KUALA LUMPUR (June 30): Loss-making Shell Refining Co (Federation of Malaya) Bhd expects its major shareholder Shell Overseas Holdings Ltd - which holds a 51% stake - to decide whether to sell its stake or convert its refinery in Port Dickson, Negri Sembilan in the "next few months."
According to its chairman Iain John Lo, Shell Refining hopes to arrive at the decision" soon" as it has a RM450 million debt to be paid by Dec 31, 2015, which was originally due on June 15, 2015.
"One thing remains certain: continuing to operate the business as it is today is not a long term option. Refinery margin remains uncertain and will be influenced by international supply and demand for petroleum products, seasonal and cyclical factors," he told reporters after the company's 56th annual general meeting here today.
To recap, the heavily-indebted Shell Refining had in 2010 obtained the RM450 million loan to be used as working capital, in which it is required to repay its interest payment via a 20 quarterly installment and a "bullet repayment" that was matured on June 15, 2015, but subsequently extended to Dec 31, 2015 after intense negotiations.
The RM450 million loan was received an interest rate that is based on Kuala Lumpur Interbank Offer Rate (KLIBOR) + 0.3%.
In addition, Shell Refining also has a US$240 million loan, which is due in Sept 14, 2016.
This loan was offered by creditors in 2011 to finance its capital expenditure project, which carries an interest rate that was based on London Interbank Offered Rate (LIBOR) + 0.75%.
Overall, Shell Refining has a total borrowing of RM1.758 billion, which translated to a gearing ratio of 84%.
Shell Refining has been bleeding losses in the last four years since 2011.
On Jan 9, 2015, Shell Refining announced that its board of directors has completed a structured review of its operations, which lead to it weighing two options: to either sell its refinery asset in Port Dickson - which has a net book value of RM1.1 billion - or convert it to an export-import storage terminal.