Bankruptcy Court: HOVENSA Sale On Hold Until Dec. 17
WILMINGTON, Del. – The sale of the idled HOVENSA refinery and terminal assets has been postponed until next month, pushing back efforts by the Virgin Islands government to partially revitalize the mothballed facility.
At a hearing in a U.S. bankruptcy court in the US state of Delaware Thursday, a government-preferred offer from Limetree Bay Holdings, a subsidiary of U.S. 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.
U.S. Bankruptcy Judge Mary Walrath intends to reconvene on 17 December 17, sources close to the proceedings tell the Virgin Islands Free Press.
Limetree had already been designated a lead stalking horse bidder for the terminal assets with a $184 million 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 said.
The government of the Virgin Islands is interested in achieving a global settlement of outstanding legal, tax and environmental issues, the attorney says.
HOVENSA is a fifty-fifty joint venture between Hess Corp. and Venezuelan state-owned Petróleos de Venezuela, S.A. (PDVSA).
The South Shore refinery had a peak capacity of roughly 500,000 barrels per day and supplied the U.S. 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 U.S. Gulf Coast, where gas supply abounds. The refinery reduced capacity to 350,000 barrels per day in 2011 and idled completely in early 2012 after it said it lost $1.3 billion over three years.
None of the parties commented on the hearing.
Even after the court-supervised sale is completed, an operating agreement is subject to approval by the Virgin Islands 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 Thursday´s hearing as well. A representative of PDVSA 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.