Inter buys NuStar’s European sites

SEEKING SYNERGY

ACQUISITION • INTER TERMINALS’ PLANNED PURCHASE OF NUSTAR EUROPE WILL GIVE IT A DOMINANT POSITION IN THE UK AND ADD A MAJOR FACILITY IN AMSTERDAM

INTER TERMINALS HAS agreed to acquire NuStar Energy LP’s European bulk liquids storage business for $270m (C$354m) cash. The transaction is expected to close before the end of 2018. “The addition of NuStar Europe is an exciting step forward for our European bulk liquid storage business,” says Christian Bayle, president/CEO of Inter Pipeline Ltd, Canadabased parent of Inter Terminals.

“The acquisition materially increases our overall storage capacity and establishes Inter Terminals as the largest independent storage operator in the UK,” Bayle adds. “Furthermore, the transaction provides an attractive entry into the Port of Amsterdam. The Port is the world’s largest gasoline blending hub and has experienced significant storage growth over the years.”

“Our European assets are not synergistic with our other operations and this divestiture is a critical step in the implementation of a comprehensive plan launched earlier this year to position NuStar to successfully de-lever and deliver strong, sustainable distribution coverage for the future,” says NuStar’s president and CEO Brad Barron.

The deal will increase Inter Terminals’ total storage capacity by some 33 per cent to 37m bbl (5.25m m³). It will be financed by proceeds from a common share issuance, expected to raise $200m, together with funds from Inter Pipeline’s existing borrowing arrangements.

WHAT’S IN THE DEAL NuStar Europe has seven coastal terminals in its portfolio with an aggregate capacity of 9.1m bbl (1.45m m³), of which six are in the UK. Inter Pipeline says the acquisition will give it a high-quality, modern asset base of 321 storage tanks serving a diversified range of customers that include integrated oil companies, chemical producers and major petroleum traders.

Furthermore, Inter identifies that the NuStar business, which is largely fee-based and focused on inland distribution and the blending of petroleum and petrochemical products, offers stable cash flows that, historically, have not been “materially impacted by backwardated commodity markets”. Capacity utilisation rates have also been strong, averaging around 85 per cent over the past three years and running at some 90 per cent in the first half of 2018.

“NuStar Europe has delivered stable financial results despite a challenging European storage market in recent years,” Inter Terminals adds.

The jewel in the NuStar Europe crown is the 3.8m-bbl (600,000-m³) Amsterdam terminal, which represents some 10 per cent of the port’s independent storage capacity. The terminal provides gasoline, gas oil and fuel oil storage and blending services, including those required to produce marine fuels needed to comply with the International Maritime Organisation’s (IMO) rules on sulphur content that take effect in 2020. The 44-tank facility has averaged approximately 100 per cent utilisation over the past three years.

The largest terminal in the UK is the 1.9m-bbl (300,000-m³) Grays terminal in Essex. Situated on the Thames estuary, the facility serves the greater London area and is seen as a key regional supply point, handling some 17m bbl (2.7m m³) of refined products a year. The 49-tank terminal has also averaged 100 per cent capacity utilisation over the past three years.

NuStar Europe also has smaller terminals at Belfast, Eastham, Grangemouth, Runcorn and Clydebank, primarily supporting the distribution of petrochemicals, gasoline, diesel and sulphur to regional demand centres.

NuStar’s European terminals were acquired as part of its takeover of ST Services, which itself was formed from the divestment by GATX of its bulk liquids terminal business in 2000.

Inter Terminals’ existing European network consists of 16 bulk liquids facilities in the UK, Ireland, Germany, Denmark and Sweden. HCB www.interterminals.com