Tortoise Electrification Infrastructure ETF

Reported Q1 2016 total returns included NDP at 5.5% market-based and 4.7% NAV-based, TYG at -9.3% market-based and -6.4% NAV-based, NTG at -3.5% market-based and -3.5% NAV-based, TTP at 4.6% market-based and 4.7% NAV-based, and TPZ at 6.3% market-based and 1.4% NAV-based. Through April 22, fund returns had improved by roughly 7% to 20% on a market-value basis and 10% to 15% on a NAV basis. Distributions were maintained at $0.4375 for NDP, $0.6550 for TYG and $0.4225 for NTG; TTP’s first-quarter distribution was $0.4075, down 9.4% from the fourth quarter, and TPZ’s second-quarter monthly distribution was $0.125, down 9.1% from first-quarter monthly payouts. Management did not provide revenue, EPS, gross margin, or formal next-quarter/full-year financial guidance on this call.

Brad Adam’s message was that the first quarter was a tale of two halves for energy, with conditions improving after an early-year selloff. He emphasized that not all MLPs are alike and that Tortoise is focused on high-quality companies with solid balance sheets, stable cash flows and distribution support. His tone was cautious but constructive, especially on the stability of distributions and the resilience of the portfolio.

Brent Behrens focused on fund-level performance, leverage and distributions rather than traditional operating metrics. He said some deleveraging was necessary earlier in the year to maintain adequate cushion over asset coverage requirements, and that weekly leverage amounts and ratios are disclosed on the website. He also noted distribution rates as of April 22 of 9.3% for TYG, 9.4% for NTG, 9.2% for TTP, 8.1% for TPZ and 13.4% for NTP, versus an 8.2% Tortoise MLP index average.

Management was asked whether prior deleveraging could create long-term distribution risk; Brad Adam said the short answer was no, and said TYG and NTG were intended to keep current distributions for the second quarter. Asked about future portfolio company distribution cuts, Matt Sallee said the portfolio had seen no cuts in the midstream or MLP holdings, though they had right-sized positions where downside risk looked higher and exited a couple of names. On counterparty risk, Rob Thummel said they had reviewed SEC filings and concluded the risk was concentrated and limited, with Williams Companies and Chesapeake Energy being the main exposure they were watching, but not a major headwind.