For years, I was a happy shareholder of KMI. But when Kinder announced he was taking KMI private, I started to look around for another pipeline stock. KMP and KMR didn't interest me because I think the private equity deal may cause Kinder to take his eye off the ball for awhile.
In any case, ETP caught my eye recently. But the financial arrangement it has with ETE seems incredibly convoluted. And I know it isn't just me. I have never seen a message board with so many confused shareholders trying to dechipher exactly what's going on with ETP and ETE. I would venture to say, it almost seems Enron-like. Doesn't that make people nervous?
I was just surfing through and read your Message. I took a cursory view at the numbers for ETP. Calling this Partnership "Enron like" is a quite a stretch. All Companies have two earnings components, cash and non-cash items. Non-cash: Depreciation, Changes in Inventories, Bad debt allowances etc. The Accruals Ratio for Enron was 10% to 15% into the Alarm/Danger Zone. (Beefing up earnings with non-cash items) ETP's Accruals Ratio is better than average. The Accruals ratio isn't a perfect assesssment of a company's financial health, but it is a solid starting place from an Accounting standpoint. I hope my rudimentary accounting lesson is of some assistance. Good Luck!!
eshekita wrote: "I have never seen a message board with so many confused shareholders trying to decipher exactly what's going on with ETP and ETE. I would venture to say, it almost seems Enron-like."
What you are witnessing on this board is a debate between the accounting illiterate and those who slept through their accounting classes. [grin]
Enron sought to make money through investments in energy derivatives. ETP/ETE uses derivatives to hedge and thus lower possible gains or losses due to the fact that because they own storeage facilities and physically own the molecules, the prices will change between the times those molecules were purchased and the time that they will be sold.
Enron was in trouble due to off balance sheet transactions. We are busy talking about ON balance sheet transactions.
You wrote that the ETE/ETP financial arrangement is "incredibly convoluted". Almost all MLPs have GPs [expect for those that really are LLCs]. ETP is a tad bit atypical in having a publicly traded GP [along with APL, BPL, EPD, HLND, VLI and XTEX - a list that may appear long - but it is still in the minority]. The ETP/ETE is not "incredibly convoluted". It is 'typically' convoluted.
Finally, most of this conversation took place PRE-conference call. Did you listen to the call? Did you notice ETP's attempts to clear up this confusion? Are you giving ETP any brownie points for their efforts at edification?
Yep, we are still a bit confused. The GP asset class is still very new. So there is an usual bit of urgency to our efforts to figure this out - knowing that those who get it right will be 'early to the party'.
And there is a bit of human nature behind some of our postings. ETP has had what most would consider unsustainable growth for a pretty long time. And since ETP is priced at a lower than usual yield for an MLP, better than average growth is still priced in to ETP. So there is a premium in ascertaining when ETP's growth will slow.
So I would say that you are confusing our urgent search for enlightenment that will lead to future profits with Enron and their desperate shareholders uncertainty with how far that knife would fall.
And saying something about a stock is 'Enron-like' is overly inflammatory. StLBeerman's tone was a bit tuff on you - but I can see why.
<And saying something about a stock is 'Enron-like' is overly inflammatory. StLBeerman's tone was a bit tuff on you - but I can see why.>
Yes, I apologize for that. My wording was too strong. I was speaking out of frustration. Having looked over 10Ks and earnings reports for many, many years, I can usually size up a company's financials in about 30 minutes -- not predict how they are going to do in the future, but understand their cash flows, profitability, debt structure, etc. Accounting 101. I'm afraid that is not the case with ETP/ETE. The accounting is not transparent.
The big question in my mind is whether the ETP/ETE relationship has been structured to enrich insiders more than shareholders. We're not talking about anything illegal, just whether this is a company run for insiders more than the shareholders. I know many of you are loyal ETP shareholders because the stock has done very nicely the last few years. But it would hardly be the first time a management team pulled the wool over its shareholders and Wall St. The less transparent the accounting is, the easier this is to pull off.
Bob, was that you on the "analyst" call asking about DCF per unit? Good question appearing to go unanswered. If so...did you ever get an answer?
It was a good analyst call and I especially appreciated the revised segment EBITDA for the year totalling the 980 million.
Nice to put a voice behind the moniker.
If I knew as little as you appear to about ETP, I would be nervous and I certainly would not be holding the units. The relationship ETP has with ETE is that ETE is the general partner of ETP. Similarly, KMI is the general partern of KMP (you probably did not know that, I guess). It becomes more attractive as the price comes down. IF it reaches the high 40s, it is a pretty solid buy for income investors. ETE still looks better for new money.
<KMI is the general partern of KMP (you probably did not know that, I guess).>
If the relationship between ETP and ETE is so clear, then perhaps you could clear up all the confusion on this board and tell us exactly how the LP vs GP split will breakdown and what that means for the ETP vs ETE distribution growth going forward. There is also the issue of ETE's huge debt burden and what kind of leverage that is giving them (both on the upside and downside). Perhaps you could explain that, too.
KMP vs KMI was never this hard to understand.