Shares/units of Kinder Morgan Inc. (KMI) and Kinder Morgan Energy Partners LP (KMP) were dinged Wednesday by a 26-year-old financial analyst in a report that blasted the company for allegedly short-changing maintenance spending in order to support shares/units. Management said such criticisms were raised and put to bed 10 years ago and that it is “one of the most transparent companies in America.”

Following Tweets and a press release last week that teased the report, Hedgeye Risk Management came out with it on Tuesday.

“We believe that Kinder Morgan’s high-level business strategy is to starve its pipelines and related infrastructure of routine maintenance spending in order to maximize distributable cash flow (DCF), IDR [incentive distribution rights] payments to the GP [general partner], and acquisition accretion,”wrote Hedgeye’s Keven Kaiser, a senior analyst, in the 45-page note.

“Then, after years of under-spending, Kinder Morgan will replace an asset, while simultaneously increasing the asset’s nameplate capacity, a technicality that allows the company to classify the entire budget of a replacement project as ‘expansion capex.'”

KMI shares closed down nearly 3% at $36.01, and KMP units closed down a little more than 1% at $80.49 Wednesday.

Kaiser charged that Kinder Morgan protects DCF by eventually booking 100% of maintenance expense and capex as expansion capex. Others have commented on how Kinder Morgan treats maintenance expenses but Morningstar analyst Jason Stevens pointed out that the company’s practices with regard to maintenance capex are inline with other master limited partnerships.

“For the most part, we view these topics as old news and stress that we’re talking about a group of companies that operate the nation’s largest pipeline network, generating north of $5 billion in EBITDA [earnings before interest, taxes, depreciation and amortization] from tangible physical assets,” Stevens wrote following a press release and Tweets from Hedgeye in advance of the report’s release. “While we always welcome critical analysis and questions to the give-and-take debate over master limited partnership valuation, we’re skeptical of the claims Hedgeye is making.”

Kinder Morgan had its own response to Hedgeye.

“Our business units perform a bottom-up review of maintenance capital needs and operating expenses, with the objective being to increasingly reduce risk and improve safety for the benefit of the public and the environment,” the company said. “We believe that an accurate comparison with our peers shows that we are one of the most efficient operators and also one of the safest.

“A number of large equity research firms have responded to Hedgeye’s claims with positive reports on Kinder Morgan — including Deutsche Bank, Credit Suisse, Goldman Sachs and Barclays. Additionally, there has been insider buying this week led by CEO Richard D. Kinder’s purchase of 500,000 shares of KMI stock, valued at almost $18 million.”

Besides the Tweets and press release from Hedgeye, Kaiser’s report got attention because of his earlier negative calls on Linn Energy and affiliate LinnCo., which have driven down their share prices and helped draw Securities and Exchange Commission attention to them (see Daily GPI, July 9;July 3).