Alliance Holdings wins with ownership

Alliance Holdings GP LP is an intriguing investment option because it owns 42 percent of the outstanding units in steady Alliance Resource Partners LP. It also has the No. 5 position on this year's Oklahoma Inc. list.

 
BY JAY F. MARKS | Published: November 14, 2010    Comment on this article Leave a comment

Alliance Holdings GP LP is not an obvious candidate to be one of Oklahoma's top public companies.

It owns the assets of coal producer Alliance Resource Partners LP, plus all of the incentive distribution rights.

photo - Alliance Holdings GP LP owns all of its subsidiary's assets, including the River View coal mine in Kentucky.
Alliance Holdings GP LP owns all of its subsidiary's assets, including the River View coal mine in Kentucky.

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That makes it a good long-term investment, while its counterpart is the more likely choice of those seeking immediate dividends.

"There is a greater opportunity for growth holding the GP interest,” Chief Financial Officer Brian Cantrell said.

He estimated that 10 percent growth for Alliance Resource Partners — ARLP — will translate into 14 percent growth for the holding company, AHGP, so picking which one to invest in depends on what people want out of their portfolio.

As the operating entity, Alliance Resource Partners generates its cash flow solely from its operating assets.

Alliance Holdings, which owns about 42 percent of Alliance Resource Partners, can leverage its growth with its incentive distribution rights.

"It's really two ways to invest in the cash flow streams that our operating assets generate,” Cantrell said.

Cantrell said most investors are willing to take lower initial yield from Alliance Holdings GP in exchange for future growth.

"It's really how does this potentially fit into your portfolio,” he said.




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