(Reuters) - Kinder Morgan’s billionaire chairman on Wednesday denied the U.S. pipeline company skimps on maintenance spending, hitting back at allegations by a young analyst that have rattled the company’s shares.
The analyst, Kevin Kaiser, 26, of research firm Hedgeye Risk Management, published a 45-page report on September 10 alleging, among other things, that Kinder Morgan has cut maintenance work to boost cash distributed to investors in its partnerships.
“Our policy is not, is not to skimp on maintenance capex,” Chairman Rich Kinder told investors on a conference call held specifically to discuss Kaiser’s report.
“We believe our policy and actions on maintaining our pipelines are correct and appropriate,” he added.
Shares of Kinder Morgan Inc (KMI.N) rose 4 percent after the conference call.
Four publicly-traded companies comprise Kinder Morgan: Kinder Morgan Inc, El Paso Pipeline Partners LP EPB.N, Kinder Morgan Management LLC KMR.N, and Kinder Morgan Energy Partners KMP.N, which operates most pipeline assets.
Before the Hedgeye report was published, Kaiser sent an email to his firm’s clients and went on Twitter to recommend investors short Kinder Morgan.
The email contributed to a 6 percent decline in Kinder Morgan shares the day it was released and generated a lot of buzz on Twitter and on Wall Street. Publication of his report came several days later and had little effect on the shares.
As an example in the report, Kaiser said El Paso spent $499 million to maintain five natural pipelines in 2011, while Kinder Morgan expects to spend just $132 million on the same assets in 2013. Kinder Morgan acquired El Paso in 2012.
Rich Kinder said on the conference call that Kaiser’s $499 million figure included $160 million for a Florida pipeline that Kinder Morgan does not operate.
He also said some of Kinder Morgan’s spending on pipeline maintenance is classified as an operations expense. He said this was one reason maintenance spending on the El Paso assets was lower.
Kinder Morgan also spends less on items like technology than El Paso did, he said.
Hedgeye’s Kaiser said on Wednesday that he stands by his claims.
“Kinder Morgan is implying that they are expensing a significant amount of maintenance that El Paso previously capitalized,” Kaiser said in an email. “However, the data does not suggest that is the case. Maintenance expenses on the major El Paso subsidiaries are down significantly since the acquisition.”
Reporting By Anna Driver; Editing by Terry Wade and John Wallace