John Goodgame Talks to Reuters on the Risks Investors Face Using MLP Structure
Reuters, for its article “Investor risk rises as energy partnership world gets crowded,” quoted Akin Gump energy partner John Goodgame on the risks of using the master limited partnership (MLP) structure.
One issue the article addresses is that MLPs offer minimal power or protections to investors. “If you are an investor who wants to be able to vote for the members of the board and wants to vote on shareholder proposals, then you shouldn’t own an MLP whose general partner is controlled by a sponsor,” said Goodgame. “You’re not going to have any say in governance.”
Although MLPs have generated strong returns, the article also addresses rising interest rates as another disincentive, regarding which Goodgame noted that investors may prefer U.S. treasury bills with yields similar to those of MLPs “because an MLP is in general estimation riskier than a T-bill.”