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Calumet Specialty Products Partners, LP (NASDAQ: CLMT) (“Calumet “) today announced a series of strategic transactions in its renewable diesel business. The transactions establish Montana Renewables, LLC (“MRL “) as a pure and unlimited renewable energy subsidiary of Calumet. MRL has completed a $ 300 million investment in convertible debt from funds managed by Oaktree Capital Management, LP (“Oaktree “). MRL also completed a $ 145 million preferred stock investment by Calumet. Calumet owns 100% of the shares of MRL.
Pipe‘Montana’s operations now consist of two fully independent business segments: renewable energy through MRL and conventional Canadian crude refining through Calumet Montana Refining LLC (“CMR”).
MRL will complete its in-flight capital projects and is expected to become one of the most advantaged renewable diesel producers in North America. LMR‘s the existing metallurgy of the 317L stainless steel hydrocracker is well suited to processing renewable raw materials; MRL’s unique renewable hydrogen project further reduces carbon intensity and maximizes renewable diesel production; and a new state-of-the-art raw material pre-processor, combined with the proximity to temperate oilseed and low-carbon markets, will provide MRL with significant procurement and logistics advantages.
CMR will continue to own and operate the conventional specialty refinery at Great Falls with a reconfigured processing capacity of 12,000 barrels per day of Canadian crude. The refinery is focused on producing high quality specialty asphalt, as well as meeting local demand for conventional fuels. CMR expects that the refinery will generate 60% of the historical adjusted EBITDA (before conversion) after the separation of the hydrocracker. Calumet holds 100% of the capital of CMR.
As a result of these transactions, Calumet received net cash proceeds of approximately $ 199 million and began reducing its outstanding debt by issuing a repayment notice today for the principal outstanding amount of $ 80 million. dollars of its 7.625% senior notes due 2022.
Calumet CEO Steve Mawer said: “We have a clear vision for Calumet, and we have implemented it through the re-segmentation of our business at the start of the year and now by putting in place arguably the best renewable diesel conversion project in North America. 2021 has been a year of tremendous value creation for our unitholders and we are very excited to end the year by forming this partnership at Montana Renewables with Oaktree. These operations advance Calumet‘MRL’s vision as a self-sustaining, high-growth and pure renewable fuels company. “
Bruce Fleming, EVP Montana Renewables, added: “We concluded that a financial partner would give us the ability to separate the renewable diesel business, as a first step in creating maximum value for unitholders. Once we decided that, Oaktree’s tremendous expertise and creativity made it a natural partner to build this exciting venture for future options targeting “post-money” alternatives for MRL. “
“We are delighted to partner with Calumet to support the development and expansion of its renewable diesel business. These Great Falls assets are well positioned for growth and this transaction establishes Calumet as an innovative player in the important shift towards sustainable energy. We‘are proud to support Calumet‘s to advance the energy transition, ”said Jared Parker, Oaktree CEO‘s Global Opportunities Fund.
- MRL acquired Calumet’s existing high metallurgical hydrocracker and related assets in Great Falls, MT
- MRL has entered into a 3-year, $ 300 million secured convertible term loan issued by Oaktree
- MRL completed $ 145 million preferred stock investment by Calumet, consisting of $ 44 million for renewable diesel project capital expenditures to date and $ 101 million in cash
- MRL designated as an unrestricted subsidiary of Calumet and will operate with its own board of directors
- MRL has entered into a toll deal with CMR that is expected to earn $ 30 million in cash in excess of the cost of service on an annualized basis in return for operating its hydrocracker as instructed by Calumet prior to conversion to production from renewable energy.
- MRL has entered into management, operating and other service agreements with Calumet to support the continued development and subsequent operation of the Renewable Diesel Conversion Project.
- MRL has signed a $ 50 million letter of intent with Stonebriar Commercial Finance (“Stonebriar”) to finance a renewable hydrogen plant to maximize renewable diesel production and further reduce carbon intensity (CI) in gasoline. MRL products
- MRL signed a letter of intent with Macquarie for the financing of renewable energy stocks
MRL closed the Oaktree term loan, Calumet preferred stock and certain related transactions on November 18, 2021. The Stonebriar and Macquarie transactions are expected to close by the first quarter of next year.
For more information, a presentation accompanying this press release is available in the Investor Relations section of the Calumet website at the address www.calumetspecialty.com.
Calumet also announced its intention to attend the Cowen 2021 Energy Summit on December 1 and 2, 2021, the BofA Securities Leveraged Finance conference on December 1 and 2, 2021, and the Wells Fargo Virtual Midstream, Utility & Renewables Symposium on December 8. 9, 2021.
Cowen and Company, LLC and Intrepid Partners, LLC acted as financial advisers and Gibson, Dunn & Crutcher LLP acted as legal counsel to Calumet. Guggenheim Securities acted as financial advisor and Latham & Watkins, LLP as legal advisor to Oaktree.