What going on at Green Plains Partners LP (NASDAQ: GPP)

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Green Plains Partners LP (NASDAQ: GPP) have reached an agreement to sell its storage and transportation assets and transfer railcar leases associated with the Lakota, Iowa, Bluffton, Ind. and Riga, Mich. ethanol facilities to Green Plains Inc. for $120.9 million. These three plants account for 280 million gallons of nameplate capacity, or approximately 20% of Green Plains Inc.’s reported ethanol production capacity. In addition, approximately 525 of the 3,500 railcars managed by Green Plains Partners are anticipated to be conveyed to Green Plains Inc.Green Plains Partners will receive 8.9 million units owned by Green Plains Inc. as payment for the transaction and has also entered into an amendment with Green Plains Trade Group LLC to extend the Ethanol Storage and Throughput Agreement for three years. The company expect  a reduction in cash flow to the Partnership of approximately $14.6 million, the reduction in units owned by Green Plains Inc. decreases the future distributions payable by approximately $17 million based on the current $1.90 per unit annual distribution, making this transaction accretive to the Partnership unitholders. The Partnership is in a solid position to grow with availability under its credit facility and a renewed focus on expanding the footprint in the terminal business. In addition, Green Plains Inc. and the Partnership agreed to extend the storage and throughput services agreement an additional three years to June 30, 2028.

The quarterly minimum volume commitment associated with the storage and throughput services agreement will be 235.7 million gallons or, approximately 80% of the new Green Plains Inc. annual production capacity of 1.183 billion gallons. In addition, the Partnership and Green Plains Inc. have agreed to extend the storage and throughput services agreement an additional three years through June 30, 2028.

The transaction is projected to close during the fourth quarter of 2018 in conjunction with the completion of the Green Plains Inc. ethanol asset sale. The purchase agreement is subject to customary closing conditions and regulatory approvals.

The terms of this transaction were approved by the board of directors of the general partner and the board of directors’ conflicts committee, which consists entirely of independent directors. The conflicts committee engaged Evercore to act as its independent financial advisor and Baker Botts to act as its legal counsel.

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