VTTI Energy Partners LP raised almost $400 million with its recent IPO, becoming the first foreign entity MLP with land-based fixed assets to do so. Investors took note and the unit price quickly jumped on news of the filing from $21 to $22.85.
The London-based MLP grew out of a terminal project in Rotterdam, The Netherlands, in 2006. Backed by Swiss-based multinational energy and commodity trader Vitol and the Malaysian International Shipping Corp., the Rotterdam project went on to become an 8 million barrel (MMbbl) facility. VTTI became official in April.
“These two shareholders give us a really global reach with insight into the complete value chain,” said VTTI CEO Robert Nijst. Nijst told Midstream Business that VTTI plans to use the funds for more of the same work: acquire, grow and acquire some more. VTTI has terminal facilities all over the world, including Amsterdam, Belgium, the United Arab Emirates and the U.S. VTTI’s terminal near Orlando, Fla., accounts for about 10% of its operations.
Looking forward, Nijst said, VTTI has some greenfield plans on the drawing board. One of them, a project in South Africa to build an 800,000 bbl import facility, recently won approval. Today, VTTI has terminal and storage capacity for more than 50 MMbbl.
“But at the same time, with the cash flow available to the company, we will look for assets to buy. The pipeline of projects to replenish some of the projects that we want to offer later on in the MLP is sizable,” he said. “Look at the opportunity. We started with one customer and one shareholder, which was Vitol, and we’ve really been able to design terminals to the needs of a very demanding trader who has outlets all over the world. As a result of that, we’ve been able to build—in all of these new projects that we’ve built around the world—projects that are highly flexible, highly efficient and with massive interconnectivity into our terminal.”
VTTI will continue to look for opportunities in the U.S. market, Nijst said, but there is significant competition for assets.
“Since 2007, I’ve tried to get into the U.S., but the U.S. is a very competitive market in the midstream business. So that multiplies what people need to pay here in the U.S. It’s a bit higher than what you typically see outside the U.S.,” Nijst explained. “When we started to investigate the U.S. market, the MLPs really took off and there was a confluence in the market.”
While the publicly traded MLP formula has worked well for shipping companies such as Navios Maritime Partners LP and Global Partners LP, those are marine assets that travel and aren’t necessarily connected to just one place.
“The great thing about an MLP is it doesn’t pay tax at the entity level when it operates in the U.S. and satisfies the MLP rules,” said Michael Bresson, a partner in the Houston office of Baker Botts LLP.
For now, VTTI’s terminals present a unique opportunity for investors in the midstream space.
“The purpose is not only to grow our own footprint going forward, but also to take all these MLP investors with us on this journey,” he said. “MLP investors have traditionally been investing within the U.S. This gives them the [opportunity] to grow with an MLP outside the U.S. with the same efficient capital structure as being involved in the U.S.”
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