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Inergy, L.P. Message Board

  • jimbollini jimbollini Jan 5, 2010 10:43 AM Flag

    THIS IS HOW A PARTNERSHIP GROWS

    Acquiring a N J propane company,
    right?

    (assuming no big financial burden)

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    • Two if my favorites are NLGS and SEP.

      Both have Sub C corporations as their "GP". Both corporations are selling assets to their MLP brothers at very good prices beginning this year over the next several years. SEP looks like it can generate 10% distribution growth for the next 4-5 years.

      I would not buy either at these prices if I were investing today.

      NLGS just did a big fractionation arrangment with OKS and both will generage huge returns on the agreement which should be good for both and lead to more joint arrangements since their assets are in the same part of the world.

      I am a happy very happy owner of EPD, KMP, ETE, ETP, OKS, EVEP, NS, PAA which I think of all as blue chip.

      My brother talked me into buying NRGY last night... he is convinced that propane sales are a license to steal so I bought a 1/2 core at $35.30 today.

      • 1 Reply to ferdiefor
      • ferdie,

        NGLS just did an offering that priced last night and I was able to pick some up this morning under $23 (had to be real quick on the trigger).

        As for NRGY, I bought it last March when they did an offering. Many of these MLPs are doing offerings and it's a great chance to pick up shares with a 5% discount as the equity pricing usually drops the price temporarily. More importantly, I'm thinking of switching into NRGP, the gp, because I saw a presentation that stated that the GP's distribution will grow at a multiple of the MLP. Something to think about.

    • Suburban propane distribution is a more capital intensive business than pure pipeline operations.

      Citi raised its price target to $39 from $36 but they only expect the distribution to increase $0.0025 per share per quarter.

      Adding 100,000 retail customers increasing their base to 800,000 customers (per Citi report this morning) doesn't seem to get enough bang for my buck.

      I just think there is more money in the pure pipeline operators who do not have to have employees in trucks moving gas from customer to customer.

      No doubt the Cramer effect and NRGY's performance has made great money for investors. Longer term I want to see a lot more than 1/4 of one penny of accretion for increasing the customer base by 14%

      • 3 Replies to ferdiefor
      • Ferdie, I'd be interested in knowing your favorite MLPs.

      • Inergy made two acquisitions. They closed on the purchase of Liberty Propane (purchase price ~$223 million). Liberty services over nearly 100,000 customers in its Northeast, Mid-Atlantic and West Regions through 38 facilities. Inergy also announced a definitive deal to purchase the propane assets of MGS Corp. MGS is located in Hackensack, New Jersey and services approximately 6,000 customers from five customer services centers in New Jersey, Pennsylvania and Delaware.

        WF estimates the deal will have minimal positive impact in 2010; the new assets will only be part of NRGY for one of the two winter quarters, which are by far the profitable months in the propane business. WF estimates combined deal will be ~4% accretive to Inergy. WF estimates that the 2 purchases will not increase the distribution in 2010. WF had previously estimated the 2010 dist. would be $2.80 (an increase of 9.1% from the 2009 distribution) with or without the acquisitions. The impact of the new investments kicks in in 2011: WF estimates the '11 distribution will be $3.06 (+9.3%), versus their previous '11 estimate of $3.00.

        While the WF estimates of the 2010 NRGY distribution are unchanged, their estimates of DCF/unit and EPU are down some due to interest expenses and # of units outstanding. By 2011 the DCF/unit and EPU are strongly up from where they are now.

      • i have made money with this stock, but like you, I think it's runup too fast and the acquisitions are beginning to bother me.
        I'm thinking, seriously, of shorting it eventho Ilike it.

 

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