LISLE, Ill.– SunCoke Energy, Inc. (SXC) on Monday entered into an agreement with SunCoke Energy Partners, L.P. (SXCP) to contribute a 75 percent interest in its Granite City, Ill., cokemaking facility with a total transaction value of $245 million.
Approximately $45 million of the transaction value will be used to pre-fund a future environmental project at Granite City, SXC said.
SXC is the sponsor, general partner with a 2 percent general partner interest, and largest unitholder of SXCP, holding a 54 percent 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 SunCoke Energy, Inc. “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 $245 million, including $50.6 million of SXCP limited partner interest and $1 million of general partner interest.
In addition, SXCP intends to assume $135 million principal amount of SXC’s outstanding senior notes and pay $5.6 million of accrued interest on these notes. SXCP is expected to call these notes for redemption and pay a call premium of $7.7 million.
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 $35 million to $40 million to 2014 consolidated Adjusted EBITDA. Ongoing capital expenditures at this facility are estimated to be nearly $4 million in 2014. Based on the transaction value expected to be received, this represents an approximate 8.0x multiple on 75 percent of Granite City’s estimated 2015 Adjusted EBITDA of approximately $40 million.
The closing of this agreement is subject to customary closing conditions for such transactions, the companiy said.