Midstream Energy (No K-1s)

Portfolio Highlights
  • Midstream Energy with No K-1s
    Midstream companies are the link between energy production and energy use. This strategy provides exposure to essential midstream assets by investing in the general partners of MLPs and C-corps that do not require K-1 tax forms.
  • Stable Industry with Excellent Future Opportunities
    Rising US natural gas production and the recent approval of new export facilities present opportunities for natural gas infrastructure to meet the needs of both domestic and foreign markets in the years to come. Against this backdrop, we expect midstream energy companies to provide investors with a growing income stream.
Portfolio Overview

About GPs and MLPs
Master Limited Partnerships generally comprise two entities: a limited partnership (LP) and a general partner (GP). A GP typically owns a 2% interest in the operating LP and its assets. Not only does the GP typically receive a regular distribution from common units that it may own, but it also often holds incentive distribution rights (IDRs) that entitle it to an incrementally higher percentage of the MLP’s distributions over time. Many GPs own a significant amount of their MLP’s units, further aligning their economic interests with that of the MLP.

About C-Corps
As the midstream sector has matured, more partnerships have converted to a C-corp structure (oftentimes with a tax shield). In addition to eliminating the need for K-1 tax forms, the change increases the potential investor base as it removes restrictions that can limit the inclusion of MLPs in various structures.

Investment Philosophy

The Miller/Howard Approach
We emphasize an individual company’s fundamentals, valuation, and growth prospects. The investment team focuses on businesses that demonstrate financial strength, including conservative balance sheets and adequate distribution coverage.

Typically, turnover is relatively low, with a multi-year holding period for investments. At the same time, the portfolio remains flexible. We can act quickly if we believe that a company’s prospects have changed, or if its business is mispriced, or if a company is likely to benefit from certain internal or external developments.

Experience

Miller/Howard Investments has been involved in midstream companies for more than 25 years. In the 1990s our portfolios held many midstream energy companies. We acquired our first position in Kinder Morgan Energy Partners in 1997, and have held one of the Kinder Morgan entities ever since. We’ve continuously invested in MLPs through our Income-Equity Strategy, and launched our dedicated MLP portfolio in late 2008. With deep knowledge of the companies, the players, and the areas where they operate, we believe we have the skills to achieve investment success.

Strategy Inception Date: September 2014
Portfolio Manager: MHI Investment Team

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