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Here at Alerian, we love MLPs and energy infrastructure. As an indexing company, we exclusively follow these asset classes all day, every day. They are our bread and butter, our peanut butter and jelly, our ham and eggs. We’re kind of dorks about it. Here’s what to expect: As an indexing firm, you can expect objectivity. As employees, we are prohibited from owning individual MLPs; any skin we have in the game is related to the asset class itself. You can expect transparency. We think that’s one of the only ways to run an index with integrity. We are also citizens of the modern world and value transparency over secrecy. Primarily, though, we’re interested in giving you the tools to make your own decisions. We trust that you’re smart and willing to put in some work to understand MLPs and energy infrastructure. Whenever possible, we’ll walk you through the process and spell out the facts we used to draw our conclusions, so that you are free to draw different ones. We’re stat nerds, too. So you can expect us to wax poetic about data. We’re no longer embarrassed about all those years in math club. In fact, those years of being decidedly uncool have helped us explain the things we love about statistics in ways everyone can understand. You won’t find stock tips here. We’ll talk about interesting developments and trends in energy, let you know how MLPs are exposed, and acknowledge the risks. In the end, your decisions are yours. You won’t find breaking news here. Instead, we’ll focus more on long-form journalism—the kind of writing that takes time to research and analyze. We’ll talk to industry experts, see what they have to say, and pass that along to you. We’ll attend analyst days, read 100-page government reports, track any relevant bills in Congress, build models, and draw diagrams. Whatever we find fascinating, intriguing, challenging, or just plain amusing, we’ll pass that along, too. Ask us questions. Our contributors have dramatically varied backgrounds and passions: engineering, physics, international studies, and communications undergraduate degrees along with some postgraduate alphabet soup (CFA, CPA, MPA, and MSA). We like to come at it from all angles. At the end of the day, everything we do here will be driven by our vision: to equip investors to make informed decisions about MLPs and energy infrastructure. That’s it. That’s all. That’s everything. Welcome Aboard. Alerian equips investors to make informed decisions about Master Limited Partnerships (MLPs) and energy infrastructure. Its benchmarks, including the flagship Alerian MLP Index (AMZ), are widely used by industry executives, investment professionals, research analysts, and national media to analyze relative performance. Over $19 billion is directly tied to the Alerian Index Series through exchange-traded products, delta one notes, and separately managed accounts. For more information, including index values, yields, constituents, and announcements regarding rebalancings, please visit

When a Utility is Not a Utility: A Review of the Recent Sempra Energy (SRE) Analyst Day 


We weren’t able to attend the Sempra Energy (NYSE:SRE) Analyst Day (slides available here), and so instead we were left eagerly anticipating the announcement of an MLP or YieldCo from our Dallas offices. While no S-1 was filed, SRE did announce that from 2015 to 2019, it is expecting an EPS CAGR of 11%. I’m not a Utility analyst, but even I know that an 11% CAGR is really high for a business that supposedly depends on rate cases. SRE is able to project double-digit annualized growth because of its US Gas & Power (USG&P) segment, which houses the company’s midstream energy infrastructure assets. That’s a business with which I am familiar.

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The major source of projected earnings growth in USG&P will be from Cameron LNG Trains 1-3, which will come online by the end of 2018 and contribute $300-$350 million in 2019. While they won’t contribute to earnings growth, the cash flow from the original west-to-east REX contracts will not have finished rolling off until their expiration dates in 2019, thereby guaranteeing a baseline of cash flows for the pipeline. East-to-west contracts are still being inked.

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It wasn’t until last year’s analyst day that management spoke about exploring the use of an MLP. This year, management was clear which assets (Cameron LNG, midstream, and renewables) they expect to place into the Total Return Vehicle. Notably, they are discussing a TRV and not necessarily an MLP, because they want the option to include their renewable power generation assets. If SRE does use the MLP structure for the TRV, the renewables will be housed in a corporate subsidiary that pays dividends to the publicly traded TRV. (For years, MLPs have done this with assets that generate non-qualifying income, such as gas stations and convenience stores.)

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While there are many diversified MLPs, having renewable alongside midstream assets will be a first for the structure. The management team at SRE believes that investors assign premium valuations to quality, which they define as having the following characteristics (as listed on slide 18):

•     Stable cash flow profile through long-term contracts
•     Solid long-term distribution growth
•     Large pipeline of identifiable dropdowns
•     Long-term tax efficiency
•     Proven management team

This is the same argument that marine transportation MLPs and YieldCos have been making to investors for years.

It’s also not SRE’s first time having a publicly traded subsidiary. IENova went public in 2013 as the first and only energy company trading on the Mexican Stock Exchange, a distinction it still holds. Given that the entirety of Mexico’s energy industry was state-owned until President Enrique Peña Nieto’s energy reforms in 2013 and 2014, IENova has an impressive suite of assets and is currently bidding on an additional $11 billion worth of projects.

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As Mexico continues to privatize its energy industry, other energy infrastructure companies have announced plans to extend their reach south of the border. NuStar Energy is building liquefied petroleum gases and refined fuels pipelines in partnership with Petróleos Mexicanos (known colloquially as Pemex). TransCanada  already has a few natural gas pipelines in Mexico and more are under construction. Energy Transfer Partners announced the construction of new natural gas pipelines in Mexico in 2014. Kinder Morgan’s natural gas pipeline system goes right to the border at many points, and even extends into Mexico on a limited basis. As these companies begin to expand their footprints, they’ll run into SRE (via IENova), which is already exceptionally well positioned.

So, when is a Utility not another boring, old Utility? When it has the assets, growth plan, monopolistic footprint, and mindset of an energy infrastructure company.