MLPs and Pipeline Companies Under Pressure After Regulatory Ruling
Many pipelines are regulated by the Federal Energy Regulatory Commission (FERC), which has the ability to set rates. Any change in regulations by the FERC could significantly impact cash flows and the rate of an MLP’s distribution growth. The FERC’s job is to ensure that companies charge “just and reasonable” fees and that exploration and production companies have fair access to transport products. Rates are usually set on a cost-of-service basis, factoring in capital and maintenance costs to keep the infrastructure running. While regulations have generally been a good thing for pipeline company by providing clear returns on their infrastructure investments, they are a major uncontrollable factor the businesses depend on. FERC revised a 2005 tax policy today to [...]
Enbridge (ENB)
Founded in 1949 in Canada as IPL Energy (changed name to Enbridge in 1998), Enbridge (ENB) is North America's largest midstream energy company. Enbridge's network of oil & gas gathering, storage, processing, and transportation systems connect the continent's most vital oil & gas producing regions. By division, liquids pipelines are expected to account for 51% of 2018 EBITDA, followed by gas transmission & midstream (32%), gas distribution (13%), and renewables and other (4%). Source: Enbridge Inc Enbridge is structured as a conglomerate, composed of numerous subsidiary MLPs and energy funds which it helps manage. These divisions also raise funds independently of the parent company in exchange for management fees, distributions, and incentive distribution rights (IDR) fees. Source: Enbridge Investor [...]
Brookfield Infrastructure Partners L.P. (BIP)
Brookfield Infrastructure Partners L.P. (BIP) is one of the fastest growing and most diversified utilities in the world. In fact, the limited partnership (a corporate structure similar to that of a Master Limited Partnership, or MLP) owns 35 infrastructure assets on five continents. Some examples of the partnership's assets include electrical transmission lines, railroads, toll roads, natural gas pipelines, global ports, telecom towers, and fiber optic lines. Source: Brookfield Infrastructure Investor Presentation As Brookfield points out, it essentially owns “critical and diverse infrastructure networks over which energy, water, goods, people and data flow or are stored.” Brookfield Infrastructure Partners’ healthy diversification by business segment (no business unit is more than 25% of cash flow) and geography helps to [...]
Ventas (VTR)
Ventas (VTR) was founded in 1983 and is the second largest medical REIT in the country, with more than 1,200 properties in the U.S. and the U.K. Ventas' property portfolio consists primarily of seniors housing communities, medical office buildings, life science centers, and inpatient rehab and long-term acute care facilities. The largest source of Ventas' cash flow is derived from senior housing properties, which are run by third-party operators under a triple net lease arrangement (tenant pays all maintenance, taxes, and insurance), as well as by the company itself. Over the past few years, Ventas has embarked on an aggressive portfolio evolution in which it's been selling off assets in struggling industries (such as skilled nursing) and investing more [...]
Walt Disney Company (DIS)
Walt Disney founded his namesake company in 1923, and since then the business has gone on to become one of the most iconic brands on earth. Today, Walt Disney (DIS) is a leading entertainment company with over $55 billion in revenue. The company is highly diversified and vertically integrated, with four major business segments: Media Networks (41% of sales, 30% of profits): TV programming (ABC TV and cable channels like A&E, History, Lifetime and ABC Family, ESPN network), radio (radio Disney, ESPN radio network), eight television stations. In total the company has about 100 Disney-branded television channels, which are broadcast in 34 languages and 162 countries. Parks & Resorts (34% of sales, 34% of profits): owns theme parks and resorts [...]
Starbucks (SBUX)
The first Starbucks (SBUX) location opened in 1971, and the company has since grown to become the world’s largest coffee purveyor with just over 28,000 stores in more than 75 countries. Starbucks stores sell not just premium coffee but also tea, packaged coffee, juices, bottled water, pastries, and various lunch items. In addition, the company licenses several of its products, which are available in supermarkets and stores, and sells through other up-and-coming brands such as Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La Boulange, and Ethos. In its most recent fiscal year, the vast majority of Starbucks' sales came from the company’s namesake, company-owned stores. Company-owned stores: 79% of revenue (growing 5% a year) Licensed stores: 11% of [...]
W.P. Carey (WPC)
W.P. Carey was founded in 1973 by Bill Carey, who helped to pioneer the triple net lease and sale-leaseback REIT business model. W.P. Carey went public in 1998 as a master limited partnership but converted to a REIT in 2012. Today the REIT owns 890 properties located in 19 countries around the world. W.P. Carey's portfolio is broadly diversified across tenants (over 200, none greater than 6% of rent), industries (29), property types (industrial, office, retail, storage), and geographies (35% of sales are outside of the U.S., primarily in Western and Northern Europe). Source: W.P. Carey Investor Presentation The REIT also manages more than $13 billion in non-traded REITs under its asset management business. Management fees represent 19% of [...]
Southern Company (SO)
In business for more than 100 years, Southern Company (SO) is a major regulated utility involved in selling electricity and distributing natural gas, primarily across the Southeastern U.S. The firm's vertically integrated electric utilities serve customers across Georgia, Alabama, Florida, and Mississippi. Southern Company’s mix of business and service territories significantly changed after the company's 2016 acquisition of natural gas utility AGL Resources for $12 billion. AGL Resources owns more than 80,000 miles of pipelines and over a dozen storage facilities it uses to transport and distribute natural gas to businesses and households across Illinois, Georgia, Virginia, New Jersey, Florida, Tennessee, and Maryland. After acquiring AGL Resources, Southern Company's customer count roughly doubled to 9 million, and its [...]
Spectra Energy Partners (SEP)
Spectra Energy Partners (SEP) is one of America's largest midstream master limited partnerships, or MLPs. Its assets include 170 billion cubic feet of natural gas storage, 5.6 million barrels of crude oil storage, and approximately 16,000 miles of gas and oil pipelines that connect producers, consumers, and exporters with some of North America's most important energy regions, including: The Eagle Ford oil shale formation of Texas The Marcellus/Utica shale gas fields of Ohio, Pennsylvania, and West Virginia The tar sands oil reserves of Alberta, Canada Source: Spectra Energy Partners The heart of Spectra's pipeline system is the Texas Eastern natural gas transmission system, which moves an estimated 10% of the nation's gas and serves 120 million people across 16 states, [...]
Cummins (CMI)
Founded in 1919 in Columbus, Indiana, Cummins (CMI) is the largest dedicated global industrial diesel and natural gas engine manufacturer. The company’s primary markets are highway & heavy-duty vehicles, construction, and general industrial markets, where it serves customers such as Chrysler, Daimler, Volvo, PACCAR, Navistar, CNH Global, Komatsu, and Ford. The company's products are sold in more than 190 countries via its network of 500 company-owned and independent distributor locations and over 7,500 dealers. Roughly 55% of Cummins’ revenue is generated in North America, but China (10%) and the Asia Pacific (10%) are also meaningful markets. In fact, Cummins has had a presence in China and India for more than 40 and 50 years, respectively. Cummins [...]