Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, is considering whether to form a master limited partnership, or MLP, for its energy operations to help reduce leverage.
MLPs are structured to pay cash to unit holders, shielding the partnership from corporate taxes. Many MLPs are energy-related because the tax code limits the structure primarily to natural-resources businesses.
“We’re looking at this MLP opportunity as a way to potentially generate proceeds but also to highlight the value of the asset,” Chief Financial Officer Kathleen Quirk said today in a presentation at an industry conference organized by Bank of America in Toronto.
Quirk said Phoenix-based Freeport has a three-year plan to cut the company’s debt, which jumped after it acquired Plains Exploration & Production Co. and McMoRan Exploration Co. this year for about $9 billion to add oil and natural gas assets.
“We’ve got several options that we’re looking at and if we can find options that are value-accretive and deliver more quickly than the three-year time frame, we’re obviously going to pursue those aggressively,” Quirk said in the presentation, which was broadcast on the company’s website.
Freeport said in July it was seeking to reduce debt by selling some U.S. energy assets and cutting spending by $1.9 billion this year and next. Freeport’s total debt rose to $21.2 billion as of June 30 from $3.52 billion a year earlier after it acquired the two energy companies.