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Inergy Midstream LLC Message Board

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  • lner2512 lner2512 Dec 19, 2011 2:06 AM Flag

    Good first trade day

    So, Liza, what do you think of NRGM's future? If they're trading at a discount as you imply, would you buy? They are certainly the growth part of NRGY, but I don't know what their distribution policy will be and I don't know when they'll reach the high splits.

    I wonder what you think about owning NRGM until they do approach the high splits? Given the projected supply/demand imbalance, storage could be very profitable for the next few years.

    I look forward to your thoughts!

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    • Iner, the prospectus stated that their 2012 projected distribution would be $1.48 per unit and the 50% IDR split occurs over the $0.37 quarterly per unit amount. (The first distribution, payable in Feb, would represent a stub period from the 4th quarter of 2011; in other words the projected $1.48 would be paid over the May, Aug, Nov and Feb 2013 distribution dates.) No doubt the investment community will miss this when they declare the first distribution in Feb 2012 for the stub period from the 4thQ 2011.

      Will be interesting to see some of the brokerage reports once the blackout period is lifted (30 days after the offering). Wells Fargo was one of the underwriters and covers much of the MLP industry, so I'd be interested in reading their report even if it might be viewed as conflicted since they participated in the IPO.

    • "I don't know what their distribution policy will be and I don't know when they'll reach the high splits."

      In this case, the "high splits" are any amount higher than the initial/minimum quarterly distribution. Any amount (even .0001) more than the initial quarterly distribution immediately qualifies as a 50% IDR level.

      The structure of NRGM is pretty shareholder-unfriendly in that respect. I have argued on the LINE board that IDRs are not as bad as some people make them out to be (especially in the case of new MLPs where the growth is in the future). But this is the exception to the rule...this unusual IDR structure means the pre-IDR high growth phase is eliminated and they go immediately to the high splits.

 

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