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Alliance Resource Partners LP Message Board

  • beegdawg007 beegdawg007 Mar 9, 2009 12:48 PM Flag

    ARLP vx AHGP...

    Earlier someone posted..

    >>>I actually have AHGP which benefits more as earnings grow.<<

    This is not exactly factually true. AHGP benefits from higher distribution payouts to ARLP shares. That is true because every penny of income received by AHGP is a result of the distribution for ARLP shares. Even if earnings for ARLP grew, if there is no increase in the ARLP distribution to shareholderes, than the income for AHGP does not grow. This could happen if the managing partner decides to increase CAPx to develop new properties more quickly or to simply retain more earnings in the ARLP structure for safety reasons that has a direct impact on the AHGP earnings. The other part of this worth thinking about is that the decision to "pay" ARLP distributions and the decision to pay "AHGP" distributions are separate. By that I mean, AHGP could recieve distribution income from ARLP which AGGP decides not to pay as a distribution, but to hold as cash, perhaps with the goal of buying more assets in the future. So, if an investor wants to be "most" certain of receiving distribution income, ARLP is the better choice. However, in the long run, every operational decision in regards to ARLP is being made to ultimately benefit AHGP. So if it is as a long term investment with both income and growth potential, the better answer is most likely to own AHGP. Joe Craft owns big chunks of both holding companies, so my suspicion is that the right answer would be to place side by side bets with the guy who really knows what's going on and buy positions in both companies.

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    • Good thoughts however, I'll go with the "bird in the hand" adage. For the last 2 years, AHGP's dist. grew 60% vs. ARLP of 32%. Meanwhile they are trading currently at the same yield!!!!! Market inefficient? I vote for AHGP. That is not to say that I've haven't been wrong before.-)

      Would it make sense for ARLP to capture AHGP? which has been recently done for another GP. Name eludes me.

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