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Crosstex Energy, AŞ Message Board

  • pjheyman1 pjheyman1 Feb 6, 2006 10:46 AM Flag

    Enlighten me please

    Why do the general partners shares do so much better than the limited partners units ? ie. ETE NRGP XTXCI.. An explanation or reference to a prior post would be appreciated... Thanks.

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    • 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.

    • The short answer is leveraged. Gps are a leveraged play on the MLPs. You can have the (hopefully) consistent income growth of the MLPs or lower income now and faster dividend growth with the GPs. Of course what the price per share does is anybody's guess as the GPs are getting pretty highly valued with the exception of MWP. To learn the concepts, go back on this board and MWP and read the posts by RRB1981. That will get you started.

    • The GP doesn't necessarily always do better than the LP. Paste the link below in your address window. It's a comparison of KMI and KMP. Their performance is nearly identical.