SunCoke Energy Inc. to Drop Down 75% Interest in Granite City Cokemaking Facility
01/13/2015 - On 12 January 2015, SunCoke Energy Inc. (SXC) entered into a definitive agreement with SunCoke Energy Partners L.P. (SXCP) to contribute a 75% interest in its Granite City, Ill., cokemaking facility with 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, holding a 54% limited partnership interest and all the incentive distribution rights.
“Today’s transaction aligns with our long-term vision to transform SXC to a pure-play C-Corp general partner,” said Fritz Henderson, chairman and chief executive officer of SXC. “In addition to de-levering SXC’s balance sheet, we believe this transaction will benefit SXC investors by increasing our ownership interest in SXCP at an attractive valuation and the associated opportunity to receive higher future cash distributions from SXCP, including incentive distribution rights payments.”
As a result of the agreement, SXC expects to recognize a total transaction value of US$245 million, including US$50.6 million of SXCP limited partner interest and US$1 million of general partner interest. In addition, SXCP intends to assume US$135 million principal amount of SXC’s outstanding senior notes and pay US$5.6 million of accrued interest on these notes. SXCP is expected to call these notes for redemption and pay a call premium of US$7.7 million. Approximately US$45 million of the transaction value will be used to pre-fund a future environmental project at Granite City. Based on the transaction structure, SXC anticipates no material immediate tax impact.
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. Based on the transaction value expected to be received, this represents an approximate 8.0x multiple on 75% of Granite City’s estimated 2015 Adjusted EBITDA of approximately US$40 million.
The closing of this agreement is subject to customary closing conditions for such transactions.
“Today’s transaction aligns with our long-term vision to transform SXC to a pure-play C-Corp general partner,” said Fritz Henderson, chairman and chief executive officer of SXC. “In addition to de-levering SXC’s balance sheet, we believe this transaction will benefit SXC investors by increasing our ownership interest in SXCP at an attractive valuation and the associated opportunity to receive higher future cash distributions from SXCP, including incentive distribution rights payments.”
As a result of the agreement, SXC expects to recognize a total transaction value of US$245 million, including US$50.6 million of SXCP limited partner interest and US$1 million of general partner interest. In addition, SXCP intends to assume US$135 million principal amount of SXC’s outstanding senior notes and pay US$5.6 million of accrued interest on these notes. SXCP is expected to call these notes for redemption and pay a call premium of US$7.7 million. Approximately US$45 million of the transaction value will be used to pre-fund a future environmental project at Granite City. Based on the transaction structure, SXC anticipates no material immediate tax impact.
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. Based on the transaction value expected to be received, this represents an approximate 8.0x multiple on 75% of Granite City’s estimated 2015 Adjusted EBITDA of approximately US$40 million.
The closing of this agreement is subject to customary closing conditions for such transactions.
