Valero forming MLP for logistics assets

Valero Energy Corp. plans to make good on its promises to form a master limited partnership to be composed of its logistics assets.

A Valero subsidiary, Valero Energy Partners LP, filed a document with regulators Thursday to raise as much as $345 million through an initial public offering. The number of shares to be issued and their price wasn’t announced.

Valero Energy CEO Bill Klesse said earlier this year that the independent refining company, the nation’s largest, was considering forming a logistics-based partnership.
The move still requires formal board approval.

Leadership for the partnership hasn’t been decided, Valero spokesman Bill Day said, nor has the location of its main office.

“For now, it’s safe to assume everything will be housed at the Valero headquarters,” Day said.

Assets in the partnership would include crude and refined-products pipelines and terminals in three systems, which serve Valero’s Port Arthur refinery, its McKee plant in the Panhandle and its Memphis refinery, according to the document.

“We believe that each of these refineries is well positioned in the markets that it serves and is critical to Valero’s long-term strategy,” the company said in a document filed with the Securities and Exchange Commission.

Also, for a five-year period, the partnership will have the right of first refusal to acquire certain other transportation and logistics assets owned by Valero.

For the six months ended June 30, the partnership was calculated to have had revenue of $46.4 million and net income of $22.7 million.
The partnership’s common units will trade under the ticker “VLP” on the New York Stock Exchange.

Harold York, principal analyst for oil research at the Houston office of Wood Mackenzie Ltd., said master limited partnerships “normally are a benefit for shareholders because the master limited partnership can be structured in a tax-advantaged way.”

Most master limited partnerships pay out a large portion of their cash flow to stockholders.

Valero said the sale of the company’s units to the public would begin as soon as possible after the registration statement becomes effective.

Earlier this year, Valero spun off its retail stores to form CST Brands Inc., which immediately ranked second among North America’s publicly traded sellers of fuel and convenience store merchandise.

Also, in 2011, another home-grown refiner, Tesoro Corp., spun off part of its logistics business in an initial public offering creating Tesoro Logistics LP, also a publicly traded master limited partnership.