SunCoke Energy Partners, L.P. (SXCP) acquired a 75% interest in the Granite City cokemaking facility from its sponsor SunCoke Energy Inc. (SXC). The facility has been operating since 2009 and has an annual capacity of 650,000 tons. In addition, the partnership will be able to obtain super-heated steam for the generation of electricity from the facility.
Valued at $245 million, the transaction included the acquisition of both the limited and general partner interests worth $50.6 million and $1 million, respectively, in the facility from SunCoke Energy. In addition, the partnership will also repay debts under SunCoke Energy’s senior note program.
SunCoke Energy Partners will sell the outputs – coke and power – from the Granite City cokemaking facility to United States Steel Corp. (X), a flat-rolled and tubular steel products manufacturer in the North American and European regions under a long-term take-or-pay agreement that expires in 2025.
The latest transaction will likely contribute to SunCoke Energy Partners’ future growth. The acquired asset is expected to add around $30 million and $11–$12 million to SunCoke Energy Partners’ adjusted earnings before interest, taxes, depreciation and amortization, and distributable cash flow, respectively, in 2015.
SunCoke Energy Partners will issue 7.375% senior unsecured notes, worth $200 million, and utilize a portion of the proceeds to repay SunCoke Energy’s debts and invest in an environment-friendly venture in Granite City.
The partnership has prior experience of acquiring assets from SunCoke Energy and efficiently realizing positive synergies from them.
In May 2014, the partnership acquired an additional 33% interest in each of the Haverhill and Middletown cokemaking facilities from its sponsor. The partnership’s net income in third-quarter 2014 benefited substantially from these acquisitions.
SunCoke Energy Partners’ systematic investments in strategic acquisitions will enable it to expand its scale of operations.
SunCoke Energy Partners currently has a Zacks Rank #3 (Hold). A better-ranked stock in the sector is Hallador Energy Company (HNRG), carrying a Zacks Rank #2 (Buy).
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