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Vopak has announced that it will sell its 20 percent stake in the Bahamas Oil Refining Company (BORCO) to US-based pipeline and storage terminal operator Buckeye Partners L.P. and generate an after-tax profit over USD 150 million.

The news follows the announcement on 20th December 2010 by First Reserve Corporation that it would be selling its 80 percent equity stake in BORCO, also to Buckeye Partners.

First Reserve Corporation (FRC), a US-based private investment firm in the energy industry, and Vopak jointly acquired BORCO, located in Freeport, Bahamas, in April 2008.

The former refinery was redeveloped into an independent oil storage terminal with a capacity of 3.4 million cubic meters. The equity participation of the BORCO joint venture was split 80%/20% between FRC and Vopak, respectively, whereby Vopak acted as operator.

In December 2010 a subsidiary of FRC entered into an agreement to sell its 80 percent equity stake in BORCO to a subsidiary of Buckeye for approximately USD 1.36 billion, including the proportionate debt in the joint venture.

By exercising its tag-along right, in line with the joint-venture agreement with FRC, Vopak will receive proceeds for its 20 percent equity stake being: approximately USD 168 million in cash and approximately USD 100 million in Buckeye units, consisting of 1,095,722 Buckeye Class B units and 620,861 Buckeye LP units. The actual number of units is subject to adjustment if closing does not occur before Buckeye's next limited partner distribution.

As part of the joint venture agreement, the terminal has been operated by Vopak from the start. Buckeye expressed its intention to take over the operating responsibilities of the terminal as from the end of the current operating agreement i.e. by the end of April 2013.

"To ensure full continuity for the BORCO customers, Vopak will continue to operate the terminal and work closely with Buckeye to secure a proper transition and handover," Vopak said in a statement.

Provided the value of the Buckeye units will not decrease prior to the closing date of the transaction, the sale of Vopak’s 20 percent equity stake in BORCO is expected to generate an after-tax profit over USD 150 million.

The estimated after-tax profit includes, amongst others, the book profit on the sale of Vopak's 20 percent equity stake in BORCO and the incentive fees receivable resulting from the sale by FRC of its 80 percent equity stake in BORCO to Buckeye.

The completion of the transaction is expected to occur in the coming weeks, subject to certain conditions to closing being satisfied, including government approvals in the Bahamas.

Vopak said the cash proceeds of the sale would be allocated to fund its global growth strategy. The after-tax profit on the deal will be reported as an exceptional item in the company's Q1 2011 financial results.