Enterprise Products Partners’ finances
Enterprise Products Partners (EPD) is one of the largest midstream master limited partnerships and a significant component of the Alerian MLP ETF (AMLP). The company recently gave a comprehensive investor day presentation. During the presentation, the company stressed a few major points, including how it plans to fund its multi-billion-dollar growth plans (see the first part of this series). To give some context, we also discuss a few major points about EPD’s finances.
EPD has a current enterprise value of ~$82 billion, and it’s the largest master limited partnership by both market cap and enterprise value. The next few largest midstream MLPs (by enterprise value) include Kinder Morgan Energy Partners (~$54 billion), Energy Transfer Partners (~$41 billion), and Plains All American Pipeline (~$27 billion). These are all major components of the Alerian MLP ETF (AMLP).
EPD is large and diversified, with various sources of income, such as from crude oil pipelines, natural gas liquids pipelines, propane and butane exports, natural gas gathering, processing, and transportation, and crude and liquids logistics. It also has one of the highest credit ratings in the space, with investment-grade ratings from both Moody’s and S&P (Baa1 and BBB+). As of year end 2013, its leverage (debt-to-EBITDA ratio) was 3.5x, which is in line with most large-cap midstream MLPs (~3x to 4x is normal).
EPD also reiterated its consistent distribution growth over the past several years, even through the recession of 2008 and 2009. Over the past few years, EPD has consistently grown distributions between 5% and 7% year-over-year. Given its current distribution coverage (distributable cash flow over cash distributions paid out) of 1.5x, it’s unlikely that EPD would have to cut its distributions in the near-to-medium term. If EPD generates the returns it expects from its planned projects over the next few years, the company is likely to continue to grow distributions at a similar rate.
For more on EPD’s capex projects, please refer to Key points from Enterprise Products Partners analyst day meeting, in which we discuss EPD’s growth plans in more detail.