LONDON, Nov. 10, 2015 /PRNewswire/ -- VTTI Energy Partners LP ("VTTI" or the "Partnership") (NYSE: VTTI) today reported its financial results for the third quarter ended September 30, 2015.
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Highlights
(1) Adjusted EBITDA and distributable cash flow are non-GAAP financial measures. See Appendix A for a reconciliation to the most directly comparable U.S. GAAP financial measure.
Financial and Operating Results Overview
The operating and financial performance of VTTI for the third quarter ended September 30, 2015, exceeded the performance of the Partnership during the comparative period for last year and also the second quarter of 2015. As previously disclosed, the Partnership acquired an additional 6.6% economic interest in VTTI Operating from VTTI MLP Partners B.V., effective as of July 1, 2015. The acquisition was financed by a related party loan from VTTI B.V. for the full amount of the cash consideration of $75.0 million. The equity value of the transaction was $75 million with an enterprise value of $110 million including the associated net debt. Following the acquisition, the Partnership indirectly owns a total economic interest of 42.6% and a 51.0% indirect voting interest in VTTI Operating.
Mr. Rob Nijst, Chief Executive Officer of VTTI, stated: "Another strong quarter for VTTI, continuing the pattern of stable financial performance we have seen since our IPO last year. Our business model is based on long-term structural trends, such as regional supply and demand imbalances and global product demand growth, whilst our near-term cashflows are underpinned by the take-or-pay contracts we have in place for the vast majority of our capacity. Furthermore, coincident with the Acquisition, Vitol has agreed to further extend the maturity profile of our customer contract position, and also we have again delivered on our annual distribution growth objective by increasing our quarterly distribution for the third consecutive quarter."
Total operating income for the third quarter ended September 30, 2015, was $39.7 million while net income was $25.6 million. Adjusted EBITDA for the third quarter ended September 30, 2015 was $57.1 million, compared to the third quarter of 2014 of $45.4 million. The $57.1 million of Adjusted EBITDA included a cash receipt resulting from a contractual settlement at our Rotterdam terminal of approximately $9.3 million. The Partnership generated $17.9 million of distributable cash flow for the third quarter ended September 30, 2015, compared to a prorated distributable cash flow of $6.6 million for the third quarter of 2014. (Total distributable cash flow in the third quarter 2014 before proration adjustments was $10.8 million.)
Cash Distribution
On October 27, 2015, the Board declared a quarterly cash distribution of $0.2925 per unit with respect to the third quarter of 2015, equivalent to $1.170 per unit on an annualized basis. The implied distribution coverage ratio was 1.49x. The cash distribution will be paid on November 13, 2015, to unitholders of record as of the close of business on November 9, 2015.
Financing and Liquidity
As of September 30, 2015, the Partnership had cash and cash equivalents of $37.8 million and total bank debt outstanding of $553.0 million (excluding restricted cash and debt held by affiliates), implying an annualized net debt to Adjusted EBITDA ratio of 2.7x (excluding the $9.3 million cash receipt at our Rotterdam terminal from the Adjusted EBITDA calculation). As of September 30, 2015, there was an undrawn amount of approximately $100 million available under our €580 million revolving credit facility.
As of July 1, 2015, the Partnership recognized $75 million of related party debt in conjunction with the acquisition of an additional 6.6% economic interest of VTTI Operating.
On September 28, 2015, the Partnership announced that its indirect subsidiary, VTTI Operating priced a series of senior unsecured notes (the "Notes") for a US Dollar amount of $245 million and for a Euro amount of €180 million with a weighted average fixed coupon rate of 3.9%. These notes have maturities of 7, 10, and 12 years, with a weighted average maturity of approximately 10 years. The offering is expected to settle in December 2015 and is subject to customary closing conditions. The proceeds from any issuance of the Notes will be used to repay a portion of VTTI Operating's existing €580 million revolving credit facility.
We believe that our current resources, including cash generated by the operations of the Partnership, are sufficient to meet the working capital requirements of our ongoing business.
Outlook
Mr. Rob Nijst, Chief Executive Officer of VTTI commented: "We successfully completed our first dropdown transaction this quarter whilst increasing our distribution for the third quarter in succession and we remain optimistic regarding the future prospects for the business. Furthermore, we are pleased to announce that the 1.6 MMbls expansion project in Malaysia has become operational and that the 2.7 MMbls expansion project in Fujairah is progressing well with operations expected to begin in mid-2016. These assets further increase the existing dropdown inventory for the Partnership from VTTI B.V. We also continue to engage actively in the pursuit of both greenfield and brownfield opportunities for future potential acquisitions."
About VTTI Energy Partners LP
VTTI Energy Partners LP is a fee-based, growth-oriented limited partnership, formed to own, operate, develop and acquire refined petroleum product and crude oil terminaling and related energy infrastructure assets on global scale. The Partnership's assets include interests in a broad-based portfolio of six terminals that are strategically located in energy hubs throughout the world with a combined total storage capacity of 35.5 million barrels.
Forward Looking Statements
This press release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The reader is cautioned not to rely on these forward-looking statements. All statements, other than statements of historical facts, that address activities, events or developments that the Partnership expects, projects, believes or anticipates will or may occur in the future, including, without limitation, future operating or financial results and future revenues and expenses, future, pending or recent acquisitions, general market conditions and industry trends, the financial condition and liquidity, cash available for distribution and future capital expenditures are forward-looking statements. These statements are based on current expectations of future events. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. Risks and uncertainties include, but are not limited to, such matters as: future operating or financial results and future revenues and expenses; our future financial condition and liquidity; significant interruptions in the operations of our customers; future supply of, and demand for, refined petroleum products and crude oil; our ability to renew or extend terminaling services agreements; the credit risk of our customers; our ability to retain our key customers; including Vitol; operational hazards and unforeseen interruptions, including interruptions from terrorist attacks, hurricanes, floods or severe storms; volatility in energy prices; competition from other terminals; changes in trade patterns and the global flow of oil; future or pending acquisitions of terminals or other assets; business strategy, areas of possible expansion and expected capital spending or operating expenses; the ability of our customers to obtain access to shipping, barge facilities, third party pipelines or other transportation facilities; maintenance or remediation capital expenditures on our terminals; environmental and regulatory conditions, including changes in such laws relating to climate change or greenhouse gases; health and safety regulatory conditions, including changes in such laws; costs and liabilities in responding to contamination at our facilities; our ability to obtain financing; restrictions in our credit facilities, including expected compliance and effect of restrictive covenants in such facilities; fluctuations in currencies and interest rates; the adoption of derivatives legislation by Congress; our ability to retain key officers and personnel; the expected cost of, and our ability to comply with, governmental regulations and self-regulatory organization standards, as well as standard regulations imposed by our customers applicable to our business; risks associated with our international operations; compliance with the U.S. Foreign Corrupt Practices Act or the U.K. Bribery Act; risks associated with our potential business activities involving countries, entities, and individuals subject to restrictions imposed by U.S. or other governments; and tax liabilities associated with indirect taxes on the products we service. A further list and description of these risks, uncertainties and other factors can be found in our Annual Report filed on Form 20F which was filed with the United States Securities Exchange Commission on April 30, 2015 and amended on May 29, 2015 and is available via the SEC's website at www.sec.gov. VTTI undertakes no obligation and does not intend to update these forward-looking statements to reflect events or circumstances occurring after this press release. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.
Contacts
VTTI Energy Partners LP
Robert Abbott, Chief Financial Officer
+44 20 3772 0110
Hill + Knowlton Strategies New York,
Peter Poulos
+1 212 885 0588
Hill + Knowlton Strategies Amsterdam,
Tanno Massar
+31 20 4044707
| VTTI ENERGY PARTNERS LP |
|||||
| UNAUDITED CONDENSED INTERIM CONSOLIDATED AND COMBINED CARVE-OUT STATEMENTS OF OPERATIONS |
|||||
| for the three months ended September 30, 2015 and 2014 |
|||||
| (in US$ millions) |
|||||
| Three Months Ended |
|||||
| 2015 |
2014 |
||||
| Revenues, third parties |
19.3 |
17.9 |
|||
| Revenues, affiliates |
55.0 |
57.5 |
|||
| Total revenues |
74.3 |
75.4 |
|||
| Operating costs and expenses: |
|||||
| Operating costs |
18.3 |
25.7 |
|||
| Depreciation and amortization |
17.5 |
17.5 |
|||
| Selling, general and administrative |
8.1 |
7.0 |
|||
| Loss on disposal of property, plant and equipment |
— |
0.1 |
|||
| Total operating expenses |
43.9 |
50.3 |
|||
| Other operating income |
9.3 |
— |
|||
| Total operating income |
39.7 |
25.1 |
|||
| Other income/(expense): |
|||||
| Interest expense, including related party |
(3.6) |
(3.0) |
|||
| Other finance expense |
(0.5) |
(2.9) |
|||
| Gain/(loss) on foreign currency transactions |
2.9 |
(6.2) |
|||
| Gain/(loss) on derivative financial instruments |
(2.2) |
15.1 |
|||
| Total other income/(expense), net |
(3.4) |
3.0 |
|||
| Income before income tax expense |
36.3 |
28.1 |
|||
| Income tax expense |
(10.7) |
(6.9) |
|||
| Net income |
25.6 |
21.2 |
|||
| Non-controlling interest |
(17.5) |
(4.5) |
|||
| Net income attributable to VTTI Energy Partners LP Owners |
8.1 |
16.7 |
|||
| VTTI ENERGY PARTNERS LP |
|||||
| UNAUDITED CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS |
|||||
| as of September 30, 2015 and December 31, 2014 |
|||||
| (in US$ millions) |
|||||
| September 30, |
December 31, |
||||
| ASSETS |
|||||
| Current assets: |
|||||
| Cash and cash equivalents |
37.8 |
36.3 |
|||
| Restricted cash |
1.9 |
2.2 |
|||
| Trade accounts receivable |
9.1 |
9.7 |
|||
| Affiliates |
22.8 |
23.6 |
|||
| Other receivables and current assets |
13.0 |
21.9 |
|||
| Prepaid expenses |
2.5 |
1.7 |
|||
| Deferred tax assets |
0.1 |
0.9 |
|||
| Derivative assets |
9.7 |
7.7 |
|||
| Total current assets |
96.9 |
104.0 |
|||
| Long-term assets: |
|||||
| Long-term receivables |
1.1 |
1.2 |
|||
| Long-term prepaid expenses |
22.0 |
22.7 |
|||
| Deferred tax assets |
29.5 |
32.8 |
|||
| Property, plant and equipment |
1,246.7 |
1,276.8 |
|||
| Intangible assets, net |
36.4 |
40.2 |
|||
| Goodwill |
112.9 |
119.6 |
|||
| Derivative assets |
23.0 |
15.2 |
|||
| Deferred debt issuance costs |
0.4 |
0.5 |
|||
| Total long-term assets |
1,472.0 |
1,509.0 |
|||
| Total assets |
1,568.9 |
1,613.0 |
|||
| LIABILITIES AND EQUITY |
|||||
| Current liabilities: |
|||||
| Trade accounts payable |
13.6 |
16.5 |
|||
| Affiliates |
6.4 |
4.4 |
|||
| Current installments of long-term debt, affiliates |
6.0 |
— |
|||
| Derivative liabilities |
7.6 |
5.6 |
|||
| Other liabilities and accrued expenses |
24.2 |
31.4 |
|||
| Total current liabilities |
57.8 |
57.9 |
|||
| Long-term liabilities: |
|||||
| Long-term debt, excluding current installments |
553.0 |
573.7 |
|||
| Derivative liabilities |
7.8 |
8.4 |
|||
| Long-term debt, affiliates |
144.8 |
56.1 |
|||
| Post-retirement benefit and post-employment obligation |
11.5 |
11.8 |
|||
| Environmental provisions |
20.1 |
23.0 |
|||
| Deferred tax liabilities |
53.3 |
33.0 |
|||
| Other long-term liabilities |
16.6 |
13.9 |
|||
| Total long-term liabilities |
807.1 |
719.9 |
|||
| Total liabilities |
864.9 |
777.8 |
|||
| Equity: |
|||||
| Total equity |
704.0 |
835.2 |
|||
| Total liabilities and equity |
1,568.9 |
1,613.0 |
|||
Basis of Preparation and Presentation
The accompanying unaudited interim statement of operations and balance sheets are prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and applicable rules and regulations of the U.S. Securities and Exchange Commission (the "SEC") for interim financial information.
As of August 6, 2014, the financial statements of the Partnership as a separate legal entity are presented on a consolidated basis. Prior to August 6, 2014, the statement of operations and balance sheet have been prepared on a "carve out" basis from the accounting records of the VTTI Group using actual results of operations, assets and liabilities attributable to the Partnership, including allocation of expenses from VTTI and are recorded at VTTI's historical book value. The Partnership's unaudited interim financial statements include the assets, liabilities, revenues, expenses and cash flows directly attributable to the Partnership's terminal-owning and operating subsidiaries. See Note 2 of the audited consolidated and combined carve-out financial statements for the year ended December 31, 2014, as found in the Partnership's Annual Report on Form 20-F which was filed with the SEC on April 30, 2015 and is available via the SEC's website at www.sec.gov.
The Partnership has revised its previously announced unaudited interim condensed consolidated and combined carve-out statement of operations for the recognition of certain non-cash items in the three month periods ending September 30, 2014 and December 31, 2014. For the three month period ended September 30, 2014, operating income was reduced by $3.3 million, total other income was reduced by $6.5 million and income tax expense was reduced by $1.7 million. For the three month period ended December 31, 2014, operating income increased by $3.3 million, total other expense was reduced by $2.2 million and income tax expense was reduced by $1.3 million. These changes for both periods did not impact Adjusted EBITDA or distributable cash flow as they were non-cash in nature and the annual net income reported for the 12 month period ending December 31, 2014 was also unchanged.
APPENDIX A—RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA
We define Adjusted EBITDA as net income before interest expense, income tax expense, depreciation and amortization expense, as further adjusted to reflect certain other non-cash, non-recurring items and to exclude the revenues from the Phase 2 assets of our Malaysian terminal in excess of the costs incurred to operate Phase 2 which is attributable to VTTI BV.
Adjusted EBITDA is a non-GAAP supplemental financial measure that management and external users of our combined financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or financing methods, and the viability of acquisitions and other capital expenditure projects and the returns on investment in various opportunities.
We believe that the presentation of Adjusted EBITDA provides useful information to management in assessing our financial condition and results of operations. The U.S. GAAP measure most directly comparable to Adjusted EBITDA is net income. Our non-GAAP financial measure of Adjusted EBITDA should not be considered as an alternative to U.S. GAAP net income. Adjusted EBITDA has important limitations as an analytical tool because it excludes some but not all items that affect net income. You should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. Because Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing its utility. The following table reconciles net income to Adjusted EBITDA for the third quarter ended September 30, 2015.
| (in US$ millions) |
Three Months Ended |
| Net income |
25.6 |
| Interest expense, including affiliates |
4.1 |
| Other items(a) |
(0.8) |
| Depreciation and amortization |
17.5 |
| Income tax expense |
10.7 |
| Adjusted EBITDA(b) |
57.1 |
| (a) Other items consist of non-cash items in operating expenses, anticipated timing differences between the recognition and receipt of revenues, gains and losses on foreign currency, interest rate financial derivatives and excludes the net contribution of the Phase 2 assets of our Malaysian terminal which are attributable to VTTI BV. |
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| (b) Adjusted EBITDA contains a realized foreign currency derivative gain of $2.4 million resulting from the financial instruments we have in place to hedge EUR/USD movements in our operating cash flows. |
Distributable Cash Flow ("DCF")
Distributable cash flow represents Adjusted EBITDA after considering period financial costs including estimated maintenance and replacement capital expenditures and other reserves established by the Partnership. Estimated maintenance and replacement capital expenditures represent capital expenditures required to maintain over the long-term the operating capacity of, or the revenue generated by, our capital assets. Distributable cash flow is a quantitative standard used by investors in publicly-traded partnerships to assist in evaluating a partnership's ability to make quarterly cash distributions. Distributable cash flow is a non-GAAP financial measure and should not be considered as an alternative to net income or any other indicator of the Partnership's performance calculated in accordance with U.S. GAAP. The table below reconciles Adjusted EBITDA to distributable cash flow for the third quarter ended September 30, 2015.
| (in US$ millions) |
Three Months Ended |
|
| Adjusted EBITDA |
57.1 |
|
| Cash interest expense (a) |
(4.6) |
|
| Cash income tax expense |
— |
|
| Maintenance capital expenditures |
(3.4) |
|
| Cash flow attributable to non-controlling interest |
(31.2) |
|
| Distributable cash flow |
17.9 |
|
| Total distribution |
12.0 |
|
| Coverage ratio |
1.49x |
|
| (a) Cash interest expense includes periodic cash settlement amounts for interest rate swap derivative financial instruments. |
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