China's Sinopec in Talks to Buy Stake in Hin Leong's Singapore Terminal: Sources
04.27.2020 - NEWS

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Chinese state energy company Sinopec is in early-stage talks with Hin Leong Trading Pte Ltd to buy a stake in an oil storage terminal that is partly owned by the Singapore trader, according to three sources with knowledge of the matter.

The sale could provide much needed cash for family-owned Hin Leong, one of Asia’s biggest independent traders.

The company owes a total of $3.85 billion to 23 banks and has applied to a Singapore court to delay its debt repayments, according to a Hin Leong presentation to lenders on April 14 contained in the court filing, which was reviewed by Reuters but has not been made public.

Sinopec, Asia’s largest refiner, was approached by Hin Leong earlier this month to look at investing in the Universal Terminal in Singapore, said one Beijing-based Sinopec official.

Hin Leong’s founder Lim Oon Kuin and his family own 41% of the terminal through Universal Group Holdings Pte Ltd. PetroChina holds 25% and Australian investment bank Macquarie the remaining 34%.

“Sinopec is interested, and is evaluating the quality and cost of the asset,” said the official, who declined to be named as the discussions are not public.

The three sources did not know the size of the stake Sinopec might be interested in buying, or the potential price.

Hin Leong and Sinopec did not respond to requests for comment.

A previous sale of a stake in the terminal in 2016 valued the whole terminal at more than $1.5 billion, industry sources said at the time.

Sinopec, which owns several storage facilities outside China – in Rotterdam, Antwerp and Fujairah – has long been looking for more storage sites to boost its global trading profile, the company official said.

The state oil giant, however, would be cautious about any possible investment given growing internal scrutiny over spending after a plunge in oil prices, and is closely monitoring developments around Hin Leong’s debts, the official added.

“Sinopec is aware of the good asset quality of Universal Terminal, but the question is at what price and if the terminal can come clean of creditors’ debt claims,” said the official.

Of Hin Leong Group’s assets, which also include about 130 oil tankers, the stake in Universal Terminal is the most attractive to potential investors, trade sources said.

“The terminal is the prize,” said Tony Quinn, chief executive of terminals advisory group Tankbank International.

“One big advantage is that it has its own integrated marine infrastructure – like having your own little port authority within Singapore,” said Quinn.

He added the terminal has the only independently owned supertanker jetty on Jurong Island, which is the only access point to Singapore’s rock caverns, Southeast Asia’s first underground oil storage facility.

In an affidavit contained in the court filings reviewed by Reuters, Lim Oon Kuin, also known as O.K. Lim, said Hin Leong was in discussions with a large state-owned Chinese energy company over a potential strategic investment, without giving details.

A PetroChina executive said last week that Hin Leong had not approached his company about potentially raising its stake in the terminal. PetroChina, in around 2006, became Hin Leong’s first partner, taking a 35% stake in the terminal while the Singapore trader held the remaining 65%.

PetroChina’s initial investment of S$750 million ($524 million) was recouped in less than 36 months, said a separate industry official with direct knowledge of PetroChina’s investment in the terminal.

The two companies sold a combined 34% to Macquarie in 2016 in a deal that was estimated by industry sources at about $500-$550 million.
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