Prohibitively high interest rates will delay the start of construction of Hovensa's coker project, which was originally set to begin in January.
According to Rene Sagebien, Hovensa's president and chief operating officer, the company decided on Friday not to proceed with a $650 million bond issue for the coker project because the interest rate on the bonds was higher than what officials "thought appropriate."
Sagebien called the latest development a "disappointment," but said other, less expensive financing alternatives were "actively being pursued."
Originally, financing was to be completed in early December with construction starting in early January. Work on the coker is expected to take about two years, said Hovensa vice president Alex Moorhead. He has said that at the height of the project, some 2,000 workers would be employed.
While acknowledging the financing setback, Moorhead denied rumors that the coker project would be canceled altogether.
"The project remains a priority of our company," he said, adding that contractors have been hired and all that remains is the financing.
"We still anticipate that we'll be able to get the go-ahead in early 2000."
The $650 million would fund the coker construction, refinance debt and pay for smaller projects over the next five years, Moorhead said. The coker is needed to process heavier Venezuelan crude oil, for which the refinery has a long-term supply contract with its joint venture partner, Petroleos de Venezuela.
Hess Oil of the Virgin Islands entered into the joint venture last year to recover from approximately $1.2 billion in loses since 1991.
Without the coker, HOVENSA is forced to process crude oil that is $2 to $4 per barrel more expensive than what the company’s competitors process.
