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Kinder Morgan Consolidates MLPs, Creating Third Largest US Energy Company

8/12/14 11:09 AM EDT
Kinder Morgan sent shockwaves through the energy industry on Sunday, August 10, when it announced it would be bringing its MLPs back under one roof as one corporation. The new Kinder Morgan will have an estimated enterprise value of $140 billion, making it the third largest energy company in the United States after Chevron and Exxon. For oil and gas companies, MLPs are lucrative as they do not have to pay corporate taxes, and they are a hit with investors as they distribute all of their profits to shareholders. However, to continue increasing the dividends, MLPs have to keep acquiring new assets. The Kinder companies became so large that it was hard to find suitable targets. Plus, the Kinder companies were facing difficulties financing new deals because they were paying out such large dividends. Investors will be taken care of, however, as the consolidated Kinder Morgan will pay an annual dividend of $2 per share, representing a 16% increase over this year's payout.
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