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Inergy, L.P. Message Board

  • abter1 abter1 Oct 27, 2009 10:20 AM Flag

    NRGP dist. increase % is 6x NRGY's

    I continue to be impressed with the performance of NRGP, the GP of NRGY. One of the things I look for in a GP is how much leverage they deliver on the % increase in the distribution of the underlying GP. IMHO NRGP is delivering outstanding leverage.

    For the most recent distribution announcement (end of Q3);
    NRGY raised their dist. by 1.5%, and NRGP by 9.0% this quarter. That means NRGY raised their dist. at 6 times (.09 / .015) the rate NRGP did...that's a lot of leverage!

    for a one year period, the leverage was 4.9 (with NRGY's dist. going up 30.8%, compared with NRGP's 6.3%)
    for a two year period, the leverage was 4.4 (NRGY's dist up 58.9%, NRGP's up 13.4%)

    The history shows NRGY multiplier isn't always as high as this quarter, but the 6x isn't unprecedented either. The May '09 distribution's leverage was 7.2x, and in May '07 it hit 11.3x.

    The leverage multiplier translates very straightforwardly into price appreciation as well. IMHO it is the reason that while NRGY is up ~85% this year, NRGP is up 125%.

    It has been a few months since I took a look at all the leverage info across the traded GPs, so I can't report on the comparison with other GP's leverage. But high leverage is what brought me to NRGP in the first place (disclosure: I do own a wee piece of NRGP), and they continue to deliver.