Williams Partners (NYSE:WPZ) and Williams (NYSE:WMB) today announced an agreement for Williams Partners to acquire Williams’ approximately 83-percent undivided interest in the Geismar olefins production facility, as well as Williams’ refinery-grade propylene splitter for $2.264 billion and pipelines in the Gulf region, for $100 million. Additionally, Williams Partners will be responsible for the completion of the ongoing expansion of the Geismar facility projected to cost $270 million and additional pipelines projected to cost approximately $160 million.
“The addition of the Geismar facility to Williams Partners’ portfolio immediately reduces the partnership’s exposure to the over-supplied ethane markets by nearly 70 percent and eliminates it by 2014, while increasing our ability to produce globally marketed ethylene”
Williams also agreed to temporarily waive approximately $16 million per quarter of general partner incentive distribution rights (IDRs) until the later of Dec. 31, 2013 or 30 days after the Geismar plant expansion is operational. Williams estimates the foregone IDRs will last approximately five quarters, which would total $80 million.
The table below presents a comparison of expected post-expansion segment profit plus DD&A for 2014 to the transaction price for these assets. 2014 is expected to be the first full year of operations at the Geismar facility following the expansion, expected to be completed in late 2013. As a result, 2014 is more representative of the Geismar facility’s long-term earnings and cash flow generation capacity.
Source: Business Wire
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