Keyera Corp. (TSX:KEY) (TSX:KEY.DB.A) entered into an agreement to purchase Alberta EnviroFuels (AEF), an iso-octane manufacturing business jointly owned by Chevron Standard Ltd. and Neste Canada Inc. Iso-octane is a low-emission, high-octane gasoline-blending component derived from butane, a key component of Keyera’s natural gas liquids business.
The acquisition includes a 13,600 barrel per day iso-octane manufacturing facility located south of Keyera’s Edmonton Terminal; pipelines associated with the facility; and isooctane sales agreements with major refiners. Keyera has also entered into multiyear agreements with Chevron and its affiliates relating to sales, transportation, downstream processing and shipping of iso-octane. The purchase price is US$198 million, subject to closing adjustments, plus working capital estimated at US$50 million primarily related to butane and iso-octane inventories. Closing of the acquisition is subject to regulatory approvals. Keyera is targeting closing in early 2012 and has the capacity to finance the acquisition with its recently increased bank credit facility.
“AEF is another long-term, strategic asset that will add value to our integrated business strategy,” said Jim Bertram, chief executive of Keyera Corp. “We are experienced operators of large facilities and have a successful track record marketing energy products across North America. AEF is a world-class asset and the personnel joining our team will be a great addition to our organization.”
AEF is the largest iso-octane manufacturing facility in the world. The facility uses butane as the primary feedstock and is connected by pipeline through Keyera’s Edmonton Terminal with the rest of Keyera’s NGL infrastructure in the Edmonton/Fort Saskatchewan area. Keyera has been a supplier of butane feedstock to AEF for over a decade and plans to use its pipeline, rail and storage infrastructure to create synergies with AEF’s operations. Iso-octane manufactured at AEF is shipped via the Trans Mountain Pipeline to Chevron’s Burnaby, B.C. refinery and onward to customers in California. AEF also sells iso-octane to refiners in Alberta.