Valero Energy Corp. (VLO) announced plans to close its Delaware City refinery due to poor economic conditions, significant capital spending requirements and high operating costs. The shutdown will affect
approximately 550 employees at the plant. The company plans to commence shutdown process immediately.
Valero remains committed to its marketing businesses in the Northeast and will continue to reliably supply its customers, partially through higher throughput rates at the company’s other refineries.
The company expects to report a pre-tax charge of approximately $1.7 to $1.8 billion, or $2.00 to $2.15 per share after taxes in the fourth quarter of 2009, related primarily to asset impairment, employee severance and other shutdown costs. The company estimates the cash portion of the pre-tax charge to be in the range of $125 million to $150 million.
In 2010, the company anticipates the shutdown to reduce pre-tax operating expenses by about $450 million, including $125 million of non-cash costs, and reduce capital spending and turnaround costs by about $200 million. In addition, the company expects to receive after-tax cash flows in 2010 in the range of $600 to $700 million from inventory sales assuming current prices and other cash benefits from discontinued operations.
The company expects to improve the company’s financial position and cash flow for 2010, by this closure.
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