NEW YORK/HOUSTON, Oct 9 (Reuters) - Investment bank Lazard Ltd has asked bidders that have shown interest in buying Citgo Petroleum Corp’s U.S. refineries to submit an additional round of offers, people close to the deal told Reuters this week as the sale process proceeds despite doubts.
Venezuela’s state-run oil company PDVSA hired Lazard to handle the sale process for Citgo, its refining unit in the United States. An initial round of bids was tabled at the end of September with several companies showing interest, the sources said.
Representatives for Citgo and Lazard declined to comment. A representative for PDVSA was not immediately available to comment.
The people said there has been robust interest in the Citgo refining assets among HollyFrontier Corp, Valero Energy Corp, Western Refining Inc, Reliance Industries Ltd and PBF Energy Inc.
Representatives for Reliance, Western Refining, and HollyFrontier, were not immediately available for comment.
Representatives for Valero declined to comment, while a PBF Energy spokesman said that “parties to transactions (like this) sign confidentiality agreements.”
Venezuela’s President Nicolas Maduro said two weeks ago in New York that his plan was to “keep strengthening” the investment made in Citgo. Some observers thought that suggested Maduro might halt the divestment, but the sale process has continued, the people said asking not to be named because the matter is private.
Companies that submitted an offer in the initial round of bidding had been called upon to present another, more detailed offer, one of the sources said.
Another source added that Lazard is trying to “refresh” offers it had received, and remove some of the conditions bidders had initially put into their offers.
One of the people said private equity firms had also submitted bids. Eventually private equity bidders would likely be partnered with industry players because the final buyer for the network of refineries, which have a joint capacity of 749,000 barrels per day (bpd), would need experience operating refineries, the sources added.
Citgo’s three refineries are in Lemont, Illinois; Lake Charles, Louisiana; and Corpus Christi, Texas.
The U.S. operations, which also include terminals and pipelines, have annual earnings before interest, taxes, depreciation and amortization (EBITDA) of around $1.5 billion and could fetch between $8 billion and $10 billion, according to PDVSA’s expectations.
But PDVSA could get less than that, according to three analysts and consultants at firms, including Barclays. In addition, Bank of America Merrill Lynch warned that after paying creditors, PDVSA may only net $1.8 billion.
PDVSA also has a 50 percent stake in the Chalmette refinery in Louisiana alongside Exxon Mobil Corp, which owns the remainder. The Venezuelan oil company has tapped Deutsche Bank separately to explore a sale of its stake in that refinery.
Plans to sell Citgo have been highly controversial in Maduro’s government, with top officials supporting the divestment for financial and legal reasons and others presenting arguments against the action.
People close to Citgo and the Venezuelan government said a final decision on the matter has not been made, even as the sales process continues and Venezuela’s cash needs increase.
A World Bank arbitration tribunal said on Thursday that it determined Venezuela must pay Exxon Mobil $1.6 billion to compensate for a 2007 nationalization, a decision that comes when cash-strapped Venezuela is struggling with a troubled economy and looming bond payments.
A sale of some of all of Citgo’ assets would be welcome as a cash relief for PDVSA and the Venezuelan government, according to analysts. (Reporting by Mike Stone in New York and Marianna Parraga in Houston; Editing by Terry Wade)