SunCoke Energy, Inc. announced Tuesday its plan to drop down over time the company’s entire domestic coke business to SunCoke Energy Partners, L.P. SXC is the sponsor, general partner and largest unitholder of SXCP, holding a 56 percent limited partnership interest and all the incentive distribution rights. The company also announced its strategic intent to exit the coal mining business.
As a part of management’s multi-year plan, the Board of Directors approved the initial dropdown of a 33 percent interest in the Haverhill and Middletown cokemaking operations, in which SXCP already holds a 65 percent interest. SXC will continue to retain a 2 percent interest in both facilities. Although terms have not yet been finalized, SXC anticipates SXCP will finance this transaction through a combination of equity and debt.
Fritz Henderson, SunCoke Energy’s Chairman and Chief Executive Officer, stated, “With the expiration of certain provisions in our tax sharing agreement with Sunoco, we gain greater flexibility to evolve our structure and unlock value for shareholders. The first step is to begin executing a plan to drop down our entire domestic cokemaking business to SXCP over the next few years. We believe this strategy will create significant value for shareholders directly through the proceeds received for the assets dropped down and indirectly through the increase in value of our SXCP ownership interest and higher total cash distributions paid to us, including incentive distribution rights.”
Henderson continued, “In addition, our new flexibility enables us to consider additional restructuring options for our coal mining business. While our coal mining team has delivered significant improvement in productivity, safety and production costs, we believe shareholder value will increase if we exit this business. We have retained an advisor and are currently evaluating strategic options in this regard.”