Author Topic: KMI - Kinder Morgan  (Read 128304 times)

Spekulatius

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Re: KMI - Kinder Morgan
« Reply #280 on: December 12, 2015, 04:52:57 AM »
Filed an 8k yesterday about highstar getting margin called on some of their shares and going under 2.5% as a result and consequently losing a right to nominate director.

Forced selling is what we like to see. FWIW, this is a slow growing C-Corp, best to be compared with an utility company. But it's better than an utility, because the return from FERC pipelines are typically aroun 12% (with inflation adjustments as I understand it), while utilities are typically  close to 10% and often have trouble to get their rate cases through (for investment, which are regulated by the local states, not a central authority like the FERC). Also, the Ponzi scheme optionallty to grow faster via equity issuance is still out there and will come back, it's just temporarily not available because equity cost is very high right now.
To be a realist, one has to believe in miracles.


topofeaturellc

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Re: KMI - Kinder Morgan
« Reply #281 on: December 12, 2015, 06:52:31 AM »
does the book PP&E line up with the FERC regulatory assets?

thefatbaboon

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Re: KMI - Kinder Morgan
« Reply #282 on: December 12, 2015, 07:58:59 AM »
Perhaps they bottom ticked it like Pearson.


HJ

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Re: KMI - Kinder Morgan
« Reply #283 on: December 12, 2015, 08:06:13 AM »
Filed an 8k yesterday about highstar getting margin called on some of their shares and going under 2.5% as a result and consequently losing a right to nominate director.

Forced selling is what we like to see. FWIW, this is a slow growing C-Corp, best to be compared with an utility company. But it's better than an utility, because the return from FERC pipelines are typically aroun 12% (with inflation adjustments as I understand it), while utilities are typically  close to 10% and often have trouble to get their rate cases through (for investment, which are regulated by the local states, not a central authority like the FERC). Also, the Ponzi scheme optionallty to grow faster via equity issuance is still out there and will come back, it's just temporarily not available because equity cost is very high right now.

Isn't it only if the industry is still a "growth industry"?  If the pipeline's already overbuilt relative to the commodity that will be produced, then you'd be better off in a utility where at least the ROE is positive.

shhughes1116

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Re: KMI - Kinder Morgan
« Reply #284 on: December 12, 2015, 10:09:12 AM »
Filed an 8k yesterday about highstar getting margin called on some of their shares and going under 2.5% as a result and consequently losing a right to nominate director.

Forced selling is what we like to see. FWIW, this is a slow growing C-Corp, best to be compared with an utility company. But it's better than an utility, because the return from FERC pipelines are typically aroun 12% (with inflation adjustments as I understand it), while utilities are typically  close to 10% and often have trouble to get their rate cases through (for investment, which are regulated by the local states, not a central authority like the FERC). Also, the Ponzi scheme optionallty to grow faster via equity issuance is still out there and will come back, it's just temporarily not available because equity cost is very high right now.

Isn't it only if the industry is still a "growth industry"?  If the pipeline's already overbuilt relative to the commodity that will be produced, then you'd be better off in a utility where at least the ROE is positive.

I keep hearing/seeing this comment about the overbuilding of pipelines.  That comment sounds great on the surface but is really a pretty silly comment when you consider that KMI's assets are predominately midstream and interstate pipes.  The process for building out midstream and interstate pipelines for dry gas, wet gas, oil, and refined products (gas, aviation fuel, ethylene, etc) requires that you demonstrate a need for the pipeline to FERC.  That "need" is on the supply side AND the demand side, and the time horizon is generally >25 years.  When your interstate pipe ends at a utility that depends on natural gas to power a plant, you can be pretty sure someone on the other end of that pipe is going to move natural gas through your pipe to that utility.  (As we build out more highly subsidized solar and wind power, we will require even more natural gas to provide baseload power when the sun doesn't shine or the wind doesn't blow.)     

When we talk about the "overbuilding of pipelines",  the real issue here is with companies that own gathering systems in marginal basins.  Low prices will cause producers to shut-in production in these basins, and thus certain gathering systems will not be used, or will be used at a lower capacity than designed.  KMI derives very little money from gathering systems (if any at all).   

Spekulatius

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Re: KMI - Kinder Morgan
« Reply #285 on: December 12, 2015, 03:09:17 PM »
Pipelines are not overbuild. It is correct that in order to build a FERC pipeline, there needs to be a demonstrated need,but it is true that some gathering systems in high cost areas may run below capacity, if drilling in these areas dries up.
To be a realist, one has to believe in miracles.

muscleman

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Re: KMI - Kinder Morgan
« Reply #286 on: January 12, 2016, 07:57:54 PM »
Sorry to ask a dumb question. KMI is no longer an MLP is it?  :P

tinhb

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Re: KMI - Kinder Morgan
« Reply #287 on: January 12, 2016, 10:41:23 PM »
http://ir.kindermorgan.com/press-release/all/kinder-morgan-inc-purchase-kmp-kmr-and-epb-2015-kmi-dividend-increase-2-share

Yeah it's no longer a MLP.

To be more exact, only the subsidiaries are MLPs. Then they are absorbed by KMI (which isn't a MLP).
« Last Edit: January 12, 2016, 10:44:56 PM by tinhb »

muscleman

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Re: KMI - Kinder Morgan
« Reply #288 on: January 13, 2016, 08:28:41 AM »
http://ir.kindermorgan.com/press-release/all/kinder-morgan-inc-purchase-kmp-kmr-and-epb-2015-kmi-dividend-increase-2-share

Yeah it's no longer a MLP.

To be more exact, only the subsidiaries are MLPs. Then they are absorbed by KMI (which isn't a MLP).

Thank you! I thought that was the case but never really sure. I was confused by the high dividend because KMI is paying out dividends like MLPs. So KMI is not an MLP but paying most of the distributable funds out like an MLP. Isn't that highly tax inefficient?

tinhb

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Re: KMI - Kinder Morgan
« Reply #289 on: January 13, 2016, 03:41:21 PM »
Yes the disadvantage is that it is not tax-inefficient. In my opinion, they did it to simplify the structure of the company. When everything is combined together, they thought that it would have higher debt rating --> lower interest expense (which is significant given their debts). Another plus point is that when it's simpler, they hoped that it's more attractive for investors and the stock price would increase. This is important because every year they raise money from equity (around 1B if I'm not wrong). I guess Rich Kinder preferred the combined entity.