Refinery owner hunts for capital to complete past-due conversion project on Rosedale
Nov. 15—The Torrance-based company working to turn the former Big West petroleum refinery into a renewable diesel plant has run into still more construction delays and a worsening cash crunch it says raise concern about its ability to survive.
A report issued Monday by refinery owner Global Clean Energy Holdings Inc. said the plant, originally projected to begin operating in the first quarter of 2022, now isn't expected to start running until the second quarter of 2023.
Meanwhile, after losing $15.3 million in the third quarter — 31 percent more than it lost in the same period a year earlier — GCEH is working to raise money that will allow it to continue converting the 65,000-barrel-per-day plant along Rosedale Highway into a facility that will produce 15,000 barrels per day of renewable diesel from rendered animal fats and other organic feedstocks.
The company was not overly optimistic in the filing with regulators at the U.S. Securities and Exchange Commission.
"The delay in completing the construction of our Bakersfield Renewable Fuels Refinery has created a need for additional financing, which may not be available on favorable terms, or at all," GCEH said in the report.
In another sign of its challenges, the company said the conversion project it initially estimated would cost $200 million has ballooned to $560 million, not including the 510-acre property's $40 million price tag.
Industry observers expressed surprise at the magnitude of the troubles spelled out in Monday's regulatory disclosure.
Transportation energy consultant Dave Hackett, chairman of Stillwater Associates LLC in Orange County, said GCEH isn't the only refiner having trouble meeting deadlines because of supply chain problems and a labor shortage. But he said he hadn't seen cost overruns running as high as the project is in Bakersfield.
Bay Area refinery consultant Ian Goodman said Monday's second-quarter completion estimate "seems like a major delay."
"They've run into a lot of problems," he said. "It appears they very much underestimated what all was involving in retooling" the refinery.
Investors are probably concerned, Goodman said, but there may be hope the company will be able to bring in additional money to finish the job. That's because refining companies are making good profits lately, he said.
Even so, GCEH may end up having to take a back seat on the project if investors get the feeling the project would be handled better by a company with more experience, Goodman said, adding that a change like that could force the Torrance company to give up some of the financial benefit it was going to receive from the operation.
GCEH cited numerous delays on the refinery conversion, starting with uncertainty surrounding the cost of change orders, that it said raise "substantial doubt about the company's ability to continue as a going concern for a period of at least one year" after the release of Monday's financial statements.
The company added that it has raised additional money from senior investors totaling up to $60 million and cash and an extended deadline for repaying about $16 million. It also said its subsidiaries agreed to raise at least $10 million before Dec. 31 and that the sum would add up to at least $20 million by March 31.
As for the reasons for delays, the company cited various scheduling problems with its lead contractor "and other factors beyond our control."
"The conversion of the refinery has been delayed primarily due to supply chain issues, engineering, procurement and construction issues with our principal contractor, including lack of timely scheduling, untimely change order estimations, delay in ordering certain materials and unanticipated turnover of personnel to fully handle the workstreams of the project," GCEH stated.
"We also experienced inefficiencies and delays," it continued, "from contracted engineering firms and supply chain issues related to the general lack of personnel and specialty firms to perform required material fabrication and the necessity of performing work that was not originally anticipated or budgeted."
