Construction of Inter Pipeline’s Polaris Pipeline.
What's a Calgary pipeline company doing in a place like Sweden? Expanding its bulk liquid storage business, of course. Inter Pipeline Ltd. on Wednesday revealed it bought four petroleum and petrochemical storage terminals in Swedish ports from a subsidiary of Koninklijke Vopak NV for about $131-million, drawing from its existing $1.25-billion in credit facilities.
It's a tidy little deal for the pipeline-focused company, which derived just 11 per cent of its $1.5-billion in 2014 revenue from bulk storage but has been gradually growing its storage presence in Europe. The deal increases Inter's storage capacity across Europe by 40 per cent, to 27 million barrels across 16 terminals, and makes it the largest independent bulk liquid storage provider in Scandinavia.
The Volpak Sweden business has delivered stable returns despite Europe's financial woes, generating about $20-million in operating earnings on average over the past five years for the seller, with an average utilization rate of 94 per cent in the first quarter. Inter paid a relatively cheap 6.7 times average historical operating earnings, and the deal should add 4 cents a year to its annual funds from operations.
RBC analyst Robert Kwan called the deal "modestly positive" for the conservatively managed company in a research bulletin. He noted that while the market "is focused on the core oil infrastructure business in Canada, modest-sized acquisitions of storage assets in Europe are likely to be better received [rather than] scale-changing transactions."
Sean Silcoff