After a record year for master limited partnership IPOs, there's a good chance 2014 will be a quieter year in the space. That doesn't mean we won't see any action, however, as Dominion Resources (D +3.20%), Transocean (RIG 1.87%), and PBF Energy (PBF +0.74%) have all expressed interest in MLP vehicles for certain assets.
Of the three potential MLPs we're covering today, Dominion has released the most information. The company announced in September it had caught the MLP bug and made plans to spin off two assets into its new partnership. The assets are its stake in Blue Racer Midstream and its Cove Point liquefied natural gas terminal, which Dominion estimates could generate $1 billion in EBITDA annually. Blue Racer is a gathering and processing joint venture with Caiman Energy formed a year ago, while the Cove Point LNG facility was recently granted export status to non-free-trade agreement countries. The MLP is expected some time in 2014, but exactly when it will arrive remains to be seen.
PBF Energy is a small refiner that only went public a year ago. In the tradition of some big-time refiners like Valero and Phillips 66, PBF is also mulling over the idea of spinning off its logistics assets into an MLP. This would be a very small network, comparatively, and we have yet to see an S-1 filling for PBF Logistics. The refiner recently announced plans to expand its rail unloading facility in Paulsboro, N.J. Other logistics assets include terminals, a pipeline, and marine facilities.
Transocean's MLP idea came to fruition thanks to the demands of activist investor Carl Icahn. It is not unheard of for a rig company to have an MLP -- Seadrill Partners exists, for example -- but that doesn't mean this new opportunity will be a successful one. What's good for Transocean may be mediocre for the MLP and investors will want to take a close look at the S-1 filing when it becomes available. Initial estimates by the company put this IPO in the middle of 2014.
Beyond 2014
Looking past next year, there is another factor that could really turn the MLP space on its head, and that is the MLP Parity Act. The act offers the most potential to fuel rapid growth in the MLP space by allowing renewable energy companies to structure themselves as MLPs for the first time. If and when we see this legislation come to fruition, the space will likely swell one more time. We've already seen companies like Elon Musk's SolarCity (SCTY +0.00%) embrace alternative financing measures. Surely, the MLP will appeal to other solar and wind companies. The structure has proven quite successful at raising capital for America's fossil fuel infrastructure, and there is no reason to suggest it cannot do the same for our nascent renewable industry.
Additionally, as our liquefied natural gas export story develops, we may see a few more MLPs in that space as well. Energy Transfer Partners (ETP +0.00%) and Energy Transfer Equity have mentioned creating an MLP out of their LNG export facility at Lake Charles, La.
It is unlikely that we will see another year of 20 MLP IPOs, but the story continues to develop as energy companies of all shapes and sizes pursue this growth vehicle.
