When Kinder Morgan made the decision to cut its dividend by 75 percent this week, it represented more than just a pain for investors in the pipeline company, and more than just another sign that the oil collapse continues to cause more casualties.
Kinder Morgan was the poster child for the boom in energy MLPs and the emergence of a new era in U.S. energy infrastructure.
It went public in a private equity-backed IPO in 2011, then went on a buying spree that including the acquisition of El Paso for $38 billion, becoming one of the largest midstream — oil and gas pipeline — players in North America. In August 2014, all of its various entities were combined in a $70 billion transaction, a deal under which it abandoned the MLP structure, a decision that shocked some energy industry watchers, given how closely it was associated with the concept.
Assets under management in MLPs in 2007 were $100 billion; by 2014 that had quintupled to $500 billion.
But the stock plummets this year in MLPs — including a 60 percent dive for Kinder Morgan, which has brought its market cap down to $35 billion — culminated in Kinder Morgan's dividend slashing and show that some of the arguments used to sell investors on MLPs were more myth than reality.