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BORCO sold for$1.36B

A $1.36 billion sale of the Bahamas Oil Refining Company(BORCO)oil storage terminal was announced yesterday–with U.S.-based Buckeye Partners to acquire an 80 percent interest in the Grand Bahama facility.

The agreement between First Reserve Corp. and the publicly traded Buckeye is expected to close in January 2011. First Reserve and Vopak, the world’s largest tank terminal operator, acquired the Freeport, Grand Bahama oil storage terminal in 2008. The equity of the company was split 80:20 between affiliates of First Reserve Fund XI, L.P., a global private equity fund operated by First Reserve Corp., and Vopak at the time.

State Minister for Finance Zhivargo Laing said the move should prove a good thing not only for the facility, but that island’s economy as well. Once approval is granted, government will likely receive tens of millions of dollars in stamp tax from the purchase–with 6 percent calculated on personalty and 12 percent on realty.

“It speaks wonders for the value that is put on that asset,”he toldGuardian Businessyesterday.”It’s always a possibility when people see others coming and making such handsome investments, it could be an attraction for many others.”

Vopak also has the right to sell its 20 percent ownership interest in BORCO to Buckeye at the same proportionate price and on the same terms and conditions as those in the agreement with First Reserve.

Both Buckeye and BORCO officials assert the purchase will be in the facility’s best interest.

“Buckeye is a welcomed investor that will provide long-term support for the tremendous infrastructure improvements and expansion achieved to date,”said BORCO’s Managing Director Raymond Jones, in a statement obtained byGuardian Business.”The infusion of capital, along with Vopak’s continued interest, will enable BORCO to progress through its next phase of growth and will provide additional economic benefits to The Bahamas and the region.”

Laing toldGuardian Businessthat earlier expansion plans for the facility were still on the table, as far as he knew. BORCO is the fourth largest oil and petroleum products storage terminal in the world and the largest petroleum products facility in the Caribbean with current storage capacity of 21.6 million barrels.

The BORCO terminal is expected to expand its capacity to 27.4 million barrels, advancing the terminal’s position as a key international hub for crude oil and petroleum products in the oil industry, as well as a best-in-class storage and trading platform for the region. The cost of that expansion is estimated at$350 million.

According to reports, Buckeye will be financing the purchase through a combination of equity and debt, with its CEO Forrest Wylie calling the acquisition”a natural fit for Buckeye’s core business and significantly expands our market reach by adding a global logistics hub to its asset portfolio”.

“BORCO is a premier marine storage facility with a world-class customer base that complements our fast-growing terminaling and storage business,”he said in a statement on the purchase.”On a 100 percent ownership basis, BORCO is projected to generate Adjusted EBITDA(earnings before interest, taxes, depreciation and amortization)of$138 million in 2011.”

Buckeye now owns 69 refined petroleum products terminals, and operates and maintains approximately 2,400 miles of pipeline under agreements with major oil and chemical companies. It also owns a major natural gas storage facility in northern California, and markets refined petroleum products in some of the geographic areas served by its pipeline and terminal operations.

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