes
Singapore
2010
6,321
Andros
Yes
Liberia
2010
4,605
Zakynthos
Yes
Liberia
2010
6,303
Naxos
Yes
Singapore
2009
4,626
Kerkyra
Yes
Liberia
2009
6,290
Paxoi
Yes
Liberia
2009
6,310
Kalymnos
Yes
Liberia
2009
6,283
Kefalonia
Yes
Liberia
2009
6,272
Ithaki
Yes
Singapore
2009
6,272
Syros
Yes
Liberia
2008
4,596
Patmos
Yes
Liberia
2008
6,262
Paros
Yes
Singapore
2008
4,629
Mykonos
Yes
Liberia
2008
4,626
Santorini
Yes
Liberia
2008
4,629
Kimolos
Yes
Singapore
2008
4,664
Kithnos
Yes
Liberia
2007
4,626
Amorgos
Yes
Liberia
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 Flower
Yes
United Arab Emirates
2001
6,523
Aegean Tulip
Yes
Liberia
1993
4,853
Aegean Ace
Yes
Greece
1992
1,615
Aegean Princess
Yes
Liberia
1991
7,030
Aegean Champion
Yes
Liberia
1991
23,400
Sara
Yes
Malta
1990
7,389
Aegean III
Yes
Greece
1990
2,973
Aegean VIII
Yes
Greece
1990
2,973
Aegean Rose
Yes
Greece
1988
4,935
Aegean Daisy
Yes
Greece
1988
4,935
Aegean XI
Yes
Liberia
1984
11,050
Aegean X
Yes
Panama
1982
6,400
Hope
Yes
Liberia
1980
10,597
Aegean Star
Yes
Liberia
1980
11,520
Aegean XII
Yes
Greece
1979
3,680
 
 
 
 
40

 
 
Name
Double Hull
Flag
Build
Dwt
 
In-Land Waterway Bunkering Tankers:
Florida
Yes
Belgium
2011
1,533
Montana
Yes
Belgium
2011
4,319
Quadrans 1*
Yes
Belgium
2009
3,233
New York*
Yes
Belgium
2009
4,298
Willem Sr.
Yes
Belgium
2006
3,180
Alexia*
Yes
Belgium
2005
3,550
Breitling*
Yes
Belgium
2005
4,278
Colorado
Yes
Belgium
2004
5,578
Texas
Yes
Belgium
2003
4,165
Julienne*
No
Belgium
1994
1,244
Chopin*
No
Belgium
1988
2,213
Anton*
No
Belgium
1987
4,334
Jean Bart*
No
Belgium
1981
1,306
Steidamm
No
Belgium
1972
1,634
Ellen
No
Belgium
1971
1,439
Vigo
Yes
Belgium
1971
1,319
Elbe
No
Belgium
1962
542
Broadway*
No
Belgium
1962
1,440
 
Bunkering Barges
PT22
Yes
Canada
2001
2,315
PT25
No
Canada
1988
2,560
PT36
No
Canada
1980
3,730
 
Special Purpose Vessel
Aegean Orion
No
Greek
1991
550
 
Floating Storage Facilities
Rio Luxembourg*
Yes
Marshall Islands
2011
74,999
Aeolos
Yes
Liberia
1990
84,040
Leader
Yes
Panama
1985
83,890
Mediterranean
Yes
Greek
1982
19,894
Fos II
Yes
Liberia
1981
67,980
Tapuit
No
Belgium
1971
2,500
 
______________
 
*Chartered in by us from a third party.
 

 
41

 

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 five of our bunkering tankers in the United Arab Emirates, Ghana, Gibraltar and the ARA region, which we use as floating storage facilities, and we have positioned our 550 dwt tanker, Orion, as a special purpose vessel in Greece.
 
In addition, we operate land-based storage facilities in Panama, the Canary Islands and the United Kingdom. In Panama, the Canary Islands and the United Kingdom, we store marine fuel in terminals with storage capacity of approximately 570,000, 65,000 and 40,000 cubic meters, respectively.  In addition, we plan to complete the construction of our new land-based storage facility in the UAE with storage capacity of 465,000 cubic meters over the next 18 months. We may also construct a land-based storage facility in Jamaica with a storage capacity of 80,000 cubic meters, provided we are able to obtain adequate financing, as discussed above under "—B. Business Overview—Our Service Centers—Jamaica."
 
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 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