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The Carlyle Group And Sunoco Agree To Form Philadelphia Refinery Joint Venture

Global alternative asset manager The Carlyle Group L.P. (NASDAQ: CG) and Sunoco, Inc. (NYSE: SUN) announced today that they have agreed to form Philadelphia Energy Solutions, a joint venture that will enable the historic Philadelphia refinery to continue operating. The refinery, the oldest continuously operating one on the east coast, processes 330,000 barrels of oil per day into various refined products and was scheduled for shut down in August of 2012. The joint venture is expected to save 850 jobs, secure the region’s fuel supply by continuing the daily flow of 10 million gallons of various fuels, and create 100-200 new, permanent jobs, as well as thousands of construction jobs.

This transaction is subject to customary closing conditions. Capital for this investment will come from the Carlyle Equity Opportunity Fund and the Carlyle Energy Mezzanine Opportunities Fund. JPMorgan Chase (NYSE: JPM) has agreed to provide working capital financing for intermediate products owned by the refinery in the form of an asset-backed loan, subject to documentation. The transaction is expected to close in the third quarter of 2012. Financial terms were not disclosed.

Brian P. MacDonald, Sunoco’s Chairman and Chief Executive Officer, said, “This partnership is a great example of what can happen when motivated people think creatively to solve pressing problems. The private sector, government and labor all played important roles in getting this done. This is the best possible outcome for everyone involved: existing jobs will be saved, new jobs will be created and new business opportunities will be given the chance to develop.”

Under the terms of the agreement, Sunoco will contribute its Philadelphia refinery assets to the joint venture in exchange for a non-operating minority interest. The Carlyle Group’s investment will flow directly to the refinery’s balance sheet to fund future capital projects, facility upgrades and enhance the refinery’s working capital. Carlyle will hold the majority interest, and oversee day-to-day operations of the joint venture and the refinery. Phil Rinaldi, who has successfully led other refining and chemical business turnarounds, will serve as the CEO of Philadelphia Energy Solutions.

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