Letters to the Editor
May 1, 2003
To the Editor:
I enjoyed reading the restructuring articles in the March 15 issue of Public Utilities Fortnightly. I noticed references to the use of an MLP structure for electric utility property ("Deal of the 21st Century," p. 25). My understanding is that electric properties would be "non-qualifying income" under current MLP rules. This is why MLPs are currently used in the energy business for only natural gas pipelines and other fuel services. Perhaps the attorneys interviewed meant MLPs that are privately held? Petroleum and real estate companies have used publicly traded MLPs for the following reasons:
"A publicly traded partnership is not, however, taxed as a corporation where at least 90% of the partnership's gross income consists of certain types of income, including interest dividends and real property rents, income derived from mineral and natural resources and gains from the disposition of such property producing such type of income, for each year after 1987." (Structuring Venture Capital Private Equity and Entrepreneurial Transactions, Jack S. Levin)
Thomas G. Fogarty
Energy Consultant
New York, N.Y.
Public
Utilities Fortnightly & Spark
