Coryton refinery fate to be decided in May
LONDON (Reuters) - The future of Petroplus' UK refinery Coryton, which employs around 900 people, will be decided by the middle of May, when the current deal supplying it with crude runs out, administrator PwC said on Tuesday.
Work on a potential sale or restructuring of the refinery's debt is underway with a view to reaching an agreement before the deal expires in the middle of May, or the plant will close.
"We'll do a deal or shut Coryton when the current arrangement finishes," Steven Pearson, partner and joint administrator of Petroplus Refining & Marketing Limited (PRML) told Reuters.
The plant received a three-month lifeline in February from a consortium of Morgan Stanley, private equity firm KKR and the co-founder of the stricken Petroplus Marcel Van Poecke.
But with capital expenditure needs of around $1 billion and upcoming maintenance costing $150 million due in September, the conditions for securing a deal remain challenging.
"One of the big factors here is that with the price of oil being where it is at the moment, the cost of funding the working capital is so enormous in the short term, that the economics are difficult," Pearson said. "But that's true for any refiners out there."
Brent crude futures rose to highs not seen since 2008 of $128.40 a barrel in early March, further squeezing refining profits.
Swiss-based refiner Petroplus filed for insolvency in January after defaulting on $1.75 billion of debt. Its shares fell through 2011 as refining margins were squeezed and questions surfaced about its ability to raise debt to cover costs.
The tough operating environment has taken its toll across the European industry, with tight credit conditions making deal-making difficult.
"We need committed investors to invest in the turnaround programme, there's no point in asking if the sun will come out tomorrow, we have to deal with it now," Pearson said.
With a throughput capacity of 175,000 barrels per day (bpd)and a high Nelson complexity - meaning it can produce a larger proportion of high grade fuels - Coryton is the most prized asset of the Petroplus stable.
JOBS ON THE LINE
The plant is a big employer in the Essex region, east of London, with around 900 jobs on the line.
Richard Howitt, local member of the European Parliament, said it was important that everything possible was done to ensure the plant remains open.
"It's worrying that there is talk of a collapse in the rescue deal, this should drive a deep determination to achieve a successful buyout," he said.
Adding to the tough economic climate, Pearson said the difficulties and higher costs associated with running a company in administration meant a deal needed to be done soon.
"It's costlier and more difficult to get supplies, and the staff become unsettled because of the uncertainty when a company is administration, so it's important that we get the deal done. May will be a big month for the company."
A pool of no more than ten candidates remain involved in the talks for a potential sale, although Pearson declined to comment on specifics.
"We are still working with all parties to try to find a deal, I suspect it will go up until midnight until the day before the deal expires," he said.
The closure of the refinery would lead to further upward pressure on already elevated petrol and diesel prices, squeezing hard-pressed British consumers and businesses.
Suitors are said to include major trading houses, sector specialists like Gary Klesch and private equity investors.
In the United States, Sunoco has entered into exclusive talks with private equity investor Carlyle to form a potential joint venture to run the biggest refinery on the East Coast, the 335,000 barrels per day (bpd) plant in Philadelphia.
(Editing by Mark Potter)
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