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Magellan Midstream Partners LP Message Board

  • arbtrdr arbtrdr Mar 8, 2010 7:50 PM Flag

    MMP after July 2010

    Just received my MMP annual report. While the Longhorn Pipeline is certainly an asset with huge profit potential in the future, there is one area of concern.

    40% of their pipeline receipts are FERC regulated. These rates are at the inflation plus currently an additional 1.3% until July 2010 when future rate changes will be resaet for July 2011 and beyond.

    In July of 2009 MMP increased tariffs 7.6% on 40% of thier pipeline business. This resulted in about $11M in increased revenues for 6 onths in 2009 and will put a simlar amount into 2010. However, for 2010 the FERC regulations will REDUCE charges by about 1.2% or a bit over $8M from July 2010 to July 2011.

    This inflation adjusted charge has provided a steady built in rate of increase that will go away in July. Comments


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    • It is a concern however, I am not overly concerned. MMP has chosen to keep the distribution flat while they build their coverage ratio. If anything, the Longhorn deal, which I agree will eventually become a profit machine, is currently a drain. I doubt management would have purchased the pipeline if they felt that the base business was so weak to the point that they would struggle.

      • 1 Reply to rrb1981
      • I am not concerned about MMP over the longer term, but do think a significant swing in DCF that they have no control over is certainly not a positive. Going from an additional $23M (using MMP numbers) to giving back about $5M beginning in July is tough.

        Your comment on Longhorn is very important since it is now a large drain on finances and could provide a big cash flow since they paid a very distressed price for it. Longhorn ulitmately should be very full. The return on Longhorn sould be huge since it is not subject to FERC regulation.


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