CS Take on MLPs
Slow Economy Dampens Energy Demand
23 pages, 38 exhibits
Download Link: sendspace.com
Management Meeting Takeaways: Last week we met with the
management of Boardwalk Pipeline Partners (BWP) and Sunoco Logistics
Partners (SXL). BWP is moving beyond its core interstate pipeline business
with the formation of Boardwalk Field Services. New CEO, Stan Horton, is
beginning to make an impact and is intent on re-accelerating distribution
growth. In our view, with an 8.3% yield, investors are "paid to wait".
Taking the Acela Express to SXL. SXL's conservative approach is well
suited for an MLP. Specifically, pursuing businesses that generate
stable, predictable cash flows that facilitate growth in distributions to
sustainable levels while maintaining a conservative balance sheet. This
MLP has proven to be a good steward of capital. In 2011, it has already
closed on $460 million of acquisitions that should position it for future
growth. We would not be surprised to see distribution growth accelerate
from 6% in 2011 to 8% in 2012.
EIA Short Term Energy Outlook: The U.S. Energy Information
Administration (EIA) released its Short Term Energy Outlook on Sept 7th.
Slower economic growth is dampening US energy demand. The EIA lowered
its outlook for oil prices, natural gas prices, U.S petroleum demand, and
natural gas consumption while increasing its outlook for natural gas
production. See page 4 for more detail.
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US Municipal Strategy Special Focus
Why Is The Tax-Exempt Status Of Municipals Under Assault?
9 pages, Link: ir.citi.com
The Administration's new Jobs Bill includes an unpleasant surprise for state and
local governments
Specifically, the bill would cap the value of the tax exemption for high-income
investors at 28%. This change would, in our view, increase state and local borrowing
costs significantly, and for the first time, create a retroactive change to tax
exemption.
While this provision is unlikely to be enacted in its current form, it cannot be ignored,
because it could come back again as deficit reduction and/or tax reform moves
forward.
Ironically, one of the purported reasons for this change is to pay for an Infrastructure
Bank, a less effective way to support state and local financing than the muni market
itself.
A key problem for supporters of tax-exempt financing is that the cost of such
financing to the Treasury is consistently overstated. A recent study in the National
Tax Journal explains why.
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FUNDamental Insights
CEF Highlights
12 September 2011 ¦ 27 pages
citigroupgeo.com
In this report, we aim to provide investors with a regular update and our latest views
of the closed-end fund (CEF) sector. |
