ENERGY TRANSFER EQUITY (ETE)

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joew...@optonline.net

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Nov 26, 2006, 11:48:16 AM11/26/06
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THIS IS THE DISCUSSION GROUP FOR ENERGY TRANSFER EQUITY

rex hunt

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Nov 26, 2006, 5:24:38 PM11/26/06
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Random questions and thoughts on ETE:

- why have the GP finance (via buying ETP units) FY07 capex? maybe it
will be easier to place a block of ETE than ETP. maybe Harvard will
add to their position. 4.7 times debt to ebitda is going to have to
come down below 4.0

- just loved the one word answer "YES" on the conference call when they
were asked about their interest in aquiring a pipeline to move gas east

- the 980mm ebitda guidance for ETP is ultra-conservative even for
these good ole boys ... . they say they never want us to be suprised
on the "wrong side"!

- the multiple ETE paid for the rest of the IDR's was quite punchy and
dilutiive but will be netted out by the increase in cash from the ETP
issuance

- should we be happy that ETE is taking on more ETP units? it
decreases ETE's overall leverage to ETP doesn't it?

- if ETE continues to buy ETP shares to finance growth, does that mean
this is a slow motion ETE levearged buyout of ETP?

- with the 50% GP/LP split, ETP's cost of capital is much higher than
some of the other MLPs like a CPNO. maybe instead of limiting its GP
participation like others have done the way to make ETP's cost of
equity cheaper is to just to have to GP buy the LP.

thanks in advance for your thoughts
rex

joewxman

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Nov 28, 2006, 7:25:04 AM11/28/06
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Looks like the priviate part of the equity financing is done as that
crossed the wires this morning. You ask the question about whether we
should be happy about the dilution...while i'm not thrilled about it I
am happy about the fact that the market has pretty well absorbed this
without much change in the stock price. In fact until yesterday's
market induced sell off i thought we were about to break through 30. So
far ETP has done everything right so i'm not too worried about all
this.
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> > THIS IS THE DISCUSSION GROUP FOR ENERGY TRANSFER EQUITY- Hide quoted text -- Show quoted text -

rex hunt

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Nov 28, 2006, 7:32:13 AM11/28/06
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I am not too worried either but I sure wish they would have called me
and asked if I wanted stock at a 6.3% discount!

> > > THIS IS THE DISCUSSION GROUP FOR ENERGY TRANSFER EQUITY- Hide quoted text -- Show quoted text -- Hide quoted text -- Show quoted text -

Mike

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Nov 28, 2006, 1:47:53 PM11/28/06
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Add me to the list of investors who do not understand the motivation
for GP's owning units of the underlying MLP. VEH is so heavily into
VLI that it looks more like a holding company than a play on the IDR.
This must be why the yields at VLI and VEH are so close.

To the best of my knowledge, MGG is the only pure play on the IDR as it
holds no units of MMP. Even though MGG is in a position to have
maximum leverage on distribution growth at MMP (about 2.7 x) the yields
are surprisingly close (MGG: 4.2% and MMP: 6.2%). Unless I am missing
something, MGG looks like a bargain at its current price.

mike

thegrea...@gmail.com

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Nov 29, 2006, 1:39:30 AM11/29/06
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I've thought that about MGG for quite some time Mike. Unfortunately I
watched everything else go up while MGG sat around. I still think it
has big bang potential, but I have thinned down my position a little.

rex hunt

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Nov 29, 2006, 9:00:37 AM11/29/06
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I like MGG also, but using factoids
(http://home.flash.net/~factoids/fact6/m0611.htm) numbers it has a
lower estimated growth rate than VEH, ETE & EPE and a lower FY09
projected yield than ETE, VEH, BGH, & AHD. Do you have different
projections for MGG or do you like the others as well?

> > mike- Hide quoted text -- Show quoted text -

thegrea...@gmail.com

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Nov 29, 2006, 12:31:10 PM11/29/06
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I'll have to investigate a little. Last time I checked, MGG had
superior growth projections. However, I have been travelling for a
couple months and I'm not quite up to date. My other GPs are XTXI and
ETE.

> > > mike- Hide quoted text -- Show quoted text -- Hide quoted text -- Show quoted text -

Mike

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Nov 29, 2006, 8:43:00 PM11/29/06
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The factoids data is taken from recent Lehman reports that analyze the
MLP/GP growth rates. One of the things that bugs me about Lehman's
analysis is it shows MGG's leverage to distribution growth at MMP as
only 2.3x, which puts it in the middle of the pack. This doesn't make
sense to me given the IDR dilution that exists at all the other GPs
because of their MLP holdings. Furthermore, Magellan's own website
states in big bold letters that MGG is leveraged 2.9x to the growth at
MMP.

You can speculate as to which MLP will grow faster -- many believe ETP
will be at or near the top of the pack. And that may make ETE the hot
ticket on the GP side. But the leverage offered by MGG is hard to
ignore when the market begins to price it to yield close to MMP. MMP
is projected to grow at 8-10% so you're looking at some pretty big
numbers at MGG.

What's wrong? My guess is MGG's market underperformance is largely one
of perception -- if it has failed to surpass its IPO price after almost
a year, what good is it? It may be simply dropping off people's radar
screens and that -- to me -- looks like opportunity.

mike

rex hunt

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Nov 30, 2006, 2:16:07 AM11/30/06
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Citi has MGG growing at 19.1% CAGR with a 2.4 GP multiplier. I think
MGG is a buy at this level also but think it could get smacked for tax
loss reasons into yearend. Let's hope it does!

thegrea...@gmail.com

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Nov 30, 2006, 1:22:31 AM11/30/06
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I did hear MMP was recently downgraded by Citi. Dunno if that throws
off MGG estimates. As for the multiplier, based on what I've seen in
Citi reports I've been under the impression that the multiplier
decreases over time. So initially it was 2.9 and now I think it was 2.7
or 2.5 this last div increase. I think the analysts must be calling the
multiplier the five year average they expect, or something along those
lines.

I agree that MGG looks like an opportunity, but it really has for quite
a while now. I'm happy sticking with the position I have. Surely
patience will be rewarded...

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