SunCoke Energy Inc. Completes Granite City Dropdown Transaction
01/19/2015 - On 13 January 2015, SunCoke Energy Inc. (SXC) closed on its agreement with SunCoke Energy Partners L.P. (SXCP) to contribute a 75% interest in its Granite City, Ill., cokemaking facility for a total transaction value of US$245 million.
SXC is the sponsor, general partner with a 2% general partner interest, and largest unitholder of SXCP.
As a result of this agreement, SXC received a total transaction value of US$245 million, including US$1 million of general partner interest and US$50.6 million of SXCP limited partner interest, which raised SXC’s total limited partner interest in SXCP from 54% to 56%. SXC continues to hold all of SXCP’s incentive distribution rights.
In addition, SXCP assumed US$135 million principal amount of SXC’s senior notes. SXCP is expected to call these notes for redemption and expects to pay US$5.6 million of accrued interest to the date of redemption and a call premium of US$7.7 million. Approximately US$45 million of the transaction value will be used to pre-fund SXC’s obligation to indemnify SXCP for the anticipated cost of an environmental project at Granite City.
Total transaction costs, primarily incurred by SXCP and expected to be recognized in first quarter 2015, are approximately US$6 million.
The Granite City cokemaking facility, which began operations in 2009, has annual cokemaking capacity of 650,000 tons and produces super-heated steam for power generation. Both the coke and power is provided to United States Steel Corporation under a long-term take-or-pay contract that expires in 2025. In 2014, the Granite City facility produced an estimated 689,000 tons of coke and is expected to contribute US$35 million to US$40 million to 2014 consolidated Adjusted EBITDA. Ongoing capital expenditures at this facility are estimated to be nearly US$4 million in 2014.
As a result of this agreement, SXC received a total transaction value of US$245 million, including US$1 million of general partner interest and US$50.6 million of SXCP limited partner interest, which raised SXC’s total limited partner interest in SXCP from 54% to 56%. SXC continues to hold all of SXCP’s incentive distribution rights.
In addition, SXCP assumed US$135 million principal amount of SXC’s senior notes. SXCP is expected to call these notes for redemption and expects to pay US$5.6 million of accrued interest to the date of redemption and a call premium of US$7.7 million. Approximately US$45 million of the transaction value will be used to pre-fund SXC’s obligation to indemnify SXCP for the anticipated cost of an environmental project at Granite City.
Total transaction costs, primarily incurred by SXCP and expected to be recognized in first quarter 2015, are approximately US$6 million.
The Granite City cokemaking facility, which began operations in 2009, has annual cokemaking capacity of 650,000 tons and produces super-heated steam for power generation. Both the coke and power is provided to United States Steel Corporation under a long-term take-or-pay contract that expires in 2025. In 2014, the Granite City facility produced an estimated 689,000 tons of coke and is expected to contribute US$35 million to US$40 million to 2014 consolidated Adjusted EBITDA. Ongoing capital expenditures at this facility are estimated to be nearly US$4 million in 2014.
