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Author: CM001 Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 77400  
Subject: Re: LCNO off Topic Date: 10/14/2012 12:03 AM
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The risks here are this company has a credit rating of B1 for whatever that means.
Of course I haven't seen the report on the rating, but if I were to speculate then it is because of the leverage the rating is low.

Here is an opportunity for the company. With LinCO, they have opened the access to capital market i.e., they can sell more LinCo shares in the future, periodically, to fund their cap-ex requirements. Of course this can only go so long but looks like at least for next 3 to 5 years expect periodical LinCo secondary market activity.

Here are the risks I could think of not necessarily in order of importance but what I could think of:

1) Execution
2) Remember the distribution has a good chunk of return of capital. So they have to keep growing the asset base, and especially some organic growth.
3) Interest rates
4) LINE generally hedges its capacity with about 20% production unhedged for operational reasons. This is always the X-Factor.
5) For LinCO, given the current distribution being return of capital heavy, they are tax protected (except for AMT); However, it could change in the future.
6) Commodity prices

Risks aside, I think there is a chance for the prices to go up because I think the yield could slowly overtime close the gap and firm up to 6% that alone has the potential for significant capital gains.

I guess I will take a 2% position on Monday.

PS: Solar and Wind technologies are around for sometime and I don't see them being disruptive enough to replace fossil fuels. What would replace them I don't know but future technology could very well surprise us. I am not too worried about it, since my investment $$$ are so small and I can get out of the market in blink. If you own 100 million shares of XOM then it is a different story, but if you own 100 shares who cares.
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