Valero 2013 Annual Report Download - page 14

24 25
2013 SUMMARY ANNUAL REPORT 2013 SUMMARY ANNUAL REPORT
In much the same way Valero unlocked potential
value for shareholders in spinning off its former
retail business in 2013, it executed the creation
of a master limited partnership later in the year to
hold its major logistics assets. Only, in this case,
Valero retains substantial control of the new entity,
and wants to grow it to create still more value.
The company created Valero Energy Partners LP,
and holds 100 percent ownership of its general
partner as well as a large portion of common and
subordinated units.
The master limited partnership, which began
public trading in
December 2013 under
the ticker symbol “VLP,”
includes pipeline and
terminal operations of
the Port Arthur Logistics
System, Memphis
Logistics System and
part ownership of the
McKee Products System.
But Valero still has
significant logistics assets that could be dropped
into the partnership, as a means of growing its
large logistics portfolio and achieving a broader
aim of enhancing returns for shareholders long-
term. Response to the public offering has been
robust; an attractive investment because of the
partnership’s reliable fee-based revenue stream.
Management expects at least a 20 percent
average annual distribution growth rate over the
next three years.
“Valero Energy Partners is Valero’s primary vehicle
to drive logistics growth,” said Rich Lashway, who
is Valero Vice President-Logistics Operations, and
also President and Chief Operating Officer of the
partnership. “Valero has a substantial portfolio
of retained logistics assets to grow the limited
partnership, and we are pursuing additional
projects.”
The first asset “drop” into Valero Energy Partners
could come during the second half of 2014.
Logistics growth is an integral part of Valero’s
strategy to increase access to lower-cost crude
oil and improve the capability to export products.
Other investments include rail, pipelines,
barges, tanks and docks, plus other projects in
development.
Aside from new rail unloading terminals in the
works at several locations, Valero has investments
to increase exports of products, and of crude oil
from the Gulf Coast to Canada. Work on a dock
at Corpus Christi
is expected to be
complete in the second
half of 2014, and on
tanks there by first-
quarter 2015.
Taken together, logistics
and efforts to process
more light crude oil are
expected to represent
72 percent of 2014
estimated growth investments.
Initial assets of Valero Energy Partners support
operations at Valero’s Port Arthur, Memphis and
McKee refineries.
The Port Arthur Logistics System includes the
Lucas Crude System and the Port Arthur Products
System.
The Memphis Logistics System includes the
Collierville Crude System, and the Memphis
Products System, which is the refinery’s primary
distribution outlet for refined petroleum products.
The McKee Products System, a refined petroleum
products pipeline and terminal system, connects
the McKee refinery with its refined petroleum
products terminal in El Paso, Texas, and on to
high-growth markets.
Driving Logistics: Strategy Unlocks
Potential Value of Existing Assets
Valero Energy
Partners
is Valero’s
primary
vehicle to
drive logistics
growth.
Rich Lashway
Vice President-
Logistics Operations, and
President & COO,
Valero Energy Partners LP