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Kinder Morgan Energy Partners, L.P. Message Board

  • okfixer okfixer May 11, 2012 10:32 AM Flag

    Divested Rockies assets

    So who is going to buy them?

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    • The question shouldn't be who...it should be how much. With a build cost of about $7B, KMP is in this for about $3.5B. Lets just say the current book value, with a few years of depreciation and the latest write off, book value is probably a little less the 3B...I'll eyeball it at $2.8B.
      Per the 2011 annual report,KMP's 50% of REX generates income of $86M per year...adding back in depreciation, lets round and assume that KMP's 50% ownership of REX generates $200M of cash flow a year. That's probably a stretch....as it doesn't include some corporate level overhead, but we will go with it. Using a rule of thumb of 7X cashflow, maybe...just maybe they can sell this dog for $1.4B....meaning you...KMP/KMR shareholders could have another $1.4B loss headed your way...or not...you do the math yourself.
      Of course, since KMP has to sell this....they don't really have a lot of negotiating power, and outlooks are not exactly rosy for REX...it could get much uglier. Maybe they should just hand the title over to the bondholders of REX and be done with it?

      You want to know what is most awesome of all? I am pretty sure...please correct me if I am wrong...that even though you(KMP/KMR) paid for 98% of REX....perhaps the
      most abysmal investment Rich has ever made....the cash from the sale can be counted in DCF....which means Rich and KMI could get half of the sale price....even though they only paid 2%, and it was their decision to aquire EP in KMI....forcing you to get boned yet again. Do the math folks. You have no protections from the GP's blatant conflicts of interest, and he has proven time and time again he has no problem bending you over a table.

 
KMP
77.49-0.83(-1.06%)Apr 17 4:02 PMEDT

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