14 March 2008

Second refinery project hits capital snag

Plans for a second refinery in the province are being affected by a tightening capital market, according to Bloomberg.com.

Design and engineering work will continue, but the estimated $5.0 billion green field project will not proceed until financing is sorted out.  According to Bloomberg, Newfoundland and Labrador Refining had planned to fund upwards of half the project with debt.

"Effectively, the debt markets are closed at the moment,'' Dalton said.

"It's not a pricing issue, it's just a general availability issue.'' The start of construction "depends very much on when the markets open. We're not going to start it unless we know we can finish it, that's for sure.''

The company's project update, issued Friday,  isn't quite as clear on the financing issue.

In April 2007, NL Refining was seeking at least one financial backer with deep pockets. In January 2007, Bond Papers noted the difficulties likely to come for anyone trying to raise cash for a green field refinery project while at the same time, an expansion project would have considerably less cost and therefore lesser difficulty accessing capital.

By contrast, Harvest Energy announced in February it was considering a $1.0 billion investment to expand capacity at its refinery at Come by Chance.