Business Context and Reporting Period
This Form 8-K Current Report, dated February 28, 2017, covers PBF Energy Inc. and its consolidated subsidiary, PBF Holding Company LLC. The filing details the closing of a previously announced Contribution Agreement between PBF Energy Company LLC ("PBF LLC") and PBF Logistics LP ("PBFX").
Key Financial Metrics and Transaction Details
The filing does not provide consolidated revenue, profit, cash flow, or margin data for the reporting period. The primary financial metric disclosed relates to the transaction consideration:
- Transaction Consideration: PBF Holding and PBF LLC received an $11.6 million intercompany promissory note in favor of Paulsboro Refining Company LLC.
- Ownership Structure: PBF Energy owns 2,572,944 common units and 15,886,553 subordinated units of PBFX, representing a 44.2% limited partner interest. PBF Energy also indirectly owns the general partner interest and all incentive distribution rights of PBFX.
- Service Agreement Fees: The annual fee under the Fifth Amended and Restated Operation and Management Services and Secondment Agreement increased from $6.4 million to $6.7 million, indexed for inflation.
Material Changes and Asset Contributions
PBF LLC contributed all issued and outstanding limited liability company interests of Paulsboro Natural Gas Pipeline Company LLC ("PNGPC") to PBFX's wholly owned subsidiary, PBFX Operating Company LLC. Key changes include:
- Asset Transfer: PNGPC owns an interstate natural gas pipeline connecting Texas Eastern pipeline in Pennsylvania to the PBF Holding refinery in Paulsboro, New Jersey.
- Construction Status: PNGPC has Federal Energy Regulatory Commission (FERC) approval and is constructing a new 24-inch pipeline to replace the existing one, which will be abandoned.
- Additional Rights: PBF LLC received expansion rights and a right of first refusal regarding the new pipeline, along with an assignment and assumption agreement for certain outstanding litigation involving PNGPC.
Management Commentary, Risks, and Agreements
Management executed the Fifth Amended and Restated Operation and Management Services and Secondment Agreement to govern the provision of seconded employees and facility usage among PBF Holding, PBFX, and their affiliates. This agreement now incorporates the PNGPC natural gas pipeline and the Chalmette storage tank.
Risks and Contingencies: The filing notes that certain individuals serve as officers and/or directors of multiple entities involved in the transaction. The description of the Contribution Agreement is qualified by reference to the full text of the agreement filed as an exhibit.
Investor Verification Checklist
- Verify the terms and repayment schedule of the $11.6 million intercompany promissory note.
- Review the full text of the Contribution Agreement (Exhibit 2.1 to the February 22, 2017 filing) for complete details on the PNGPC transfer.
- Examine the Fifth Amended and Restated Operation and Management Services and Secondment Agreement (Exhibit 10.1) for specific obligations regarding the new pipeline and interim fees.
- Confirm the status of the outstanding litigation involving PNGPC assumed under the assignment agreement.
- Monitor the construction progress and regulatory approvals for the new 24-inch pipeline replacing the existing infrastructure.