December 13, 2020 [Hydrocarbon Engineering] – Keppel Infrastructure Fund Management Pte Ltd (KIFM), as the Trustee-Manager of Keppel Infrastructure Trust (KIT), is pleased to announce that KIT and Metro Pacific Investments Corp. (MPIC) have entered into a conditional sale and purchase agreement with Philippine Investment Alliance for Infrastructure (PINAI) to acquire 100% interest of Philippine Tank Storage International (Holdings) Inc. (PTSI) which owns Philippine Coastal Storage & Pipeline Corp. (PCSPC), a petroleum products import storage facility in the Philippines.
Upon completion of the proposed acquisition, it is intended that KIT will indirectly hold 80% of the shares in PTSI, and MPIC will indirectly hold 20% of the shares in PTSI. The purchase consideration payable by KIT will be in proportion to its respective shareholding in PTSI and is estimated to be US$267 million (approximately S$357.6 million) subject to adjustments after the completion of the proposed acquisition.
KIT is also in discussions with MPIC on a proposed grant of a call option, which will allow MPIC’s subsidiary to have a right to purchase up to 30% of PTSI. More details of the call option will be provided upon the execution of any definitive agreement.
Mr Matthew Pollard, CEO of KIFM, said: “The strategic acquisition of PCSPC will allow KIT to diversify, grow and strengthen the resilience of KIT’s distributable cash flow. As the largest petroleum products import storage facility in the Philippines, where demand for petroleum products is expected to grow, PCSPC presents an attractive opportunity for KIT to capture opportunities arising from the strong macroeconomic outlook as well as robust growth fundamentals for imported petroleum products in the Philippines.”
PCSPC is a petroleum products import storage facility in the Philippines, which comprises three tank farms and one marine terminal area, with a combined land size of approximately 150 ha. Strategically located in the Subic Bay Freeport Zone, PCSPC is well placed to capture demand from Metro Manila, as well as Central and North Luzon, which account for more than half of oil product demand in the Philippines.
The Subic Bay Freeport Zone is a tax-friendly zone that is easily accessible by major oil refiners located in North and Southeast Asia via specialised vessels. The surrounding area has deep draft 1 levels that is conducive to facilitate berthing of specialised vessels. The Subic Bay Freeport Zone is also naturally sheltered from typhoons, which provides PCSPC’s clients with year-round access.
When PCSPC completes a conversion in early 2021, it will have 86 storage tanks with a storage capacity of approximately 6 million bbl, which will account for approximately 36% of the total import terminal storage capacity in the country.
In addition, the PCSPC serves a stable base of blue-chip customers, which include a government agency, oil and gas conglomerates, multinational corporations and domestic gasoline retailers. A large majority of customers are on “take-or-pay” contracts, which significantly reduces PCSPC exposure to petroleum price and volume risks.
As an essential service provider, PCSPC continued to operate throughout the various levels of lockdown in the Philippines, with no major operational disruptions to date.
Mr Pollard added, “PCSPC’s strong fundamental attributes are highly defensive, given its strategic location and leading market position. In addition, it provides essential services to creditworthy customers in a market that exhibits strong growth prospects. The addition of PCSPC to our portfolio will strengthen the Trust’s ability to provide long-term sustainable distributions to our unitholders.”
The proposed acquisition is expected to be completed by January 2021 and KIFM intends to fund the purchase consideration payable by KIT via existing cash and debt. Upon completion of the acquisition, KIT’s enlarged portfolio will grow from S$5.05 billion to S$5.7 billion. The proposed acquisition will also diversify KIT’s portfolio with exposure to the distribution and network segment and reduce the portfolio’s concentration of concession assets through the addition of a resilient business with potential for long-term growth.
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