VTTI Energy Partners (VTTI) Q2 2017 Results - Earnings Call Transcript

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About: VTTI Energy Partners LP (VTTI)
by: SA Transcripts

VTTI Energy Partners LP (NYSE:VTTI) Q2 2017 Results Conference Call August 8, 2017 9:00 AM ET

Executives

Rob Abbott - Chief Financial Officer

Operator

Good day, ladies and gentlemen. Welcome to the VTTI Energy Partners’ Second Quarter Earnings Conference Call. During today’s slide presentation, all parties will be in listen-only mode. Following the conclusion of the slide presentation, the conference will be opened for a question-and-answer session. Please note today’s event is being recorded.

At this time, I would like to call over to Rob Abbott, Chief Financial Officer of VTTI. Please go ahead sir.

Rob Abbott

Good day and thank you all for joining the VTTI Energy Partners’ Q2 2017 earnings call. Please note that the press release announcing our results and relating to the slides are available on our website at vttienergypartners.com.

I would like to also remind you that certain declarations made by management during the conference call will include the use of statements that are forward-looking in nature and will not be based on historical facts. Accordingly, we direct you to the risks and uncertainties disclosure included in the company’s latest filings with the SEC.

With that, I will turn to Slide 4 and our corporate spend operating review. Following the buyout offer announcement in March, we have entered into a definitive merger agreement with VTTI B.V., pursued to which VTTI B.V. will acquire, for cash, all of the outstanding common units of the Partnership at a price of $19.50 per common unit. This is based on the recommendation of the conflicts committee and approved by the Board of Directors of the German partner. The definitive merger agreement has been signed and a special meeting date has been set for 13 September 2017, F1 3 for the of unitholder date.

Please refer to the proxy statement available on VTTI or SEC website for guidance on how to submit your vote. From closing of the merger the partnership will be an indirect wholly owned subsidiary of VTTI, B.V., and will seek to be publicly held partnership. In addition, unitholders of the partnership will continue to receive regular quarterly distributions of $0.0336 per unit for each completed quarter prior to the closing date, hence including Q2, 2017.

In terms of operating financial highlights, we experienced strong performance in the quarter with increased revenue and the profit levels compared to the pact comparative periods of 2016 and generated adjusted EBITDA of approximately $52 million. This was driven by storage rate increases at certain locations and high end ancillary fees. [Indiscernible] Q2 remained at approximately 100% for tax and service across the portfolio and we continue to forecast great CapEx on a growth basis of approximately $40 million for the year 2017. And finally in terms of the market, we are starting to see a less favorable backdrop particularly hub locations which is primarily due to the lack of Contango price structure in the market.

Turning now to Page 5, we show our financial results for the quarter in more detail. And as previously stated, the adjusted EBITDA was $52.3 million and this was approximately $2 million higher than the prior quarter due to step up in revenue generation. The cost base is flat from the prior year excluding cost associated with the private transaction, while interest cost also remained flat given a stable capital structure and gearing level. However, we experienced after quarter of material cash tax in Q2 for the payable amount of $4.2 million for the quarter. We had previously planned that we would be moving into a cash tax payable position during 2017, given our cash losses and capital allowances could be gradually utilized overtime. As far as to previously cash tax will grow slowly from here by a few percentage points of EBITDA per annum.

Maintenance CapEx was slightly above run-rate levels due to the savings and we are expecting $25 million to $27 million of the full year 2017 in line with the prior year.

In conclusion, distributable cash flow was approximately $2 million lower than the prior quarter, due to the impact of the cash tax and moderately elevated maintenance CapEx. Therefore, the coverage ratio was 0.94 times below our target range of one time to 1.0 times to 1.1 times through the cycle on a flat distribution.

Turning briefly to the last slide on Page 6. You can see our advantage fees and hedging position. Our external net debt was broadly stable at approximately $570 million, implying a gearing level of 2.7 times in Q2 adjusted EBITDA on an annualize basis, excluding restricted cash and affiliate debt. And finally, the financial targets and policy as you see here are unchanged. We will look in the near-term to roll forward euro to US dollar foreign exchange hedging program for an additional year. The current program extends to the end of 2020 with step down in mid 2019.

With that we’ll turn to question-and-answer session.

Question-and-Answer Session

Operator

Rob Abbott

I would just like to thank you all for joining our Q2 earnings call. And we look forward to speaking with you again soon. Thank you.

Operator

The conference has now concluded. Thank you for attending today’s presentation. And you may now disconnect.