SPC
buys BP’s stake in SRC to capitalise on energy demand
Posted: 1 March 2004
The Board of Directors of Singapore Petroleum Company Limited (“SPC”
or “the Company”) is pleased to announce that the Company
through a wholly owned subsidiary has entered into a conditional
Sale and Purchase Agreement with BP Singapore Pte. Limited (“BPS”),
a wholly owned subsidiary of UK-based British Petroleum p.l.c (“BP”),
for the acquisition of BPS’ Singapore refining interests.
The acquisition involves the purchase of BPS’ one-third equity
interest in Singapore Refining Company Private Limited (“SRC”);
BPS’ interest in the SRC joint venture and related refining
assets in SRC; and BPS’ one-sixth equity interest in Tanker
Mooring Services Company Pte Ltd (“TMS”), collectively
referred to as the “Assets”.
SPC will also acquire all of BPS’ interests in crude and
product inventories at SRC at agreed market related prices, on completion
of the transaction.
Consideration
The aggregate cash consideration for the Assets is approximately
US$140 million payable on completion. The consideration was arrived
at on a willing buyer-willing seller basis, taking into account
the net present value of the incremental net cash flows arising
from the Assets and the unaudited book net tangible asset values
of BPS’ interest in SRC and TMS.
SPC intends to fund the acquisition through internal resources
and bank borrowings.
Conditions & Completion
Completion of the acquisition is conditional upon, inter alia, the
approvals of regulators and the shareholders of SPC and SRC, if
required.
The acquisition is expected to complete by 30 June 2004.
Rationale for Investment
The acquisition would essentially double SPC’s refining capacity
and strengthen its position as a leading supplier of quality petroleum
products in the Asia Pacific region.
Demand for petroleum products in the Asia Pacific region is expected
to increase in line with the region’s robust economic growth
projected for the next few years. In particular, demand for petroleum
products for use as transportation fuels, power generation fuels
and as petrochemical feedstocks is anticipated to surpass the rest
of the world. China, India and Indo-China, for instance, are forecast
to register GDP growth in excess of six (6) per cent. Oil consumption
in ASEAN will similarly increase as these economies continue to
expand.
On the other hand, expansion and growth in refining capacity in
the region in recent years has been limited. There has been no new
green-field refinery added due to prohibitive construction cost
and the Asian financial crisis. Due to the long gestation for new
capacity, it is envisaged that no additional capacity will come
onstream for the next few years. Furthermore, recent shutdown of
refineries in the Philippines, Australia and Japan has reduced the
effective refining capacity.
The anticipated robust demand for petroleum products and constraints
on expansion and growth in refining capacity are expected to sustain
regional refining margins at a healthy level for the next few years.
The doubling of SPC’s refining capacity will enable it to
capitalise on the growth in demand for petroleum products and healthy
refining margins.
Commenting on the acquisition, Mr Choo Chiau Beng, SPC’s
Chairman, said, “This acquisition is a logical step for SPC
to consolidate its assets base, strengthen its earnings capability
and add to shareholders’ value. With healthier refining margins,
this acquisition is expected to enhance SPC’s earnings.”
Financial Effects of the Acquisition
The proforma net profit before tax attributable to the Assets acquired
would amount to S$26.1 million and would increase the unaudited
earnings per SPC share from 13.92 cents to 19.06 cents for the year
ended 31 December 2003, assuming that the transaction had been effected
at the beginning of the year.
The transaction will not have any material impact on the unaudited
net tangible asset per SPC share as at 31 December 2003, assuming
that the transaction had been effected on 31 December 2003.
None of the directors of SPC or its (so far as SPC is aware) controlling
shareholders has any interest, whether direct or indirect, in the
acquisition.
Background Information
SPC is an associated company of Keppel Oil & Gas Services Pte
Ltd, a wholly owned subsidiary of Keppel Corporation Limited.
BPS is a company incorporated in Singapore and is a wholly owned
subsidiary of BP.
SRC is a company incorporated in Singapore and is the operating
company for an oil refinery situated on Jurong Island with a nameplate
capacity of 285,000 barrels per day. SRC’s shareholders are
SPC, BPS, Caltex Trading Private Limited and Caltex Singapore Private
Limited.
TMS is a company incorporated in Singapore and currently provides
fixed berth jetty services to the shareholders of SRC for the discharge
of crude oil into the refinery. PSA Marine Private Limited holds
50 per cent of the shares in the capital of TMS. The remaining 50
per cent is held in equal proportions amongst SPC, BPS and Caltex
Singapore Private Limited.
For more information see www.kepcorp.com
Posted by Richard Price,
Editor Pipeline Magazine
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