GPs tend to outperform MLPs because of the incentive distribution rights (IDRs). In the "high splits" the GP gets 50% of the incremental distributable cash flow with the other half going to the MLP. So, think about it. The MLP is putting up 100% of the incremental investment capital and getting 50% of the incremental cash flow. The GP is putting up no capital and getting a 50% carried interest in the upside of the MLP.
Thanks for the reply. As I wasn't quick enough to get XTXI I'm trying to look at ETP and ETE. It looks to me that it just comes down to the number of shares involved.
Roughly speaking there are about 110M shares of ETP and 140M of ETE. Calculating on the 50% distribution and 33% ownership of ETP, ETE looks to get about $ 1 for ever $ 1 paid by ETP. Does that sound right ??? What am I missing ??
its more complicated than that. ETE owns 1/2 of the Incentive Distribution Rights and a 2% GP interest, plus around 1/3 of the ETP units, plus ETE has some debt. Crosstex has all of the IDRs, and no debt. Also ETE is a partnership and pays no tax, whereas XTXI is a corporation and pays tax. All things said, the growth rate of distributions from ETE versus ETP should be around 2:1. I think ETE can double its dividend in a couple of years. They have a massive project under way, for which 75% of the capacity is spoken for. In a couple of years it should be full.