Green Plains Partners LP (NASDAQ:GPP) is a fee-based master limited partnership (MLP) formed by its parent company, Green Plains Inc. (NASDAQ:GPRE), to provide ethanol and fuel storage, terminal and transportation services. The common units of Green Plains Partners began trading on the NASDAQ Stock Market on June 26. The net proceeds from the offering of 10 million common units were roughly $157.9 million after subtracting underwriting discounts, structuring fees and offering expenses. Most of the raised capital will be used to pay a distribution to Green Plains Inc., which “dropped down” the rail cars, ethanol terminals and other transportation and storage assets into the MLP. The parent company, Green Plains Inc., owns 62.5% of the outstanding common units and subordinated units of Green Plains Partners along with 2% general partner interest and Incentive Distribution Rights, while the public owns the remaining common units that represent a 35.5% limited partner interest in Green Plain Partners. It is also worth mentioning that Jason Karp’s Tourbillon Capital Partners is the largest shareholder in Green Plains Inc. (NASDAQ:GPRE) from our database with 2.32 million shares, while Dmitry Balyasny’s hedge fund closed its position in the company during the first quarter of 2015.
Follow Jason Karp's Tourbillon Capital Partners
Green Plains Partners LP (NASDAQ:GPP) is anticipated to serve as the primary downstream logistics service provider of its parent company. The company’s assets are the main method of storing and delivering the ethanol that Green Plains produces. In addition to that, Green Plains Inc. will most likely benefit from this vertical integration by making better use of the economic value of these operations within the ethanol value chain. The Chief Executive Officer of the parent company, Todd Becker, has also claimed that the IPO of this MLP will strengthen the balance sheet of Green Plains Inc. as its management intends to make more acquisitions. For instance, the parent company has recently announced production expansion at its ethanol production plants by roughly 100 mmgy and will seek for other expansion projects in the future. Thus, Green Plains Partners will indubitably benefit from new growth opportunities as the MLP is expected to generate stable cash flows from fee-based revenues for receiving, storing, transferring and transporting ethanol and other fuels. Moreover, the company will not be influenced directly by any fluctuations in commodity prices.
At the moment, Green Plains Partners owns 27 ethanol storage facilities near its parent company’s ethanol production plants, eight fuel terminal facilities that are primarily located near important rail lines to transport fuel, and other transportation assets, including a leased fleet of 2,200 rail cars to transport ethanol from Green Plains’ facilities to refineries both domestically and worldwide. Let’s now briefly outline and summarize the main reasons for the spin-off. The first reason of this spin-off is that the marketing and distribution segment is very profitable and the IPO will provide capital for new growth opportunities. The second reason is that the spin-off will reduce the parent company’s risk associated with the transportation business. Hence, it seems that the two companies will be better-off by operating separately. Ultimately, as master limited partnerships have experienced increased investor interest lately, Green Plains Partners LP (NASDAQ:GPP) should be no exception. So it is definitely worth keeping an eye on the newly-created MLP as it might represent a great buying opportunity.
Disclosure: None
