Kinder Morgan Falls Amid Questions on Cash Flow

Kinder Morgan Energy Partners LP, the second-biggest U.S. pipeline company, fell the most in almost four years after a Barron’s article said the partnership has overstated cash flows and is overpriced.

The operator of 82,000 miles (132,000 kilometers) of oil and natural gas pipelines declined 3.5 percent to $75.69 at 10:40 a.m. in New York, after earlier having its biggest intraday drop since May 2010. Kinder Morgan Inc. (KMI), its parent company, fell as much as 4.8 percent and Kinder Morgan Management LLC (KMR), which manages the partnership, declined as much as 4.9 percent.

The Feb. 22 article raised questions about whether the Houston-based partnership had been understating its spending to boost distributable cash flows for investors. Barron’s quoted Hedgeye Risk Management’s Kevin Kaiser, who issued a report in September calling Kinder Morgan a “house of cards.” Kinder Morgan said in a statement today that its spending isn’t understated and it expects to continue offering “attractive returns” to unitholders.

“The article rehashes the long-term bear story” on Kinder Morgan, Ethan Bellamy, a Robert W. Baird & Co. analyst in Denver, said in a note to clients today. “Retail investors are likely to run for the hills today.”

Enterprise Products Partners LP is the largest U.S. pipeline company based on market capitalization.

To contact the reporter on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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