Kinder Morgan Inc (NYSE:KMI) In Cash Distribution Trouble


Dallas, Texas 03/12/2014 (FINANCIALSTRENDS) – Kinder Morgan Inc (NYSE:KMI) is the Houston-based diversified energy transportation company which also operates in the storage assets business. KMI is part of the group, which includes Kinder Morgan Energy Partners or KMP and Kinder Morgan Management or KMR.  In the recent weeks, the group has been in a spot of trouble regarding the distribution of cash among partner members.

The question that has been raising its doubts and creating negative sentiments in investor community is as follows: Was distributable cash flow manipulated?  Was maintenance capital understated, so as not to indicate higher cash flows? These questions were raised in the last week of February by analysts Barron. Again, it is argued that Barron’ note was loosely based on a presentation made by Hedgeye earlier in September of 2013.

The bottom line for KMI, according to Barron’s notes, is a drop in growth prospects, given the IDR payments it is required to make. The maintenance capex is currently inflated for distributable ‘cash flow.’

Kinder Morgan Inc (NYSE:KMI), according to analysts, the Master Limited Partnership which this company offers is perfect model for investors looking for good, steady income.

Kinder Morgan Inc (NYSE:KMI) perceives high growth in the future. Hedgeye analysts opine that the valuation is crazy for the stock under current values.  It also argues that the stocks across the group are likely to decline by over 40%.

Other analysts such as Deutsche Bank are not in agreement with Barrons’ notes, due to inherent inaccuracies in the formers report.

Kinder Morgan response

However, KMI has clarified that the maintenance capex has not been spent, with respect to maintenance of assets, without increasing the capacity or the throughput. The company reiterated that the focus for the company is to ensure that there are no pipeline leaks as these may result in environmental disasters, therefore, it cannot compromise on fundamental functions.