Fundamental Research

Yorkville Capital's core competency is conducting in-depth fundamental research on the companies in which we invest. We seek to continually build on and harness our in-depth knowledge of the asset class to drive superior investment results.

MLP Investment Criteria

Cash flow analysis is the primary tool used in U.S. energy infrastructure investing. We invest in partnerships whose cash flows are both predictable and growing. These two characteristics are critical as they provide income security, a hedge against inflation, and support capital appreciation.

Quality of Cash Flows

YCM will never invest in a partnership that has the slightest probability of cutting its distribution. We track distribution coverage ratios to ensure stability in our investments - the higher the distribution coverage ratio, the safer the distribution.

Distribution Growth Catalysts

We invest in partnerships whose fundamentals will be an impetus for future distribution growth. Growth in distributions is a hedge against inflation - it preserves the purchasing power of our investment over the long-term. Strong growth also often results in underlying capital appreciation.

Financial Modeling

Yorkville marries a top-down quantitative screening process with a rigorous bottom-up analysis of the partnerships we invest in. We develop detailed financial models that allow us to forecast distributable cash flow and growth prospects.

Capital Structure

A strong balance sheet is an essential part of our investment criteria. Partnerships are pass-through vehicles that rely on the capital markets to fund distribution growth. We invest in partnerships that maintain a conservative capital structure. This reduces the risk profile and grants the partnership greater access to the capital markets. We also analyze debt maturities in order to quantify interest rate risk which can pose a headwind to distribution growth.

Valuation

The primary driver of MLP value is distributable cash flow. Yorkville values infrastructure investments according to distributable cash flow yield and the present value of future distributable cash flows. Our primary focus is on income and the cash returns the partnerships produce as current income is critical to the total return. Discounting future distributable cash flow takes into account future growth of distributions, the primary component of capital appreciation.