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Sprague to buy distillate terminal, convert half of capacity to gasoline service

Sprague Resources LP's operating subsidiary Sprague Operating Resources LLC agreed to acquire a refined product terminal in Rhode Island from Capital Terminal Co. for $23 million.

The terminal, located in East Providence, R.I., has a combined distillate storage capacity of over 1 million barrels, which has been leased exclusively by Sprague since 2014, according to a Jan. 25 news release. With the storage capacity at East Providence, Sprague's total capacity is at 14.2 million bbl.

Sprague plans to invest $8 million in the conversion of half the terminal's capacity to gasoline and ethanol service in an effort to introduce a new revenue stream at the facility to augment the partnership's proprietary distillate marketing business. The fee-for-service gasoline contract would include ratable take or pay revenue guarantees and is scheduled to start in the third quarter of 2017.

An additional $3 million expansion capital investment would be allocated to optimize distillate storage and expand the materials handling business at Sprague's existing Providence facility.

The transaction, to be funded using borrowings from Sprague's senior secured credit facility, would be accretive to distributable cash flow and ramp-up to about $6 million of adjusted EBITDA annually over the first five years, along with increases in minimum handling volumes. Deal closing is expected within 30 days, the partnership said in the release.

Sprague also recently agreed to buy distillate terminals and storage assets in Springfield, Mass., from L.E. Belcher Inc., making the partnership the owner of the largest distillate tankage position in the area.