Court approves sale of Orion Refinery to Valero Energy

By Carlise Newman

Chicago, June 27 - Orion Refining Corp. has received court approval for the sale of its refinery in Louisiana to Valero Energy Corp. for $400 million plus $130 million for the refinery's on-hand inventories.

With Orion's bankruptcy proceedings completed, and because the Federal Trade Commission has already approved the acquisition, Valero expects to complete the acquisition on July 1.

"We're happy that we can now move forward and complete this acquisition," said Bill Greehey, Valero's chief executive officer, in a news release. "In the time since we announced our plans to acquire the refinery, we have had the opportunity to learn even more about the assets and the great employees who run the refinery, and we're more excited about the potential this refinery has to positively impact our profitability and add long-term value for our shareholders. We are looking forward to working with the employees to make this refinery a world-class facility."

As previously announced, San Antonio-based Valero will finance the acquisition with $250 million in cash and the issuance of $250 million of three-year mandatory convertible preferred securities. The majority owners are Credit Suisse First Boston LLC, Trust Company of the West, Jefferies & Co. Inc., and Oaktree Capital Management LLC.

The purchase agreement also calls for a possible earn-out payment if the refining margins reach a specified level during any of the next seven years, which cannot exceed $50 million in a given year or $175 million total.

Approximately $25 million in additional expansion and upgrade opportunities will enable the refinery to process additional heavy feedstocks, increase throughput capacity, upgrade its product yields and improve on-stream reliability, the company said. The projects are expected to add more than $50 million to annual operating income.

Projects planned for the first quarter of 2004 include increasing the plant's crude processing capacity from 155,000 BPD to 185,000 BPD and expanding the coker capacity to 70,000 BPD.

Greehey said projections indicate that cash flow from operations will be more than sufficient to cover all of the projects planned for 2004 and 2005, including projects to meet the required Tier II sulfur reductions.

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