Right here we see that size does matter, and GPs do us all a favor by deferring IDR payments in the wake of large acquisitions. Equally important from an investing standpoint, Armstrong continues to elaborate on how things shake out at Plains:
I think it’s fair to say that our general partner has steadfastly said they’ll support the growth and make whatever appropriate modifications that’s been requested of management. I think the longest it has taken us to get approval for an IDR reduction is like 48 hours, when we’ve got a transaction that’s in front of them. So I think what you should walk away from here is that PAA’s general partner’s going to be very flexible and supportive.
The idea that GPs will be supportive of a temporary reduction in IDRs is not unique to Plains, but it’s important to hear nonetheless, especially for unitholders.
Case in point
We can look to the most recent deal over at Kinder Morgan Energy Partners LP (NYSE:KMP) Partners to get an idea of what IDR deferral looks like with a big transaction. When KMP announced its desire to purchase Copano Energy, L.L.C. (NASDAQ:CPNO) for $5 billion, KMI announced that it would waive IDRs on a sliding scale over the next few years. It will forgo $120 million in payments in 2014 and 2015 and $110 million in 2016, with a reduction of $5 million per year every year after that.
Again, we see Armstrong’s point about IDRs and big acquisitions hammered home. We all know how it works now, and that knowledge gives us one more thing to pay attention to and evaluate when acquisitions are announced.
Foolish takeaway
Many conference calls come at inconvenient times — we have lives, after all — but the transcripts are almost always available online 24 hours later, and investors should make a point of checking them out. The Q&A at the end is especially valuable.
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The article Is This Payment Ruining Your MLP? originally appeared on Fool.com and is written by Aimee Duffy.
Fool contributor Aimee Duffy owns shares of Plains All American Pipeline. The Motley Fool recommends Enterprise Products Partners and Kinder Morgan and owns shares of Kinder Morgan.
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