HOUSTON, Aug. 30, 2017 /PRNewswire/ -- Our thoughts and
prayers are with all of those impacted by Hurricane and Tropical
Storm Harvey. We are fortunate to report that all Center
Coast employees are safe and sound, and we have been operating at
full capacity ever since Harvey hit the U.S. Gulf Coast and
continue to do so. If you need immediate assistance, please
contact us at 713-759-1400 or refer to our website,
http://www.centercoastcap.com, for more information.
Critically, not all residents in the Gulf Coast and Houston area have been as fortunate as Center
Coast employees; the losses are devastating. Thus, we
encourage everyone to do their part by donating time, goods,
services, and/or money to any of the Harvey donation banks set up
online and around town, for example: text HARVEY to 90999 to donate
$10 to American Red Cross; donate to
the Houston SPCA at www.houstonspca.org; help bring volunteers to
Texas by visiting
https://teamrubiconusa.org; or donate to JJ Watt's Flood Relief
Fund at
https://www.youcaring.com/victimsofhurricaneharvey-915053.
Harvey's Impact on Fund Constituents
At present we have not heard of any permanent or long-term
damage to the assets of any Fund constituents, but we continue to
monitor the situation and expect more detailed assessments from the
companies over the next few weeks. Enterprise Products
Partners L.P. (NYSE: EPD), one of our top holdings with significant
assets on the Gulf Coast, reported a couple days ago that "[a]t
this time none of the facilities have incurred any significant
damage." Similarly, Targa Resources Corp. (NYSE: TRGP),
another top holding of the Fund with important assets on the Gulf
Coast, reported yesterday that "damage to date to Targa facilities
has been minimal…disruptions to operations are expected to be
limited…normal operations will resume shortly after flood waters
recede."
We do expect temporary outages and downtime for assets
positioned in or connected to the affected regions of the Gulf
Coast (see list below). The magnitude of the impact will
depend on the length of the downtime and the contractual
arrangement behind the cash flows generated by each impacted asset.
To date, the impact of Hurricane Harvey and the related
flooding appears to be transitory in nature and limited to asset
downtime, with little or no impact to the long-term investment
thesis of midstream infrastructure. For example, Genesis
Energy, L.P. (NYSE: GEL), a midstream provider focused on the
Gulf of Mexico and the Gulf Coast,
indicated that operational impacts may impact quarterly results by
less than 2% with no lasting impacts. We anticipate similar
types of impacts to those midstream names with significant
infrastructure on the coast and we believe that disclosures
regarding any material cash flow impacts or downtime would need to
be made within the week.
Assets with known downtime:
- Upstream
-
- Certain producing Eagle Ford assets
- Select offshore platforms
- Downstream
-
- Refineries around Houston,
Beaumont, Galveston, Port
Arthur, and Lake Charles
- Petchem facilities, including a significant amount of ethylene
capacity
- Midstream
-
- Assets associated with impacted upstream and downstream assets
listed above
- Some offshore pipelines
- Onshore pipelines closer to demand centers
- Some Mont Belvieu
fractionation
- Export facilities from Corpus
Christi all the way to Louisiana
Importantly, it appears that a large portion of the Fund's
constituents should see limited or no impact from Harvey.
Nevertheless, we are staying abreast of the situation and will pass
along material information as necessary.
Best,
The Center Coast team
Top 10 Public Holdings as of 6/30/17
|
Holding
|
Weighting
|
1
|
Energy Transfer
Partners LP
|
7.57%
|
2
|
MPLX LP
|
7.57%
|
3
|
Enterprise Products
Partners LP
|
7.23%
|
4
|
Tesoro Logistics
LP
|
6.58%
|
5
|
EnLink Midstream
Partners LP
|
6.46%
|
6
|
Targa Resources
Corp
|
6.33%
|
7
|
Plains All American
Pipeline LP
|
5.69%
|
8
|
NuStar Energy
LP
|
5.35%
|
9
|
TC PipeLines
LP
|
4.97%
|
10
|
Buckeye Partners
LP
|
4.95%
|
CEN Quarter Report Notes & Disclosure
This
letter does not constitute an offer of any securities or investment
advisory services, or a recommendation with respect to any of the
securities discussed herein.
The investment ideas summarized above represent Center Coast
Capital's current views and are subject to change depending on
events with respect to particular companies and conditions and
trends in the securities markets and the economy in general. The
foregoing discussion includes and is based upon numerous
assumptions and opinions of Center Coast concerning particular
MLPs, companies, financial markets and other matters, the accuracy
of which cannot be assured. There can be no assurance that the
Fund's investment strategy will achieve a profitable
result.
Performance data reflects fees and expenses of the Fund, but
does not reflect sales charges or fees that may be incurred. All
performance data is unaudited and assumes reinvestment of all
distributions. Current performance may be lower or higher than that
shown based on market fluctuations from the end of the reported
period. Before making an investment in the Fund, you should
consider the investment objective, risks, charges and expenses of
the fund which, together with and other important information are
included in the fund's most recent prospectus and other filings
with the SEC. There can be no assurance that the Fund's
investment objectives will be attained. Shares of closed-end
funds frequently trade at a market price that is below their net
asset value. The Fund uses leverage with creates risks that
may adversely affect return, including the likelihood of greater
volatility of net asset value and the market price of common
shares.
Distribution rate is calculated as distribution per share
annualized and divided by the current share price. The total return
sought by the Fund includes appreciation in the net asset value of
the Fund's common shares and all distributions made by the Fund to
its common shareholders, regardless of the tax characterization of
such distributions, including distributions characterized as return
of capital.
The Fund expects to distribute cash in
excess of its earnings and profits to its common shareholders which
may be treated as a return of capital to the extent of the common
shareholders' bases in the Common Shares. As a result, common
shareholders may receive distributions that represent a return of
capital although no assurance can be given in this regard. The
portion of any distribution treated as return of capital will not
be subject to tax currently, but will result in a reduction in
basis in their Common Shares. Such a reduction in basis will result
in the shareholder's recognizing more gain or less loss (that is,
will result in an increase of a shareholder's tax liability) when
the shareholder later sells Common Shares, even if such Common
Shares have not increased in value or have, in fact, lost
value. For the year ended November 30,
2016, 100% of the fund¹s distributions were treated as
return of capital.
Comparison to any market or MLP Index is for illustrative
purposes only, and the volatility of these may be materially
different from the volatility of the Fund due to a variety of
factors.
The Fund's investments are concentrated in the energy
infrastructure industry with an emphasis on securities issued by
MLPs, which may increase price fluctuation. The value of
commodity-linked investments such as the MLPs and energy
infrastructure companies (including Midstream MLPs and energy
infrastructure companies) in which the Fund invests are subject to
risks specific to the industry they serve, such as fluctuations in
commodity prices, reduced volumes of available natural gas or other
energy commodities, slowdowns in new construction and acquisitions,
a sustained reduced demand for crude oil, natural gas and refined
petroleum products, depletion of the natural gas reserves or other
commodities, changes in the macroeconomic or regulatory
environment, environmental hazards, rising interest rates and
threats of attack by terrorists on energy assets, each of which
could affect the Fund's profitability.
MLPs are subject to significant regulation and may be
adversely affected by changes in the regulatory environment
including the risk that an MLP could lose its tax status as a
partnership. If an MLP were to be obligated to pay federal income
tax on its income at the corporate tax rate, the amount of cash
available for distribution would be reduced and such distributions
received by the Fund would be taxed under federal income tax
laws applicable to corporate dividends received (as dividend
income, return of capital, or capital gain).
In addition, investing in MLPs involves additional risks as
compared to the risks of investing in common stock, including risks
related to cash flow, dilution and voting rights. Such companies
may trade less frequently than larger companies due to their
smaller capitalizations which may result in erratic price movement
or difficulty in buying or selling.
The information contained herein has been prepared by Center
Coast Capital Advisors, LP and is current as of the date
hereof. Such information is subject to change.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
AN INVESTMENT IN THE FUND COULD SUFFER LOSS.
The Fund seeks to achieve its investment objective by investing
primarily in a portfolio of master limited partnerships ("MLPs")
and energy infrastructure companies. Under normal market
conditions, the Fund will invest at least 80% of its Managed Assets
in securities of MLPs and energy infrastructure companies. The Fund
may invest up to 20% of its Managed Assets in unregistered or
restricted securities, including securities issued by private
companies. The Fund utilizes leverage as part of its investment
strategy. There is no assurance that the Fund will achieve its
investment objectives.
The Fund is a non-diversified closed-end investment company.
Shares of closed-end investment companies, such as the Fund,
frequently trade at a discount to their net asset value, which may
increase investors' risk of loss.
Investors should consider the Fund's investment objective,
risks, charges and expenses carefully before investing.
This document is not an offer to sell securities or the
solicitation of an offer to buy securities, nor shall there be any
sale or offer of these securities, in any jurisdiction where such
sale or offer is not permitted.
Investing in the Fund involves risk, including possible loss of
principal invested. The Fund is not a complete investment program
and you may lose money investing in the Fund.
Because of the Fund's concentration in MLP investments, the Fund is
not eligible to be treated as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the
"Code"). Instead, the Fund will be treated as a regular corporation
for U.S. federal income tax purposes and, as a result, unlike most
investment companies, will be subject to corporate income tax to
the extent the Fund recognizes taxable income.
The Fund is a non-diversified investment company under the
Investment Company Act of 1940, as amended, and will not elect to
be treated as a regulated investment company under the Code.
Accordingly, the Fund may concentrate its investments in a limited
number of companies. As a result, the Fund's returns may fluctuate
as a result of any single economic, political or regulatory
occurrence affecting, or in the market's assessment of, such
portfolio companies to a greater extent than
those of a diversified investment company.
An investment in MLP units involves risks that differ from a
similar investment in equity securities, such as common stock, of a
corporation. Holders of MLP units have the rights typically
afforded to limited partners in a limited partnership. As compared
to common shareholders of a corporation, holders of MLP units
have more limited control and limited rights to
vote on matters affecting the partnership. There are certain tax
risks associated with an investment in MLP units. Additionally,
conflicts of interest may exist between common unit holders,
subordinated unit holders and the general partner of an MLP; for
example, a conflict may arise as a result of incentive distribution
payments, as such an incentive structure may result in divergent
and potentially conflicting interests between common unitholders
and the general partner, which may have more motivation to pursue
projects with high risk and high potential reward.
Because the Fund is focused in MLP and infrastructure companies
operating in the industry or group of industries that make up the
energy sector of the economy, the Fund may be more susceptible to
risks associated with such sector. A downturn in such sector could
have a larger impact on the Fund than on an investment company that
does not concentrate in such sector. At times, the performance of
securities of companies in the energy sector may lag the
performance of other sectors or the broader market as a whole.
The Fund currently seeks to enhance the level of its current
distributions by utilizing financial leverage. The Fund may utilize
financial leverage up to the limits imposed by the Investment
Company Act of 1940, as amended. The costs associated with the
issuance and use of financial leverage will be borne by the
holders of the common shares. Financial leverage is a
speculative technique and investors should note that there are
special risks and costs associated with financial leverage. There
can be no assurance that a financial leverage strategy will be
successful during any period in which it is employed. On
June 30, 2017, the Fund's outstanding
borrowings were $76.0 million under
its credit facility (20% of Managed Assets) and $50.0 million of Mandatory Redeemable Preferred
Stock (12% of Managed Assets), resulting in a total leverage
percentage of 33.8%. As of June 30,
2017, the Credit Facility had an interest rate of 2.17% and
the Preferred Stock has a 4.29% annual coupon.
Information is as of the date indicated and subject to
change.
For information about
the Fund, please contact your Financial Advisor.
|
Financial
Advisors/Analysts only please contact:
|
(800)
651-2345
|
Media Relations
please contact:
|
(646)
839-5543
|
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SOURCE Center Coast MLP & Infrastructure Fund