Private equity firm Carlyle Group (NYSE:CG) has teamed with Sunoco to help keep the oil giant’s Philadelphia refinery open, easing concerns that a mass exodus of oil on the East Coast would lead to shortages during the busy summer season.
The companies have established a joint venture called Philadelphia Energy Solutions that allows the oldest and biggest East Coast refinery to continue operating. The facility, which processes 330,000 barrels of oil a day, was scheduled to shut down in August.
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With Carlyle stepping in, the two are able to secure the region’s fuel supply, which includes the daily flow of 10 million gallons of various fuels. It saves an existing 850 jobs, and they say it will add another 100 to 200 permanent jobs as well as thousands of temporary construction jobs.
In a joint statement, the companies said Sunoco will retain a minority stake in the plant, while Carlyle will oversee its daily operations. Carlyle has hired Philip Rinaldi, who turned around a troubled refinery in Kansas, as the joint venture’s CEO.
Terms of the deal were not disclosed, but the companies said Carlyle’s investment will help fund future capital projects, facility upgrades and enhance the refinery’s working capital with a focus on reducing waste, emissions and reliance on foreign oil supplies.
J.P. Morgan Chase’s (NYSE:JPM) commodities division will supply the refinery with crude and non-crude feedstocks and purchase fuel produced by the refinery for offtake. Sunoco and Carlyle are also expected to bring in Marcellus Shale gas to help power the facility.
“Together we’ve re-imagined the Philadelphia refinery and its role as a critical energy hub in the Northeast,” Carlyle Managing Director Rodney Cohen said in a statement. “The refinery will be a reliable and critical supplier of fuels to the regional market through its new business structure and improved crude oil sourcing.”
Philadelphia Energy Solutions will also receive economic support from the Commonwealth of Pennsylvania, which is expected to provide grants to help build a high-speed train unloading facility at the refinery.
The transaction is subject to customary closing conditions and is expected to close in the third quarter of 2012.