Valero Energy Corp (VLO) announced that it intends to permanently shut down its Delaware City refinery due to financial losses caused by very poor economic conditions, significant capital spending requirements and high operating costs. The shutdown will affect about 550 employees at the plant.
In the fourth quarter of 2009, the company expects to report a pre-tax charge of approximately $1.7 billion to $1.8 billion, or $2.00 to $2.15 per share after taxes, related primarily to asset impairment, employee severance and other shutdown costs. The company estimates the cash portion of the pre-tax charge will be in the range of $125 million to $150 million.
The company estimates the shutdown will reduce pre-tax operating expenses by approximately $450 million, including $125 million of non-cash costs, in 2010 and will reduce capital spending and turnaround costs by approximately $200 million through 2010.
In addition, the company expects to receive after-tax cash flows in 2010 in the range of $600 million to $700 million from inventory sales assuming current prices and other cash benefits from discontinued operations.
"As a result of this business decision, we expect the substantial cost savings and cash benefits will improve the company's financial position and cash flow for 2010," said Valero Chairman and CEO Bill Klesse.
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