Valero (NYSE:VLI)
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Pacific Energy Partners, L.P. (NYSE:PPX) ("Pacific")
announced that one of its wholly-owned subsidiaries has signed a
definitive agreement to acquire certain terminal and pipeline assets
from subsidiaries of Valero L.P. (NYSE:VLI), consisting of two
California terminals handling refined products, blend stocks, and
crude oil, three East Coast refined products terminals, and a 550-mile
refined products pipeline with four truck terminals and storage in the
U.S. Rocky Mountains. The total purchase price of the assets is $455
million. Pacific expects to fund the acquisition on a permanent basis
by issuing common units for approximately 60 - 65% of the acquisition
price and debt securities for approximately 35 - 40% of the
acquisition price. The transaction is subject to the receipt of
regulatory approvals and is expected to close within the next 90 days.
Valero L.P. is required to divest these assets pursuant to an order
from the Federal Trade Commission in connection with its acquisition
of the Kaneb group of companies.
"The acquisition of these premium assets enhances Pacific's asset
class and geographic diversity and further strengthens our focus on
stable, fee-based assets with no direct commodity price exposure,"
stated Irv Toole, President and Chief Executive Officer of Pacific.
"These assets are in growing markets, provide diversification into
refined products service, which has been one of Pacific's growth
objectives, and have significant near term expansion opportunities.
Pacific's management team has substantial experience operating refined
products assets, and we are confident we can promptly and efficiently
integrate these assets with Pacific's existing operations. The
transaction will be immediately accretive to cash available for
distribution to our limited partners."
Curt Anastasio, President and Chief Executive Officer of Valero
L.P., stated, "Divesting these assets quickly, at a favorable price
and with favorable conditions is a win-win situation for everyone. It
is great news for our unitholders because we plan to use the proceeds
from the divestiture to pay down debt, strengthening our balance sheet
and positioning the partnership for future growth opportunities. It's
also great news for the employees and the community because Pacific
Energy Partners, L.P., is a good company with a strong commitment to
safety and the environment. And they have committed to hiring all
employees and providing them with comparable pay, benefits and
employment opportunities. For all of these reasons, we anticipate that
it will be a very smooth transition for everyone.
"Additionally, as we said on July 1 when we announced the
completion of the Kaneb acquisition, we will now recommend to our
board of directors an increase in the annual distribution rate from
$3.20 per unit to $3.42 per unit," Mr. Anastasio added.
The terminals and pipeline system being acquired by Pacific from
Valero L.P. include:
-- West Coast Terminals in the San Francisco, California area -
The Martinez Terminal and the Richmond Terminal, which have
4.1 million barrels of combined storage capacity, are located
on approximately 147 acres of company-owned land, providing
ample room for additional tankage. These terminals have
marine, pipeline and rail access.
-- East Coast Terminals in the Philadelphia, Pennsylvania area -
The North Philadelphia Terminal, the South Philadelphia
Terminal and the Paulsboro, New Jersey Terminal, which have a
combined storage capacity of 3.2 million barrels, are located
on approximately 102 acres of company-owned land, also
providing room for additional tankage. These terminals have
marine and pipeline access.
-- West Pipeline System in the U.S. Rocky Mountains - This system
consists of 550 miles of refined products pipeline extending
from Casper, Wyoming east to Rapid City, South Dakota and
south to Colorado Springs, Colorado. In addition, there are
products terminals at Rapid City, South Dakota, Cheyenne,
Wyoming, and Denver and Colorado Springs, Colorado with a
combined storage capacity of 1.7 million barrels.
For full year 2006, for the acquired assets, Pacific is
forecasting EBITDA (earnings before interest, taxes, depreciation and
amortization expense) of approximately $42 million. Sustaining capital
expenditures are expected to be $2.0 - 2.5 million per year. Pacific
has identified numerous growth initiatives which it would expect to
undertake during the next three years, beginning in 2006, at an
aggregate capital cost of approximately $40 million.
Management of the general partner of Pacific is expected to
recommend to its Board of Directors that upon completion of the
acquisition, Pacific should increase its cash distribution by $0.12
per common unit annually, or $0.03 per quarter, a 5.9% increase over
the cash distribution paid for the quarter ended March 31, 2005. This
increase, if approved, would be payable for the first full quarter
following the closing of the acquisition. The increased cash
distribution rate would equal an annual rate of $2.17 per common unit.
In addition, the growth initiatives to be undertaken over the next
three years will provide significant accretion beyond this level.
Lehman Brothers Inc. served as exclusive financial advisor to
Pacific with respect to the acquisition. Pacific has received $700
million in financing commitments from Bank of America, N.A. and Lehman
Brothers Inc. These commitments include a new five-year $400 million
secured revolving credit facility, which would partly fund the
acquisition as well as repay and replace Pacific's existing U.S. and
Canadian revolving credit facilities, which would have matured in
mid-2007. These commitments also include a $300 million, 364-day
secured bridge credit facility, which would only be used to fund the
acquisition if permanent financing has not yet been obtained by the
closing date.
CONFERENCE CALL AND WEBCAST INFORMATION
Pacific will host a conference call at 2:00 p.m. EDT (11:00 a.m.
PDT) on Tuesday, July 5, 2005, to discuss the specific aspects of the
acquisition.
To participate in the call, please call (800) 260-8140 or, for
international callers, (617) 614-3672 and the pass code is 54622568.
You may also listen to the live broadcast on www.PacificEnergy.com (go
to "Investor Info"). The call, with questions and answers, will
continue to be available on Pacific's web site following the call. A
replay of the call will be available for one week at (888) 286-8010
and the passcode is 48087319.
About Pacific:
Pacific Energy Partners, L.P. is a master limited partnership
headquartered in Long Beach, California. Pacific is currently engaged
in the business of gathering, transporting, storing and distributing
crude oil and other related products in California and the Rocky
Mountain region, including Alberta, Canada. Pacific generates revenues
today by transporting crude oil on its pipelines and by leasing
capacity in its storage facilities. Pacific also buys, blends and
sells crude oil, activities that are complementary to its pipeline
transportation business.
This news release may include "forward-looking" statements within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements other than statements of historical fact included or
incorporated herein may constitute forward-looking statements.
Although Pacific believes that the forward-looking statements are
reasonable, it can give no assurance that such expectations will prove
to be correct. The estimates associated with the acquisition are based
on facts known at the time of estimation and Pacific's assessment of
the ultimate outcome. The achievement of the forecast 2006 EBITDA is
dependent on many factors, including the timely construction and
leasing of additional storage tanks. The forward-looking statements
involve risks and uncertainties that may affect Pacific's operations
and financial performance. Among the factors that could cause results
to differ materially are those risks discussed in Pacific's filings
with the Securities and Exchange Commission, including its Annual
Report on Form 10-K for the year ended December 31, 2004.
EBITDA is used as a supplemental financial measure by management
and by external users of Pacific's financial statements, such as
investors, commercial banks, research analysts and rating agencies, to
assess: (i) the financial performance of the partnership's assets
without regard to financing methods, capital structures or historical
cost basis; (ii) the ability of the partnership's assets to generate
cash sufficient to pay interest cost and support the partnership's
indebtedness; (iii) Pacific's operating performance and return on
capital as compared to those of other companies in the midstream
energy sector, without regard to financing and capital structure; and
(iv) the viability of projects and the overall rates of return on
alternative investment opportunities. EBITDA is not a generally
accepted accounting principle ("GAAP") financial measure and should
not be considered as an alternative to net income, income before
taxes, cash flows from operating activities, or any other measure of
financial performance presented in accordance with GAAP. EBITDA is not
intended to represent cash flow. Pacific's EBITDA may not be
comparable to EBITDA or similarly titled measures of other companies.
Pacific is forecasting 2006 cash flow from operating activities, for
the acquired assets, of $31 million, based on its projected EBITDA of
$42 million less projected interest expense of $11 million from the
debt component of the financing for the acquisition. Interest expense
will vary for many reasons, including general market conditions and
the nature of the permanent debt financing that Pacific undertakes.
Cash flow from operating activities is a GAAP financial measure.
For additional information about Pacific Energy, please visit our
website at www.PacificEnergy.com.