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MLP comments: Enterprise GP, Teppco and Enterprise, Kinder



July 03, 2009 – Comments (1) | RELATED TICKERS: TPP.DL2 , KMP.DL , ETE

Teppco and Enterprise were in the news this week, as Teppco finally agreed to be bought out by Enterprise. My take is that Enterprise GP holdings will have the same assets it has today. It will have eliminated the costs associated with Teppco being an independent entity. I think they paid about a fair price. It was a good move on Dan Duncan's part - not spectacular, but pretty good.

I hate to change my mind so soon, but I've reconsidered my stance on Kinder Morgan Partners/Management (KMP/KMR). I still think this is a hold and a very good company. However, I just realized that KMP is well into the high splits, where the general partner takes 50% of incremental cash flows. That alone wouldn't be a big deal, but KMP has also been issuing a lot of units, probably to build a fund for acquisitions. MLPs must distribute most of their cash to unitholders, so they can only issue new units or debt to raise cash. That's fine, but it also dilutes existing holders and means that the MLP has to pay that much more cash out. 

One poster (Kurt Wulff) on Seeking Alpha continually railed against the structure of MLPs in general and KMP in particular. I thought he was off base. He still is, but at KMP's stage in its life cycle, he has a point. I would not buy any new units. I still think that Enterprise GP holdings, Energy Transfer Equity and its GP, Energy Transfer Partners are good holdings. Note that EPE owns 17.6% of ETE anyway. It's not impossible that Duncan will make a play for the whole company, but I don't see the need to bet on that - ETP/E is a great company on its own.

1 Comments – Post Your Own

#1) On July 14, 2009 at 7:45 AM, stocknod (< 20) wrote:

The Houston, Texas based Enterprise GP Holdings L.P. EPE is a provider of transportation and other services to the consumers and producers of natural gas and crude oil in the U.S. EPE is the owner of the general partner of Enterprise Products Partners L.P. EPD and was offered publicly from EPD on August 24, 2005.


Visit for Enterprise GP Holdings share price.

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