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  • akaralph akaralph Sep 17, 2010 6:39 PM Flag

    Barclays Presentation 9/15

    Evidently so did a lot of other folks.

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    • The presentation indicated that there are five potential interconnects in the Tres Palacios transaction.

      To put into perspective EPD bought a large system for $2B earlier this year at 10x ebitda and was highly critisized for overpaying. When EPD made its first interconnect it dropped the ebitda multiple to 8.5x. These interconnects immediately are super accretive because the marginal cost to interconnect from a main system is organic growth at its best.

      If NRGY can duplicate EPD we will see a report that the ebitda multiple drops from 10x to perhaps near 8.5x making it a super deal with potential future interconnects that only continue to lower the initial ebitda multiple.

      That may be the reason for the surge because EPD took a lot of grief but proved once again they were the smartest guys in the room. I think NRGY is in that class because residential propane is a tough business to operate.