Targa Resources Partners LP Agrees to Acquire Downstream Business From Targa Resources, Inc. and Announces Conference Call for Investors and Analysts

Tuesday, July 28, 2009 8:00 AM

HOUSTON, July 28, 2009 (GLOBE NEWSWIRE) -- Targa Resources Partners LP (Nasdaq:NGLS) ("Targa Resources Partners" or the "Partnership") announced today that it has agreed to acquire Targa Resources, Inc.'s ("Targa") natural gas liquids business (the "Downstream Business") for $530 million. The Downstream Business includes the (i) Logistics Assets, (ii) NGL Distribution and Marketing and (iii) Wholesale Marketing segments as reported by Targa. As part of the transaction, Targa will provide distribution support to the Partnership beginning with the fourth quarter of 2009 and continuing through the fourth quarter of 2011. As described further below, Targa will provide support for quarterly distribution coverage of 1.0x, up to a maximum of $8 million of support in any quarter.

Consideration to Targa will include 25% of the transaction value in newly issued common and general partner units of the Partnership, the maximum equity component permitted under Targa's financing agreements. The remaining 75% or approximately $397.5 million will be in cash, funded through borrowings under the Partnership's senior secured revolving credit facility.

The acquisition improves business diversity of and adds primarily fee-based cash flow to the Partnership. For the full year ending December 31, 2009 the Downstream Business is expected to generate Adjusted EBITDA of approximately $80 to $85 million. The Downstream Business consists of critical natural gas liquids infrastructure including:


 * Three fractionation facilities with approximately 380 MBbls/d
   maximum gross capacity;
 * Storage wells with approximately 65 MMBbl of capacity and 15
   terminal facilities;
 * Approximately 800 miles of pipeline supporting fractionation,
   storage and terminalling;
 * The second largest LPG import and export facility in the Gulf
   Coast; and
 * Approximately 770 railcars, 70 transport tractors, 100 tank
   trailers and 21 pressurized NGL barges.

"The acquisition of the Downstream Business is immediately accretive to the Partnership's distributable cash flow. Moreover, the acquisition provides visibility with respect to the current distribution for the foreseeable future, especially given the cash flow generating capability of the Downstream Business and the distribution support that the Partnership will enjoy for the next two years. More importantly, the transaction adds high quality assets that generate a significant amount of fee based income and will strengthen and diversify the EBITDA profile of the Partnership. The Downstream Business includes a large portfolio of potential internal growth projects that if developed would generate additional fee based income. We believe that the combined businesses will provide positive distribution coverage under most scenarios and that Targa's distribution support will provide additional security for the current distribution," said Rene Joyce, Chief Executive Officer of the Partnership's general partner and of Targa. "The powerful combination of this strategic asset platform, substantial distribution support and the maximum equity consideration permitted under Targa's financing agreements underscores Targa's commitment to the Partnership's long term success."

Liquidity and Financing Update

The Partnership is currently seeking commitment increases under the accordion feature of its existing $850 million senior secured revolving credit facility. The Partnership has received $127.5 million of additional commitments and expects to close the commitment increase July 29, 2009, which would bring total commitments under the revolver to $977.5 million. As of June 30, 2009 and after giving effect to the July 6th closing of the 11.25 percent senior unsecured notes due July 2017, pro forma borrowings under the senior secured revolving credit facility were $216.4 million. After giving effect to the recent notes offering and the transaction, including letters of credit required for the Downstream Business, pro forma liquidity would be approximately $300 million as of June 30, 2009.

The Downstream Business

The Downstream Business is also referred to as Targa's NGL Logistics and Marketing Division, which consists of three segments: (i) Logistics Assets, (ii) NGL Distribution and Marketing and (iii) Wholesale Marketing. The Logistics Assets segment includes the assets involved in the fractionation, storage and transportation of NGLs, as well as Targa's 39% equity method investment in Gulf Coast Fractionators LP. The NGL Distribution and Marketing segment markets internal and affiliate NGL production, purchases NGL products from third parties for resale, and manages much of the logistics between facilities.

Related Stories