Buckeye Partners acquires 80% of Bahamas petroleum storage terminal

Buckeye Partners LP announced in late December 2010 that it had acquired an 80% interest in Bahamas Oil Refining Company International (BORCO) from affiliates of First Reserve Corporation for $1.36 billion.

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. Buckeye expects to finance the purchase through a combination of equity and debt. "This acquisition is a natural fit for Buckeye's core business and significantly expands our market reach by adding a global logistics hub to our portfolio of assets," said Forrest E Wylie, Chairman and CEO of Buckeye. "BORCO is a premier marine storage facility with a world-class customer base that complements our fast-growing terminaling and storage business. "We are pleased that First Reserve has agreed to take a portion of its purchase price in equity and that we have obtained commitments for the remainder of our anticipated equity financing needs from other institutional investors. Moreover, First Reserve's decision to make a substantial investment in Buckeye demonstrates their positive view of our base business, as well as their continued support for BORCO's planned expansion."

Royal Vopak, which is based in The Netherlands, owns the remaining 20% in BORCO.

The transaction is subject to approval by certain Bahamian governmental authorities and is otherwise subject to customary closing conditions. Buckeye expects to complete the transaction during the first quarter of 2011. Vopak has the right to sell its 20% 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.

Located only 80 miles from the Florida coast, no other regional commercial storage terminal enjoys BORCO's proximity to the US demand and supply centers, as well as its scale and comprehensive service offerings, according to Buckeye officials. The BORCO terminal is comprised of a fully integrated terminaling business and offers customers storage, berthing, heating, transshipment, blending, treating, bunkering, and other ancillary services. The facility is located along the Northwest Providence Channel of The Grand Bahama Island.

BORCO has total installed storage capacity of 21.6 million barrels and is prepared to undertake a significant expansion project, which Buckeye expects will be phased in over the next two to three years and would add approximately 7.5 million barrels of flexible petroleum product storage, increasing total storage capacity to more than 29 million barrels. This expansion is expected to be completed at a cost of approximately $400 million and to generate incremental adjusted EBITDA of $70-80 million per year. The facility site also has a significant amount of unused land available for other future expansions, with room to install approximately 13 million barrels of incremental storage capacity.

The existing marine infrastructure of BORCO consists of three deep-water jetties. The jetties are situated in water depths ranging from approximately 42 feet to 100 feet and are approximately 3,000 feet to 4,000 feet from the shoreline. After completion of an ongoing refurbishment project on one of the jetties, which is expected to occur in the second half of 2011, the three jetties will provide six deep-water berths that serve as the access points to the storage facilities and are capable of handling vessels over a range of deadweight tonnage ("DWT"), from a minimum of 20,000 DWT to a maximum of 500,000 DWT, including both VLCCs and ULCCs.

The BORCO facility also includes an inland dock with an approximately 650-foot berth located in Freeport Harbor. The inland dock is in the process of being upgraded, which will include the build-out of a new berth. Upon completion, the inland dock will include two berths capable of handling Panamax vessels of up to 80,000 DWT. Completion of the upgrade of the inland dock is expected to occur in 2011. Upon completion of the jetty refurbishment and inland dock renovation projects, BORCO will have a total of eight berths.

Ancillary services provided by BORCO facilitate customer activities within the tank farm and at the jetties. Onshore activities include heating, blending, and treating of petroleum products. Transshipment services allow customers to transfer cargo directly from one vessel to another across the jetties, expediting product movements. Bunkering, the supplying of vessels with fuel, is done primarily by barge while the vessel is anchored offshore or via pipeline when the vessel is berthed at one of the jetties or the inland dock. BORCO offers complete berthing services to vessels loading and unloading at the facility, including piloting, vessel mooring (line handling), tug services, and tendering services.

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