S'pore Petroleum buys BP's refining assets for US$ 140m
Business Times, Tuesday, 2 March 2004
By Joyce Koh
SINGAPORE Petroleum Company, part of Keppel Group, yesterday said ft has agreed to buy British Petroleum plc's refining assets in Singapore , a move seen by the market as giving further impetus to ripple's divestment plans.
The company announced it will pay US$140 million for BP's one-third stake in Singapore Refining Company and also its one-sixth interest in Tanker Mooring Services Company.
SPC already owns a one third stake, with the remaining being owned by Caltex.
The transaction, expected to be completed by end June, would enhance earnings, said SPC.
It would also double its refining capacity so it can meet the anticipated booming demand for petroleum products, especially in countries like China and India .
Explaining why the purchase makes sense, SPC said: "There has been no Greenfield refinery added due to prohibitive construction costs and the Asian financial crisis."
It added: "Due to the long gestation for new capacity, it is envisaged that no additional capacity will come on stream for the next few years."
When contacted yesterday, however, most market watchers were neutral about SPC's move. Instead, they pointed out that Keppel stood to benefit the most if it divested its stake in SPC now as the company's share'" price is at an all-time high. "It remains to be seen if SPC's investment will pay off but for Keppel'Corp, it would be a good thing to do now since they can get a good price for it," said one market observer.
Keppel sold 28 per cent of its stake in SPC for $180 million last October and now owns 49 per cent of the company.
Since mid-January, SPC's share price has been spiking, soaring about 60 per cent this year. The counter rose one cent to close at $2.22 yesterday.
When contacted, a Keppel Corp spokeswoman reiterated its commitment to exit from its non-core businesses, but said it was not the company's policy to have a timeline on the eventual divestment of SPC.
Besides its share price, SPC's performance has also been on a high.
In late January, SPC reported its full year 2003 net profit rose 21 per cent to $59 million from 2002, its second highest profit level since it was listed in 1990.
It said it will be paying a final dividend of six cents a share, totaling $25.5 million or 43 per cent of its net profit.
As for how SPC's purchase of BP's refining assets will affect its business, most market watchers are adopting a wait-and-see attitude for now.
They point to the past volatility and excess capacity in the refining industry as reasons for their reservations.
"There may be a possibility that the huge demand expected from China ma not be fulfilled from this region, as the Chinese then selves are also expanding their capacity," said On Eng Tong, a fuel consultant at OBHL Pte Ltd.
Indeed, there was speculation that SPC might bi buying the refining asset; through a Chinese-owner subsidiary so as to tap the China market directly.
The Keppel spokeswoman, however, declined to name the subsidiary, saying it was an investment vehicle of SPC.
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