DBRS Comments on Inter Pipeline Ltd.’s Acquisition of European Bulk Liquid Storage Business

DBRS Limited (DBRS) notes that Inter Pipeline Ltd. (IPL or the Company; rated BBB with Stable trends by DBRS) has announced that its European subsidiary, Inter Terminals Ltd., has entered into an agreement to acquire 100% of the issued share capital of NuStar Energy, L.P.'s European bulk liquid storage business (NuStar Europe) for USD 270 million, or approximately $354 million. IPL plans to fund the acquisition with proceeds from a $200 million equity issue and available capacity on its $1.5 billion committed revolving facility. The transaction is expected to close in Q4 2018.

DBRS views the acquisition as being credit neutral and notes that the acquisition adds scale and complements IPL’s existing European suite of bulk liquids storage assets. NuStar Europe operates as storage and blending hubs for the transshipment of refined products as well as the inland distribution of petroleum and petrochemical products through seven terminals totalling 9.1 million barrels of storage strategically located along key waterways in Amsterdam and the United Kingdom. Historic storage utilization rates have averaged approximately 85%, and IPL expects the acquisition to add approximately $40 million in EBITDA 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.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The principal methodologies are Rating Companies in the Pipeline and Diversified Energy Industry (December 2017) and Rating Companies in the Oil and Gas and Oilfield Services Industries (August 2018), which can be found on dbrs.com under Methodologies.

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