Kinder Morgan Restructuring Raises Questions About Other Master Limited Partnerships
On Sunday Kinder Morgan made an announcement that it planned to consolidate its four associated pipeline companies into a big one. The announcement stunned many including the executives and bankers of Houston and New York, predominantly those who are involved in the energy and the merger sectors.
As the move is proposed, Kinder Morgan that transports most of the oil and natural gas of America will be discarding the structure of master limited partnership which it assisted to be popularized. Currently it has a $100 billion empire.
Kinder Morgan's success is the main reason behind the popularity of the partnership structure, which it will now let go of. This structure has gained immense popularity especially with energy companies.
The popular structure permits them to pass on all their profits to their investors in form of dividends where they have to pay no corporate taxes. The investors are however subject to be taxed on the distributions.
As of now with the restructuring of Kinder Morgan as a traditional corporation several questions arise pertaining to the many other entities with master limited partnerships. If the model of the structure Kinder Morgan does not want to follow the scheme will the structure still be feasible for the several other companies?