Investment opportunities in energy transportation operators
Today’s energy distribution network is already relatively complex; however, not very efficient, as production sites are usually located far away from end-users. Energy can be transported in numerous ways depending on the type of energy. At first one thinks of tankers for oil, pipelines for gas and oil, and high-voltage lines for electrical energy. Most often these are operated by privately held joint ventures (Nabucco/Southern Stream pipeline), privately held companies (oil tankers held by Greek shipping owners), or by largely state-influenced companies (electricity distribution network).
An often unknown and interesting investment opportunity arises in the US, however, where pipeline operators are listed companies. Their business is highly stable because the transportation capacity of their infrastructure links directly into their ultimate profitability as a result of their well-known operating costs. Furthermore, their business is relatively well protected from any competition as there are no other efficient alternatives for transporting energy over long distances.
| Company | Ticker | Country | Upside Potential | Sharpe (FY01) |
| Kinder Morgan | KMI | USA | 11 % | 5.12 |
| Investment case: Kinder Morgan, Inc. owns interests in an energy transportation and storage facility. It owns and operates pipelines that transport natural gas, gasoline, crude oil, carbon dioxide and other products. Kinder is the biggest midstream energy company and as such it has a direct say in any new pipeline project in the US. | ||||
| Company | Ticker | Country | Upside Potential | Sharpe (FY01) |
| Magellan Midstream Partners | MMP | USA | 9 % | 6.08 |
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Investment case: Magellan is set-up as a limited partnership. It operates pipelines and storage terminals in the US. Its business consists of transportation, storage, and the distribution of refined petroleum products, crude, and other related products. Its business is fee-based and therefore of particular interest to investors. |
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| Company | Ticker | Country | Upside Potential | Sharpe (FY01) |
| Spectra Energy | SEP | USA | -4 % | 4.21 |
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Investment case: Spectra Energy operates as a midstream operator to the natural gas industry in the US and Western Canada. It is relatively small; however, it operates premier fee-based assets and maintains an attractive distribution growth profile. |
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