Editor's Note: This article was originally published at 2:03 p.m. on Real Money on Aug. 11. Sign up for a free trial of Real Money.
Richard Kinder is still the brilliant seer of U.S. oil infrastructure, announcing today that he will consolidate his three master limited partnership (MLP) companies, abandoning the MLP format he virtually invented but also freeing up tons of cash to increase his transport portfolio several-fold. This brilliant move will be copied by several other large MLPs, and it supports the immediate repurchase of large MLPs for your portfolio, including Enterprise Product Partners (EPD) and Enbridge Energy Partners (EEP).
Kinder is consolidating his three MLPs -- Kinder Morgan Energy Partners (KMP), Kinder Morgan Management (KMR) and El Paso Pipeline Partners (EPB) -- into their corporate parent, Kinder Morgan (KMI), thus abandoning the MLP structure, with its tax advantages of subordinated debt, a structure that Richard Kinder pioneered 20 years ago. But with the loss of those tax advantages comes the unwrapping of billions of dollars of tax-stranded capital that Kinder is now going to use to purchase and build out even more pipes, tanks and processing sites.
This is the fascinating projection of Richard Kinder's that deserves note: He believes that the most money will be made in the fast growth of that pipeline network, despite the less advantaged tax stance that will result. I think that once again, Richard Kinder is totally right.