Houston, 4 September (Argus) — Alon USA has filed documents to spin its 70,000 b/d west Texas refinery into a variable-pay limited partnership less than a month after suggesting the structure might not work for the company.
A filing with the US Securities and Exchange commission detailed the proposed sale of $230mn in common units of a limited partnership with its Big Spring, Texas, refinery and associated assets.
Master limited partnerships have become popular for midstream assets — stable, fee-based energy businesses that delivery quarterly dividends to holders. Such constructions allow the tax benefits of a limited partnership and the trading of a public company.
A variable MLP drops the stability of the partnership. While standard MLPs risk default for failing to deliver a quarterly dividend, variable MLPs merely pay out cash available.
The west Texas refinery is one of the company's most stable, and has access to nearby Permian basin crudes the independent refiner has sought to better exploit. Alon sells fuels from the refinery in Texas, New Mexico, Oklahoma and Arizona.
The company in early August showed little interest in a variable master limited partnership – a structure pursued just a few weeks earlier by US independent Northern Tier Energy.
“One thing I would say is that refining is a very volatile business, so I assume that works for this competitor of ours or one of our peers and I wish them good luck,” chief executive Uzi Yemin said. “I don't see us, at this point, going that route.”
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