China's Sinochem is in advanced talks with state energy giant PetroChina to transfer its stake in an indebted refinery, as the state-run chemicals and oil group looks to sell non-core assets as it readies a US$2-billion IPO of its energy unit, Reuters reports, citing sources briefed on the plans.
Sinochem is looking to transfer its 33.6-percent stake in the West Pacific Petrochemical Corp (WEPEC) refinery, which has a capacity of 200,000 bpd, but which is heavily indebted, according to Reuters' sources.
WEPEC's debts exceeded its assets by almost 50 percent at the end of last year, two sources with knowledge of the refinery's finances told Reuters. The reason for this indebtedness was hefty losses in 2008 and 2014, even though refining margins have improved since 2014.
It was not immediately clear at how much the 33.6-percent stake in the refinery would be valued. Talks are in an advanced stage, but it could still take months to be finalized, or even longer, the sources said.
Sinochem is looking to sell non-core assets as it prepares for an initial public offering (IPO) of its energy arm, Sinochem Energy.
At the end of last month, Sinochem Energy filed for an IPO in Hong Kong, and the listing is expected to raise around US$2 billion. The IPO of the energy arm is part of Sinochem's plan to raise capital for its new strategy to shift from exploration and production to higher value-added businesses such as refining, petrochemicals, trading, and refined products retailing.
Sinochem Energy is Sinochem's unit operating the refining, oil and petroleum products trading, storage and logistics, and distribution and retail businesses.
Sinochem is also reportedly merging with ChemChina in a deal that has been rumored for two years and that, if finalized, would merge China's two biggest chemical companies into the world's largest industrial chemicals firm with annual revenues topping US$100 billion.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More
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