US largest refinery in trouble again in Philadelphia
NEW YORK: Philadelphia Energy Solutions Inc, (PES) owner of the largest and oldest refinery on the US East Coast, is facing another financial crisis just months after emerging from a controversial bankruptcy, according to sources and review of court filings.
PES, which exited bankruptcy in August, saw its cash balance fall to $87.7 million at the end of 2018, down from $148 million just three months earlier, a $61 million decline, according to a post-bankruptcy financial report filed late last month.
The company entered bankruptcy roughly a year ago with $43 million cash on hand, court documents show.
Refineries based on the East Coast suffer from difficult economics due to the cost of shipping crude oil from West Texas or Canada, but PES has had other problems at the plant in South Philadelphia including weak gasoline margins and high debt costs.
The company filed for bankruptcy in January 2018, blaming its woes largely on the costs of complying with the US Renewable Fuel Standard, a 2005 law that requires refiners to either blend biofuels like ethanol into fuel or purchase credits, called RINS, from competitors who do.
PES does not have those blending capabilities, so it has to pay for credits. But a Reuters analysis showed other factors played a role in the bankruptcy, including the withdrawal of more than $590 million in dividend-style payments from the company by its investor owners.
After filing for bankruptcy, the company was given a waiver for half of its $350 million in liabilities related to biofuels credits by the United States Environmental Agency.
Poor gasoline margins have hurt the company’s bottom line as well. PES’S weak cash position forced the refiner to significantly scale back a planned $90 million maintenance project that began in January, according to two sources familiar with the plant’s operations. Refiners perform maintenance to keep units operating reliably and safely, protecting themselves from costly unplanned outages.
“I am not surprised that they are economically struggling once again, but I didn’t expect it to happen so soon,” Christina Simeone, a director at the Kleinman Center for Energy Policy, said. Protection
PES, which exited bankruptcy in August, saw its cash balance fall to $87.7 million at the end of 2018, down from $148 million just three months earlier, a $61 million decline