INEOS writes down value of Grangemouth petchems assets to zero

04 October 2013 13:01  [Source: ICIS news]

INEOSLONDON (ICIS)--INEOS has been forced to write down the value of its Grangemouth petrochemical assets in the UK to “nil value” because of repeated annual losses, the Swiss-headquartered producer said on Friday.

The company has written down the value of all of the petrochemical assets at the site, including property, plant and equipment, from £400m (€476m) to zero.

Calum MacLean, the chairman of the Grangemouth Petrochemicals Business, said: “We had no option but to write down these assets."

With the North Sea gases – which provide the Grangemouth production facilities with raw materials – running out, the petrochemicals site would close in 2017 without massive new investment.

“After four years of heavy losses, the petrochemicals business is effectively worthless. Without lower costs and an alternative source of additional raw material, it will close 2017, at the latest,” MacLean said.

INEOS said, despite investing over £1bn since taking over at Grangemouth in 2006, the site continues to lose money. The petrochemicals site lost more than £150m over the last four years, with money continuing to flow out of the business every month, it added.

On 30 September, INEOS launched a survival plan to ensure the long-term future of the loss-making Grangemouth refining and petrochemicals site by switching to ethane feedstock imported from the US.

The company has indicated it is willing to invest £300m to facilitate the development of a new gas terminal to bring in ethane from the US, making Grangemouth the beneficiary of a scheme identical to the one the company is currently executing in Rafnes, Norway.

The company has asked the Scottish and UK governments for grants and loan guarantees totalling £150m to support the venture at the site, which includes the 210,000 bbl/day Petroineos refinery.

Another part of the survival plan aimed at making Grangemouth more competitive involves requesting all employees to accept “a superior money purchase pension scheme”, with the existing final salary scheme to close, INEOS said.

The company’s pension costs alone are now 65% of base salary and the pension fund is £200m in deficit, it said.

A number of plants would be closed and headcount would be reduced if the plan went ahead, INEOS added.

“The Petrochemical business at Grangemouth is at a crossroads. The current financial position is unsustainable and this write down simply confirms the stark choices that we have ahead of us,” MacLean said.

On 27 September, workers at the Petroineos refinery voted in favour of industrial action following a decision made by INEOS Petrochemicals UK to place Stephen Deans, a trade union representative and member of the local Falkirk Constituency Labour party (CLP), under investigation.

INEOS Petrochemicals UK said the investigation into Deans was to determine whether Deans' activities – regarding conduct in the replacement process for departing Labour MP Eric Joyce – were in line with his role as an employee and union representative at the Grangemouth site.

“Perhaps now the Union will wake up to the reality of this situation. Unless we reform our cost base ‘now’ and secure investment in a new gas import terminal, the site will close in 2017, latest. We need the union to acknowledge this very real issue and start to work with us, to give the site any chance of a future, not to constantly threaten industrial action,” MacLean said.

INEOS added that discussions on the changes necessary to secure this investment are ongoing with employees and the union.

Additional reporting by Will Beacham

(€1 = £0.84)

By: Franco Capaldo
+44 (0)20 8652 3214

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