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June 27, 2011

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MLP Initial Public Offering Update

With two MLPs filing to go public last week, it seems like a good time to provide an update on the recent initial public offering market for MLPs.  Thus far in 2011, there has been a flurry of MLP IPOs, at least by 2009 standards (when there were no MLP IPOs at all).  So far in 2011, there have been 5 MLP IPOs priced, 1 GP IPO (in a corporate structure – KMI), and there are now 6 MLPs registered to go public at some point in the future.  If all of those filed were to price this year, the total MLP IPOs for 2011 could be 11 (not counting KMI), the second most in a single year ever.   The inflated IPO market of 2006 and 2007 combined to produce 31 IPOs, but 8 of those were GPs.  Valuations and capital flowing into the sector has helped ensure the IPO window has been wide open in 2010 and 2011.  See below for some updated charts on MLP IPOs past and present.
MLP Sector IPOs since 1996
As shown in chart below, valuations (based on yield) are way up even just in 2011 vs. 2010.  On a per deal basis, the average IPO size has fallen year over year from $264 million in 2010 to $195 million.  Not counting the 2 GP IPOs, total gross proceeds from MLP IPOs so far has been almost $1.0 billion, and given the backlog it appears the sector is poised to raise more than the $1.6 billion raised last year.

IPO yields are down since the last time I did these charts.  Midstream IPO yields aren’t quite as low as they were back in 2006 and 2007, but have dipped back below 6.5%.
Yield at IPO for Last 25 MLP IPOs
Here is the chart of IPOs priced thus far in 2011.  The most noteworthy part about this list is just how varied the assets are that these companies own.  From traditional refined products (TLLP) to fertilizer (UAN), shipping (GMLP) and compression (GSJK, winner for worst ticker of all MLPs, runner up is UAN).

Summary of IPOs so far in 2011

Filed MLP IPOs

Below is a summary of the remaining filed IPOs, that will be hitting the market in the coming months.  Plenty of diversity in the assets of these companies as well, including 2 E&P MLPs, both with incentive distribution rights, another compression MLP, as well as a variable-distribution MLP that will start with a single asset (a large propane dehydration plant).  All of this expansion of the business being put into MLPs to me means that investors should be more than ever focused on stock selection and buying good assets as opposed to buying anything that ends in “Partners L.P.”   That trend is fine with me, helps add to the value I bring my clients.

MLP IPOs filed and not priced currently

Related posts:
History and basics of MLP IPOs
Kinder Morgan IPO Thoughts
Disclosure: The information in this article is not meant to be financial advice, we are not your financial advisor and I am posting my comments for informational purposes only. Long KMI.

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