Investing.com -- Genesis Energy L.P. (Genesis or NYSE:GEL) has seen its outlook revised to positive from stable by S&P Global Ratings, following the divestment of its soda ash business. This is expected to improve the company’s leverage over the next 12-24 months. The company’s cash flow is also anticipated to increase with the completion of several offshore pipeline projects.
S&P Global Ratings has affirmed its ’B’ issuer credit rating on the partnership and its ’B’ issue-level rating on its senior unsecured debt. The ’3’ recovery rating on the unsecured notes remains unchanged.
The improved outlook is driven by the recent divestment of GEL’s soda ash business, which is expected to generate approximately $1 billion. This will be used to repay existing debt. Under S&P Global Ratings’ base-case forecast, it is assumed that the partnership will generate about $600 million of adjusted EBITDA in 2025 and between $650 million and $700 million in 2026. GEL is also expected to maintain adjusted leverage of 6.2x in 2025 and 6.0x in 2026.
The soda ash divestment will also result in $110 million of recurring savings annually. This includes repayment of existing debt and the deconsolidation of the Alkali senior notes, as well as maintenance capital expenditure related to the soda ash business.
The divestment is also expected to reduce the volatility of GEL’s operating cash flow. Historically, the soda ash segment was the most volatile of GEL’s operations. Despite the expansion of its Granger facility in 2023, the soda ash segment’s operating margin was down $70 million in 2024 due to weak prices and an outage at its Wastvaco facility.
GEL’s 2025 EBITDA is still dependent on the timely commissioning of multiple offshore pipeline projects, namely Shenandoah in the second quarter and Salamanca in the third quarter. GEL’s EBITDA growth for 2026 and 2027 is dependent on the timely startup of other projects.
The positive outlook reflects S&P Global Ratings’ expectation that adjusted leverage will approach 6.0x in the next 12 months. It is also expected that Genesis will maintain adequate liquidity for the next 12 months.
S&P Global Ratings could revise the outlook to stable if Genesis maintains leverage of more than 6.5x or faces liquidity issues. These conditions could arise from lower-than-expected volumes flowing through the company’s midstream assets or delays in commissioning of its offshore pipeline projects. A change in the company’s financial policy could also trigger these conditions.
The rating on GEL could be raised if S&P Global Ratings expects adjusted debt to EBITDA will remain below 6.0x. This could occur if Genesis pays down more debt and benefits from additional cash flows from its new offshore pipeline projects.
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