Independent refiner HollyFrontier Corp., Dallas, has entered an agreement in principle to sell newly built naphtha fractionation and hydrogen generation units at its 135,000-b/sd refinery in El Dorado, Kan., to consolidated variable interest entity Holly Energy Partners LP (HEP), also of Dallas.
Subject to the execution of definitive agreements and other customary closing conditions, HEP subsidiary Holly Energy Partners Operating LP (HEP Operating) will purchase the units from HollyFrontier’s wholly owned subsidiary Frontier El Dorado Refining LLC (FEDR) for aggregate cash consideration of $62 million, the companies said.
As part of the deal’s closing, HEP Operating and FEDR plan to enter 15-year tolling agreements for containing minimum quarterly throughput commitments for each of the units from FEDR, with the subsidiaries’ obligations under those agreements to be guaranteed by HEP and HollyFrontier.
The proposed transaction, which HollyFrontier said it expects will be immediately accretive to unitholders, is scheduled to close during this year’s fourth quarter.
Completed during the previous quarter at an estimated capital cost of $99 million, the El Dorado refinery’s naphtha fractionation and hydrogen generation units have capacities to process as much as 50,000 b/d of naphtha and 17 MMscfd of hydrogen, respectively, the companies said in recent presentations to investors and analysts.
HEP’s acquisition of the processing assets comes as part of a collaborative effort with HollyFrontier to grow business by leveraging HollyFrontier’s refining footprint and commercial commitments alongside HEP’s logistic capabilities.
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