Riverstone due diligence support
Photo credit: International‐Matex Tank Terminals
Riverstone Holdings LLC, an asset management firm that invests in the private markets primarily within energy, power and infrastructure, believes evaluating ESG risk across the life cycle of an investment is critical to the firm’s ability to maximize value for its investors.
ESG factors played a key role in Riverstone’s recent acquisition of International‐Matex Tank Terminals (IMTT). Established in 1939, IMTT is an industry leader in the storage and handling of bulk liquid products used in energy, industrial, consumer, and transportation industries. IMTT operates 19 terminals and has total storage capacity of approximately 48 million barrels across North America.
During the due diligence period, Riverstone evaluated key ESG considerations using ERM and other subject matter experts to understand potential risks as well as identify opportunities for value creation throughout the investment life cycle of the asset. Based on the review, some key focus areas emerged that resulted in the follow actions:
- Rigorous review of technical considerations associated with soil and groundwater legacy risks;
- Detailed assessment of process safety and asset integrity performance associated with tank and pipeline systems;
- Careful evaluation of community engagements regarding the impact of the business on surrounding populations and businesses; and
- Verification of performance associated with permitted discharges to air and water.
In each of these areas, ERM estimated the short- and long-term cost implications necessary to proactively mitigate each risk, as well as screening the medium- and long-term risk levels associated with climate change on the assets and business. Additionally, IMTT’s ESG performance and disclosure reporting was benchmarked against other sector leaders.
The process revealed a company that was performing very well across most ESG metrics, which aligned with Riverstone’s ESG minimum expectations. IMTT has also been active in preparing for future physical and transitional risks associated with climate change. IMTT has made significant efforts in recent years and continues to expand its business into the storage of non-petroleum products including vegetable and tropical oils, renewable diesel and biodiesel.
In all areas where the due diligence team identified ESG improvement opportunities, ERM and other advisors to Riverstone were able to identify cost-effective mitigation strategies to protect both financial and reputational interests. The following table summarizes some of the key opportunities identified or already in progress to improve ESG performance across these assets.
Through the ESG due diligence process, Riverstone not only confirmed that ESG standards were being achieved by IMTT, but opened doors for new value creation opportunities to be integrated into the investment thesis and post-acquisition planning.
By committing to a detailed review of existing ESG practices, performance and plans to manage risk, Riverstone has positioned IMTT to grow stronger from a solid foundation and move forward creating positive social and environmental benefits well beyond their involvement. These lasting changes are the core of Riverstone’s long-term success and vision as a firm.