Bonds

Some clarity, but senators skeptical about USVI refinery

While some ownership questions were answered, U.S. Virgin Island senators were nearly universally skeptical about a presentation at a hearing Thursday from the purchaser of a major oil refinery site that’s been plagued by financial and environmental challenges for years at a hearing Thursday.

The site, Limetree Bay Refinery, and the companies operating it since the 1960s, have usually been the territory’s largest private sector employer. Little activity has taken place there since Limetree Bay Energy went bankrupt in July 2021.

In December, West Indies Petroleum Limited and Port Hamilton Refining & Transportation LLLP successfully bid $62 million for Limetree Bay Energy’s assets, with a plan to restart refining, and the court did not activate the transfer of assets until late January.

U.S. Virgin Islands senators were concerned when one of the owners of an oil refinery site to be reopened could not provide the other owners’ names.

Bloomberg News

Charles Chambers, a Port Hamilton principal and West Indies CEO, and Danville Walker, senior vice president with West Indies, told the senators at a Thursday hearing that Port Hamilton alone owns the facility, although several West Indies owners are also Port Hamilton investors.

When asked why West Indies did not simply purchase the site on its own, as had been discussed earlier, Chambers said to succeed, they knew they needed outside investors.

Chambers said his investing group holds a 42% stake in Port Hamilton, and four or five other companies hold the other 58%. But when pressed, Chambers told the senators he did not know their names off the top of his head.

Sen. Kurt Vialet accused Chambers of “playing games” by not revealing the names.

In addition to providing jobs, Limetree Bay Energy made payments in lieu of taxes to the Virgin Islands government as part of an operating agreement, which Moody’s Investors Service Vice President Pisei Chea said at the time, “are a significant source of revenue for the government.”

Port Hamilton will have to make those PILOT payments when the refinery reopens, which it hopes will be in the second quarter of 2023.

The government also expects to receive more than $5 million of past due payments in the next few months, by exercising a letter of credit Limetree Bay Energy had to take out.

Chambers told the Senate reopening the refinery could help address high gasoline prices.

The Limetree Bay refinery was shut down repeatedly by the U.S. Environmental Protection Agency in spring 2021 because of accidental leaks of hazardous gases to the surrounding community.

Several senators said they welcomed the possible economic impact of reopening the site but worried about its potential environmental and human health impact.

Chambers told the senators safety would be a priority when reopening.

In late June, Limetree Bay Terminals, which operates next to the now quiet Limetree Bay refinery site, sued Port Hamilton in the St. Croix Division of Virgin Islands Superior Court for not paying for services it provided.

At the hearing Vialet said Port Hamilton was not making these payments because it is broke.

Chambers said Port Hamilton planned to raise $200 million through debt and equity to finance the initial startup of the site, which would require 170 employees, he said.

If it manages to get the whole site operating, Port Hamilton would need more than 500 employees, said Fermin Rodriquez, acting refinery manager.

Sen. Alma Heyliger was concerned that only 170 employees would be needed at the beginning.

Earlier this week Virgin Islands Senate President Donna Frett-Gregory told The Bond Buyer, “I remain optimistic that there will be a resolution on the use of the Limetree Bay property within the next 12 months and will be prepared to vet any potential agreement that may require legislative approval.” Frett-Gregory did not attend Thursday’s hearing.

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