Keep Income Coming in an Uncertain Market

02/20/2009 4:09 pm EST


Mary Lyman

Executive Director, NAPTP

This panel of experts explained the benefits of Master Limited Partnerships (MLPs), unique investment vehicles whose high income is very attractive during uncertain economic times.

Mary Lyman, associate director, Navigant Consulting, moderated the panel, which included Rob Thummel, president, Tortoise North American Energy Corp., Bill Baerg, manager of investor and media relations for El Paso Pipeline Partners and El Paso Corporation, Randy Burkhalter, vice president, investor relations, enterprise products partners, LP, Clay Jeansonne, Linn Energy’s vice president of investor relations, and Roy Lamoreaux, manager, investor relations and equity capital markets, Plains All American Pipeline, LP.

Lyman opened the panel discussion with a history of mater limited partnerships, noting that they began in the early 80s, and there are now some 95 trading on major exchanges. Additional issues are offered in the over-the-counter market, as well as the pink sheets.

80% of MLPs are energy related—the majority in mid-stream business—which encompass the operations from the time oil or gas is taken out of the ground to the point where it’s retailed to the end consumer. This includes processing, transportation through pipelines, and refining.

Lyman explained that the next largest category is exploration and production, and includes companies that distribute propane and heating oil, others that transport fuel on barges and tanks, and a few that operate coal mines.

Miscellaneous categories include real estate—although those have decreased over time—investment businesses, and commodities.

Lyman also covered one of the most significant benefits: MLPs don’t pay corporate taxes. Instead, the partners pay taxes on their distributions that come out of the MLP’s cash flow.

Lyman then turned the panel over to the other participants, who each gave a summary of their companies’ business operations, growth strategies, and visions for the future.

Some points addressed by the panel members included, insider ownership, and acquisition strategy. In addition they discussed commodity risk, including the differential between crude and gas prices, as well as their hedging tactics. Lastly, and importantly, each member talked about their yields and the likelihood of continuing at the same payout.

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