Alon Partners to buy Krotz Springs refinery from Alon Energy

Alon USA Partners LP has agreed to buy the 74,000-b/d Krotz Springs refinery from Alon USA Energy Inc., Dallas, for a total consideration of $437.5 million, which will be payable to Alon Energy in a combination of $100 million cash and $337.5 million in common units representing limited partner interests in Alon Partners, the companies jointly said.

As part of the deal, Alon Energy has agreed to reimburse anticipated capital expenditures related to a previously scheduled major maintenance turnaround at the Krotz Springs refinery in 2015, the companies said.

Alon Partners’ acquisition of Krotz Springs is intended to provide the company an opportunity for diversification of its assets by allowing it to process a wider slate of crudes, increase its end-product slate, expand its customer base and geographic reach, and reduce dependence on the 73,000-b/d Big Spring, Tex., refinery, which currently is the partnership’s sole asset.

The sale will also help to simplify Alon Energy’s corporate and capital structure, the companies said.

“We are committed to identifying transactions that are accretive to Alon Partners’ unit holders, and this acquisition is a significant step in fulfilling that commitment,” said Paul Eisman, president and chief executive officer of Alon Partners and Alon Energy.

“[The] Krotz Springs refinery is well positioned to generate significant free cash flow, and this transaction unlocks the value of that business,” Eisman said, adding that the dropdown sale was an important step for the continued success of both Alon Partners and Alon Energy.

Alon Energy’s board and the conflicts committee of Alon Partners’ board already have approved the Krotz Springs sale, which is scheduled to close by Nov. 28, the companies said.

Alon Energy, which formed Alon Partners as a limited partnership in August 2012, purchased the Krotz Springs refinery from Valero Energy Corp., San Antonio, in 2008 for $333 million in cash plus about $140 million for working capital, including inventories (OGJ Online, July 8, 2008).