IPO Report: Green Plains Partners LP (GPP)

Francis Gaskins |

Green Plains Partners LP (GPP) is a fee-based Delaware limited partnership recently formed by GPP’s parent, Green Plains Inc., to provide ethanol and fuel storage, terminal and transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses. The company is based in Omaha, NE.

Twelve other companies are scheduled for the week of June 22. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: Barclays, BofA Merrill Lynch, Credit Suisse, Macquarie Capital, RBC Capital Markets
Co-managers: Baird, Raymond James, Stephens, Stifel

End of lockup (180 days): Wednesday, December 23, 2015
End of 25-day quiet period: Tuesday, July 21, 2015

GPP scheduled a $200 million IPO with a market capitalization of $318 million at a price range midpoint of $20 for Friday, June 26, 2015 on Nasdaq.

GPP IPO Summary

GPP is a fee-based Delaware limited partnership recently formed by GPP’s parent, Green Plains Inc., to provide ethanol and fuel storage, terminal and transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses. Green Plains (GPRE) the parent has a market cap of $1.2 billion.

GPP expects to be its parent’s primary downstream logistics service provider in support of its approximately 1.2 billion gallons per year, or bgy, ethanol marketing and distribution business because GPP’s assets are the principal method of storing and delivering the ethanol its parent produces for its customers.

GPP Valuation

Glossary

Per share dilution

.

.

-$18.62

     
             

Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Green Plains Partners LP (GPP)

$648

2.4

37.2

11.2

14.5

31%

             

GPP Conclusion

Neutral

8% payout at $20

10% cash overage  for June '16 yr

Per share dilution of -$18.62

The parent GPRE has a market cap of $1.2bb

GPP's Business

GPP is a fee-based Delaware limited partnership recently formed by GPP’s parent, Green Plains Inc., to provide ethanol and fuel storage, terminal and transportation services by owning, operating, developing and acquiring ethanol and fuel storage tanks, terminals, transportation assets and other related assets and businesses.   Green Plains (GPRE) the parent has a market cap of $1.2bb.

GPP expects to be its parent’s primary downstream logistics service provider in support of its approximately 1.2 billion gallons per year, or bgy, ethanol marketing and distribution business because GPP’s assets are the principal method of storing and delivering the ethanol its parent produces for its customers.

GPP’s parent believes that this vertical integration will enable it to better capture the economic value of these operations within the ethanol value chain and continue to develop downstream logistics assets while pursuing growth opportunities.

The ethanol that GPP’s parent produces is fuel grade, principally from the starch extracted from corn, and is primarily used in the blending of gasoline.

Ethanol currently comprises approximately 10% of the U.S. gasoline market and is an economical source of octane and oxygenate for blending into the fuel supply.

GPP generates a substantial portion of its revenues under fee-based commercial agreements with Green Plains Trade for receiving, storing, transferring and transporting ethanol and other fuels.

GPP does not take ownership of, or receive any payments based on the value of, the ethanol or other fuels GPP handles; as a result, GPP will not have any direct exposure to fluctuations in commodity prices.

GPP’s initial assets include:

Ethanol Storage Facilities.
GPP owns 27 ethanol storage facilities located at or near its parent’s twelve ethanol production plants located in Indiana, Iowa, Michigan, Minnesota, Nebraska and Tennessee and which have a current combined ethanol production capacity of approximately 1.0 bgy. GPP’s ethanol storage assets currently have a combined storage capacity of approximately 26.6 million gallons, or mmg, and have the ability to efficiently and effectively store and load railcars and tanker trucks with all of the ethanol produced at GPP’s parent’s ethanol production plants. For the years ended December 31, 2014 and 2013, GPP’s ethanol storage assets had annual throughput of approximately 966.2 million gallons per year, or mmgy, and 729.2 mmgy, respectively, which represents 95.6% and 94.1%, respectively, of the combined daily average production capacity of GPP’s parent’s ethanol production plants. For the three months ended March 31, 2015, GPP’s ethanol storage assets had aggregate throughput of approximately 232.5 mmg, which represents 92.4% of the combined daily average production capacity of its parent’s ethanol production plants.

Fuel Terminal Facilities.
GPP provides terminal services and logistics solutions through its fuel terminal facilities that GPP owns and operates through its wholly-owned subsidiary, BlendStar LLC. These fuel terminal facilities, at eight locations in seven south-central U.S. states, have fuel holding tanks and access to major rail lines for transporting ethanol or other fuels. Additionally, GPP’s Birmingham, Alabama-unit train terminal, or GPP’s Birmingham facility, is one of 20 facilities in the United States capable of efficiently receiving and offloading ethanol and other fuels from unit trains. GPP’s fuel terminal facilities have a current combined total storage capacity of approximately 7.4 mmg and for the year ended December 31, 2014 and the three months ended March 31, 2015 had an aggregate throughput of approximately 324.8 mmg and 80.5 mmg, respectively.

Transportation Assets.
GPP’s transportation assets include a leased railcar fleet of approximately 2,200 railcars with an aggregate capacity of 66.3 mmg as of March 31, 2015 that is dedicated to transporting products under commercial agreements with GPP’s parent, including ethanol and other fuels, from GPP’s fuel terminal facilities or third-party production facilities to refineries throughout the United States and international export terminals.

Intellectual property

GPP’s parent will grant GPP a non-transferable, nonexclusive, royalty free right and license to use Green Plains’ trademarks and tradenames. This license will terminate upon the termination of the omnibus agreement.

Competition

GPP’s operating facilities for ethanol storage and distribution are an integral part of its parent’s vertically-integrated operations and business strategy, and GPP has significant experience in managing these assets both efficiently and safely. For this reason, and due to GPP’s contractual relationship with Green Plains Trade related to its parent’s ethanol production plants and the integrated nature of ethanol storage with the production facilities, there is little potential competition for the outsourcing of the services provided under its commercial agreements to other third-party operators.

GPP does and will compete with other independent fuel terminal operators and major fuel producers on the basis of terminal location, services provided, safety and price.

 Competition for managing fuel terminal operations for third parties comes primarily from related producers, refiners and distribution companies that also have marketing and trading capabilities.

5% shareholders pre-IPO

Green Plains Inc.           100%   

Dividends

Upon the consummation of this offering, GPP’s partnership agreement will provide for a minimum quarterly distribution of $0.40 per unit for each whole quarter, or $1.60 per unit on an annualized basis. GPP’s ability to pay cash distributions at the minimum quarterly distribution rate will be subject to factors.

Use of proceeds

GPP expects to receive $184 million from its IPO and use it for the following:

$181.0 million will be distributed to its parent, in part, as a reimbursement for certain capital expenditures incurred with respect to its assets;

$1.0 million will be used to pay origination fees under its new revolving credit facility; and

$1.6 million will be retained by GPP for general partnership purposes.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
GPP Green Plains Partners LP 19.15 -0.10 -0.52 28,218

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