Refinery to be sold

Just three years after it purchased the refinery at Come By Chance, Harvest Energy Trust of Calgary is selling the facility.

The company announced last Wednesday it has entered into an agreement with Korea National Oil Corporation (KNOC) which would see the Korean company pay $1.8 billion for all issued and outstanding trusts, and assume North Atlantic's $2.3 billion debt.

"We are extremely pleased to announce this transaction, which provides substantial value to our investors," said John Zahary, president and Chief Executive Officer of Harvest Energy, in a press release on Oct. 21. "Harvest has a considerable portfolio of opportunities including large oil in place assets coupled with production and throughput expansion opportunities in the upstream and downstream segments respectively. Continued investment by KNOC will supplement this growth."

Young-won Kang, President of KNOC commented in the press release, "Korea National Oil Corporation is excited about this acquisition and believes Harvest is a perfect fit for KNOC's North American growth strategy."

He added, "KNOC has ambitious plans for future growth and is committed to a long term investment strategy in Canada. We are very pleased to be joining forces with a Harvest team that has such a deep and rich experience as well as a proven track record of success."

The Board of Directors of Harvest has unanimously approved the proposed deal. They intend to vote in favour of the arrangement and are recommending other unitholders do the same.

The Arrangement Agreement is subject to formal KNOC board approval on or before Oct. 29.

The Arrangement is also subject to court and regulatory approval, and the approval of 66 2/3 percent of unitholders at a special meeting to be held in December.

When Harvest Energy purchased the refinery in 2006 for $1.6 billion, president John Zahary indicated they were in this for the long-term.

"We want to operate this plant for a long, long time and we certain see that opportunity, given its characteristics," he said in an interview at the time.

However, the refinery purchase led Standard and Poor's Ratings Service to put Harvest Energy on its CreditWatch list.

Since its purchase of the refinery, Harvest Energy invested hundreds of thousands of dollars in improvements.

a $2 billion expansion plan that would enable the facility to refine an extra 75,000 barrels of oil a day and produce a higher-quality product.

Last May, members of the Steelworkers Union, part-time workers at the refinery, protested on the news that North Atlantic was going to start contracting out work.

The company confirmed that 115 temporary workers would be affected.

A spokesperson for the company explained the workers are usually called in for maintenance turnaround but that due to the $800 million in refurbishments of the past few years, the company did not need to do major maintenance that year.

A few months later, in November, 2008, the company announced that due to the global economic crunch, it was holding back on the $2 billion expansion.

Harvest Energy CEO Zahary said the expansion would not go ahead until Harvest could find an investment partner.

He said, however, the company still planned to invest $300 million in the refinery over the next few years to "debottleneck" the refinery.

The provincial government says it had no advance notice of Harvest Energy's intent to sell the refinery.

Tracy Barron, a public relations officer with the Department of Natural Resources, told Transcontinental News that officials intend to meet with the Korean company to find out what the transaction means for the facility.

"The department will be talking to the company as soon as possible on its plans and the implications for local operations," she said.

Representatives of the Steelworkers Union local at the refinery could not be reached for comment up to deadline.