Kinder Morgan to Combine all its Entities into 1 Corporation | Russell T. Rudy Energy LLC
“Rigzone” reported yesterday that Kinder Morgan, Inc. plans to consolidate its Master Limited Partnerships (MLP’s) with Kinder Morgan Management, LLC, into a single C-corporation. The MLP’s, Kinder Morgan Energy Partners and El Paso Pipeline Partners LP, and the Management Company operate or own an interest in 80,000 miles of pipelines. The new combined entity will be the largest pipeline company in the U. S.
MLP’s pay no taxes if the bulk of their profits are distributed to their investors. The investors in turn are responsible for paying their own taxes on the distributed profits. MLP’s traditionally offer strong cash flow to their investors, and there is constant pressure to increase these payouts. While this is beneficial in the short run, the partnership is left with fewer funds to expand the business. If the MLP has to borrow money for expansion, it can be very vulnerable to rising interest rates.
Kinder Morgan anticipates the new structure enabling it to retain more earnings for investment in the many mid-stream opportunities created by the shale boom. While the company did not indicate potential takeover targets, it did say that it would stay with its core business, and not get involved in rail and truck transportation. The restructuring should be complete by the end of this year.
The stock market reacted favorably to the news. Kinder Morgan Inc. was up 5%, Kinder Morgan Energy Partners 14%, and El Paso Partners 17%.
To read the article in its entirety, please go to www.rigzone.com/news/article.asp?hpf=1&a_id=134468&utm.
