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HollyFrontier to build biodiesel production unit at refinery in New Mexico

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Texas, US-based petroleum refiner HollyFrontier has announced plans to construct a renewable diesel unit (RDU) at its refinery in Artesia, New Mexico.

Plans for the biodiesel plant, which was proposed to lower costs related to blending to renewable fuels, were announced alongside HollyFrontier’s $1 billion (€0.9 billion) share buyback programme.

“Today’s announcements illustrate HollyFrontier’s commitment to both grow our business and deliver superior cash returns to shareholders,” commented chairman of the board, Franklin Myers. “We expect our new renewable diesel plant will generate attractive returns and help us meet our requirements under the Renewable Fuel Standard. At the same time, we are increasing cash returns to shareholders through an increase in our regular dividend with a path for future dividend growth and a new HollyFrontier share repurchase authorisation.

“All of these actions are consistent with our balanced approach to capital allocation: 1) reinvest in and maintain our existing assets, 2) maintain a healthy balance sheet with an investment grade credit profile, 3) pay a competitive and sustainable regular dividend through the cycle, 4) invest in growth capital projects or acquisitions with a superior return, and 5) return excess cash to shareholders through share repurchases.”

The RDU at HollyFrontier’s Artesia refinery will have an annual production capacity of approximately 125 million gallons, enabling the company to process soybean oil and other renewable feedstocks into renewable diesel.

The new facility will help to meet demand for low-carbon fuels, while covering the costs of the company’s annual Renewable Identification Number (RIN) purchase obligation under the current market conditions.

Alongside rail infrastructure and storage tanks, the RDU is expected to have a total capital cost of $350 million (€316.4 million), and is due to be completed in the first quarter of 2022. The unit will be funded with cash on hand and is expected to generate an internal rate of return of 20-30%, the company added.

The share repurchase programme was authorised by HollyFrontier’s board of directors, replacing all existing share repurchase authorisations, of which there was around $281 million (€254 million) remaining. Over the past 15 months, HollyFrontier has returned over $719 million (€650 million) to shareholders and reduced the outstanding share count by 8%.