March 29, 2024

NH Company Buys Capital Terminal in EP for $23M

Company Had Leased Property since 2014

Posted

In a January 25, 2017 press release, Sprague Resources LP announced that its operating subsidiary, Sprague Operating Resources LLC, has signed a definitive agreement to purchase the East Providence, Rhode Island refined product terminal asset of Capital Terminal Company (“Capital”) for $23 million in cash at closing. The terminal’s combined distillate storage capacity of just over 1 million barrels has been leased exclusively by Sprague since April 2014 and was previously included in the company’s total storage capacity of 14.2 million barrels. The property is at 100 Dexter Road in the city's industrial area.

In conjunction with the purchase agreement, Sprague also announced that it will invest $8 million to convert half of the terminal’s storage capacity to gasoline and ethanol service in order to create a new revenue stream at the facility in addition to Sprague’s existing proprietary distillate marketing business. The expansion investment will be supported by a new long term gasoline storage and handling agreement with a large multi-national supplier operating an extensive proprietary branded distribution business. "The fee-for-service gasoline contract is expected to begin in the third quarter of 2017, contains ratable take or pay revenue guarantees and does not require Sprague to take title to any of the gasoline inventory held by its customer," said the company press release.

In addition to the purchase and investment in Sprague’s new East Providence terminal, the company announced a $3 million expansion capital investment to optimize distillate storage and expand the materials handling business at its existing Providence facility. Cash flows from the gasoline services agreement and increased materials handling in Providence are expected to begin following the conversion project’s completion in the third quarter of 2017.

“I am excited to announce the latest example of our acquisition strategy in action,” said David Glendon, President and Chief Executive Officer. “The Capital terminal has given a boost to Sprague’s distillate marketing activities in Providence over the past two years, and we are thrilled to convert our status from tenant to owner of this high quality terminal and welcome the site employees to the Sprague team. We are looking forward to investing in the terminal and diversifying the product mix to include more ratable gasoline handling services, eventually making East Providence the highest volume gasoline facility in our system. Our ability to finance the upgrade at a low effective multiple by simultaneously signing a long term take-or-pay contract demonstrates our team’s ability to think creatively and uncover additional value inherent in our asset base,” said Glendon.

According to the firm's website, "Sprague Resources LP is engaged in the purchase, storage, distribution and sale of refined petroleum products and natural gas. The company also provides storage and handling services for a broad range of materials. More information concerning Sprague can be found at www.spragueenergy.com."

It was not immediately known if the deal will provide East Providence with any additional change or boost in economic development. The deal is seen as a positive one for all parties.

(Photo credit: Provided by Sprague Operating Resources, Pillsbury Associates Aerial Photography, Don Pillsbury)

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