Refinery Deal Done, Smaller-than-Contracted Immediate Payout Completed

Limetree Bay has the pieces in place to restart the shuttered Hovensa refinery. (Government House photo)
Limetree Bay has the pieces in place to restart the shuttered Hovensa refinery. (Government House photo)

Limetree Bay has submitted a payment due on closing of the refinery’s restart agreement with the V.I. government, Finance Commissioner Valdamier Collens confirmed Tuesday, indicating all the contractual pieces are in place to begin work partially restarting the St. Croix oil refinery.

The sum paid, $20 million, is less than anticipated and the government is lending, instead of borrowing money in the deal.

When Gov. Kenneth Mapp unveiled a deal with Limetree Bay in July, it involved an “immediate” payment of $70 million, with $40 million as a short-term loan and $30 million as payment for a land purchase for the refinery. Mapp’s proposal also involved using some of the borrowed funds to help fund a hotel on St. Thomas and some payments to the collapsing V.I. Government Employees Retirement System. The Legislature split off the hotel and pension portions of Mapp’s proposal and sent them to committee. The hotel portion was tabled indefinitely in November. Senators were also wary of borrowing $40 million on terms requiring repayment over just a few years.

“Upon the closing of the transaction, ArcLight Capital will make a $70 million closing payment to the Government of the Virgin Islands,” Government House announced in July, when unveiling a proposed new agreement with Limetree Bay and plans to potentially partially restart the refinery.

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Limetree has paid $20 million, and the government will not be borrowing the $40 million, according to Collens.

“The transaction closed with $20 million in proceeds from the sale of property. The difference of $50 million is a result of two factors: 1) the government decided not to take the $40 million advance; and 2) $10 million (of the $30 million property sale price) is being paid to the government over 10 years at 10 percent,” Collens said in an email Tuesday.

The contract approved by the Legislature says, in the relevant part:

“At Closing, Terminal Operator shall pay to the Government thirty million dollars ($30,000,000) (the “Closing Payment”) in consideration of the conveyance to Terminal Operator of the Property Acquired for Closing Payment and the granting of easements for access and utilities by delivery of appropriately executed deed(s), complete for recording purposes, in the form substantially set forth in Appendix E. The Closing Payment is in addition to the amount of forty million dollars ($40,000,000) to be paid to the Government … .”

Limetree Bay Ventures announced Nov. 30 that it had closed on $1.25 billion financing to restart its St. Croix refinery, which the company said could happen by “the end of next year.”

According to the company, the financing includes $550 million of preferred equity and a $700 million term loan.

The Source sent an email to the contact information provided by Limetree Bay, asking why Limetree Bay financed $10 million with the V.I. government while simultaneously borrowing $700 million. The company has yet to respond to any emails from the Source sent to the contact: [email protected], to which the company directed questions. Stay tuned for an update when that information becomes available.

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