Renewable diesel solutions are about to be launched by the US Development Group (USDG), and its partnership USD Partners. In fact, they have created a new subsidiary company, USD Clean Fuels with which the Partnership has entered into a Terminal Services Agreement.
Firstly, the Terminal Services agreement will provide for the inbound shipment of renewable diesel on rail and the outbound shipment of the product on tank trucks to local consumers.
Secondly, the agreement has an initial term of five years with a target commencement date of December 1, 2021; it is also supported by a minimum throughput commitment to USD Clean Fuels, from an investment-grade rated refining customer; as well as a performance guaranty from USDG.
Thirdly, the agreement will add to the current ethanol business of the Partnership, and it will also, generate substantial revenues for the company. About its commercial relevance, Adam Altsuler, the Partnership’s Chief Financial Officer, said. “We are excited to announce this very accretive opportunity at the Partnership.”
He also remarked. “This opportunity is incremental to our existing ethanol business at West Colton; and will generate additional Adjusted EBITDA of $2.0 million per year; over the five-year term. Total capital associated with the opportunity is approximately $1.8 million; which we intend to fund from cash flows from operations.”
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Renewable diesel transport solutions, coupled with marketing and omnibus agreements
Moreover, USD Clean Fuels is a newly created entity, as said above. It was formed by USDG to focus on providing production; and also, logistics solutions to the growing market for clean energy transportation fuels.
Consequently, and in addition to the Terminal Services Agreement, USDG also signed a Marketing Agreement with USD Clean Fuels; which will grant the company the right to market and develop renewable diesel growth projects at the West Colton terminal.
Additionally, USDG entered into an amended and restated Omnibus Agreement with the Partnership; this, to extend the term of the Partnership’s right of first offer on any midstream infrastructure assets that the sponsor may develop; construct, or acquire, which would include any renewable diesel growth projects at the West Colton Terminal.
This, also for an additional five years, subject to certain conditions. The Partnership’s right of first offer would expire in October of 2021. Finally, with such agreements, USDG will further strengthen its solutions portfolio for the markets across North America.