CVR Energy to roll up refining MLP

CVR Energy will at the end of the month acquire the outstanding shares of its variable refining master limited partnership (MLP), terminating the last downstream example of the rare corporate structure.

The US independent refiner and fertilizer producer said it planned to purchase the remaining shares of CVR Refining on 29 January.

A CVR representative could not be immediately reached for comment. CVR Energy said in a notice to shareholders that the company was reconsidering its corporate structure as refining peers have moved away from the unique hybrid of corporation and partnership.

Master limited partnerships offer the tax advantages of a limited partnership and equity market access of a corporation. Standard MLPs pay shareholders quarterly distributions from stable businesses such as pipelines and terminals. The structure quickly rose in popularity in the mid-2000s, leading most US refiners to launch their own for logistics assets beginning around 2011.

Variable MLPs carried no commitment for stable, quarterly distributions, instead offering higher potential yields and more exposure to commodity prices. Such entities could include more cyclical businesses, such as refineries.

While nearly every US refiner created a logistics MLP, variable MLPs were much more rare. Northern Tier used the structure in 2012, followed by former refiner Alon USA and CVR Energy.

Both Northern Tier and Alon were later acquired.

US refiners have since turned away from even traditional MLP structures as investor appetite waned. A Federal Energy Regulatory Commission (FERC) decision last March that MLPs could no longer recover certain tax allowances helped to shake investor interest in the structures.

Valero reacquired its logistics MLP shares earlier this month after determining last year it had more effective ways to raise capital.