Master Limited Partnerships - current opportunities profiles

Mlps recently got beaten down because of the FERC ruling on income tax allowance in the calculation of cost of service rates. I’d say that the main reason why the mlp model failed or has had a set back is the overbuild of pipelines based off of expected production. Much of it was debt and equity funded, which therein lies the problem. When short term expectations were slashed because of less drilling activity, mlp shares tanked. So they had a higher fixed charge burden (interest expense from debt issuance and distribution expense from equity issuance), but they didn’t have the cash flow to overcome it. Many mlps cut distributions and the perception of mlp risk has heightened considerably (I think they aren’t as risky as the market is pricing them). Along with that, mlps strategy for growth has been foiled. Because their equity prices were so low, their traditional funding model of half equity and half debt no longer worked. Many mlps tried issuing preferred equity to fill the gap. And then Kmi moved to c-Corp and slashed dividend payment 75%. Near term opportunity is the deleware and dj. But it might be priced in already. Personally, I’m interested in the liquefaction and terminalling. If I were managing a portfolio, I would move out of reits and utilities and into mlps. But on an absolute basis, the attractive opportunities are all in upstream and e&s right now.