Inter Pipeline Announces Acquisition of Multinational European Bulk Liquid Storage Business

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CALGARY, Oct. 30, 2018 /CNW/ - Inter Pipeline Ltd. ("Inter Pipeline") (TSX: IPL) announced today that its European storage subsidiary, Inter Terminals Ltd., has entered into an agreement to acquire 100 percent of the issued share capital of NuStar Energy, L.P.'s European bulk liquid storage business ("NuStar Europe") for cash consideration of USD$270 million, or approximately CAD$354 million. The transaction is expected to close in the fourth quarter of 2018 and is subject to customary closing conditions.

"The addition of NuStar Europe is an exciting step forward for our European bulk liquid storage business," commented Christian Bayle, Inter Pipeline's President and Chief Executive Officer. "The acquisition materially increases our overall storage capacity and establishes Inter Terminals as the largest independent storage operator in the United Kingdom.  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."

Transaction Highlights

NuStar Europe consists of seven coastal terminals totaling 9.1 million barrels of storage. One terminal is located in Amsterdam, Netherlands with the remaining facilities located in the United Kingdom (UK) near London, Runcorn, Eastham, Grangemouth, Clydebank and Belfast.

Key investment highlights related to the acquisition:

• High-quality, modern asset base of 321 tanks serving a diversified customer base, including integrated oil companies, chemical companies and major petroleum traders;
  
  
• Cost-of-service and fee-based storage business primarily focused on inland distribution and blending of petroleum and petrochemical products;
  
  
• Stable cash flows not materially impacted by backwardated commodity markets, historically;
  
  
• Historically strong utilization rates, averaging approximately 85 percent over the past three years;
  
  
• All terminals are strategically located along key waterways with proximity to large metropolitan areas, an important competitive advantage;
  
  
• Increases Inter Terminal's storage capacity by approximately 33 percent to 37 million barrels; and
  
  
• Strong integration potential with Inter Terminal's existing terminals in the UK, resulting in enhanced product storage and custom blending solutions for customers.

Business Overview

The NuStar Europe terminals operate as storage and blending hubs for the trans-shipment of refined products as well as the inland distribution of petroleum and petrochemical products. These facilities are well-positioned to facilitate the regional movement of products driven by the significant imbalances that exist between supply sources and demand locations.

In the UK, the 1.9 million barrel Grays terminal is strategically located on the River Thames and serves the greater London area. Grays is a key regional supply point, responsible for handling approximately 17 million barrels of refined products per year, and provides cost effective access to London's fuel distribution network. The 49 tank terminal has averaged approximately 100 percent utilization over the past three years.

The 3.8 million barrel state-of-the-art terminal in Amsterdam, Netherlands plays a key role in the Port of Amsterdam with approximately 10 percent of the independent storage capacity. The terminal provides gasoline, gas oil and fuel oil storage, and blending services, including those required to produce IMO 2020 compliant marine fuels. The 44 tank facility has averaged approximately 100 percent utilization over the past three years.

The smaller terminals at Belfast, Eastham, Grangemouth, Runcorn and Clydebank in the UK primarily support the distribution of petrochemicals, gasoline, diesel and sulphur to regional demand centres.

Cash flow in the business is supported by cost-of-service and fixed-fee contracts with major integrated oil companies, petrochemical companies and petroleum traders with terms typically ranging from one to five years. Additional revenue is generated through ancillary services such as product blending and throughput fees.

Historically, the business has experienced a high contract renewal rate with its customers. Storage utilization rates averaged approximately 90 percent in the first half of 2018.

Financial Performance

NuStar Europe has delivered stable financial results despite a challenging European storage market in recent years.

Inter Pipeline expects this business to continue providing reliable results, generating approximately CAD$40 million in average annual EBITDA, over the next several years. This implies a purchase price multiple of approximately 8.9 times future EBITDA.

Acquisition Financing

Inter Pipeline is committed to maintaining a strong balance sheet and financial flexibility. As such, funding for this acquisition will be provided by proceeds from a common share issuance and available capacity on its $1.5 billion committed revolving credit facility. No third party debt will be assumed under the terms of the transaction. 

Concurrent with the acquisition, Inter Pipeline has entered into an agreement with a syndicate of underwriters whereby they will purchase from Inter Pipeline, on a bought deal basis, 9.62 million common shares at a price of $20.80 per common share for total gross proceeds of approximately $200 million (the "Offering"). The common shares will be issued under Inter Pipeline's short form base shelf prospectus dated January 18, 2018, and a prospectus supplement to such short form base shelf prospectus to be filed on or before October 31, 2018 in each of the provinces of Canada. The Offering is being led by TD Securities Inc. as the sole bookrunner, and co-led by BMO Capital Markets.

The offering of common shares is expected to close on or about November 7, 2018, subject to customary closing conditions and regulatory approvals.

This news release is not an offer of securities for sale in the United States. The securities being offered have not been and will not be registered under the United States Securities Act of 1933, as amended (the "Securities Act"), or any state securities laws and accordingly are not being offered for sale and may not be offered, sold or delivered, directly or indirectly within the United States, its possessions and other areas subject to its jurisdiction, except pursuant to an exemption from the registration requirements of the Securities Act.

Investor Presentation

For further information on the NuStar Europe acquisition, please refer to a slide presentation available on Inter Pipeline's website at www.interpipeline.com or at www.sedar.com.

About Inter Pipeline Ltd.

Inter Pipeline is a major petroleum transportation, natural gas liquids processing, and bulk liquid storage business based in Calgary, Alberta, Canada. Inter Pipeline owns and operates energy infrastructure assets in western Canada and Europe. Inter Pipeline is a member of the S&P/TSX 60 Index and its common shares trade on the Toronto Stock Exchange under the symbol IPL.  www.interpipeline.com

Contact Information

Investor Relations:
Jeremy Roberge
Vice President, Finance and Investor Relations
Email: [email protected]
Tel:  403-290-6015 or 1-866-716-7473

Media Relations:
Steven Noble
Senior Communications Advisor
Email: [email protected]
Tel: 403-717-5725

Disclaimer

Certain information contained herein may constitute forward-looking statements that involve risks and uncertainties. Readers are cautioned not to place undue reliance on forward-looking statements, including, but not limited to, statements regarding the anticipated benefits of the NuStar Europe acquisition and growth opportunities associated with the NuStar Europe acquisition including, without limitation, NuStar Europe's annual average EBITDA over the next several years,, the completion, size, funding and timing of the NuStar Europe acquisition and the completion, size and timing of the offering of common shares. Such statements reflect the current views of Inter Pipeline with respect to future events and are subject to certain risks, uncertainties and assumptions that could cause the results of Inter Pipeline to differ materially from those expressed in the forward-looking statements. Factors that could cause actual results to vary from forward-looking information or may affect the operations, performance, development and results of Inter Pipeline's businesses include, among other things: risks relating to closing of the NuStar Europe acquisition; the potential for undisclosed liabilities associated with the NuStar Europe acquisition and realizing the expected benefits from the NuStar Europe acquisition; risks and assumptions associated with operations, such as Inter Pipeline's ability to successfully implement its strategic initiatives and achieve expected benefits. With respect to the anticipated benefits from the NuStar Europe acquisition and statements with regards to NuStar Europe's annual average EBITDA over the next several years, such factors also include, but are not limited to: synergies may not be realized in the time frame anticipated, the ability to promptly and effectively integrate the businesses, reputational risks, and diversion of management time on acquisition-related matters. Such information, although considered reasonable by Inter Pipeline at the time of preparation, may later prove to be incorrect and actual results may differ materially from those anticipated in the statements made. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements often contain terms such as "may", "will", "should", "anticipate", "expects" and similar expressions. Such risks and uncertainties include, but are not limited to, risks associated with operations, such as loss of markets, regulatory matters, environmental risks, industry competition, potential delays and cost overruns of construction projects, and the ability to access sufficient debt or equity capital from internal and external sources. You can find a discussion of those risks and uncertainties in Inter Pipeline's securities filings at www.sedar.com. The forward-looking statements contained in this news release are made as of the date of this document, and, except to the extent required by applicable securities laws and regulations, Inter Pipeline assumes no obligation to update or revise forward-looking statements made herein or otherwise, whether as a result of new information, future events, or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary note.

Certain financial measures referred to in this news release including EBITDA are not measures recognized by Canadian generally accepted accounting principles (GAAP), as outlined in the Chartered Professional Accountant (CPA) Handbook Part I, and used by management to evaluate the performance of Inter Pipeline and its business segments. Since certain non-GAAP financial measures may not have a standardized meaning, securities regulations require that non-GAAP financial measures are clearly defined, qualified and reconciled with their nearest GAAP measure. See the "Non-GAAP Financial Measures" section in Inter Pipeline's most recently filed management's discussion and analysis available at www.sedar.com for further information on the definition, calculation and reconciliation of non-GAAP financial measures.

All dollar values are expressed in Canadian dollars unless otherwise noted. 

SOURCE Inter Pipeline Ltd.