New York Times, Kinder Morgan’s Reorganization Puts Master Limited Partnerships in Question, by David Gelles:
What happens when the pioneer of an industry abandons its own legacy?
When Kinder Morgan announced on Sunday that it was consolidating its four related pipeline companies into one, executives and bankers from Houston to New York, particularly those in the merger and energy sectors, were stunned.
With the move, Kinder Morgan, a $100 billion empire that transports much of America’s oil and natural gas, was abandoning the master limited partnership structure it helped popularize. Largely because of Kinder Morgan’s success, the partnerships have become increasingly popular for energy companies. The structure allows them to pass all profits along to their investors as dividends, and pay no corporate taxes (though the investors are subject to taxes on the distributions).
But now, with Kinder Morgan restructuring as a traditional corporation, questions have emerged about what will happen to the many other master limited partnerships. If Kinder Morgan no longer wants to be one, does the structure still make sense for other companies?
Adding to the sense of uncertainty was the Treasury Department, which said on Monday that it was examining whether the partnerships were depriving the government of needed tax revenue. Although the partnerships have mostly managed to fly under the radar, the renewed focus on the corporate tax code and its loopholes is putting the structure under new scrutiny.
Despite the move by Kinder Morgan, and saber-rattling from Washington, master limited partnerships are for the most part seen as safe for now.
- Bloomberg, Pipeline Billionaire Spurns the Tax Break He Popularized
- Forbes, Kinder Morgan Eats Its Own; Will Other MLPs Follow Its Lead?
- Investment News, MLP Investors Face Prospect of New Taxes After Kinder Morgan Deal
- New York Times, After Kinder Morgan Deal, What’s Next for Master Limited Partnerships?
- New York Times, Renouncing Partnership Structure, Pipeline Group Kinder Morgan to Reorganize as Single Corporation
- New York Times, To Solve a Problem of Size, Kinder Morgan Gets Bigger
- U.S. News & World Report, Kinder Morgan to Abandon MLP Structure It Pioneered
- Wall Street Journal, Kinder Morgan to Consolidate Empire
- Wall Street Journal, Kinder Morgan Deal Risks Big Tax Bills for Investors
- Wall Street Journal, Q&A: How the Kinder Morgan Deal Affects Investors’ Taxes