To that end, it recently bought additional oil and natural gas interests and a 49% interest in a large soda ash business. Through the first six months of the year, Natural Resource Partners LP (NYSE:NRP)’ “other” businesses grew 15%, leaving the top line down just 1% despite a 25% drop in coal prices. Increased mining activity on its properties not only helped offset coal pricing weakness, but also increased the amount of coal going through the company’s handling facilities. And, the first half shows that the partnership’s diversification efforts are paying off.
The rest of 2013 will be hard for the partnership because of coal’s malaise, but when prices recover, Natural Resource Partners LP (NYSE:NRP) will be a stronger and more diversified player. The company is worth a look for more aggressive income investors—particularly because of its non-coal assets.
A midstream giant
Then there’s Kinder Morgan Energy Partners LP (NYSE:KMP), which is best known for its midstream assets. However, it currently has about $450 million worth of coal terminal expansion projects in the works. The company owns about 110 terminals that handle liquid and bulk materials (around 80 are dry bulk), and 35 train loading and unloading facilities. This business represents about 15% of Kinder Morgan Energy Partners LP (NYSE:KMP)’s top line.
The company’s coal terminal expansion efforts set the partnership up to benefit as more miners look to sell coal internationally, specifically to Asia. Moreover, Kinder Morgan Energy Partners LP (NYSE:KMP) is looking to create a coal royalty business, much like Natural Resource Partners LP (NYSE:NRP). Although coal is a relatively small part of the company’s business today, investors should keep an eye on the efforts here. With an around 6.4% yield, Kinder Morgan Energy Partners LP (NYSE:KMP) is a diversified way to invest in coal without taking on the risk, or the stigma, of a coal-focused company.
“Other” assets
It requires a lot to get coal from the ground into a steel mill or a power plant, and mining is only one piece of that process. CONSOL sees potential in selling its infrastructure assets so it can invest in its core businesses, which could help reshape the way investors view the company and spur growth. Natural Resource Partners LP (NYSE:NRP) and Kinder Morgan Energy Partners LP (NYSE:KMP), meanwhile, still like the types of businesses that CONSOL is looking to offload. Although they aren’t exciting, they fit nicely within the toll-taker model that each employs to support generous distributions. That said, Kinder Morgan Energy Partners LP (NYSE:KMP) is the more diversified and less risky of the pair.
The article Is Shipping Coal a Profitable Business? originally appeared on Fool.com is written by Reuben Brewer.
Reuben Brewer has positions in Natural Resource Partners and Kinder Morgan Energy Partners. The Motley Fool has no position in any of the stocks mentioned.
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