12%–15% distribution growth
Tesoro Logistics (TLLP) expects its distributions to grow 12%–15% for 2017. The company had increased its 3Q16 distributions 4% over 2Q16. TLLP currently trades at a yield of more than 7%.
TSO waives incentive distributions
In addition to the investments discussed in the previous parts, TLLP announced that its sponsor, Tesoro (TSO), has agreed to waive $100 million of general partner incentive distributions over the next two years. This equates to a waiver of $12.5 million per quarter. To learn more about IDRs (incentive distribution rights), please read The Importance of Incentive Distribution Rights for MLPs.
In the company’s remarks relating to the acquisition, Greg Goff, TLLP’s chairman and CEO, said, “The waiver positions us to have balanced distribution growth, improves our cost of capital and the overall attractiveness of our LP units.”
Goff added, “We continue to evaluate our IDR structure relative to our long term strategy and believe there are potential options that will continue to position TLLP to be very competitive and provide strong growth potential for all of the unitholders.”
Could Tesoro’s Western Refining acquisition impact TLLP?
Tesoro’s acquisition of Western Refining (WNR) was announced during the week ended November 18, 2016. This acquisition is expected to have some changes in the MLPs of the joint entity, as WNR has an MLP of its own—Western Refining Logistics (WNRL).
The combined entity should determine an MLP strategy for the future. Enbridge (ENB) is working on deciding an MLP strategy for Enbridge Energy Partners (EEP) and Spectra Energy Partners (SEP) after the Spectra Energy (SE) acquisition.
With respect to Tesoro’s WNR acquisition, Goff said, “We believe that creating a premier, highly integrated and geographically diversified parent company will provide additional strategic and organic growth opportunities for Tesoro Logistics.”