Coryton’s fate to be decided in May
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 threemonth 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.