Americas Pipelines and MLPs: Investor Feedback Following the Initiation of EE at Buy and NEXT at Neutral

Research evidence excerpt

Americas Pipelines and MLPs: Investor Feedback Following the Initiation of EE at Buy and NEXT at Neutral

Goldman Sachs Americas Pipelines and MLPs

the market is forced to consider near-term growth headwinds from the ongoing

conflict in the Middle East. On the other hand, investors who skewed more

constructive pushed back on our 10.25% WACC suggesting that is wider than both

what a bottom-up (CAPM) model would imply and wider than what the market

contemplates for closest peer GLNG.

n Downstream integration risk: While benefits from vertical integration, particularly

on margin enhancement and customer stickiness, were broadly cited as positives for

the growth outlook, sentiment on downstream integration was more mixed. The

specific debate centered on the risk/reward of leaning further into fixed

downstream infrastructure given the inherent risk of developing immobile

downstream infrastructure vs the balance of EE’s floating FSRU infrastructure (which

can be mobilized to different sites in a left tail risk scenario).

Key Feedback and Debates on NEXT

Key discussions during investor conversations on NEXT included:

n Operational catalyst path: Most investors we speak with leaned constructive on the

operating catalyst path, citing NEXT’s use of known liquefaction technology and an

industry-leading engineering, procurement, and construction (EPC) contractor,

Bechtel, as key to derisking the production growth outlook. That said, we fielded a

few inbounds on the potential for broader investor expectations for NEXT’s ramp to

already contemplate early in-service for Phase 1, leaving little margin for error on

the production ramp. Thus, the latter cohort of investors cited recent timeline

slippages and construction challenges at peer projects and asked if the market may