During the quarter we initiated a position in the newly-issued Tallgrass Energy GP LP, (TEGP, Financial) the general partner of a fast-growing master limited partnership. Tallgrass has an interest in various assets that transport, store and process natural gas and crude oil, primarily in the Appalachian Basin. We have been following this company (and its management team) for a long time through our Firm’s investment in Tallgrass Energy Partners, LP (TEP), which is led by many of the same executives.
We have high conviction in the ability of TEGP to grow its cash distributions at a rapid pace for the foreseeable future through its economic interest in the cash flow streams of high-quality infrastructure assets with limited exposure to commodity price and volume risk. The top-notch TEGP management team has demonstrated its ability to create significant value at TEP. We believe that the tax-advantaged TEGP structure will allow investors to participate alongside this heavily-incented management team as they take advantage of many opportunities to expand their portfolio of fee-based midstream energy assets. We believe they should be able to grow by wringing additional cash flow out of their existing collection of properties, as well as through the acquisition of complimentary assets.
From Baron Funds' second quarter commentary.
