Tulsa-based NGL Energy Partners LP announced it has signed an agreement to sell its remaining Retail Propane business to Superior Plus Corp. in a $900 million deal.
It means NGL Energy Partners is getting completely out of the retail propane business and plans to “re-deploy” its capital at a higher rate of return in its Water solutions and Crude Logistics businesses.
Superior Plus Corp. is a Canadian firm based in Toronto.
NGL indicated its water and logistics operations in the Delaware Basin in Texas and the DJ basin in northern Colorado offer far better returns than the retail propane business.
“The acquisition of NGL Propane is a highly strategic and transformative transaction for Superior and represents an exciting opportunity to leverage our current core competencies and integrated supply capacities with NGL Propane’s strong Eastern U.S. retail platform,” said Luc Desjardins, CEO of Superior. “The acquisition of NGL Propane significantly expands our U.S. propane distribution business and solidifies Superior as a leading North American propane distributor. I am looking forward to working with the management and employees of NGL Propane and the many brands it operates under.”
The deal should be finalized in about 60 days and according to the announcement will represent a more than 10 times fiscal 2018 adjusted EBITDA. The company intends to use the proceeds to reduce leverage and enhance liquidity.
The move to exit the retail propane business will narrow NGL’s operations to four segments but Crude Logistics and Water Solutions will remain the primary growth platforms. The company also indicated the exit will greatly reduce the seasonality and weather-dependence of NGL’s earnings and reduce maintenance capital expenditures by nearly $10 million a year.
“Retail Propane has been a stable asset for NGL and has grown through bolt-on acquisitions over time, but it is not a growth driver for the Partnership in the future. The $900 million sales price for our remaining propane assets allows for significant deleveraging of our balance sheet and positions us to focus on, and reinvest in, our two largest growth platforms which are Crude Logistics and Water Solutions,” stated Mike Krimbill, CEO of NGL.
“The recent divestitures of all of the Partnership’s retail propane assets generated over $1.1 billion of gross cash proceeds, which equates to a 2018 EBITDA multiple of over 10x,” stated Trey Karlovich, CFO of the Partnership. “The energy infrastructure investor base is calling for a self-funding model and this sale transaction strengthens our balance sheet and allows us to fund all of our near-term internal growth prospects without relying on the equity or debt capital markets.”
NGL leadership indicated the company will immediately repay certain indebtedness of about $800 million which includes capital expenditures through the first quarter of fiscal 2019. The rest will be aimed at the near-term growth opportunities, primarily the Water Solutions segment.
NGL Propane sells propane and distillates to over 316,000 residential, commercial and industrial customers. NGL Propane, with over 1,000 employees in 151 locations (including 61 satellite distribution locations) and a fleet in excess of 1,000 trucks, services 22 states in the Northeast U.S., Southeast U.S. and Upper Midwest U.S. NGL Propane, trades under prominent regional brands, including Osterman Propane, Downeast Energy, Eastern Propane, Atlantic Propane, Anthem Propane, Gas Inc. and Brantley Gas.