InvestingDaily.com

Account Information

  • My Account

    Manage all your subscriptions, update your address, email preferences and change your password.

  • Help Center

    Get answers to common service questions, ask the analyst or contact our customer service department.

  • My Stock Talk Profile

    Update your stock talk name and/or picture.



Close
FEATURED STRATEGY

$1,230 in Instant Income?

$1,230 in Instant Income?Our top income expert recently pulled the wraps off his breakthrough moneymaking technique. And he proved beyond a shadow of a doubt how you can use it to generate instant cash payouts of up to $1,230 (or more). Over and over again. But then he took things a big step further and guaranteed you can make $1 million by following his program. And the second he did, our phones went nuts! Space is limited — get the details here.

 

 

A Stirring Proposition From Green Plains

By Robert Rapier on April 28, 2016

While the vast majority of MLPs are in the oil and gas midstream sector (i.e., transport and logistics), I’m always on the lookout for more unconventional partnerships to highlight. The MLP structure provides great advantages to investors, but it pays to have some unconventional options in case of a downturn in the oil and gas sector.

Hence, in the past I’ve highlighted unconventional MLPs like amusement parks operator Cedar Fair (NYSE: FUN), cemetery operator StoneMor Partners (NYSE: STON), and cellular tower real estate company Landmark Infrastructure Partners (NASDAQ: LMRK). These are MLPs that give investors some options beyond energy.

Many unconventional MLPs have gone public in recent years. Green Plains Partners (NASDAQ: GPP) is a midstream MLP, but it is the first to be involved predominantly in ethanol transportation. In June 2015 GPP was spun off from Green Plains (NASDAQ: GPRE), one of the country’s largest producers, marketers and distributors of ethanol.

Green Plains Partners own 30 ethanol storage facilities located at its sponsor’s 14 ethanol production plants in Indiana, Iowa, Michigan, Minnesota, Nebraska, Tennessee, Texas and Virginia. These storage tanks can hold 32 million gallons in the aggregate, with throughput capacity of 1.7 billion gallons per year. In 2015 the ethanol storage assets had throughput of approximately 948 million gallons, representing 91% of the parent’s daily average production capacity.

GPP also owns and operates eight fuel terminals with access to major rail lines and combined storage capacity of approximately 7.4 million gallons in Alabama, Louisiana, Mississippi, Kentucky, Tennessee and Oklahoma. Last year the aggregate throughput at these facilities was approximately 321.5 million gallons.

The partnership also has a leased railcar fleet of approximately 2,500 railcars with an aggregate capacity of approximately 76.3 million gallons. These railcars are used to transport product primarily from GPP’s fuel terminals or third-party production facilities to international export terminals and refineries located throughout the United States.

Green Plains Partners went public less than a year ago, so a full year’s results aren’t yet available. But for Q4 2015 the partnership reported adjusted EBITDA of $14.3 million and distributable cash flow of $14.1 million, which represented a 1.08x coverage ratio of the fourth quarter distribution. Based on the most recent quarterly distribution, the partnership yields a hefty 11.8%.

However, GPP’s business faces a couple of challenges. The biggest is that it is highly sensitive to federal government policy.

The U.S. ethanol industry initially boomed in an analogous fashion to shale oil and gas production. After the Energy Policy Act of 2005 created a Renewable Fuel Standard (RFS) requiring 7.5 billion gallons of renewable fuel to be blended into the fuel supply by 2012, ethanol production growth exploded.

But ethanol production quickly outstripped the mandates, so the 2007 Energy Independence and Security Act (EISA) increased and accelerated the quotas schedule. The result was explosive growth in the U.S. corn ethanol industry until 2011, when some of the tax credits were allowed to expire.

0,0,2040,100,80,4284,5722,4096,6502

This explosive production growth that suddenly flattened out is similar to what happened with shale oil, albeit for entirely different reasons. The U.S. has now reached the point where ethanol is reaching the 10% waiver limit for gasoline set by the EPA in 1978. This limit is sometimes referred to as the “blend wall,” and it has proved to be an obstacle to growth in the ethanol industry.

Thus, while there isn’t an immediate threat to the ethanol industry in the U.S. (the RFS is unlikely to be repealed), future growth prospects are likely to be modest at best. In that case GPP may be able to maintain an attractive distribution, but may have difficulty growing it much. But with a current yield of nearly 12% with a coverage ratio above 1.0x, it may be worth it.

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)

 


You might also enjoy…

 

Boost Your Annual Income By As Much As $12,036

We’ve uncovered a unique income-boosting opportunity that allows you to collect up to $1,003 a month in extra government cash. 

This plan is available to everyone over the age of 18.

The amount you make isn’t dependent upon your marital status…

How much money you currently make…

Or even how much money you made in the past.

Best of all, because of the way Uncle Sam views the money that comes from this plan, your current—or future—Social Security benefits won’t be affected, either. 

There’s still time to get your name on the list for the next check run. 

I’ll show you how here.

Stock Talk — Post a comment Comment Guidelines

Our Stock Talk section is reserved for productive dialogue pertaining to the content and portfolio recommendations of this service. We reserve the right to remove any comments we feel do not benefit other readers. If you have a general investment comment not related to this article, please post to our Stock Talk page. If you have a personal question about your subscription or need technical help, please contact our customer service team. And if you have any success stories to share with our analysts, they’re always happy to hear them. Note that we may use your kind words in our promotional materials. Thank you.

You must be logged in to post to Stock Talk OR create an account.

Create a new Investing Daily account

  • - OR -

* Investing Daily will use any information you provide in a manner consistent with our Privacy Policy. Your email address is used for account verification and will remain private.