Island Energy Services plans to reinvest net sale proceeds in Hawaii to further expand its logistics infrastructure.
Island Energy Services (IES) is divesting select refinery assets to Par Pacific Holdings Inc. IES is shifting its strategic focus to dedicated logistics and retail operations while ceasing its refining operations.
Par intends to use the acquired assets for continued refining operations to supply fuel to IES, which will allow IES to fulfill certain utility fuel supply contracts in Hawaii. In connection with the transaction, IES has agreed to enter into a long-term agreement with Par to provide fuel storage and throughput services.
Par is acquiring the refining units for $45 million plus additional amounts for certain hydrocarbon and non-hydrocarbon inventory. The units, which are located near Par’s current Kapolei refinery, will be utilized by Par Pacific to supplement its existing operations in supplying IES so that IES may fulfill its existing contractual obligations with Hawaiian Electric Co., Maui Electric Co., Hawaii Electric Light Co., and Kauai Island Utility Cooperative.
To supply its customers, including IES’s 56 Texaco-branded stations, IES plans to continue to source petroleum products from its current network of local and global suppliers and does not expect any disruption to Hawaii’s supply of petroleum products as a result of this transaction.
IES also expects to reinvest net sale proceeds in Hawaii to further expand its logistics infrastructure, which includes a network of tank farms, pipelines, and other distribution assets. These planned investments are intended to ensure IES remains well-positioned as a long-term valued supplier of fuel products in Hawaii. In addition, IES plans to expand its retail operations with the opening of a new Texaco-branded station in Kapolei in early 2019 as well as other new locations throughout Hawaii.
“We recognize the impact this transaction will have on all of our employees and we are committed to supporting each of them during this transformation of the business,” IES CEO Jon Mauer said. “Our immediate and long-term focus is to continue to reliably service our customers, both through this transition and beyond.”
Mauer added, “This shift in operations better positions IES as an integrated logistics provider, anchored by our large-scale Kapolei import terminal. We look forward to maintaining our role as a trusted local fuel supplier for the state as we respond to changing market conditions, industry regulations and Hawaii’s long-term energy mandate.”
Closing of the transaction is subject to the satisfaction of customary closing conditions, including certain regulatory and compliance matters, and is expected to close before the end of the fourth quarter of 2018. Following the transaction, IES and Par will continue to operate as independent competitors.
“We believe this transaction will prevent any disruption to the supply of fuel to meet Hawaii’s electric generation needs,” said William Pate, president and CEO, Par Pacific. “The closure of one of Hawaii’s refineries was anticipated in 2014 by the governor’s Hawaii Refinery Task Force. As the owner and operator of Hawaii’s remaining refinery, we recognize our role in meeting the essential demand for petroleum products today and to ensure continuity and a smooth and practical transition to Hawaii’s clean energy future.”
Par Pacific expects to hire approximately 65 IES employees in connection with the acquisition. New employees will receive benefits comparable to those provided to Par Pacific’s existing employees. Par Pacific anticipates hiring another 20 employees at its Kapolei refinery in conjunction with the new investment.
“We look forward to expanding our team and keeping high-quality energy jobs available in Hawaii,” said Jim Yates, president, Par Hawaii, Inc. “With deep local roots and longstanding commitments to Hawaii, our priority has always been to take care of our employees and support our community. We believe this transition represents a best-case scenario for a ‘soft landing’ for all constituents in the state’s transition to a renewable energy future.”