Pipeline Billionaire Follows Playbook, Stepping Down But Staying
(Bloomberg) - Kelcy Warren, the Dallas billionaire known for controversial pipelines and aggressive dealmaking, resigns as chief executive officer of Energy Transfer LP. But if the move is similar to that of other Mughals in the pipeline industry, it doesn't go far.
The company named Chief Operating Officer Mackie McCrea and Chief Financial Officer Tom Long as co-CEOs late Thursday. The 64-year-old Warren remains CEO and remains the top investor. He will also retain a majority stake in the so-called general partner who controls Energy Transfer's board of directors.
Warren appears to be following a game book used by his billionaire rivals in the pipeline industry. Kinder Morgan Inc.'s founder, Rich Kinder, continues to serve as chairman of his company despite relinquishing the CEO title in 2015. Randa Duncan has held the same position at Enterprise Products Partners LP after her father, the company's founder, passed away in 2010.
"Although I retire from day-to-day running of the business, I will continue to be closely involved in the strategic growth of energy transfer," said Warren, who has approximately $ 3 billion net worth according to the Bloomberg Billionaires Index.
Warren co-founded Energy Transfer in 1996 with Ray Davis, who now owns the Texas Rangers baseball team. Warren's appetite for acquisitions and his use of the tax-privileged master limited partnership model enabled him to turn 200 miles of natural gas pipelines into one of the largest pipeline operations in the country.
These same traits have often earned him the wrath of everyone, from regulators to environmental groups to investors.
Warren gained national attention for its Dakota Access crude oil pipeline, which sparked months of protests on the ground after the Sioux tribe of Standing Rock objected to the project's path in North Dakota. Even when Dakota Access disappeared from the headlines after the project was accelerated by the Trump administration, Warren and Energy Transfer continued to draw attention.
While building the Rover gas pipeline, the company bulldozed a historic Ohio home that it had notified federal agencies to use as office space. Energy Transfer's Mariner East natural gas liquid pipeline has been blamed for a number of sinkholes in Pennsylvania.
Warren has taken a similarly combative approach when it comes to dealmaking. Energy Transfer in 2016 relied on a $ 36.6 billion deal with Williams Cos., Which would have created the largest natural gas carrier in the country. Two years later, Energy Transfer made a hostile and unsuccessful run at NuStar Energy LP.
And despite all the acquisitions he's made, two dramatic downturns in the oil industry have brought the value of power transmission down from a peak of more than $ 35 billion in 2015 to less than $ 6 billion.
More recently, Warren has had to defend Energy Transfer's decision to stick to the MLP model, even if his colleagues adopt more traditional structures after a series of tax changes. He gave a hint that structural upheaval may not be far off earlier this year, even though it did before the coronavirus pandemic revitalized the oil market.
Dakota Access has also re-emerged as a hotspot after a federal judge ruled the summer that the pipeline must be shut down until a more robust environmental review is completed. The company appealed this ruling and is likely to be safe from further consideration of the shutdown by the end of the year. Nonetheless, the presidential elections in November could create new uncertainties about the project.
Warren hosted Trump's first personal fundraiser since the coronavirus outbreak in June and is one of the president's top donors in the energy industry. Former US Secretary of Energy Rick Perry sits on the board of directors of Energy Transfer's general partner, an arrangement that, according to Democratic Senator Elizabeth Warren, “represents the kind of unethical revolving door corruption that has made Americans cynical and suspicious of the federal government. ”
Even before the company's management restructuring was announced, the billionaire took a back seat on conference calls, letting McCrea and Long do most of the conversation. Warren was known to be particularly open when calling. While other CEOs discussed the potential for acquisitions that investors had become wary of, Warren made no apologies for his hunger for deals.
However, his tone was markedly different on the company's latest earnings statement when Energy Transfer, along with its colleagues, cut spending plans on new projects in response to a crash in crude oil prices.
"We have had a very aggressive growth spurt and it was painful because it took longer than we expected and it cost more than we expected," he said. "But now it's over and we're relieved that it's so."
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