NOTICES
Order
[34 Pa.B. 2656] Public Meeting held
April 29, 2004Commissioners Present: Terrance J. Fitzpatrick, Chairperson; Robert K. Bloom, Vice Chairperson; Glen R. Thomas; Kim Pizzingrilli; Wendell F. Holland
Joint Application of Laurel Pipeline Company, LP and Buckeye Pipeline Company, LP for approval of the transfer, by sale, of all the outstanding equity interest in Glenmoor, Ltd., parent of the general partner of the applicants, to BPL Acquisition, LP; Doc Nos. A-140000F0002 and A-140110F0003
Order By the Commission:
Laurel Pipeline Company, LP (Laurel) and Buckeye Pipeline Company, LP (Buckeye) (together, the applicants or the utilities) filed the previously captioned joint application on March 10, 2004, under Chapter 11 of the Public Utility Code (66 Pa.C.S. §§ 1102, et seq.) seeking approval of the transfer, by sale, of 100% of the equity ownership of the entity controlling the general partner of Laurel and Buckeye.
I. The Parties
Buckeye and Laurel are pipeline utilities transporting a variety of petroleum-based products in the western and eastern portions, respectively, of this Commonwealth. Currently, Glenmoor, Ltd. (Glenmoor) indirectly controls 100% of Buckeye Pipe Line Company (BPL Co.), a corporation. BPL Co. owns a 1% general partnership interest in, and is the sole general partner of, each of Buckeye and Laurel. In addition, BPL Co. owns a 1% interest in, and is the sole general partner of, Buckeye Partners, LP, which owns a 99% limited partnership interest in each of Buckeye and Laurel.
II. The Proposed Transaction
By their filing, the applicants propose the acquisition of all the equity of Glenmoor by BPL Acquisition, LP. The latter is a limited partnership controlled by a private equity fund, Carlyle Riverstone Global Energy and Power Fund II, L. P. (Carlyle Riverstone), a joint venture between Riverstone Holdings LLC and the Carlyle Group that is focused on investing in the energy and power sectors. Glenmoor's stock, held by members and related entities of one family, will be purchased by Carlyle Riverstone as another in a series of investments in energy-related industries. The applicants have furnished a detailed description of Carlyle Riverstone and its affiliates, and it supports the applicants' averments that the acquirer possesses the managerial, technical and financial fitness to operate Buckeye and Laurel.
In summary, Carlyle Riverstone is a joint venture between two private investors. Riverstone Holdings LLC is a private equity firm specializing in energy investments. The Carlyle Group is an international private equity investor that participates in a variety of buyouts, venture investments and turnarounds in North America, Europe and Asia. The senior principals of Carlyle Riverstone are two former managing directors at a prominent New York investment banking firm. Both have spent their careers investing in and managing energy companies.
While the existing management of Buckeye and Laurel is to be retained, the applicants point to Carlyle Riverstone's ability to add management depth as an advantage, and similarly identify the acquirer's greater access to capital as a benefit. The promise of improvement in managerial and financial resources allows the proposed transaction to meet the standard set by City of York v. Pennsylvania Public Utility Commission, 446 Pa. 136, 295 A.2d 825 (1972), that the change in control provide an affirmative public benefit.
The applicants have also noted that the change in control will not result in any change in rates or diminution of service, and that service will continue to be provided by Buckeye and Laurel under their currently effective tariffs.
III. Jurisdiction
We turn now to a jurisdictional question which arose in our consideration of this case. As previously noted, BPL Co., the general partner of the Buckeye and Laurel limited partnerships, owns both a direct 1% general partnership interest and indirectly, a 0.99% limited partnership interest in the two utilities, for a total equity and voting interest of 1.99%. In 1994, we adopted a Policy Statement entitled Utility Stock Transfers that addressed our jurisdiction over these transfers under section 1102(a)(3) of the Public Utility Code, and which is published at 52 Pa. Code § 69.901.1 In that Statement, we defined controlling interest solely in terms of voting interest, and chose as the lower limit at which de facto control is reached as the holding of at least 20% of the voting interest, where that is also the largest voting interest extant.
In the instant case, the limited partners other than BPL Co. own 98.01% of the equity interest in the two jurisdictional pipelines, but do not have any voting interest over operational matters. This gives the general partner, BPL Co., complete voting control over operational matters of Buckeye and Laurel.
On April 21, 2004, the utilities filed a letter supplementing their application. In it, they stated that the organization of the Laurel and Buckeye partnerships provides the limited partners voting power only in very limited circumstances, such as the sale of all the partnerships' assets or in changes in the partnership agreement. ''In all other matters,'' including operational matters, ''100% voting control lies in the general partner.'' Letter, ¶3.
We accept the expanded explanation of the Laurel and Buckeye partnerships structure, specifically that voting control over operational matters of Buckeye and Laurel resides in BPL Co., the general partner. Consequently, we recognize that the instant transaction is jurisdictional and consistent with our 1994 Policy Statement.
IV. Conclusion
We have reviewed the application of Laurel and Buckeye regarding the change in control of their common general partner, and thereby control of the two utilities. We find that the proposed transaction is jurisdictional, and that it is necessary or proper for the service, accommodation, convenience or safety of the public; Therefore,
It Is Ordered That:
1. The joint application of Laurel Pipeline Company, L. P. and Buckeye Pipeline Company, L. P. for approval of the transfer to BPL Acquisition, LP of all the outstanding voting interest in Glenmoor, Ltd., the ultimate owner of the general partner of the two utilities, be and is hereby approved.
2. Certificates of public convenience be issued evidencing our approval, and that the case be marked closed for both applicants.
3. Notice of the date of the consummation of the transaction approved in Ordering Paragraph No. 1 be filed within 30 days of consummation.
4. A copy of this order be published in the Pennsylvania Bulletin.
JAMES J. MCNULTY,
Secretary
[Pa.B. Doc. No. 04-880. Filed for public inspection May 14, 2004, 9:00 a.m.] _______
1 Our rationale and intent in adopting the Policy Statement is set forth in our Order at M-00930490, entered September 13, 1994, and published at 24 Pa.B. 5328 (October 22, 1994).
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