Valero Energy Partners LP’s board of directors of its general partner has approved the partnership’s acquisitions of the Port Arthur terminal assets and Parkway Pipeline LLC from Valero Energy Corp. for total consideration of US$508 million. In the first year of operation, the acquired operations are expected to contribute a total of approximately US$24 million and US$60 million of net income and EBITDA, respectively. The transaction is expected to close on 1 November 2017.
The Port Arthur terminal assets consist of 47 tanks with 8.5 million bbls of storage capacity for crude oil, intermediates, and refined petroleum products, which support Valero’s Port Arthur refinery. Parkway Pipeline is a 141 mile, 16 in. refined petroleum products pipeline linking Valero’s St. Charles refinery with the Plantation and Colonial pipeline systems. Parkway Pipeline currently has 110 000 bpd of capacity, with the ability to expand to more than 200 000 bpd.
Valero Energy Partners expects to finance the acquisitions primarily using borrowings under its revolving credit facility, cash on hand, and the issuance of additional common units and general partner units to Valero subsidiaries. The newly issued units will be allocated in a proportion allowing the general partner to maintain its 2% general partner interest.
The Partnership continues to target annual distribution growth of 25% for 2017 and at least 20% for 2018.
Upon closing, the Partnership plans to enter into separate 10 year terminaling and transportation agreements with Valero. The agreements are each expected to include minimum volume commitments covering approximately 85% of expected throughput.
The terms of the transaction were approved, subject to the execution of definitive documentation, by the board of directors of VLP’s general partner, following the approval and recommendation of the board’s conflicts committee. The conflicts committee is composed of independent directors and was advised by Evercore Group L.L.C., its financial advisor, and Akin Gump Straus Hauer & Feld LLP, its legal counsel.
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