Aug 15th, 2014
MLP Market Post
In the media, there is the concept of a pre-written obituary. News outlets (TV and print) prepare segments and obituaries in advance of a celebrity’s death, so they have facts straight and are ready to publish when the famous person dies. The New York Times apparently has a database of more than 1,200 pre-written obituaries, with the oldest one written in 1982 (according to this article on the subject).
When Robin Williams died earlier this week, the NY Times may have had a pre-written obituary ready to go, but most news outlets probably didn’t. If it were my policy to have pre-written obituaries on MLPs that could potentially be consolidated and go away entirely, KMP would not have been at the top of the list.
It wasn’t a surprise to see KMP announce a transaction that fixes the IDR burden on a permanent basis. The first post I wrote on this blog asked the question, can KMP sustain distribution growth of 5%+ per year given its huge GP take? It’s a question that’s been around a long time. But Kinder endured with the El Paso acquisition, which allowed KMP to continue its growth for a few more years, while sucking EPB’s coverage dry.
Eventually, KMP needed to fix itself, and certainly the expectation was that it would someone make it happen. But the market (and KMP investors in particular) was surprised at the structure of the transaction that would leave no publicly-traded partnerships bearing the Kinder name. We’ve always seen IDR buyouts where the MLP buys out the parent and continues on as a public company (e.g. EPD, MMP, BPL), even when the GP was held in a corporate structure (e.g. MWE’s buyout of Markwest Hydrocarbon, Inc.).
What follows is my post mortem on the deal announced this past Sunday, after lengthy discussion and reflection on the transaction.
Transaction Review: A Simpler Kinder Complex
Kinder Morgan, Inc. (KMI) is acquiring all of the outstanding units of KMP and EPB, and all of the outstanding shares of KMR, in a cash and stock transaction valued at $71.0bn (press release).
- KMI will have a stepped up tax basis on the acquired companies, and will use higher depreciation from that basis (and from accelerated depreciation) to reduce the effective tax rate at KMI and grow distributions at 10% per year for the next 5 years.
- KMI announced that the combined entity will have target leverage of 5.0-5.5x EBITDA, and that it would be investment grade.
- KMI announced that its lower cost of capital and size would enable it to be an acquirer of other midstream companies.
What will Kinder Look Like in the Future?
KMI may be advantaged relative to MLPs when it comes to buying assets outside the U.S. KMI will be able to buy non-qualifying assets abroad more easily than MLPs. Does this mean they will buy Canadian pipelines, LNG regasification terminals in Asia or Europe, or terminals in Latin America? I don’t know, but it seems like this transaction sets them up to be able to do that.
Kinder will have another MLP someday, whether it’s a spin out of existing assets in 2016 or 2017, or it’s an MLP acquired as part of buying an existing MLPs G.P., I don’t know. But the flow through tax advantages are still there.
Other Open Questions Asked this Week
- Who are the acquisition candidates for KMI?
- Is a 5.0×-5.5x levered company really investment grade?
- How will the new MLP compete on a cost of capital basis against other MLPs when the depreciation and coverage at KMI burns off?
- Doesn’t KMP have an advantage not paying taxes vs KMI over the long term?
- Maintenance capex looked at differently going forward?
- Kinder said this somewhat circular comment on conference call: “Maintenance capex is less relevant with all the extra cash we have, we think it becomes a lot less important given our size”
Impact on the Sector
MLP Structure: Neutral Impact
I don’t think this will lead to other MLPs leaving the MLP structure. EPD is much larger than KMP, with a market capitalization of roughly $70bn. EPD is under no pressure whatsoever to convert its MLP to a corporate structure. EPD solved its cost of capital issues long ago by eliminating the IDRs, as others have done.
- The traditional MLP structure continues to work as is, and if an MLP’s cost of capital becomes a drag because it becomes too big, there are a number of solutions to that, a KMI-type deal being just one of them.
- Shell’s MLP IPO, Dominion’s MLP IPO, Hess’s MLP IPO, and the large shadow backlog of unannounced MLP IPOs should still move forward
- There are MLPs that have high IDR burdens, but none of them is as large as KMP was. The top 5 MLPs that have the highest percentage of cash flow being paid to the GP/IDR interest (excluding KMP and not counting IDR givebacks/waivers): ETP (38.1%), PAA (34.9%), WPZ (32.2%), OKS (31.2%), and ARLP (31.2%). KMP is paying 46.0% to its GP (gross, not counting waivers), and EPB is paying 28.1%.
Capital Flows: Positive Impact
- The retail investor base of KMP includes big pool of investors that have been long-term holders and never wanted to sell for tax purposes, and were probably planning to die and get a step-up in basis on their KMP units. Now those investors are forced to sell and will have to pay out massive taxes. The end result is that that big pool of retail investor money is now free to diversify into other MLPs.
- Combined between EPB and KMP, retail ownership is approximately $21bn. Some portion of the after-tax proceeds of that has a good chance of finding a home with other MLPs, which is good for MLPs.
- With this transaction, KMP will essentially graduate from the Alerian MLP Index up to the S&P 500. KMP and EPB represent more than 12.5% combined in the Alerian MLP Infrastructure Index, which is tracked by the ETF AMLP (and its $9bn).
- The weights of the other large cap MLPs should go up (ETP, PAA, MMP, WPZ, etc.) in this index and others, which has positive implications for their stock prices.
Consolidation / M&A Premiums: Positive Impact
Other MLPs are likely to carry consolidation M&A takeout premiums for a while, given how vocal KMP has been about consolidating the sector. KMP buying other natural gas pipeline MLPs is a challenge given HSR anti-trust issues, but gathering & processing MLPs and liquids-focused MLPs would be logical targets. Also, this transaction may increase pressure on other large MLPs to grow even larger, and could lead to consolidation outside of KMI.
Tax Impact: Turn in Your Deferrals
KMI is basically forcing a huge step up in basis on its largely retail investor base and then will be using that new step up to have higher depreciation and save on taxes at KMI, which is the key driver of KMI’s ability to grow at 10% a year for the next 5 years.
KMI put out an estimated tax cost for the average KMP unitholder of approximately $12.39/unit. But that is going to vary wildly. Newer unitholders will do better on an after tax basis than older ones. I personally know someone who has owned KMP since 1993. His CPA has estimated that he will owe around $27/unit in taxes. In the hypothetical, illustrative example below, I show you what that will mean (using a round number of 10,000 units) to the income he is used to receiving. He will need to sell shares of KMI to pay taxes and the net result is 44.5% less take home cash on an annual basis. This is an extreme example, but you see why long-time KMP investors, who rely on KMP for income, might be a little upset that this transaction messes up tax planning and also actual cash flow.
KMP first went public 22 years ago as Enron Liquids with a market capitalization of approximately $150mm and a 9.5% yield. At the time, there were only 9 MLPs. By the time Rich Kinder took over in 1997, 4.5 years later, Enron Liquids hadn’t grown very much. KMP was only a 3.5% weight in the Alerian MLP Index (Amerigas was the largest at 12.5%). But less than 3 years later, at the end of 1999, KMP had grown its market cap by 10x to $2.4bn, making it the largest MLP of all at the time, a title it carried for several years more before EPD overtook it. At the end of 1999, KMP represented a 22.4% weight in the MLP Index. That was KMP’s peak relative size. As the number of MLPs grew, and the index eventually reached its 50 stock maximum, KMP’s weight in the Index slid down to 8.5% at the end of July.
Before Rich Kinder took over Enron Liquids, MLPs were all about yield. Investors bought them in the early 90s as an alternative to bonds and utilities because of their high yield and stable cash flows, not their growth prospects. Today, annual distribution growth has become as prominent as yield when reviewing the MLP sector. The CAGR-ization of the MLP space began with KMP.
15 years ago, in July 1999, there were 21 MLPs in the Alerian MLP Index (it wasn’t until 1Q 2006 that the AMZ reached its maximum number of 50 names).
- 12 were midstream, 9 were other (including 7 propane MLPs)
- Of those 22, 12 are still trading today, 9 of which are midstream MLPs
- EPD, KMP, PAA, ETP, EEP, OKS, BPL, GEL , TCP
- Of those 9 midstream MLPs, KMP has grown distributions at a faster rate than all of them at a 9.6% annual rate
- The fastest growth for KMP came in its most active dealmaking period, when it grew distributions 15.1% annually from 1999-2004
Landmark Kinder Deals
So, how did KMP grow so big so fast early on and maintain its growth over the years? Well, it wasn’t a single transaction that did it; it was the growth machine that KMP management built, first through acquisitions and later through organic growth. In all, in 17 years, KMP executed 88 acquisitions for a total of $26.5bn. It was a combination of large acquisitions and small bolt-on acquisitions, see below (click to enlarge).
Below are two press releases from two of the larger deals KMP did early on. Reviewing those press releases takes you back to a time when competition for assets wasn’t as great and capital wasn’t as easily obtained, such that KMP could buy another publicly-traded MLP and its GP and still have it be 12.5% accretive to distributions per unit, or could buy a $750mm pipeline asset at 7.5x EBITDA.
Aug 10th, 2014
MLP Market Post
The Alerian MLP Index broke its 7-day losing streak in a big way on Monday with a 2.1% pop, the best day for the MLP Index all year. That huge day was followed by the first day of the year that all 50 MLPs were down on the same day, resulting in a 1.8% decline overall that erased most of Monday’s gains. The rest of the week was much less volatile, with the MLP Index finishing up 0.7% for the full week. The broad market was volatile as well, finishing up 0.3%, while utilities were flat. Interest rates were lower, and the US 10 Yr now yields 2.42%, 61 basis points lower than at year end 2013.
Within the MLP Index, large cap MLPs outperformed the smaller ones, as evidenced by the disparity between the 0.3% price change for the Alerian MLP Index and 0.3% decline for the Equal Weight version.
On the commodity front, WTI oil price dropped to a six month low on Wednesday, before recovering to close out the week roughly flat. Natural gas prices bounced 4.5% this week, but that wasn’t enough to pull up ethane (down 2.7%).
Earnings: Exports in Focus
It was another busy week of earnings releases, with more than 40 MLPs reporting. Results were mixed, but when results failed to meet the Street’s expectations, research analysts were able rationalize the weaker than expected results in various ways. Below are some paraphrased examples of what analysts wrote about earnings.
- Despite miss, growth story intact
- Thesis unchanged despite miss
- Drop down timing issues lead to miss vs. expectations
- EBITDA miss, but DCF beat on lower than expected maintenance capex
- Miss, but guidance maintained as volumes are expected to ramp in 2H14
- Growth backlog building, giving us comfort despite weak quarter
On the conference calls, the clear focus was trying to figure out which MLPs might have the ability to join the condensate exporting party that Pioneer and EPD started last month. The consensus seems to be that PAA is closest to joining the party. Also notable, analysts pressed management for details on DPM’s small Chesapeake export terminal project to export butane from the Marcellus Shale.
The investment community is eager to identify future potential beneficiaries from exports of abundant U.S. resources, and with good reason. Firms that have the ability to provide export outlets today produced strong results in 2Q (EPD, NGLS, OILT and SXL all handily beat expectations). Further conflict in Iraq escalated over the weekend. Increased geopolitical conflict could potentially provide cover for approving further condensate exports under the rationale of providing secure supply to the global market. Worth monitoring, but likely something for the next administration to tackle.
There are a few final earnings announcements to come next week. Beyond earnings, and potentially an overnight offering or two between now and the end of the month, I expect the news flow to slow substantially by the end of this coming week. The IPO window is closed until after Labor Day, but it should be a very crowded capital markets calendar in the Fall.
Winners & Losers
LGP was the runaway winner this week after it announced the latest transformative M&A transaction in the MLP space. Read about the transaction below, but it was a combination of the ETP/SUSS deal and the DVN/XTEX deal that dramatically changed the expected growth profile of LGP. IPO HMLP was the second best performer for the week, which is consistent with last week when the 3 IPOs led the MLP sector’s returns. DKL popped 11% after posting results that blew away expectations and that included 2.0x quarterly coverage. HCLP and ENBL round out the top 5.
HCLP went from bottom 5 last week to top 5 this week. GLOP and BKEP went the other way, from the top 5 to the bottom 5.
For the year to date, BWP has caught and passed EROC, which means we have a new biggest losing MLP this week. MMLP joined the bottom 5 after its rough week. On the upside, GLOP dropped from 2nd to 5th, but the other top performers remained intact.
We had another successful MLP IPO launch this week, making it 10 MLP IPOs for 2014 so far. 9 out of those 10 closed their first day of trading up from IPO price. The one broken IPO of 2014 was coal producer Foresight Energy (FELP). Also, while MLPs didn’t get the cover of Barron’s this week, there were two articles relevant to MLP investors. One was the annual round table MLP discussion, which this year featured two research analysts (Michael Blum from Wells Fargo, Becca Followill from US Capital), one tax attorney (Tim Fenn, whose middle name might be MLP), and one buy side representative (Doug Rachlin of Neuberger Berman). The second article covered the topic of yieldco renewable spin offs from utilities, and how they were similar to MLPs.
- Hoegh LNG Partners (HMLP) priced initial public offering of 9.6mm common units at $20.00/unit, raising $192mm in gross proceeds (MarineLink.com)
- Priced at midpoint of filing range, or at 6.75% yield
- Opened at $22.00, traded as high as $22.40, before closing at $22.25 (+11.3% from pricing) on its first trading session
- HMLP’s initial assets consist of 50% interests in 2 vessels, and a 100% interest in a third vessel
- All 3 of the vessels are floating storage and regasification units operating under long-term charter agreements with average remaining contract life of approximately 17 years
- HMLP plans to grow via drop downs from its parent company, also named Hoegh LNG
- Energy Transfer (ETP) sold 1.2mm of its units of Amerigas (APU) for net proceeds of $55mm (buried in earnings press release)
- ETP sold $377mm worth (8.5mm units) in June
- SunCoke Energy (SXCP) files equity distribution agreement to sell up to $75mm worth of common units at the market (prospectus)
M&A / Growth
- Regency Energy (RGP) announces JV with American Energy – Midstream, LLC for construction and operation of RGP’s previously announced Utica Ohio River Project (press release)
- RGP and American Energy Utica, LLC (AEU) will enter into a gathering agreement for gas produced from the Utica
- RGP and AEU will contribute all previously signed agreements to the JV, including volume commitments and acreage dedications
- The project will be upsized to accommodate more than 2 bcf/d of firm volume commitments
- Total project costs expected to be $500mm, with RGP contributing 75%
- Lehigh Gas Partners (LGP) announces sale of GP interest and IDRs to CST Brands for $85mm (press release)
- CEO Joe Topper and other investors to retain subordinated and common units representing 44% L.P. interest in LGP
- Creates a sponsor-backed, growth-oriented MLP vehicle
- CST to pursue long-term drop down strategy of its US wholesale fuel supply business and newly constructed real estate into LGP
- Given the early stage nature of LGP and its IDR tiers, the multiple paid for the GP interest was more than 650x current annualized cash flow
- Allows CST to bypass IPO route and gain control of an existing MLP with some scale in place
- CST has 1900 locations throughout the Southwestern US and Eastern Canada
- LGP operates a wholesale distribution business and owns real estate used in the retail distribution of motor fuels (distributes fuel to more than 1,050 locations and owns/leases 625 sites in 16 states)
- Blueknight Energy (BKEP) announces plans to build $300mm crude pipeline linking East Texas resources to Oiltanking Houston (press release)
- 160-mile, 16-inch diameter pipeline backed by long-term shipper commitments, including an agreement with Vitol, which owns 50% of BKEP’s G.P. and an agreement with SEI Energy, LLC
- EnLink Midstream (ENLK) announces two new growth projects for $200mm+ (press release)
- ENLK to expand Bearkat System in West Texas by constructing a new natural gas processing plant, supported by Devon production, for $200mm
- ENLK to construct NGL pipeline extension from Existing Cajun-Sibon system in South Louisiana in a JV with Marathon Petroleum
- With earnings, DCP Midstream (DPM) announced $160mm of smaller organic growth projects (press release)
- Sand Hills pipeline lateral lines extending DPM’s footprint into new areas of the Permian
- Eagle Ford condensate handling, expanding capabilities at two Eagle Ford plants
- Marysville liquids handling
- Chesapeake terminal upgrade for butane exports
- Linn Energy (LINE) announces $340mm acquisition (press release)
- LINE to acquire assets in the Hugoton Basin from Pioneer Resources
- Details of assets acquired:
- 40 MMcfe/d current production, 60% natural gas
- 6% decline curve, 23 year reserve life
- 340 bcfe of reserves (95% PDP), 235,000 net acres, all held by production
- 51% operating interest in the Satanta natural gas processing plant with 240 mmcfe/d of capacity
- To be partially funded by sale of undeveloped acreage in the Anadarko Basin for $90mm
- Vanguard Natural Resources (VNR) announces $278mm acquisition (press release)
- VNR to acquire assets in North Louisiana and East Texas for $278mm from Hunt Oil
- Details of assets acquired:
- 23,000 net acres, currently producing 17.5 MMcfe/d (67% natural gas)
- Estimated reserve life of 23 years, based on reserves of 150 bcfe, which are 57% proved developed
- Mid-Con Energy (MCEP) announces $19.4mm acquisition of Waterflood reserves in the Gulf Coast region (press release)
- MCEP to acquire oil properties with 658,000 barrels of reserves
- Properties are currently producing 154 bbls/d, with annual decline rates of 8% for the next 3 years
Aug 3rd, 2014
MLP Market Post
MLPs declined every day this week, making it 7 straight days of declines for the MLP Index since last Wednesday. The Alerian MLP Index was down 5.0% (4.2% including distributions) in what was the worst trading week for MLPs in 15 months. 48 of the 50 names in the index were down. The widespread, nearly universal selloff was concentrated on the large caps, as evidenced by the wide gap between the cap-weighted Alerian MLP Index vs. the Equal Weight version.
The broader stock market and the utility sector sold off hard as well, but not as hard as the MLP sector. Oil dropping 4.4% and broader energy sector weakness may have contributed to the selling. As I will discuss below, there is some element of MLP seasonality at play as well, with a number of MLP ex-distribution dates happening this past week.
Whatever the reason, MLPs were due for a selloff, and it shouldn’t have come as too much of a surprise. If reasonably strong earnings continue and equity offerings slow their pace, we also shouldn’t be surprised to see MLPs rally in the coming weeks, either.
Year to date, The MLP Index has produced total return of 11.3%, and is well ahead of the S&P 500 on price change, helped by interest rate declines since the beginning of the year. Light NGL prices have deteriorated along with natural gas prices since the beginning of the year, but fee-based MLPs haven’t seen those prices impact volumes generally (some parts of the value chain and some geographies providing exceptions). Producers are reporting production beats in the Marcellus, Eagle Ford, Permian and in Colorado. But natural gas price realizations are coming in light of expectations, suggesting outlets from those areas and access to demand centers remains a rich opportunity set for MLPs.
Boy, That Escalated Quickly
The MLP Index has now gone down for 7 straight trading days. Losing streaks of 7 days or longer have happened in the MLP space 6 other times by my count, with the longest such streak being 10 days, which happened in early 2010. See below for a chart that shows how this streak escalated.
The streak started out fairly benign, but really got out of hand as the week progressed.
Thursday’s -2.0% decline was the worst day of the year for the Alerian MLP Index. Before Thursday, the MLP Index hadn’t even had a single day of more than 1.5% decline, and in fact had seen only 6 days with more than 1% decline in the Alerian MLP Index (including Wednesday’s 1.1% drop), much lower than we’ve seen in recent years. In fact, the most such days occurred during 2009, which also had the highest return.
This week’s 4.2% total return performance was the worst for the MLP Index since May of 2013 when the index dropped 4.3% in a week. The last time we got a weekly selloff like this in mid-summer it was the first week of August 2011, when the MLP Index declined 5.5%. The MLP Index bounced back with a 3.6% gain the next week. In fact, the last 10 times the Index has been down 4% or more in a week, 9 times the index has traded up the next week, and each of those times the index was up more than 1%.
Thursday’s 2.0% decline also set a new record for the worst July ever for the Alerian MLP Index (out of 18 other July’s since 1996) at -3.6%. The previous worst July was 2011, when the index was down 1.9%. July was once a consistently positive month, posting gains in each of the first 11 years of the Alerian MLP Index historical data from 1996 through 2005. Since then, July has been negative for 5 of the last 8 years.
Out of 223 months, this July was the 25th worst month for the index. In 15 of those 24 months, the Index traded up the next month. 3 of those when it didn’t were in the second half of 2008, which I think was a much different environment than today.
In recent years, August hasn’t been kind to MLP investors either, posting negative returns in 5 of the last 7 years, including a 2.5% decline last August.
Winners & Losers
Way more losers than winners this week. Only 9 MLPs were positive, out of 91 non-variable pay MLPs. That doesn’t include the 3 MLP IPOs this week, all of which traded up (WLKP +21.9%, RIGP +10.0%, VTTI +5.2% for the week). Only one MLP in the top five is in the Alerian MLP Index (ARLP). It is also worth noting that only 2 of the MLPs in the bottom five are in the MLP Index (EQM and LGCY), which I think highlight how lighter volume can magnify trading performance in either direction.
PBFX, LGCY and EROC reported 2Q results this week, contributing to their outsized declines. In what seems to be a quarterly event, ARLP’s results were the biggest surprise beat in the MLP sector, reminding the market that at least one coal producer isn’t dying a slow death in the face of regulatory headwinds and huge natural gas production growth. BKEP and HEP did not report earnings or anything else this week, while AMID announced an acquisition.
HCLP’s reign as the top performing MLP of 2014 lasted just one week. PSXP is back in the lead, followed by GLOP, which also leapfrogged HCLP. TEP replaces EQM in the top 5. CMLP and USAC replaced LGP and EXLP in the bottom 5.
News of the (MLP) World
3 IPOs on 3 consecutive days is a first in the MLP sector. Back in January 2013, we had 3 MLPs in 4 days when USAC, CVRR and SXCP went public. 12 times we’ve had 2 MLPs in either 1 or 2 days. Also, there was one instance of 4 MLPs in the span of 7 calendar days (December 2011). IPOs continue to work well on average, with heavy institutional participation and after-market buying. Given the losing stream MLPs are on, I would not be surprised if the MLP IPO market will shut down for the remainder of August, setting up for an active Fall equity calendar.
- Westlake Chemical Partners (WLKP) prices IPO of 11.25mm units at $24.00/unit, raising $270mm in gross proceeds ($310.5mm with overallotment option) (prospectus)
- 4.6% implied IPO yield, priced $3/unit above the range
- Opened initial trading at $30.28, and closed at $30.78, up 28.3% its first day
- Transocean Partners (RIGP) prices IPO of 17.5mm units at $22.00/unit, raising $385mm in gross proceeds ($442.8mm with overallotment option) (prospectus)
- 6.6% implied IPO yield, priced $1/unit above the range
- Opened initial trading at $22.00, closed at $24.30, up 10.5% its first day
- VTTI Energy Partners (VTTI) prices IPO of 17.5mm units at $21.00/unit, raising $367.5mm in gross proceeds (prospectus)
- 5.0% implied IPO yield, priced at high end of the filing range
- Opened initial trading at $21.00, traded as high as $23.42 before closing at $22.10, up 5.2%
M&A / Growth
- ONEOK Partners (OKS) plans to invest $605mm to $785mm for new natural gas processing facility and related infrastructure in the Bakken (press release)
- New 200 mmcf/d plant to be in-service by end of 2016
- Compression and 12-mile NGL line to connect the facility into OKS’s existing Bakken NGL line
- OKS has now announced $7.0bn worth of projects through 2016, and has an additional $3-4bn of unannounced growth projects
- Enterprise Products (EPD) announces additional agreement for ethane export terminal (press release)
- EPD now has long-term commitments for 85% of the terminal’s planned capacity
- EPD’s previously announced ethane export terminal is slated to be complete in 3Q 2016
- EPD provided little detail on who the customers are for the terminal and where the those customers will be taking the ethane, either in the press release or on the 2Q earnings conference call this week
- ArcLight Capital forms JV to construct crude oil infrastructure in the Eagle Ford shale, 50% of which will be sold to American Midstream (AMID) upon completion (press release)
- Republic Midstream, a newly-formed portfolio company of ArcLight Capital, announced agreements to construct and operate a crude oil gathering system, a central delivery terminal complex and an intermediate takeaway pipeline to serve Penn Virginia’s Eagle Ford production
- ArcLight to invest $400mm in the project, and will offer 50% to each of AMID and JP Energy Partners when complete
- Williams Partners (WPZ) announces $150mm Transco expansion (press release)
- WPZ to add additional compression to provide additional natural gas transportation into New Jersey
- Project expected to be in-service in phases in 2016 and 2017\
- Buckeye Partners (BPL) announces sale of Lodi Gas Storage, LLC to Brookfield Infrastructure for $105mm (press release)
- BPL acquired the California storage facility for $432mm from ArcLight Capital in January 2008