Aug. 12, 2014, 10:28 AM
- The Kinder Morgan companies open lower, giving back a bit of yesterday's big gains following the plan to consolidate their collection of pipeline companies: KMI -1%, KMP -1.4%, KMR -1.1%, EPB -1%.
- Some investors in Kinder’s MLPs could be left with big, unexpected tax bills; taxes on the substantial quarterly payouts from MLPs are deferred, and when the units are sold or exchanged - as they will be in the reorganization - the deferred taxes come due.
- Some investors were planning on holding the units and not paying a tax until they sold it or died, "so it's probably going to be a bit of a surprise for those people,” says Twenty-First Securities' Robert Gordon.
- Kinder Morgan confirms the deal will be a taxable transaction for owners of KMP and EPB, while KMR owners will have a tax-free transaction; according to estimates released by the company, the tax owed by an average investor in KMP units could range from $12.39 to $18.16 per unit, depending on the individual’s tax rate.
Aug. 11, 2014, 3:43 PM
- Kinder Morgan's (KMI +8.6%) consolidation is "the right long-term move for shareholders," Raymond James analysts say; the "streamlined structure, lower cost of capital, and benefit of tax depreciation meaningfully enhance long-term value."
- A lower equity cost of capital will greatly improve Kinder’s ability to maximize return on investment capital on both organic and acquisition-driven capital expenditures, the firm says; the substantial tax depreciation from existing basis and future capex - the five-year forecast organic backlog alone currently reflects ~$17B, with no acquisition capex forecast - also creates meaningful value.
- BofA/Merrill upgrades KMI to Buy from Neutral, and Goldman Sachs maintains its Conviction Buy rating and raises its price target to $50.
- KMP +16.4%, KMR +23.8%, EPB +20%.
Aug. 11, 2014, 12:48 PM
- Before today’s pop, all four Kinder Morgan stocks traded roughly flat to slightly down in 2014, and a source familiar with the just-announced Kinder combination tells WSJ the stalling share price of the four stocks was one reason Richard Kinder moved to simplify the structure.
- Another reason for the deal: the consolidated company will be more tax efficient - even with the restructuring, Kinder Morgan says it actually will cut its tax bill by $20B over 14 years despite relinquishing the MLP tax benefits.
- The source says KMI now is likely to focus squarely on the midstream space, buying up more energy infrastructure in the U.S. amid the country’s oil and gas boom.
- KMI +10.7%, KMP +18.7%, KMR +26.2%, EPB +22.5%.
Aug. 11, 2014, 12:47 PM
Aug. 11, 2014, 11:27 AM
- Not a bad way to start one's week: Rich Kinder made $1.5B this morning from the mega-deal that will streamline all the publicly traded Kinder Morgan entities into one company.
- The stocks - Kinder Morgan (KMI +8.1%), Kinder Morgan Partners (KMP +16.5%), Kinder Morgan Management (KMR +22.9%) and El Paso Pipeline Partners (EPB +20.1%) - are all sharply higher, as the general view is that investors like the streamlined structure and that the company will now have a lower cost of capital.
- Kinder is the largest KMI shareholder with 243.1M shares, a ~24% stake.
Aug. 11, 2014, 9:16 AM
Aug. 11, 2014, 8:37 AM
- KInder Morgan (NYSE:KMI) +20.1%, Kinder Morgan Partners (NYSE:KMP) +27.1%, Kinder Morgan Management (NYSE:KMR) +34.6%, El Paso Partners (NYSE:EPB) +30.5% premarket on news of the consolidation of the Kinder companies that will create the largest energy infrastructure company in North America, with an 80K-mile network of pipes that together would be long enough to circle the Earth three times.
- Kinder appears to have solved its biggest problem in one stunning swoop: how to maintain growth; to increase distributions by a projected 5%-6%, Kinder would have to put $3B-$4B to work each year on attractive projects, a daunting task for any firm.
- "This is a very simple and elegant solution to a problem of complexity," says Baird analyst Ethan Bellamy; he does not think other MLPs will follow in Kinder's footsteps because other companies still benefit from the financial structure as a way to attract investment.
- ETFs: AMLP, AMJ, MLPL, YMLP, MLPI, MLPA, ENY, MLPN, MLPG, EMLP, MLPS, MLPX, MLPY, MLPJ, AMU, YMLI, ATMP, ZMLP, MLPW, IMLP, ENFR, MLPC
Aug. 10, 2014, 9:37 PM
- Consolidating its oil-and-gas pipeline empire into a single company, Kinder Morgan (NYSE:KMI) will purchase Kinder Morgan Energy Partners (NYSE:KMP), Kinder Morgan Management (NYSE:KMR), and El Paso Pipeline Partners (NYSE:EPB).
- The MLP structure is limiting, says Richard Kinder. Combining the four companies into one unit "will allow us to further expand the reach of the kind of projects we can do."
- KMP unitholders will receive 2.1931 KMI shares and $10.77 in cash for each KMP unit, or $89.98, a 12% premium to Friday's close (based on KMI's Friday close).
- KMR shareholders will receive 2.4849 KMI share for each share of KMR, or $89.75, a 16.5% premium to Friday's close (based on KMI's Friday close).
- EPB unitholders will receive .9451 KMI shares and $4.65 in cash for each EPB unit, or $38.79, a 15.4% premium to Friday's close (based on KMI's Friday close).
- In conjunction with the deal, KMI expects a $2 annual dividend in 2015, a 16% boost to 2014's anticipated payout. The dividend is expected to grow about 10% per year through 2020.
- A conference call is set for Monday morning at 8:30 ET.
- Press release
Feb. 24, 2014, 3:24 PM
- Rcihard Kinder discloses buying nearly 200K shares of Kinder Morgan (KMI -2.4%) worth ~$6.4M, just four days after disclosure of a 100K share purchase worth ~$3.3M.
- The purchases may add to the perception, discussed in this weekend's negative Barron's piece, of an enormous transfer of wealth from MLP Kinder Morgan Partners (KMP -5.3%) to general partner KMI and that “the smart money has gravitated toward the GP.”
- Rich Kinder owns an $8.1B stake in KMI vs. just $26M in KMP.
- Also: KMR -4.6%, EPB -0.6%.
Feb. 24, 2014, 8:21 AM
- Barron's joined the parade of bears on Kinder Morgan Partners (KMP) and general partner Kinder Morgan Inc. (KMI) over the weekend, sending KMP -2%, KMI -1.2% and KMR -0.4% premarket.
- The article says KMP's calculation of distributable cash flow uses aggressive assumptions about how much it takes to sustain some of the company's businesses, particularly its oil production division, which generates almost 20% of annual cash flow; more conservative assumptions would lower DCF and probably the distribution and the price of the MLP units.
- KMI takes 43% of total distributions from KMP and 50% of distributions generated on new capital spending, which places the MLP at a disadvantage to some rivals and limits growth prospects, the article maintains.
- Deutsche Bank says the Barron's report contains "old inaccuracies," and that KMP's recent offering is a common feature of MLPs to fund growth capex and is not specific to the Kinder companies.
Dec. 4, 2013, 10:16 AM
- El Paso Pipeline Partners (EPB -9.5%) sinks following disappointing dividend guidance for nearly flat distributions over the next five quarters even with a lift from dropdowns.
- At least two firms are issuing downgrades: Morgan Stanley cuts units to Underweight from Equal Weight, and Tudor Pickering lowers its rating to Trim from Hold.
- Other Kinder Morgan companies are lower too: KMI -5%, KMP -1.9%, KMR -1.7%.
Sep. 18, 2013, 9:01 AM
Sep. 9, 2013, 11:44 AM
- Kinder Morgan (KMI +2.6%) CEO Richard Kinder today bought 500K KMI shares at $35.47-$36, worth ~$17.9M, an SEC filing reveals.
- Last week, Hedgeye asserted KMI and its affiliated companies were headed for a fall, apparently over how the Kinder companies account for maintenance and capex spending, commodity hedging and acquisition strategies.
- The CEO owns more than $8B worth of various Kinder entities; would anyone really put this much of their savings into a fraud?
- Also: KMP +0.2%, KMR -0.4%, EPB -0.4%.
Sep. 4, 2013, 3:58 PM
- Deutsche Bank is out with a strong defense of the Kinder Morgan family of companies from an attack by Hedgeye's Kevin Kaiser as "a house of cards," which has hit shares hard today: KMI -5.9%, KMP -3.1%, KMR -4.7%.
- On KMP's CO2 business: It is ~18% of EBITDA in DB's 2013 model and is projected to continue to decline to ~15% in 2015 because of the growth of other segments.
- On hedging: KMP reports actual cash generated from its production; it does not include non-cash impacts of hedging activities as is the case with some other E&P MLPs.
- On maintenance capital: KMP has been "extraordinarily clear" that it shows a future decline in production in the CO2 business while noting that it has outperformed those expectations with production gains and acquisitions.
- DB has a Buy rating on KMI with a $48 price target; KMP is Buy-rated with a $102 target.
Sep. 4, 2013, 12:23 PM
- Excerpts from the thrashing of the Kinder Morgan companies by Hedgeye's Kevin Kaiser as "a house of cards":
- "Like a toll road - except for the E&P segment that generates +20% of KMP’s segment DCF."
- "$78B of combined market cap sitting on top of $1.6B of tangible equity?"
- "KMP’s investor presentation 'returns' vs. actual returns to the KMP unitholder."
- "How 'Certain' are KMP’s 'Certain Items'"?
- Kaiser says he'll release a full report Sept. 10.
- KMI -4.3%, KMP -2.4%, KMR -3.1%, EPB -0.8%.
Sep. 4, 2013, 11:30 AM
Kinder Morgan Management LLC through Kinder Morgan Energy Partners, L.P operates as a pipeline transportation & energy storage company in North America. Its pipelines transport natural gas, refined petroleum products, carbon dioxide & other products.
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