Keppel Infrastructure Trust to acquire 80% of Philippine storage facility owner

THE manager of Keppel Infrastructure Trust (KIT) and its Philippine partner Metro Pacific Investments Corporation (MPIC) have entered a conditional agreement to fully acquire an entity that owns the largest petroleum products import storage facility in the Philippines.

The target entity is the Philippine Tank Storage International (Holdings) Inc (PTSI), which owns the storage facility, the Philippine Coastal Storage & Pipeline Corporation (PCSPC).

Upon completion of the deal, KIT will indirectly hold 80 per cent of the shares in PTSI, while MPIC will indirectly hold the remainder. KIT's purchase consideration, proportionate to its shareholding, is estimated at US$267 million. This is subject to adjustments post-deal.

KIT is also discussing with MPIC the proposed grant of a call option, under which MPIC's subsidiary will have the right to purchase up to 30 per cent of PTSI. More details of the call option will be provided upon definitive agreement.

PCSPC comprises three tank farms and one marine terminal area, with a combined land size of approximately 150 hectares. Located in the Subic Bay Freeport Zone, the facility captures demand from Metro Manila, as well as Central and North Luzon, which account for more than half of the demand for oil products in the Philippines, KIT said.

The Subic Bay Freeport Zone is a tax-friendly zone, accessible by major oil refiners year-round, thanks to being sheltered from typhoons.

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When PCSPC completes a conversion in early 2021, it will have 86 storage tanks, with a storage capacity of some six million barrels. This will account for about 36 per cent of the total import terminal storage capacity in the Philippines, KIT said.

PCSPC's customer base includes a government agency, oil-and-gas conglomerates, multinational corporations and domestic gasoline retailers. A "large majority" are on "take-or-pay" contracts, which reduces exposure to petroleum price and volume risks, KIT said.

Matthew Pollard, chief executive of KIT's manager, said that the strategic acquisition will enable KIT to diversify and grow, while strengthening the resilience of its distributable cash flow.

"As the largest petroleum products import storage facility in the Philippines, where demand for petroleum products is expected to grow, PCSPC presents an attractive opportunity for KIT to capture opportunities arising from the strong macroeconomic outlook as well as robust growth fundamentals for imported petroleum products in the Philippines," he said.

He added: "PCSPC's strong fundamental attributes are highly defensive, given its strategic location and leading market position. In addition, it provides essential services to credit-worthy customers."

Units of KIT closed flat at S$0.55 on Tuesday.