Valero Energy Corp. Buys Aruba Refinery

SAN ANTONIO --Valero Energy Corp. has acquired El Paso Corp.'s 315,000 barrel-per-day refinery in Aruba for $365 million, plus $100 million for the related marine, bunkering and marketing operations, and $162 million for working capital at closing, according to a report by the Associated Press.

In addition, Valero plans to acquire inventories owned by a third-party marketing firm under an existing agreement once the 60-day contract ends. These inventories are valued at approximately $40 million based on today's inventory levels and pricing, and Valero plans to fund this purchase with bank borrowings.

The acquisition of the refinery and related assets was funded with $200 million in cash, $21 million in borrowings under existing credit facilities and $406 million in proceeds from the common equity offering completed in February.

"This is a great acquisition because we were able to acquire the refinery for 15 percent of its $2.4 billion replacement cost," said Bill Greehey, Valero's chairman and CEO. "What's more, we are already benefiting from the more than $640 million that has been invested in the refinery in the last five years. Because of the significant investments already made to improve the plant's reliability, the refinery has been running at sustained rates of over 200,000 BPD with no downtime since the beginning of the year. The current rate is 225,000 BPD.

"We are very excited that this refinery is now part of Valero and look forward to working with the employees and the Aruban government to dramatically improve the plant's safety, reliability, profitability and environmental performance. By improving operations and continuing to improve reliability, we expect to immediately boost the refinery's profitability -- just as we did when we acquired our St. Charles, La., refinery last year.

Greehey told AP the refinery will immediately become a major contributor to Valero's earnings and cash flow. "We expect the refinery will contribute over $80 million in net income to Valero's results in 2004 and $175 million in 2005," he said.

Valero has approximately 20,000 employees and annual revenues of more than $38 billion. The company currently owns and operates 15 refineries throughout the United States, Canada and the Caribbean. The refineries have a combined throughput capacity of approximately 2.4 million barrels per day, which represents approximately 10 percent of the total U.S. refining capacity. Valero has over 4,500 retail outlets in the United States, Canada and the Caribbean under various brand names including Diamond Shamrock, Ultramar, Valero and Beacon.