Charlesbank Capital Partners, EIG Global Energy Partners and Tailwater provided a new $175 million equity commitment to enhance liquidity and support anticipated growth initiatives for Southcross Energy Partners and Southcross Holdings LP.
Of the total, $50 million is committed to Southcross Energy Partners and will be funded as needed to pursue significant growth opportunities that currently exist in the Eagle Ford, including both accretive organic capital projects and strategic acquisitions. The new capital is also available for potential future covenant cures and asset drop-downs from Southcross Holdings. The capital is expected to be structured to minimize any potential dilution of existing common unit holders.
The remaining $125 million will be directed to Southcross Holdings to enhance the inventory of drop-down assets available to Southcross Energy Partners.
Southcross Holdings owns 100 percent of Southcross Energy Partners GP LLC, the general partner of Southcross Energy Partners, limited partner interests in Southcross Energy Partners and several key Eagle Ford midstream assets. The capital that is committed to Southcross Holdings is also available for direct investment in Southcross Energy Partners for future growth projects.
“This recent capital commitment by the sponsors reflects our continued belief in the significant growth opportunities at Southcross [Energy Partners] and our support of the management team,” said Jon Biotti of Charlesbank Capital Partners.
While the new commitment is expected to be sufficient to meet forecasted growth capital needs through 2016, the sponsors have stated a willingness and a desire to provide incremental capital as needed to fund additional growth projects.
“The sponsors are committed to pursuing development projects and acquisitions structured in a way that is accretive to the Southcross [Energy Partners] unitholders,” stated Wallace Henderson, managing director of EIG Global Energy Partners. Jason Downie, of Tailwater Capital, added, “We will continue to work closely with the Southcross [Energy Partners] management team to drive growth through the current commodity price environment.”
Dedicated Growth Inventory
Southcross Holdings maintains an inventory of assets that are well-suited to be dropped down to Southcross Energy Partners. These include the Robstown Fractionator, the Lancaster gathering system, a 100 MMcf/d treating facility, and two strategically placed NGL pipelines. The assets are well-situated geographically in the Eagle Ford shale and are interconnected with the existing Southcross Energy Partners system.
Several projects are currently underway to further enhance the value of these assets. Train A of the Robstown Fractionator is expected to be operational in September 2015 and will increase the facility’s capacity to 63,000 Bbls/d. Expansion of the Lancaster treating facility, which will double its capacity, is anticipated to be completed in the third quarter of 2016. Based on the treating and fractionation capacity for these assets, the estimated annual adjusted EBITDA potential is in excess of $100 million.
Southcross Energy Partners is targeting to complete a drop-down every four to six months, subject to market conditions and the anticipated ramp in volumes for the Southcross Holdings assets. Southcross Energy Partners expects that the drop-down of these assets could be completed as early as mid-2017.Tags: Eagle Ford, equity investment, Southcross Energy Partners, Southcross Holdings, Texas