Hovensa refinery sale postponed to December

OREANDA-NEWS. November 24, 2015. The sale of the idled Hovensa refinery and terminal assets has been postponed until next month, pushing back efforts by the US Virgin Islands to partially revitalize the mothballed facility.

At a hearing in a US bankruptcy court in the US state of Delaware today, a government-preferred offer from Limetree Bay Holdings, a subsidiary of US private equity firm ArcLight Capital Partners, was not immediately approved by the judge amid objections from competing bidder Buckeye Pipeline and a committee of creditors.

The court intends to reconvene on 17 December, sources close to the proceedings tell Argus.

Limetree had already been designated a lead stalking horse bidder for the terminal assets with a \\$184mn offer. Buckeye, a US midstream company, submitted a competing bid, but the local government sees Limetree?s bid as more "robust" and offering a better chance to restore jobs and partially restart the refinery, an attorney representing the local government tells Argus.

The government of the US Virgin Islands is interested in achieving a global settlement of outstanding legal, tax and environmental issues, the attorney says.

Hovensa is a 50:50 joint venture between US independent Hess and Venezuelan state-owned PdV.

Located on the island of St Croix, the refinery had a peak capacity of roughly 500,000 b/d and supplied the US Atlantic coast products market. Much of the heavy crude that was processed at the refinery came from Venezuela.

But costly energy to run the facility on the island eroded its bottom line, particularly in light of more competitive refineries on the US Gulf Coast, where gas supply abounds. The refinery reduced capacity to 350,000 b/d in 2011 and idled completely in early 2012 after losing \\$1.3bn over three years.

None of the parties commented on today?s hearing.

Even after the court-supervised sale is completed, an operating agreement is subject to approval by the local legislature, which could prove to be more of a challenge. An earlier operating agreement between the government and start-up firm Atlantic Basin Refining (ABR) was rejected by local lawmakers in December 2014. A deal with ArcLight or Buckeye is considered more likely to pass because they are more experienced firms.

There is no shortage of other hurdles to a final deal. ABR recently filed a lawsuit against ArcLight for allegedly appropriating its transaction plan. ArcLight has not commented, but the local government does not see the case as an impediment.

The issue of financing for the bankruptcy process itself arose at today?s hearing as well. A representative of PdV said the company would no longer provide debtor in possession financing for the process. It is unclear how this would immediately affect the ongoing proceedings.