Enterprise to acquire Diamond-Koch's propylene fractionation unit

By the OGJ Online Staff

HOUSTON, Nov. 26 -- Enterprise Products Partners LP said Monday it plans to acquire, for cash, a propylene fractionation business from units of Ultramar Diamond Shamrock Corp. and Koch Industries Inc.

D-K Diamond Koch LLC, Diamond-Koch LP, and Diamond-Koch III LP own the properties.

The sale includes a 66.66% interest in a polymer grade propylene fractionation facility in Mont Belvieu, Tex., a 50% interest in a polymer-grade propylene export terminal on the Houston Ship Channel, and equity interests in four pipelines that distribute product to customers and to the export terminal. The fractionation plant is rated at 3 billion lb/year, or 45,000 b/d, of polymer-grade propylene.

O.S. "Dub" Andras, Enterprise president and CEO, said, "These are high-quality facilities that will complement our existing service businesses. Upon closing, this acquisition will be immediately accretive to our limited partner units in terms of cash flow."

As an industry, about half of polymer-grade propylene production is used to manufacture polypropylene, which is used to make molded plastics for housewares, appliances, automobiles, and medical products. It is also used to produce packaging materials and fibers for carpet and upholstery.

Andras said, "We believe this business has excellent growth prospects. Demand for chemical grade and polymer-grade propylene has grown by approximately 7%/year since 1993. Because it is a basic component of our daily lives, consumption of polymer grade propylene and demand for fractionation services has remained strong during 2001 despite a slower economy. Growth in polymer grade propylene demand is expected to average 4%/year from 2001 through 2005."

The parties expect the transaction to be completed in 90 days.

Enterprise Products Partners LP is the second largest publicly traded midstream energy partnership with an enterprise value of $5 billion. It provides gas transportation, processing, and storage and gas liquids fractionation, transportation, storage, and import/export terminalling.

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