Kelcy Warren Defends MLPs, Deals, Plugs Ad at Texas Summit

(Bloomberg) -- The billionaire chief executive officer of Energy Transfer LP defended the pipeline giant’s partnership structure, stood by his propensity for dealmaking and announced an upcoming commercial to air during the Masters golf tournament at an industry conference in Houston.

Donning black cowboy boots and a suit, Kelcy Warren told the Argus Americas Crude Summit that he may at some point consider shaking up Energy Transfer’s corporate structure even as he touted the benefits of the out-of-favor master limited partnership model and predicted a revival.

“We may do an up-C, and we probably will do that,” Warren said, referring to a corporate structure that typically involves a publicly traded corporation that holds an interest in a tax-advantaged limited liability company. “We probably will have an alternative currency for our unitholders to look at, but MLPs are just too good of an instrument. They’re just too efficient not to attract people back at some point.”

Warren’s comments are the latest sign that even the pipeline MLP sector’s biggest players are being forced to justify sticking to the structure after most of their peers left the model behind following a series of tax changes that sent investors fleeing.

“Today they’re so out of favor,” Warren said. “I think it will ultimately go back, but that’s the way it is today.”

Just a few months earlier, Enterprise Products Partners LP, one of Energy Transfer’s biggest rivals, said that converting to a corporation may be “inevitable” if more MLPs continue to leave the structure behind.

“There are not many of us left,” Warren said. “Do I think MLPs are dead? Absolutely not.”

Warren also sought to stand by the company’s penchant for big acquisitions. His most recent deal to buy SemGroup Corp. sent the company’s units falling despite a relatively modest price tag when compared to some of his previous runs.

He said it’s not sustainable for companies like his to count on cash flow from its own projects. “Sometimes you need to be defensive,” he said. “To run an MLP correctly, you must have a mix of M&A and organic growth.”

It’s not just Energy Transfer’s dealmaking that has attracted criticism in the past. Warren was asked Wednesday about the Dakota Access crude oil pipeline, which garnered months of on-the-ground protests when it was under construction and is now in the process of being expanded.

“I talk about DAPL like I talk about my son,” he said, referring to Dakota Access. “I’m so proud of that project.”

One way the company has sought to improve its reputation among the general public is with commercials, an unusual tactic for pipeline operators. Energy Transfer has been running a television ad campaign since 2018 across major cities including Houston and New York -- even buying time during major events, like football’s Big 12 Championship.

Now, Warren said, the company is working on a commercial to air during the Masters golf tournament in April.

To contact the reporter on this story: Rachel Adams-Heard in Houston at radamsheard@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net, Carlos Caminada, Christine Buurma

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