Growth MLPs like Valero Energy Partners will continue
to see interest from investors as it gets harder and
harder for mature MLPs to move the needle.
The partnership recently announced its first
acquisition from parent company Valero (NYSE: VLO).
Let’s take a closer look.
Why Valero Energy Partners?
Like any deal, investors need to know a few things:
• Which assets?
• How much did the deal cost?
• How will the deal be funded?
• How long will it take the acquisition to pay for
What are we looking for?
• 72,000 bpd
• 200 miles of pipe
• 20 oil truck
• 240,000 bbls of
The McKee Crude
• Located in the
• 11 oil truck
• 1 mile pipe:
• 30-mile pipe:
• 180,000 barrels
• Deal closes July 1
• Assets supported by 10-year transportation and
• Minimum throughput agreements account for
90% of expected volume.
Where’s the money coming from?
The deal will be funded by cash on hand
(which means it won’t dilute current unitholders,
nor will VLP have to issue debt.)
The assets are expected to contribute EBITDA of
$15.4 million in their first full year of operation.
Given the $154 million price tag, this deal has
an EBITDA multiple of 10x, meaning it will take
10 years for these assets to pay for themselves.
Let’s compare this deal to
Phillips 66 Partners’ first deal to
give the acquisition some context.
180,000 bbls storage
4.3 million bbls storage
Price $154 million $700 million
10x 10x – 10.7x*
*PSXP gave a range of expected EBITDA for the first full year of operations for its acquisition.
A 10x EBITDA multiple seems to be the norm with
these dropdowns. Tesoro Logistics paid something
similar for one of its dropdowns last year as well.
So far, Valero Energy Partners seems to be sticking to
close to the MLP-spinoff pack.
Solid first acquisition for VLP:
Filling out its asset footprint at a reasonable price
What to watch:
How much EBITDA does this system actually
generate for VLP? Q3, Q4 earnings will be telling.