The message below and the following discussion was posted at http://www.11wall.com and might be of interest here. 11Wall is a moderated discussion board. As such it has no spam or flame wars and is generally civil and thoughtful. You might visit if postings like this interest you, whether you agree with them or not. I don't read here, so please post any responses at 11Wall. ****************************************** Ivan: KABThe Wall Board: Stocks (Misc): STOCKS NOT OTHERWISE LISTED: Ivan: KAB By Gap on Tuesday, December 7, 1999 - 11:35 am:Strange mix. Your comparison to a utility is quite appropriate. Pipelines are highly regulatedand therefore basically subject to govt. price controls. Pipelines can only significantly growrevenue by increasing throughput. How does the IS piece "fit"? Unless the techies arefocusing on pipeline-related issues, it seems an awfully strange combination. Disturbing,even, from an investment point of view, because the businesses are so vastly different. The pipeline and tanks are valuable assets that can be milked until eternity, throwing off agood bit of cash year after year. There is little competition worry, since the laying ofsignificant new pipelines or building of tanks is very difficult today. I wouldn't worry too much about the litigation. Pipeline companies are always being sued bysomeone... that's just a cost of doing business. Right of way issues, spill issues, tarriff issues,you name it. Someone's always mad at them. Even their customers frequently sue themwhen capacity gets tight and has to be rationed. Each customer usually claims the formulaused to ration capacity isn't fair or somesuch. What's their loss reserve? Some "bad" pipelines go as high as 10% of revenue, while othersare less than a percent. The good news is that nothing can compete with an operational pipeline. They relentlesslymove product 24x7x365. Someone recently told me that owning a pipeline is basically anexcuse to make money. The bad news is their earnings from these assets are capped byregulation. How did they end up with the IS division? What sort of work do they take? Are they a "bodyshop" (recruiter, taking $x per hour)? Or do they do full life cycle development on a projectbasis?
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