Plans to build the first sizable U.S. grassroots refinery in the past 20 years have collapsed.
Williams Energy Ventures (WEV), a unit of Williams Cos. Inc., Tulsa, last week disclosed it was scrapping plans to develop a 50,000 b/d refinery at Mobile, Ariz., near Phoenix.
Meantime, Williams last week completed its tender offer for Transco Energy Co., Houston. Including the assumption of debt, the entire transaction is valued at about $3 billion and will create the biggest U.S. natural gas pipeline in terms of throughput (OGJ, Dec. 19, 1994, p. 27).
REFINERY PROJECT
WEV last September said it had obtained all required permits for the Maricopa County project and would conduct detailed engineering and marketing analyses to determine whether the project could meet the company's criteria for such an investment (OGJ, Oct. 10, 1994, p. 38).
"Comprehensive analysis shows that while this region of the country should require significant future incremental fuel supply, the amount of capital required to build the type of complex highly flexible refinery capable of capturing that demand could be significantly greater than preliminary estimates," said Keith Bailey, Williams' chairman, president, and chief executive officer.
The project's original cost estimate was $450 million, but later estimates climbed to $550-625 million.
"While we were able to secure a number of risk-containing commercial arrangements to offset the impact of the higher cost estimates, we failed to identify an experienced refiner partner as we had hoped to do," Bailey said.
"This is combined with the fact that our pending acquisition of Transco immediately provides a great range of potential regulated and nonregulated investment in opportunities where we have a great deal of experience."
The Maricopa County Board of Supervisors' decision to delay a vote on the project to Feb. 15 from Jan. 18 had nothing to do with Williams' decision, he added. The project had run into some local opposition, mainly over environmental concerns. Williams had purchased the project from Maricopa Refining Co., which originally envisioned it as a 30,000 b/d refinery (OGJ, Dec. 12, 1994, Newsletter).
WEV spent $5.4 million developing the project and will take a related charge to its 1994 earnings.
TRANSCO DEAL
A preliminary count showed that 35.5 million shares, or about 86.7% of Transco's common stock were tendered to Williams.
Williams by Jan. 18 had accepted 24.6 million shares, its goal. The tender offer of $17.50/share expired Jan. 17. A final proration factor was to come in about 1 week. Based on the preliminary count, Williams expects to purchase about 69.296% of the shares.
The tender offer will be followed by a trade in which Transco common shares not purchased will be exchanged for 0.625 shares of Williams common.
Transco will schedule a stockholders' meeting in late March or early April to put the merger to a vote, the outcome of which will be controlled by Williams because it owns a majority of Transco shares. Shortly thereafter Transco will become a wholly owned subsidiary of Williams.
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