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Slump in refining margins to push debt levels at Marsden Point

Refining margins at the country's only refinery, at Marsden Point, have slumped to levels not seen since 2009, prompting Refining NZ [NZX: NZR] to warn its borrowings will peak at up to $120 million more than originally expected to complete the major upgrade currently under way.

The refiner's margin slipped to average US$2.91 per barrel in September and October, according to new figures released to the NZX today, the lowest since November/December 2009, when refining margins reached their lowest point in recent years, at US$1.18 a barrel.

In the year to August, refiners' margins averaged US$6.26 per barrel.

Margins at Singapore refining facilities had been negative throughout the most recent two month period, affecting refining margins "across the refining industry worldwide," the company said in a statement to the NZX.

The impact of this change, along with a month-long shutdown to install a $55 million upgrade to the refinery's hydro-cracker unit and the $365 million Te Mahi Hou upgrade project already under way, was likely to see company debt in 2014 peak "at around $80 million to $120 million higher than originally estimated at the time of the TMH investment case".

As a result, the company will supplement its existing $300 million of banking facilities with longer term core debt of $150 million.

"The company is currently in positive discussions with its bankers to put this longer term core debt into place and a further announcement will be made when these arrangements are complete," the company said.

Current borrowings stand at around $170 million.

Refining NZ shares fell 3 percent to $2.23 in trading this morning.