In the most recent earnings report, KMP shows that distributable cash flow ($.99/share) is lighter than the quarterly distribution of $1.05/share.
My concern is long term distribution growth. What kinds of new revenue will we be seeing from the recently completed Rockies express pipeline, the Plantation pipe now shipping biodiesel, and the Louisiana pipeline? All of these projects have just commenced shipping fuel/nat gas, etc. recently, but will they be enough to continue distribution growth?
The $4.40 distribution projection for 2010 seems reasonable, but if someone could shed some light on how much these new lines are projected to impact KMP it would be very helpful.
I admire Kinder Morgan and Rich Kinder, but he has grown the company so large, that high growth in the distribution is nearly impossible.
Further, Kinder has to resort to tertiary recovery projects like SACROC and Yates to grow the distribution. I think these are fabulous assets, but I disagree with having them in an MLP while simultaneously running with a coverage ratio of 1.0x (or in the current case, a less than 1.0x). I think Kinder Morgan would be much more attractive if Kinder finally merged the GP IDRs into KMP. KMP has grown so large that even 3% distribution growth at KMP translates into a significant amount of money to the GP.
On the other hand, KMP has a stable of solid, regulated pipelines with steady predictable cash flow, so investors pay up for top notch management and safety and sacrifice above average growth.
I made a small fortune on KMI and I think highly of Kinder, but I doubt that KMP's best days are ahead of it. The other issue I dislike about Kinder and Enbridge are the i-units. I understand fully that it is essentially a dividend reinvestment plan, but the fact that they yield much higher hurts them every Q. If Kinder were to merge the GP's incentive distribution rights back in the MLP and force the conversion of KMR into KMP units, I think it would be much more attractive.
RRB: you wrote "The other issue I dislike about Kinder and Enbridge are the i-units. I understand fully that it is essentially a dividend reinvestment plan, but the fact that they yield much higher hurts them every Q."
Could you explain a bit more what you are thinking? I'm always trying to understand KMR, and MLPs in general, and there are lots of weird twists to understand. The price (or yield) difference between KMP and KMR (and the vastly smaller one between EEP and EEQ) always baffle me.
I think of KMR from 2 different points of view; what does the investor get out of it, and what does KM get. No reason to expect those to be the same.
I agree: from the KM perspective, KMR works like a mini-secondary each quarter. There are some similarities there to a company-sponsored DRIP company gets new investment capital by directly selling new shares.
But I don't follow your comment "...but the fact that they yield much higher hurts them every Q." Would you expand on this?
Also, the Q2 2009 conference call is available for replay (about one hour). Richard Kinder addresses your issue . KMP is very confident in earning enough DCF for all of 2009 to cover 2009 distribution, even though the 1st half is below, they expect the 2nd half to be above.