Bloomberg News

Turcas, Socar Seek Loan for $5 Billion Turkish Oil Refinery

January 11, 2012

(Updates with CEO’s comments from third paragraph.)

Jan. 11 (Bloomberg) -- Turcas Petrol AS, a Turkish fuel retailer, will seek as much as $4 billion in loans in the second half of this year with State Oil Co. of Azerbaijan to build an oil refinery on the country’s western coast.

Turcas’s joint venture with Socar, as the Azeri company is known, hired Unicredit SpA, which is holding talks with the export-import credit insurance agencies of the home countries of companies that may bid to build the oil refinery, Chief Executive Officer Batu Aksoy said in an interview yesterday in his office in central Istanbul.

“The joint venture plans to inject approximately $1 billion of equity for the refinery and is seeking long-term loans for the remainder of the project,” Aksoy said. “With the condition of European credit markets this isn’t an easy process but we don’t foresee any problems.”

Turcas and Socar are building the refinery at the site of Turkey’s biggest petrochemicals maker, Petkim Petrokimya Holding AS, in the Aliaga region on the Aegean coast. The Socar Turcas Aegean Refinery venture, known as Star Rafineri AS, plans to open the refinery in 2015 with capacity to process 10 million metric tons of crude a year, or 200,000 barrels a day, Aksoy said. Socar holds 81.5 percent and Turcas 18.5 percent of the venture.

Tupras Turkiye Petrol Rafinerileri AS, the country’s sole refiner, owns four plants that have a total capacity of 28.1 million tons a year.

Focus on Refining

Star Rafineri will make naphtha for Petkim, cutting its dependency on imports and allowing the chemicals maker to double capacity, as well as products for the local market, Aksoy said.

Turcas sold its 25 percent stake in Petkim to Socar last month for $44 million and bought the Star Rafineri stake to focus on oil refining, Aksoy said. Foster Wheeler Italiana Srl has completed the engineering and design of the refinery and Fluor Corp is project management consultant for the project, Aksoy said.

“You can’t have two large investments,” he said. “We want to focus on refining as we will have synergies between the refinery and the fuel retail business.”

Shell & Turcas Petrol AS, owned 30 percent by Turcas and 70 percent by Royal Dutch Shell Plc, will benefit from lower-cost fuel from the refinery, Aksoy said. Shell & Turcas, Turkey’s second-largest fuel retailer after OMV Petrol Ofisi AS, had sales of 9.4 billion liras ($5 billion) in 2010, he said.

Power Generation

Turcas is also expanding its power generation capacity in western Turkey, Aksoy said. The RWE & Turcas Guney Elektrik Uretim AS venture is building a 800-megawatt gas-fired power plant in the city of Denizli to be completed in the third quarter, Aksoy said. RWE AG owns 70 percent of the utility and Turcas holds 30 percent.

“The plant will produce 6.4 billion kilowatt-hours of electricity a year, which is about 3 percent of Turkey’s total production,” Aksoy said.

Turcas provided 180 million euros ($230 million) of financing for the plant, borrowing 150 million euros for 13 years from WestLB AG, BayernLB Holdings AG and Turkiye Sinai Kalkinma Bankasi AS, Aksoy said. RWE funded 400 million euros of the project, he said.

The venture may also build a coal-fired power plant with a capacity of 800 megawatts, Aksoy said. The investment decision will be reviewed after the gas-fired plant comes on stream, he said.

Turcas also plans between 50 million euros to 100 million euros of investment in three years to add power production capacity of as much as 100 megawatts in renewable energy, possibly in geothermal, wind or solar, Aksoy said.

--Editors: Torrey Clark, Tony Barrett

To contact the reporter on this story: Ercan Ersoy in Istanbul eersoy@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.


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