Insiders, except for that Morgan guy, don't have such a good record for timing and stock price predictions. they've been wrong twice in a row, bought too high, didn't buy when it was 11, 12, or low teens. So I'm not looking to them for predictions. If they (continue) to run the business right, that is all I ask.
I already know enough. I don't need insider signals from KMI management. I know that in a few years, the growth capex backlog will be gone (unless something new a great happens) and the DCF starts to go for dividends in a big way. Share price doubles from today's price. Can't stop those people from buying the stock when the dividend returns to its old level.
doogoo1, listen to the CC, or read the transcript, and you won't be disappointed by expecting pay down of debt using current cash flow when management has no intention of doing that.
doogoo1, 'The cash received will almost certainly have to go to capital gains taxes."
Kim said in the call that they are still in an NOL position, and no cash income taxes are projected until 2023.
"When a company sells off 50% of a project in construction....: and agrees with the buyer that they will borrow any future need funds for the project from them... "
doogoo1, please give more details on this provision of the agreement. I never read anything about it. Why would KMI need to borrow for this project? It is only $500 million. If Riverstone has cheap money that they want to lend KMI, maybe it benefits KMI, although KMI's efforts are clearly to reduce debt. They sure don't need to borrow for the little Utopia project.
ocelotz508, "- KMI said they wouldn't make asset sales in this market"
They said that in December, primarily in reference to oil and gas properties. And it isn't "this market" anymore, as Southern Company's eagerness to acquire SNG makes clear.
doogoo1, Myria Holdings owned 50% of NGPL and controlled the purse strings. KMI operated the company, but at 20% ownership, I doubt that they had much latitude in managing it.
Look at NGPL now. Chicago Expansion and Gulf Coast Southbound. The amount of Marcellus gas that NGPL will transport is huge. KMI got it at a low price, and you say that is bad management. You have the mentality and risk taking spirit of a bondholder, yet you owned the common stock.
The NGPL acquisition may have been the straw that broke the camel's back, but it was just a straw.
Stillwondering7312, thanks for the explanation. Here's what I still don't understand. KMI's debt ratio in the original budget for year end 2016 was 5.5. Due to the SNG sale, it is now projected to be 5.3 EOY 2016. And a .1 turn higher at the end of 2017, making it 5.4.
Yet the Credit Swiss and Wells Fargo analysts are writing that KMI will be at 5.0 at year end 2017. That is quite a difference. It screams for an explanation, yet no one takes any notice.
unkaphil60, regarding your statement: " A caller stated that Credit agencies have indicated that "if" KMI's debt ration goes below 5.0 they would upgrade their credit rating but Kimberly said KMI has no plans to do that."
I listened again at 27.34 minutes. Ross Payne of Wells Fargo said that "it looks like you will be able to get to 5.0 or below in 2017 based on GAAP. Moodys and S&P said they would upgrade you if you are at 5.0 on an adjusted and sustainable basis. Is that something you want to do in addition to buying in shares and increasing the dividend?"
Kim's answer was "we will decide at the time."
I don't understand what it is that KMI would need to do if the ratio gets to 5.0 based on GAAP? Wouldn't the upgrade be automatic? Are the key words "adjusted and sustainable?" Somehow the ratio would not be sustainable if cash was used to buy back shares or pay down debt?
Is there some issue with "adjusted"? The 5.0 reached in 2017 would not be under GAAP?
unkaphil60, at 24 minutes into the call Kim said that on a full year basis the debt to EBITDA ratio would be a .1 turn (higher). At he end of 2016 the ratio would be 5.3 because the transaction closes in the 3rd or 4th quarter so KMI will receive 100% of the EBITDA until the closing. After a full year in the new partnership the ratio should be 5.4. I imagine a "turn" is a .1 movement.
This doesn't make sense. Maybe it assumes that nothing else changes regarding EBITDA during 2017, and the 5.4 reflects only the impact of the SNG sale. An earlier caller stated the KMI would be at 5.0 during 2017 and the group didn't contradict him. I'll have to do more checking.
"...debt ratio should be at 5.3 by year end with the 2017 target #$%$0. A caller stated that Credit agencies have indicated that "if" KMI's debt ration goes below 5.0 they would upgrade their credit rating but Kimberly said KMI has no plans to do that."
My recollection of today's call is that the debt ratio will trend a bit higher when a full year of reduced EBITDA is considered, but will trend back down when the expansions of the joint venture start contributing to earnings in the next few years. This joint venture alone can't make or bread KMI's debt metrics. I didn't get the impression from the call that KMI expects to be faced with the choice of paying debt down to below 5.0 and getting a ratings upgrade, or starting to pay higher dividends, once 5.0 is reached, and not getting the upgrade.
I would expect the upgrade to come as time passes, oil prices improve, the share price improves (merely due to the passage of time, and fears receding), and EBITDA growth from capex in all of KMI's businesses in the coming years.
doogoo1, you are focusing on the taxation of MLPs held in IRAs? Have you ever read about the mental trait that certain people have in which they tend to focus on the mundane and irrelevant during times of extreme stress? Airlines, for example, screen for this trait in the pilots they are considering hiring because a pilot must be able to concentrate on flying the plane during an emergency or the plane might crash.
So watch for this trait in yourself during times when you are short KMI and it makes a dramatic break on the upside due to good news.
unkaphil60, from what I've gathered over the years, having the IRA custodian pay ( by selling MLP units, if necessary) the tax from inside the IRA is the only way to avoid a penalty. The liability is the IRA's liability, and not the account owners. If the individual paid the tax himself using his own money from outside the IRA, it would be deemed a non-allowed contribution to the IRA and would cause a penalty. If the individual took a distribution from the IRA in order to raise the funds, that distribution would be taxable, and subject to penalty if the individual was under 59 1/2, and the subsequent payment of the UBTI would be a non-allowed contribution to the IRA, causing another penalty.
I got that wrong. Total enterprise value of SNG is $4 B. The 50% equity interest is valued at $1.5 B, so the total partnership debt is about $1 billion. So KMI could reduce the debt on its balance sheet by the $1.5 B cash plus 50% of the partnership debt, or $500 million, for a total debt reduction of $2 billion. $2.5 billion if all of the partnership debt is nonrecourse to KMI.
Don't forget the share of SNG's debt that Southern Co would be assuming. Seems to be $2.68 billion total, which at 50% is $1.34 B plus the $1.47 B cash equals $2.81 billion total debt reduction. Possibly all of the partnership debt could be off loaded if the partnership's stand alone credit rating is strong and the debt was nonrecourse. It didn't happen with the NGPL acquisition.
Its unlikely that the rating agencies would not be aware of desperation, if it were present.
I would say Tennessee Gas Pipeline is KMI's crown jewel. It runs right thru the heart of Marcellus. NGPL is also quite a jewel for what it can do regarding Marcellus gas.
SNG has had little or no expansion capex in recent years, and almost none for the near future. I don't think that the Elba LNG export facility is part of this deal, and neither would KMI's 50% ownership of Florida Gas Transmission.
Its not like Southern Company is scratching its head wondering what it is going to do with SNG. Southern Company wasn't in a position of saying "alright, I'll take it off your hands for cheap."
From the Bloomberg article:
"With demand for electricity declining and natural gas taking market share from coal, Atlanta-based Southern was among the first utility owners to seek growth by buying a gas transporter. Duke Energy Corp. and Dominion Resources Inc. followed suit. Southern last month received regulatory clearance for its $8 billion takeover of natural-gas distributor AGL Resources Inc.
“The notion of being long gas infrastructure between now and 2050 is a real winner,” Southern Chairman and Chief Executive Officer Thomas A. Fanning said in a June 29 interview on Bloomberg Television. An interstate pipeline would provide “terrific synergy” with a generation fleet that’s switching to gas from coal,” he said."
Atlantic Coast Pipeline is a proposed $5 billion 550 mile nat gas pipeline that would serve Virginia and N. Carolina. Atlantic Coast's partners are Duke, Dominion, Piedmont, and AGL. Duke is/has acquired Piedmont, Southern Company is acquiring AGL, and Dominion is acquiring Questar. Big electric companies in the southeast are acquiring gas utilities that have ownership in interstate pipelines. KMI would need to partner with a big southeastern electric company even if its debt was much lower. The electric utilities are going to favor the pipelines that they own.
I've found from the January Analysts Presentation that KMI also has the Deer Park Rail Terminal at Pasadena, TX which handles numerous different commodities, including bulk, and also handles what is called base oil. I doubt that its business is tied much to any under performing shale oil fields that have been shut in, or have curtailed production.
Oh the "Moodys downgrade" from stable outlook to negative outlook. I wonder if KMI will ever be able to get that downgrade reversed? Wait a minute. It was reversed by Moodys in less than a week, and that was about 7 months ago.
So that's the "Moodys downgrade" story for anyone who doesn't follow this stock. I doubt that includes anyone reading these posts.
When the market begins to realize that KMI will be paying a $3 annual dividend four years or so from now, that $20 billion decline (if it is $20 B) will be fully recouped and then some.
Also, KMI doesn't need a 25% restoration of its income. It never lost that much income. As we all know, DCF is what matters to KMI investors and that figure held up very well in the worst of times (low oil prices) which are now fading in the rear view mirror.
doogoo1, here's the EPD related article that you cited in the 7/06/16 "From Seeking Alpha" topic:
US Crude-by-Rail Movements Keep Falling: MLP Impact
By Kurt Gallon | Jul 4, 2016 2:06 pm EDT
US crude-by-rail movements
"According to a monthly report published by the EIA (Energy Information Administration) on June 30, movement of crude oil by rail in the United States, including imports from Canada, fell 25.1% month-over-month to 12.8 MMbbl (million barrels) by the end of April 2016. Except for March, crude oil movements by rail have continued to decline over the past six months. The movement of crude oil by rail in the United States has decreased 40.6% since the beginning of 2016."
It's movement of crude by rail in the US that the article discusses. Canadian crude that moves by rail to another location in Canada is not addressed. We should assume that KMI is well aware that an expanded Trans Mountain could negatively impact its crude by rail terminals in Edmonton, Alberta. KMI likely regards its Canadian crude by rail terminals as an interim solution. Not a forever core business. Contracts probably protect against revenue loss from volume declines, and have fixed fees not tied to volumes.