Shell, Delek To Renew Talks On Montreal Refinery Sale
July 25 2010 - 5:56PM
Dow Jones News
Delek US Holdings Inc. (DK) agreed to meet with Royal Dutch
Shell Plc (RDSA) executives to re-start negotiations over the sale
of Shell's Montreal East refinery, Shell said.
"Shell has received a response from Delek, who have agreed to
meet to see if common ground can be reached regarding a potential
sale of the Montreal East Refinery," Shell said in a statement
released over the weekend.
Canadian politicians are putting pressure on both companies to
renew talks in an effort to save jobs. On Friday, Shell had sent a
letter to Delek asking them to agree to re-start negotiations
within 48 hours. It said it was willing to sell the refinery for
the C$150 million to C$200 million price listed in the term sheet
earlier this year.
Delek was the only serious bidder for the 77-year-old, 130,000
-barrel-a-day refinery in Montreal East after Canadian politicians
intervened in the bidding process, offering promises of cheap
financing and other incentives to potential buyers in an effort to
save more than 400 jobs there.
Before the Canadian government got involved, a more than
one-year long sale process for the refinery failed to receive a
single offer, leading Shell to announce in January that it planned
to convert the refinery into a fuel terminal, which would result in
hundreds of lay-offs.
At issue for any potential bidder is the cost of maintaining and
upgrading the refinery, which executives at both companies
estimated to be at least between C$600 million and C$800
million.
In a Parliamentary hearing last week, Richard Oblath, vice
president of Shell Canada's downstream portfolio, told politicians
that despite investing more than C$400 million in the Montreal East
refinery over several years, Shell was unable to make it
competitive against newer, more modern refineries.
Delek US Holdings is the U.S. downstream energy subsidiary of
Delek Group DLKGF, DLEKG.TV), one of Israel's largest
conglomerates.
-By Edward Welsch, Dow Jones Newswires; 403-471-3855;
edward.welsch@dowjones.com
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