Williams Partners expects that the addition of olefins production to its business via this acquisition would be accretive to distributable cash flow, on a per-unit basis for the partnership's unitholders. As contemplated, Williams Partners would fund the transaction largely with the issuance of limited-partner units to Williams.
The partnership expects the addition of olefins production to its business would bring more certainty to cash flows that today are exposed to the market for ethane, which is projected to experience periods of volatility as demand infrastructure lags new supplies from shale-gas production. Ethylene demand is expected to remain strong as ethylene is and is expected to be significantly less expensive than crude-oil based feedstock.
Williams owns 68 percent of Williams Partners, including the general-partner interest.
Located south of Baton Rouge, La., the Geismar facility is a light-end natural gas liquid (NGL) cracker with current volumes of 37,000 barrels per day (bpd) of ethane and 3,000 bpd of propane and annual production of 1.35 billion pounds of ethylene. With the benefit of a $350-$400 million expansion under way and scheduled for completion by late 2013, the facility's annual ethylene production capacity will grow by 600 million pounds to 1.95 billion pounds.
"Adding the Geismar olefins-production facilities to Williams Partners' portfolio would immediately reduce the partnership's exposure to the ethane market by nearly 70 percent; and it would nearly eliminate it by 2014," said Alan Armstrong, chief executive officer of the general partner of Williams Partners. "The business is highly desirable because it would create greater consistency in our earnings and cash flows. It provides strong support of our plans for continued growth in the cash distributions we pay unitholders."
The transaction is subject to execution of an agreement between the two parties, review and recommendation by the conflicts committee of the general partner of Williams Partners, and approval of the two parties' boards of directors.
Along with ethane, propane and ethylene, the Geismar facility also produces propylene, butadiene and debutanized aromatic concentrate (DAC). Williams owns 83.3 percent of the Geismar facility and operates the plant.