Why Kinder Morgan Partners (KMP) Is Lower

NEW YORK (TheStreet) -- Kinder Morgan Partners (KMP) is lower on Monday after an article in Barron's over the weekend turned bearish on one of the nation's largest providers of energy infrastructure.

By early afternoon, shares had taken off 4.6% to $74.80. Trading volume of 7 million was more than four times its three-month daily average.

In editorial over the weekend, the financial media company argued the Houston-based business erroneously calculated its distributable cash flow in relation to its various businesses, particularly oil production, a segment which accounts for almost 20% of annual cash flow.

In a note on Monday, Deutsche Bank analyst Curt Launer defended the company, arguing the article cites old inaccuracies management has since rectified.

"The current issue of Barron's brings back the maintenance capex, GP vs LP and coverage ratio issues that have been raised about KM before. It remains our opinion that KM stands out favorably in the group in these measures as well as in disclosure related to them. It seems that the trigger for the Barron's article was the KMP equity offering last week, clearly a common feature of MLPs to fund growth capex, that Barron's makes sound unique to Kinder," wrote Launer in the report.

Last week, Kinder Morgan Partners said it was commencing a public offering of 6.9 million units

"The KM maintenance capex is in line or above industry averages and the claim that the maintenance capex for the pipelines was drastically reduced does not become accurate because Barron's is repeating it. Our current valuation information shows KMI trading at 12.3x ebitda vs the group average of 15.5x. KMP shows a yield of 6.9% vs the average of 6.5% for the large diversified MLPs that have General Partner burdens," added Launer.

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