This transaction requires approval of shareholders holding 80% of Philly Tankers shares.
Shareholders accounting for over 85% of Philly Tankers’ outstanding shares have already entered into irrevocable voting undertakings approving the transaction. An extraordinary general meeting of the shareholders will be scheduled this month for formal shareholder approval of the transaction.
Each LNG-conversion-ready tanker will have a capacity of 337,000 barrels. The vessels will be delivered to Kinder Morgan between November 2016 and November 2017 and placed in US Jones Act trades.
The first two that are scheduled for delivery in late 2016 and early 2017, are under long-term contract to an unnamed oil company. Contract discussions for the two tankers to be delivered by late 2017 are ongoing with other counterparties, and contracts are expected to be completed by early 2016. About 10% of each vessel’s price will be paid upon construction start up, with the pro-rata balance due upon each ship’s delivery.
These four new vessels will increase Kinder Morgan’s Jones Act tanker fleet to 16 ships by late 2017, of which 14 are under long-term charter contracts.
“There continues to be strong demand for domestic waterborne transportation to move petroleum products and crude oil and our fleet of highly efficient tankers will provide stable, fee-based cash flow to KMI shareholders for many years to come through multi-year contracts,” said Kinder Morgan Terminals president, John Schlosser. “This latest transaction clearly underscores Kinder Morgan’s commitment to marine transportation of crude oil, condensate and refined products in the US domestic trade.”
“This is just the latest indication that we continue to have good opportunities to deploy capital in our core businesses at attractive returns,” said Steve Kean, president and CEO of Kinder Morgan.
Prior to this transaction, the company identified a backlog of projects that had grown to $22 bill. “We are seeing numerous opportunities in our core pipelines and terminals businesses, as the demand for midstream transportation and storage services continues to grow,” Kean said.
Kinder Morgan currently has seven product tankers on the water and five tankers that are in various stages of design and construction at the NASSCO shipyard in San Diego, California, scheduled for delivery between late 2015 and mid-2017.
The company entered the Jones Act product tanker business with an initial purchase of five ships in January of 2014 through the acquisition of American Petroleum Tankers and State Class Tankers for $960 mill in cash.