Standard & Poors 12 April 2006
NEW YORK April 12, 2006--In a report published today, "Industry Report Card: U.S. Energy Master Limited Partnerships," Standard & Poor's Ratings Services said that the sector continues to experience a strong business environment, but that ability to sustain growth opportunities is an emerging concern that will differentiate one subsector from another within the master limited partnership (MLP) space.
"While overall energy MLPs continue to benefit from high energy prices, commodity-sensitive businesses are still performing stronger than fee-based operations," said Standard & Poor's credit analyst Aneesh Prabhu.
Standard & Poor's currently rates 22 MLPs in the U.S. energy sector, most of which are in the 'BBB' and 'BB' rating categories.
In addition, the report said that holding company IPOs continue to gain momentum.
"Public ownership of general partner interests has increased the competition for funds and has significant credit implications, as financial flexibility and the ability to raise equity capital are critical to the MLP growth strategy," said Mr. Prabhu.
The report details four other trends that will influence the performance of these MLPS in 2006:
-- The significant decline of acquisition markets, with asset purchases now being more selective as organic growth projects are being built around them;
-- The increasing effect of organic spending on balance sheets due to longer gestation periods;
-- Greater importance of the ability to grow distributions or otherwise show growth prospects as competition for funds rises; and
-- More pronounced performance difference between subsectors.
(Note: PreferredsOnline will be adding extensive coverage of Energy MLPs and REITS in the coming weeks).
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