Fitch Ratings: US retail propane companies see improved financial results

Aug. 12, 2003
Retail propane master limited partnerships (MLPs) benefited from a particularly cold start to the 2002-03 heating season, Fitch Ratings Ltd. said in its recent report "Retail Propane Distribution: 2003 Midyear Update."

By OGJ editors
HOUSTON, Aug. 8 -- Retail propane master limited partnerships (MLPs) benefited from a particularly cold start to the 2002-03 heating season, Fitch Ratings Ltd. said in its recent report "Retail Propane Distribution: 2003 Midyear Update."

The winter brought strong propane demand for space heating purposes and boosted delivery volumes. The increased propane deliveries and companies' effective management of product costs yielded improved year-over-year financial results for the MLPs, Fitch said.

"Despite the existence of very high propane inventories heading into the 2002-03 heating season, strong demand combined with high natural gas and crude oil prices to push wholesale propane prices up significantly during the winter months. The propane MLPs successively passed through their higher supply costs to end-use customers, with the majority of companies actually improving their gross profit per retail gallon sold," Fitch analysts said.

Liquidity
In contrast to some other energy sector participants, the retail propane MLPs have maintained levels of liquidity and continued to demonstrate access to the capital markets, they said.

During the past 6 months, several MLPs renegotiated bank facilities and completed debt and equity issuances.