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UPDATE 2-Valero not seeking sale of California refineries - CEO
March 19, 2013 / 3:50 AM / in 5 years

UPDATE 2-Valero not seeking sale of California refineries - CEO

* Sale did not seem right for shareholders - CEO

* Valero looking to equip Benicia and Wilmington for crude-by-rail

* Spinoff of retail operations targeted for May 1

March 19 (Reuters) - The head of Valero Energy Corp said on Monday his company is not pursuing a sale of its two California refineries, putting an end to months of speculation over whether the refining major was seeking buyers for the two plants.

“No, we’re not,” Valero Chief Executive Bill Klesse said on the sidelines of the American Fuel and Petrochemical Manufacturers’ conference in San Antonio, Texas.

“It didn’t seem like the right thing for our shareholders,” Klesse said, because “there aren’t a lot of buyers” and “there’s not a lot of value.”

Valero’s 132,000 barrel-per-day (bpd) San Francisco-area refinery in Benicia and 78,000 bpd Los-Angeles-area refinery in Wilmington had been rumored to be up for sale in light of a 2006 California emissions law that could cost the company hundreds of millions in upgrades.

Klesse had said during an earnings call in 2011 that the company was looking at its options for the two refineries, and an October report from the Wall Street Journal said Valero had hired investment bank Citigroup to find buyers for the plants.

But speaking to reporters in San Antonio on Monday, Klesse made clear that no sales processes were in the works.

“There’s nothing going on,” he said.

Instead, Valero is looking to equip both refineries with infrastructure to handle crude oil shipments by rail. The company is applying for permits to bring rail into Wilmington and Benicia, Klesse said, estimating potential crude-by-rail shipments at 30,000 to 50,000 bpd.

Elsewhere, Klesse said a planned spinoff of the company’s 1,900 retail fuel stores in the United States and Canada into a separate business is being targeted for completion by May 1. The company is awaiting a letter from the Internal Revenue Service ensuring favorable tax treatment for the deal and “we anticipate getting it very quickly,” Klesse said.

Valero is seeking to separate the retail business from its manufacturing and marketing arm because investors are ignoring the higher potential value of the retail segment, according to a recent management presentation.

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