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Table Of Contents

I. Introduction -- A Framework For Investment
II. Why Own MLPs?
A. Above-Average Performance And Good Portfolio Diversification
B. MLP Value Proposition -- Tax-Efficient Income Plus Growth
C. MLPs Have Been Defensive During Economic Slowdowns
E. Demographics
F. MLPs Are An Emerging Asset Class
III. Who Can Own MLPs?
A. Mutual Funds Can Own MLPs…But Most Do Not
B. Challenges Remain For Mutual Fund Ownership Of MLPs
C. Tax-Exempt Vehicles Should Not Own MLPs
IV. How To Build An Effective MLP Portfolio
V. Types Of Assets In Energy MLPs And Associated Commodity Exposure
A. A Brief Review Of The Evolution Of The MLP Sector
B. Asset Overview
VI. The Basics
A. What Is An MLP?
B. Why Create An MLP?
C. What Qualifies As An MLP?
D. What Are The Advantages Of The MLP Structure?
E. How Many MLPs Are There?
F. What Is The K-1 Statement?
G. What Is The Difference Between A LLC And MLP?
H. Are MLPs The Same As U.S. Royalty Trusts? Canadian Royalty Trusts?
I. What Are I-Shares?
VII. Drivers Of Performance
A. Distribution Growth
B. Access To Capital
C. Interest Rates
D. Commodity Prices
VIII. Key Terms
A. What Are Distributions?
B. What Are Incentive Distribution Rights (IDR)?
C. Calculating Incentive Distribution Payments
E. Are MLPs Required To Pay Out “All” Their Cash Flow?
F. What Is The Distribution Coverage Ratio And Why Is It So Important?
G. What Is The Difference Between Maintenance Capex And Growth Capex?
IX. Tax And Legislative Issues
A. Who Pays Taxes?
B. What Are The Tax Advantages For The LP Unitholder (The Investor)?
C. The Mechanics Of A Purchase And Sale Of MLP Units And The Tax Consequences
D. Can MLPs Be Held In An IRA?
E. State And Local Taxes, And Return Filing Requirements
F. Foreign Investor Ownership
G. MLPs As An Estate Planning Tool
What Is The Risk Of MLPs’ Losing Their Tax-Advantaged Status?
Canadian Royalty Trusts Tax Status Expected To Change In 2011
FERC Includes MLPs In Determining Pipeline ROEs
MLPs Income Tax Allowance In Pipeline Ratemaking
XI. Sector Trends
A. Dramatic Growth Of MLPs
B. MLP Investor Base Is Changing
C. Shift In Supply Sources Is Driving Energy Infrastructure Investment
D. MLPs Have Been Successful In Making Acquisitions And Investing Organically
E. The Emergence Of “Dropdown” MLPs
F. MLPs Continue To Enjoy Good Access To Capital
G. MLPs Are Employing Creative Financing Solutions To Fund Growth PIPE Mania
A Paradigm Shift In PIPE Dynamics
Hybrid Securities
Paid-In-Kind (PIK) Equity
GP Subsidies
H. Publicly Traded General Partners -- Recognizing The Value Of The GP
Power Of The IDRs
The Multiplier
Not All GPs Are Created Equal
General Partners Are Held In Different Entities
I. Return Of Upstream MLPs
Upstream MLPs Failed in the 1980s. Why?
J. Cost Of Capital Is Becoming A More Prominent Issue, In Our View
K. Emergence Of MLP Indices
L. Financial Products Facilitate Participation In MLPs
XI. Valuation Of MLPs
A. Distribution Yield
B. Two-Stage Distribution (Dividend) Model
C. Price-To-Distributable Cash Flow
D. Enterprise Value-To-Adjusted EBITDA
E. Spread Versus The 10-Year Treasury
XII. Risks
XIII. Appendix
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Wachovia MLP Primer

Wachovia MLP Primer

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Published by: themudcat on Dec 06, 2010
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