SunCoke Energy's CEO Discusses Q3 2013 Results - Earnings Call Transcript

| About: SunCoke Energy (SXCP)
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SunCoke Energy Partners (NYSE:SXCP) Q3 2013 Earnings Call October 25, 2013 10:00 AM ET

Executives

Ryan Osterholm - Investor Relations

Frederick Henderson - Chairman and Chief Executive Officer

Mark Newman - Senior Vice President and Chief Financial Officer

Analysts

Dave Katz - JPMorgan

Dan Chandra - DW Investment Management

Garrett Nelson - BB&T Capital Market

Lucas Pipes - Brean Capital

Christine Cho - Barclays

Operator

Welcome to the SunCoke Energy Partners L.P. third quarter 2013 earnings call. My name is John and I will be your operator for today's call. (Operator Instructions) And I will now turn the call over to Ryan Osterholm. Ryan, you may begin.

Ryan Osterholm

Thank you. Good morning, everyone, and thank you for joining us on the SunCoke Energy Partners third quarter 2013 earnings conference call. With me are Fritz Henderson, the Chairman and Chief Executive Officer of our General Partner; and Mark Newman, the Senior Vice President and Chief Financial Officer of our General Partner.

Following the remarks made by management, the call will be open for Q&A. This conference call is being webcast live on the Investor Relations section of our website, at www.sxcpartners.com. There will be a replay available on our website. If we don't get to your question during the call, please call our Investor Relations department at 630-824-1907.

Now before I turn over the call to Fritz let me remind you that the various remarks we make about future expectations constitute forward-looking statements and the cautionary language regarding forward-looking statements in our SEC filings apply to the remarks on our call today. These documents are available on our website as are reconciliations of any non-GAAP measures discussed on this call.

Now, I'll turn it over to Fritz.

Frederick Henderson

Thanks, good morning. This is the first time we'll be conducting the call separately for SXCP with unitholders and investors and analysts who cover SXCP separate from SunCoke Energy. I want to thank a number of you, probably on the call, who gave feedback suggesting that this is a good way to do it. So we're excited to be able to do it this way and welcome to the call this morning.

Page 2, is the highlights, is a summary of the highlights from the quarter. Quarter saw another quarter of strong and continued sustained operational excellence both on the safety side, the environmental side and then from a productivity and profitability perspective as well. Our operating performance at the cokemaking operations, we generated in total, adjusted EBITDA of $35.7 million and we did have one month of results, which Mark will cover later in the results for our first acquisition in the coal handling business.

We also began to deliver on our growth opportunities and our growth strategy in the quarter. We completed two coal logistics acquisitions. The Lake Terminal, which closed August 30. So we have one month of results in the quarter for Lake Terminal. We also have expenses associated with deals in the quarter, which Mark will take you through. And then KRT was closed actually October 1. So you'll see that in the fourth quarter. And transactions are expected to be immediately accretive to the unitholders.

We also in the quarter received a favorable indication from the IRS on a private letter ruling on iron ore concentrating and palletizing. A number of you who have followed us, know that we petitioned the IRS earlier this year for a private letter ruling this year and we received a favor for this month. So it was good news. It gives us more confidence in terms of the strategic flexibility going forward.

In terms of our financial flexibility during the quarter, we did upsized the revolver by $50 million to a $150 million and ended the quarter with a cash position of $79 million. Obviously, the next day October 1, we closed on the KRT transaction, and Mark will take you through how we financed that.

And then finally, in terms of cash distributions for the unitholders, we did in the third quarter increase our quarterly cash distribution by 2.4% to $0.4325 per unit for the November '13 payment. And with the closing of KRT and with the closing of Lake and with continued strong performance from our cokemaking operations, we expect to increase our fourth quarter cash distribution by 10% to $0.475 for the February 2014 payments.

So that's a quick set of highlights for the quarter. I'll turn it over to Mark.

Mark Newman

Thanks, Fritz. We had another great quarter at SXCP, where we delivered net income attributable to SXCP of $13.7 million or $0.43 per unit. On an adjusted EBITDA basis, EBITDA attributable to SXCP was $22.1 million or $35.7 million, including EBITDA attributable to SXC.

On a year-over-year basis, coke sales were down about 17,000 tons. This has to do primarily with the placement of trains out of our Haverhill operations. We also last year had some sales of nonconforming coke at Middletown, which were not repeated this year.

Our cokemaking adjusted EBITDA is actually up year-over-year by $12 per ton to $87 per ton, really reflecting improved yield performance and higher operating and maintenance recovery at Middletown. If you notice on the chart versus Q2, our adjusted EBITDA is down slightly. I think the differential can really be explained by the fact that we had acquisition cost in Q3 that we didn't have in Q2.

So as we called out in the text, we had $2.4 million of acquisition costs, $1.8 million related to the payment of DTE on the acquisition of Lake Terminal and about $600,000 in due diligence costs related to both Lake Terminal acquisition and the KRT acquisition, which we closed on October 1. We have closed the two coal logistics transactions and proud to announce that in the quarter, with only one month of operation, Lake Terminal generated about $0.7 million in adjusted EBITDA for the month.

Turning to Chart 4. On distributable cash flow, we reported distributable cash flow of $18.5 million or $0.58 per unit. You'll notice that our distributable cash flow is in line with our Q2 levels, in spite of having lower adjusted EBITDA in the month versus Q2.

And you'll note also that for the calculation of distributable cash flow, we add back the DTE payment, doesn't flow through operating surplus, which is really part of our acquisition cost of Lake Terminal. We also had a $0.6 million favorable make-whole payment from SXC related to the slight reduction in production at Middletown, an accommodation that we provided to AK Steel that we talked about on our Q2 earnings call.

For Q3, we declared cash distribution of $13.9 million or $0.4325 per unit, and as you'll see in the chart, we achieved a 1.33 coverage ratio in the quarter. I'd just like to point out that ongoing CapEx in the quarter was $2.1 million attributable to SXCP, higher than where we've been running year-to-date, but we do expect our Q4 ongoing CapEx to be higher as we complete some of the ongoing projects at Middletown and Haverhill.

The other point I'd note here is with the closure of our two coal logistic transactions, we now anticipate that we will have accretion of roughly $0.15 per unit annually, on a pro forma 50-50 debt equity financing. We did fund the transaction, and I'll cover that in the liquidity section later on, using cash on our balance sheet. So as financed, it's closer to $0.30 per unit. We think it's more pragmatic to or correct to think about it on a pro forma basis at $0.15 per unit prospectively.

Turning to Chart 5. As I mentioned earlier this week, we announced the Q3 cash distribution, which was a 2.4% increase over our Q2 distribution level to $0.4325 per unit and that will be paid in November. That also represents a 4.8% over our minimum quarterly distribution when we started the IPO earlier this year.

As Fritz announced, our expectation is to increase that our Q4 distribution by approximately 10% to $0.4750 per unit. Again, this represents a 15% increase over the MQD. And at this level, we are now into the first split of our incentive distribution rights to the General Partner.

And from this point, any increase in distributions will result in 15% of incremental distributions going to the GP. Again, we've made this decision to increase distributions really on account to strong coke operations on a year-to-date basis and with the benefit now of the coal logistics acquisitions, which have been closed.

Turning to liquidity, on Chart 6. Our liquidity remains strong in spite recent acquisitions, and as Fritz mentioned, we recently upsized the revolver by $50 million to $150 million. In the quarter, as noted in the chart, our cash balance declined by $37 million, primarily due to the acquisition of Lake Terminal, our ongoing spend on environmental remediation and ongoing capital in the quarter of $3.2 million, and that's a 100% basis number, so it's 2.1 attributable to the MLP.

We also had some unfavorable working capital, largely just due to timing of coal payables. And as what you'll see also is, we made our first interest payment on bonds of about $3 million in the quarter. You'll note, all the way to the right of the chart, we have a note really to do with liquidity effective October 1, the day on which we closed the KRT transactions. And as we called out there, we used $46 million of our cash balance and $40 million draw against the $150 million revolver availability.

So as of October 1, we're left with approximately a $143 million in liquidity, $33 million in cash approximately and then a $110 million remaining on our revolver capacity. And we think this is an adequate level of liquidity to run the business prospectively.

On Chart 7, we layout our full year guidance. And again, as a result of three strong quarters and closing the Lake Terminal and KRT transactions, we're increasing our full year guidance. As we point out in the chart, on a pro forma basis, and this pro forma is effectively taking the MLP effective January 1, 2013, our expectation is for a full year adjusted EBITDA of $95 million to $100 million, with a midpoint of our guidance range for Q4 being approximately $25 million.

As we point out in the body of the chart, our full year CapEx, again attributable to SXCP is $9.1 million, with the expectation that approximately half of that will be spent in Q4. Again, a number of projects ongoing that we hope to bring closure to in the quarter, which will drive up the CapEx in the quarter.

You'll notice that we also expect further down in the chart, a small make-whole payment of about $0.4 million. In Q4, again we continue to moderate production at Middletown, as part of our accommodation to AK Steel.

With the higher level of Q4 distributions at the $0.475 level that will result in $15.2 million of cash distributed in the quarter, and will result in a 1.08 coverage ratio in the quarter. Applying this, again, Q4 distribution level for the full year in the pro forma's, what we're showing here is that, we're at a 1.2 to 1.29 coverage ratio based on the full year EBITDA and ongoing CapEx expenditure.

With that, I'll turn it over to Fritz.

Frederick Henderson

Thanks, Mark. Just wrapping it up here. Coal logistics on Page 8. Briefly, we did complete the two deals. We expect to get a full impact of this in the fourth quarter. We created a new coal logistic segment in our financials to retain the CEO of KRT, and he is responsible for leading this new segment. And the team brings an extensive operating and industry expertise to SXCP, which we plan to capitalize on to grow this business further.

And finally, in terms of our growth strategy. This is a similar chart that we've used many times, but it is just that they could bear us repeating in terms of how we're trying to grow the business here at SunCoke Energy Partners, to cokemaking coal logistics and potentially activities in the fairest side of the business.

On cokemaking, we continue to do work to permit a new plant. Again, we're not spending capital. We don't have customer commitments for that today, but we certainly think in the future we're confident. We'll build that plant, but there is no guarantees in that regard. But we are permitting the plant.

We did in the quarter renew our contract with Indiana Harbor. This is the only contract that we had in the three of our coke batteries, whose contract expiration took place prior to 2020. This took place on October 1, 2013. We renewed the contract or I should say our sponsor renewed the contract with ArcelorMittal and that's goes for 10 years from October 1, 2013. So it goes to 2023.

In terms of M&A, obviously we did the two deals in the quarter. We're looking at, but back to cokemaking, we're talking to a number of parties about potential cokemaking asset acquisitions, but the complexity of these deals suggest that these would not affect 2013. These would need to be done beyond.

On coal logistics, as I said before, we plan to leverage the management team in place to look for opportunities to further grow this business, both in terms of organic growth than it's growing, because there is plenty of capacity actually within KRT to grow. And then, also look for a selective acquisitions in this area.

And finally, with the receipt of the favorable ruling, concentrating and palletizing, we continue to talk to potential parties about how we might work together in ferrous, whether it's a concentrating and palletizing or even evaluating potential greenfield DRI opportunities potential down the road.

That's all we have this morning. So let's open it up for question.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question is from Dave Katz from JPMorgan.

Dave Katz - JPMorgan

I'm just curious, where you expected working capital to go in the fourth quarter?

Mark Newman

Again, the working capital changes were quite modest in this quarter. Typically Q1 and Q3, obviously we did the IPO in Q1, so it didn't apply to our Q1 results. We have our interest payable on our notes. So I'd say Q1 and Q3 are usually our worse quarters on capital working. In Q4, we do have the extension of payment terms to AK Steel. As we pointed on our Q2 earnings call, that amount is about $20 million. But that extension of working capital or payables will be born by SunCoke Energy, SXC. And so effectively there will be no impact to the MLP.

Dave Katz - JPMorgan

And then, looking forward, so assuming that working capital remains relatively steady, one would assume that the liquidity wouldn't dip that much below than the pro forma 143 level. But when you look forward in terms of growth, do you expect to finance that through debt or do you expect to finance that at all using the cash that's generated from the business?

Mark Newman

So if you look at our full year guidance on EBITDA, it's $95 million to $100 million. So let's just use a $100 million as a round number. It would suggest that we could lever the business about where it is today. We have approximately $190 million in leverage. So we do have additional leverage capacity within the confines of our covenants under credit agreement.

So considerably we could go up to almost $400 million of leverage. And Fritz and I believe it's appropriate to run the business between 3 to 3.5. So we have additional leverage capacity, if other opportunities came along. And I'd suggest maybe the most likely way that we would fund that would be a potential follow-on offering on our notes that are out there today.

Dave Katz - JPMorgan

So just a simple math would imply that you anticipate at some point for growth and add on of a $110 million to $160 million. Once you've used that amount to grow, how would growth be financed or taken on after that point?

Frederick Henderson

Let me touch on that David. First of all, good morning. What I would say is that obviously it depends on the size of the deals. Likely the growth of this magnitude would come through acquisition, not organically. I think maintaining a target 50-50 debt equity ratio is the right way to think about the business.

Obviously, if we did an acquisition, you'd have to add the EBITDA into the business to determine what your potential leverage capacity is. But obviously, we do small deals. If we did something small, the smart thing to do, the logical thing to do, would be to use additional debt capacity. If we do something larger, and obviously, we don't have any plans to do dropdowns. But if there are dropdowns in the future, we need to consider this in the capital structure as well.

But the way I think about it is 50-50 debt equity ratio is probably the right way to do it. The business should be levered between 3 and 3.5. That's we're quite comfortable with that, given the nature of the business. And therefore, obviously, we would look at whether it's acquisitions, whether it capital spending, if we do the projects in Kentucky, we want to try to maintain the business with that kind of ratio. And then use the debt markets or even if we needed to do an equity offering, we would do that to try to maintain it. It would just depend on size.

Operator

Our next question is from Dan Chandra from DW Investment Management.

Dan Chandra - DW Investment Management

Just following on what Dave was saying, I guess you're targeting 3x, 3.5x in leverage. I mean, if you were to increase the leverage to 4x, will you feel like you're cost of funding or cost-to-debt would be materially worse?

Frederick Henderson

Hypothetical question. A lot of it would depend how the business was performing and how the high yield markets were performing. I just think it's probably prudent to maintain 3 to 3.5. We think the business can support it. We could go out to 4x, if we needed to, opportunistically. But I think if we did that we would then look for strategies to bring ourselves back within our capital structure guidelines in the relatively near-term basis. So I'm not sure. Frankly, I don't think we would let that happen, if we thought it might materially affect our cost of fund. Mark, you want to add something to this.

Mark Newman

Yes. I'd just say, our credit facility allows us to go out to 4x in a quarter on an acquisition, with a glide path to come back to 3.75x. Obviously, we do want some cushion with respect to operating within our credit facility. So the other thing I think today, given the relative small size of the MLP and the fact that we only have two customers, obviously that changes as we do more coal logistics. We think the 3.5 type leverage ratio is more prudent at this stage. But we do have the ability to go wider on an acquisition if we need to.

Dan Chandra - DW Investment Management

I mean, I guess, following on to that. So you stayed within the 3x to 3.5x, which is obviously very reasonable, given your contracted cash flows and your maintenance CapEx. Your coverage ratio right now is like 1.33x this quarter. Can you talk about how you see the evolution of that over the next year or so and whether you think that could actually move down?

Frederick Henderson

Let me take a crack at that. First, let's go back to the page that has the pro forma's for 2013. Obviously, we're not providing guidance today on 2014. So let me just stick with 2013. With the increase in distribution that we expect to implement for the fourth quarter payable in February 2014, that would annualize out of the 1.90. So you see with the 2013 numbers, the low and the high, our coverage ratio will be 1.20 to 1.29.

Our target coverage ratio is 1.15. So we're still above that. But in truth, we've got one month of experience on Lake and no month of experience on KRT. So what we would like to do, we're confident that we'll hit our numbers on those businesses. But we think it's prudent to give ourselves some time to make sure we're realizing those projections and the benefits we see on those deals. And if we do, obviously we're still operating above the 1.15 ratio, and it gives us opportunities to increase distributions in the future. But right now, we think this is the prudent way to go.

Dan Chandra - DW Investment Management

And last question if I may. Obviously, it's great news about getting the private letter ruling on the iron ore side. Can you talk about where you see the opportunities set there on that side of business? Obviously, it's very welcome that it gives you more venues for growth.

Frederick Henderson

Mark, go ahead.

Mark Newman

So the iron ore side of the business is quite a bit larger than the carbon side or cokemaking side. And that it's used by both, blast furnace operators and many mills, so it's a significantly larger opportunity set. With respect to the ruling that we have received, we're really focused on converting iron ore into concentrate or iron fines and then converting fines into pellets, which is a primary methodology performed in which iron ore is used today here in the U.S.

There are number of large players, both integrated steelmakers, and companies like say, Cliffs, for example, or in iron ore mining that have significant investments in both concentrating facilities and pelletizing facilities. So we see an immediate opportunity set here around introducing acquisitions in this space, where we would essentially be processing either iron ore into concentrate or concentrate into pellets, on behalf of people who own those asset today and they'd be able to then deploy that capital elsewhere in their business.

There is also a lot of work going on in the steel industrial around DRI. DRI actually requires an upgraded form of pellet, so DR pellet. And there is no DR pellet production in North America today, all of it is imported from other parts of the world. And so we could also look at this in terms of new capital of being invested to create DR pellet facilities. And obviously, we're doing work around DRI to look at how that could be also funded, between either the parent or the MLP.

Frederick Henderson

I think the key is, obviously was Mark talking about is the opportunities set, obviously today we don't have any deals that are in process, Mark used Cliffs as example, it goes beyond, obviously just the integrated mills, that's the point. That the opportunity set is bigger, it opens the potential partners to a broader range of companies, but we don't have anything specific today. We have just received ruling for that matter.

Dan Chandra - DW Investment Management

So when did you received the ruling?

Frederick Henderson

In the third quarter.

Operator

Our next question is from Garrett Nelson from BB&T Capital Market.

Garrett Nelson - BB&T Capital Market

Nice distribution hike for Q4. I'm sure a lot of holders appreciate that. Looking at through 2014, how should we be thinking about the partnerships distribution growth potential from here, when looking at the three categories you're showing, what's most likely to fund distribution growth from these levels?

Frederick Henderson

Let me see, if I can take a crack and then come back and maybe ask you to clarify the question, but I think I understand. First of all, we're not talking about 2014 guidance today. At the appropriate time we will talk about that and I think we'll get into at that point, distribution strategy for our unitholders as we look into 2014. But as I said on Page 7, we should just look at year 2013 in the pro forma basis, we think that the move to the $1.90 annualized is prudent and defensible.

Obviously, we still have room relative to $1.15, but we want to see these acquisitions achieve their goals. And in other words, we just need to get some more experience in this regard. But I really can't talk about, I'll call it, a forecast, for next year, what I can say though is that in terms of the assets themselves, the coke making businesses is still the principal business within SXCP. The plants continue to have made another good quarter, plants continue to run well. We just, I think what we have to do is see these acquisitions actually hit their numbers as we go into the fourth quarter of this year and 2014.

Garrett Nelson - BB&T Capital Market

I was mainly just talking about Slide 9. You showed the three categories: cokemaking, coal logistics and iron ore processing. Obviously, your two most recent acquisitions have been on the coal logistic side, do you see other opportunities there? I mean I know there have been reports of some coal transportation in logistics assets set up for sale in Northern App and Central App? Would you consider additional coal logistics acquisitions that don't have some kind of synergistic relationship with your coke business?

Frederick Henderson

I think the answer is yes. Now that we're in the business, we've got a management team. This management team joined at October 1. So the team is three weeks into their experience with SunCoke Energy, the SunCoke Energy or SunCoke Energy Partners.

That said, it's good management team and we're already kind of exploring how we might actually either do things that will be synergistic with the assets we've already acquired, i.e. how might we leverage for example the KRT terminal to allow us to do further things or alternatively look at other opportunities in this space, now that we have a management team that can manage them.

The other thing we liked about this is the size is good, particularly the size of the KRT acquisitions we thought was attractive, and relative speed. In other words, being able to from negotiation of a deal to closure and then moving on, we like this kind of deal. So we would be open to considering deals like this in the future.

Garrett Nelson - BB&T Capital Market

Could you also remind us date of the Sunoco tax sharing agreement expires at the parent?

Frederick Henderson

I think in January of next year, and I believe its January 18, but I'm looking down the table of my colleagues, to make sure I had my knowledge of the calendar correct. Yes, they're shaking their heads. January 18.

Operator

Our next question is from Lucas Pipes from of Brean Capital.

Lucas Pipes - Brean Capital

My first question is on the Lakeshore acquisition. I think you disclosed that you generated about $700,000 of EBITDA in one months of operation. So on a run rate that would imply a pretty robust figure, especially in comparison to what you paid for this asset. Is there seasonality to this business or this is a pretty good run rate to use going forward?

Frederick Henderson

I would say, I would caution you to not take that 0.7 and multiply it by 12. We had a couple of good -- we did some interesting things. We had a good start. So we were pleased with it. But we also during the month had a chance to perform some other services for our client there. And those are the services that were kind of one-off. So they affected the month and therefore the quarter, but I wouldn't take that opportunity to annualize that number.

Mark Newman

I think operating costs came in a little bit below expectations and then we had some additional services that we were able to provide and we're not in a forecast. But I think when we announced this acquisition we expect this is close to a $5 million adjusted EBITDA plant. And we paid, including the DTE fee about $30 million, so we acquired it about six times. So it's still a great acquisition, but as Fritz said, we shouldn't annualize one month.

Lucas Pipes - Brean Capital

And then more of a bigger picture question on the replacement CapEx -- accrual on the replacement CapEx accrual. Could you walk us through kind of your basic assumptions for that figure?

Mark Newman

When we did the IPO, we modeled out essentially what it would take to replace -- most of that is really driven by Haverhill and Middletown and so basically it's a multi-year forecast, where you're looking at what it will take ultimately to replace those plants at end of life. Our view is our coke plants have kind of a 40 to 50 year life with several major remediations underway like we're doing today at Indiana Harbor. And so what we assume is that this money, which is not segregated in terms of a cash accrual, but is simply an accrual that reduces the amount of cash we distribute to unitholders, is reinvested basically at the yield, that the MLP is generating.

So the assumption is that you get to reinvest this capital and earn a return that the MLP is generating today. You have various inflation assumptions around what needs to be replaced at the end of life of the asset and you put that into and model it, it's not dissimilar to kind of a sinking fund analysis. And so probably it will be too complicated for us to go through that in any more detail on the call, but we can certainly take you through that if you are interested.

Operator

And our next question from Christine Cho from Barclays.

Christine Cho - Barclays

Can you talk about what the lead time is to build these greenfield DRI opportunities, including I don't know, any regulatory approvals you might need, construction time et cetera.

Frederick Henderson

So Christine, let me talk about lead time for our coke plant and then maybe see if I can bridge that. We're not done with DRI plant, so I'm talking from the basis of the exploratory work we've done. Typical coke plant takes a year to permit. We began the work in earnest, for example, the plant in Kentucky that we hope to build in December of last year.

We anticipate receiving a permit probably first quarter of next year, so it's 12 to 14 months. I don't think that DRI process would be longer than that, reasonable chance it could be a little shorter, but still it's an industrial plant, so I would say the permitting process would be suitably rigorous and not dissimilar from our coke plant, maybe a little bit shorter.

Again, this is just little bit of guess work, but we've done some research in this area. And then in terms of construction, in the construction process, major projects like this, a coke plant tends to be two years, and I don't think that DRI plant is that different actually. And if I look at what Nucor is doing in Louisiana, I can't tell you exactly how many months, but it's about that. And I think they are planning to start up their plant up early next year and they've been working on it for several years. So these are long-lived assets, substantial industrial projects, and I think that's a reasonable timeframe.

Christine Cho - Barclays

And I guess like, I mean hypothetically, if you were to built one, I guess what's the cost for a size that you would be comfortable with, am I getting ahead of myself?

Frederick Henderson

I think so, because frankly as we look at it, we think that the scale, in another words, what's an efficient scale size for a deal, the plant is like a 1.5 million to 2 million tons roughly. So I don't think you're going to build small ones, you end up your capital cost per ton of capacity isn't really optimized. Nucor's model sizes I think are 2.5 million range. So they're obviously in the sweet spot. They're obviously going to use the large part of the metal themselves. But I think in general a 1.5 million to 2 million ton plant is a good module-size in terms of efficiency. In terms of capital cost, frankly you know it's premature to talk about with that might be.

Christine Cho - Barclays

But its probable large enough where you have to do it at the parent, and then drop it down right?

Frederick Henderson

You can't say that for certain, but I'm highly confident that if we take on the kind of project we're building at the parent, and then we would handle it like we think we would handle a coke plant. We would build the parent and then it's conclusion that would be offered to the MLP.

Christine Cho - Barclays

And then, I guess just piggybacking off the tax sharing question that was asked earlier, was that coming up in January? I mean is there any information you could or updated thoughts you can offer us on dropping down the remaining 35% of the Haverhill and Middletown facilities.

Frederick Henderson

Christine, I've always been saying, there is no such thing as a bad question, just bad answers. In this particular case there is nothing I can add about the timing. I mean we just don't have a plan for any future dropdowns, obviously we have options post-January 18, and I'd say stay tuned, we just can't get enough of that.

Christine Cho - Barclays

Well, I guess other than the tax sharing agreement, is there anything I guess that would hinder you from being able to do it this year?

Frederick Henderson

On the 35%?

Christine Cho - Barclays

Yes.

Frederick Henderson

The answer is the tax sharing agreement is what would limit that, you get pass the expiration of tax sharing agreement, just to my analysis, nothing else that would limit that.

Operator

That was our final question. I will now turn it back over to Fritz for any closing remarks.

Frederick Henderson

Again, thanks very much for joining us this morning. I hope this format works better for the unitholders and for those of you from the analysts' communities that join the call. And again, thanks very much for your interest in SunCoke Energy Partners.

Operator

Thank you, ladies and gentlemen. That concludes today's call. Thank you for participating. You may now disconnect.

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