Tuesday, August 12, 2014

Kinder Morgan deal brings MLP investors relief

Kinder Morgan Inc.’s consolidation of master limited partnerships can’t happen too soon for those invested in billions of dollars of exchange-traded securities linked to MLPs’ performance.

This chart compares the performance of the company’s two MLPs with the Alerian MLP Index, comprised of 50 energy-related partnerships, since the industry gauge began to rise from a six-year low in November 2008.

Kinder Morgan Energy Partners LP, the larger of the two, trailed its peers throughout the advance. Its 82 percent gain through last week was the third-smallest among 38 MLPs in the Alerian index that traded for the entire period, according to data compiled by Bloomberg. The index jumped 226 percent.

Energy Partners has the second-highest weighting behind Enterprise Products Partners LP in the index, which underlies exchange-traded notes sold by JPMorgan Chase & Co. and UBS AG. It carries the most weight among 25 partnerships in the Alerian MLP Infrastructure Index, the basis for an exchange-traded fund from Alps Advisors Inc. and a UBS note.

Kinder Morgan’s other MLP, El Paso Pipeline Partners LP, is also represented in both indexes. The Houston-based company took control of the partnership through a $38 billion acquisition of El Paso Corp., completed in May 2012.

El Paso Pipeline fell behind the Alerian MLP Index last December, as shown in the chart. The units sank after Kinder Morgan indicated the partnership would no longer increase its distribution every quarter, as it had done since payouts began in 2008. The distribution has been 65 cents a unit since then.

Kinder Morgan will take full control of Energy Partners and El Paso Pipeline through a $44 billion cash-and-stock deal. The transaction also involves Kinder Morgan Management Inc., which runs Energy Partners.

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