UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
SCHEDULE 14A INFORMATION
Consent Solicitation Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
| ☐ | Preliminary Proxy Statement |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material under § |
CRESTWOOD EQUITY PARTNERS LP
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check all boxes that apply):
| ☒ | No fee required. |
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules |
Letter
CRESTWOOD EQUITY PARTNERS LP
811 Main Street, Suite 3400
Houston, Texas 77002
To holders of our preferred units:
As announced on August 16, 2023, we have entered into a definitive merger agreement with Energy Transfer LP pursuant to Unitholders
Dear Fellow Crestwood Unitholders,
On behalfwhich Energy Transfer will acquire Crestwood. In connection with the merger and at the direction of Energy Transfer, pursuant to the merger agreement, we are soliciting consents from holders of our preferred units to approve certain proposed amendments to our partnership agreement. The purpose of the BoardConsent Solicitation is to (i) increase the cash redemption price for our preferred units in connection with a cash redemption election in the merger, and (ii) conform certain terms of Directorsour preferred units with Energy Transfer’s other outstanding series of preferred units in order to simplify Energy Transfer’s capital structure following the merger. This consent solicitation is being conducted pursuant to a consent solicitation statement on Schedule 14A, which is filed with the Securities and managementExchange Commission. If the requisite consents in this consent solicitation are obtained and the conditions to the closing of Crestwood, I am pleasedthe merger are satisfied or waived, as applicable, by the parties to invite youthe merger agreement and the merger agreement is not otherwise terminated, the proposed amendment would, among other things, (i) permit us to increase the redemption price payable to holders of our preferred units that make a cash redemption election in connection with the merger; (ii) eliminate the application of a deficiency rate with respect to distributions payable to the holders of preferred units during any quarter in which distributions are accrued and unpaid; (iii) modify the right of holders of our preferred units to participate in special distributions made to holders of our second annual meetingcommon units; and (iv) conform the voting rights of unitholdersthe holders of preferred units to the voting rights of holders of Energy Transfer’s other outstanding series of preferred units. If the requisite consents in this consent solicitation are obtained and the conditions to the closing of the merger are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated, (i) holders of our preferred units making a redemption election in connection with the consideration they receive in the merger would receive such cash redemption price as increased pursuant to the proposed amendment and (ii) holders of our preferred units electing to receive preferred units of Energy Transfer with substantially similar terms as our preferred units as consideration in the merger will receive such Energy Transfer preferred units with terms reflecting the proposed amendment.
The proposed amendment would be approved and go into effect if holders of at least two-thirds of the issued and outstanding preferred units consent to the proposed amendment and the conditions to the closing of the merger are either satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated. Holders of our preferred units who wish to consent must deliver their properly submitted consent in accordance with The Depository Trust Company’s Automated Tender Offer Program at or prior to 5:00 p.m., Eastern Time, on Thursday, May 11,October 17, 2023 at 2:00 pm CDT, which(subject to earlier conclusion, termination or extension). We realize your time is valuable, and consequently, we are offering a consent fee of $0.182546 per preferred unit to be paid to holders of preferred units who validly provide (and do not revoke) their consent to the proposed amendment.
In addition, separately from the solicitation of consents to approve the proposed amendment, we will be held virtually via live webcast. Your participationsoliciting votes from holders of our common units and holders of our preferred units to approve the completion of the merger. We will conduct such solicitation pursuant to a separate proxy statement on Schedule 14A, which preliminary merger proxy statement is contained in the meetingRegistration Statement on Form S-4 (File No. 333-274526), filed by Energy Transfer with the U.S. Securities and voteExchange Commission on September 27, 2023. Following effectiveness of such Registration Statement on Form S-4, we will file and mail the definitive merger proxy statement to the Crestwood unitholders.
If the merger is completed, each of our preferred units outstanding immediately prior to the effective time of the merger will, at the election of the holder of such preferred units, in accordance with our partnership agreement, either (i) convert into common units at the then-applicable Conversion Ratio (as defined in the Crestwood Partnership Agreement, currently one Crestwood common unit for 10 Crestwood preferred units), subject to the payment of any accrued but unpaid distributions prior to the effective time of the merger, (ii) convert into a preferred unit of Energy Transfer that has substantially similar terms, including with respect to economics and
structural protections, as our preferred units, as such preferred unit terms may be amended if the requisite consents are obtained in connection with this consent solicitation or (iii) be redeemed in exchange for cash or common units, at the sole discretion of our general partner, at a price of (x) $9.218573 per preferred unit or (y) if the requisite consents are obtained in this consent solicitation, $9.857484 per preferred unit, in each case, plus accrued and unpaid distributions to the date of such redemption. If no election is made by a holder of our preferred units, such holder will be deemed to have elected to receive the new preferred units of Energy Transfer. We have agreed to cause our general partner to elect to pay cash for any preferred units whose holders have elected to have such preferred units redeemed as described in clause (iii) above. Holders of our preferred units that receive our common units pursuant to the foregoing clause (i) will be entitled to receive 2.07 common units of Energy Transfer, each representing a limited partner interest in Energy Transfer, in exchange for each such common unit at the effective time of the merger.
IF THE PROPOSED AMENDMENT IS APPROVED BY THE REQUISITE HOLDERS OF PREFERRED UNITS, THE CONSIDERATION YOU MAY ELECT TO RECEIVE IN THE MERGER, AS A HOLDER OF PREFERRED UNITS, WILL BE AFFECTED IN THE FOLLOWING WAY: (A) IF YOU ELECT TO RECEIVE PREFERRED UNITS OF ENERGY TRANSFER, SUCH PREFERRED UNITS WILL HAVE TERMS REFLECTING THE PROPOSED AMENDMENT, AND (B) IF YOU MAKE A CASH REDEMPTION ELECTION, THE CASH REDEMPTION PRICE WILL INCREASE FROM $9.218573 TO $9.857484 PER PREFERRED UNIT. WE WILL ANNOUNCE THE RESULTS OF THE CONSENT SOLICITATION AS PROMPTLY AS POSSIBLE FOLLOWING THE EXPIRATION DATE OF THIS CONSENT SOLICITATION, AND WE ANTICIPATE THAT YOU WILL HAVE AT LEAST 10 DAYS BETWEEN SUCH ANNOUNCEMENT AND THE DEADLINE TO MAKE A MERGER CONSIDERATION ELECTION FOR YOUR PREFERRED UNITS.
Your consent is important — please readto us and our business. Your broker cannot provide a consent with respect to your preferred units on your behalf until it receives your instructions. Please provide your consent by following the proxy materials and follow the voting instructions to ensure your units are represented at the meeting.
This unitholder meeting allows me to thank our Board of Directors and management team for their dedication and execution in repositioning Crestwood to meet current and future industry challenges and take advantage of long-term midstream opportunities. Clearly, in 2022, the US oil and gas industry faced numerous challenges including global supply and demand disruption, commodity price volatility, cost inflation and supply chain issues leading to modest capital investmentcontained in the upstream and midstream sectors comparedConsent Solicitation Statement. We look forward to previous cycles. The industry has now shifted to roughly maintaining current oil and gas supply levels, with minimal growth, through better capital efficiency resulting in improved returns to investors. We believe Crestwood’s regional consolidation strategy, initiated in 2021 and completed in early 2023 with the sale of our Tres Palacios natural gas storage facility, best positions the Partnership to compete in this environment and deliver stable unitholder returns with long-term growth upside potential related to stronger commodity prices in late 2023 and beyond.your participation.
With this strategy in mind during 2022, Crestwood achieved its goal of becoming a top-tier gatherer and processor in the Williston, Delaware and Powder River basins with critical midstream infrastructure that supports
|
Robert G. Phillips Founder, Chairman and |
Letter
811 Main Street, Suite 3400
Houston, Texas 77002
CONSENT SOLICITATION STATEMENT
Solicitation of Consents to UnitholdersAmend the
Partnership Agreement from
In
Holders of Preferred Units:
On August 16, 2023, we plan to execute on a core-asset optimization strategy which will focus on driving lower operating and organizational costs from recent acquisitions and divestitures, connecting a record number of new wells planned by our producers, and reducing growth capital year over year. Looking forward, we will utilize a disciplined capital allocation strategy that delivers both near term debt reduction and a high-returning accretive capital program to increase system capacity where needed for future producer development and add to our long-term dedicated inventory position.
Capturing these opportunities over the next few years should provide Crestwood’s investors with improved visibility to increasing free cash flow, debt reduction back to our long-term 3.5x leverage target, and greater distribution growth and coverage potential which should lead to attractive capital allocation priorities that drive value creation for our investors.
Finally, I am also pleased to acknowledge the entire Crestwood organization by highlighting recognition from leading third-party organizations for our efforts in sustainability, customer service and operations, and investor and employee relations. These awards include an upgrade to an A rating by MSCI, inclusion into the Bloomberg Gender-Equality Index for the third consecutive year, #1 rankings in customer service and operations by EnergyPoint Research, numerous #1 rankings by Institutional Investor, and for five consecutive years, recognition as one of Houston Chronicle’s Top Workplaces. These accomplishments exemplify Crestwood’s commitment to being a leading midstream operator with a sharp focus on safety, customer service, environmental stewardship, community engagement and a best-in-class employer to our valued employees.
We look forward to the upcoming annual meeting and remain appreciative of your on-going support and investment in Crestwood.
Sincerely,
Robert G. Phillips
Founder, Chairman and
Chief Executive Officer
Carlsbad Processing Plant acquired from Sendero Midstream in July 2022
About Crestwood
Crestwood Equity Partners LP, (NYSE: CEQP) is a publicly traded masterDelaware limited partnership that owns(the “Partnership”, “CEQP”, “we”, “us”, or “our”), entered into an Agreement and operates midstream assets located primarilyPlan of Merger (the “merger agreement”) with Energy Transfer LP (“Energy Transfer”), Pachyderm Merger Sub LLC, a direct wholly owned subsidiary of Energy Transfer (“Merger Sub”), and, solely for the purposes of Sections 2.1(a), 2.1(b), 2.1(c) and 5.21 thereof, LE GP, LLC, pursuant to which the Partnership will merge with and into Merger Sub (the “merger”), with Merger Sub surviving the merger as a direct wholly owned subsidiary of Energy Transfer. If the merger is completed, each Preferred Unit (as defined below) outstanding immediately prior to the effective time of the merger will, at the election of the holder of such Preferred Units, in accordance with the Partnership Agreement (as defined below), either (i) convert into Common Units (as defined below) at the then-applicable Conversion Ratio (as defined in the Williston Basin,Crestwood Partnership Agreement, currently one Crestwood common unit for 10 Crestwood preferred units), subject to the payment of any accrued but unpaid distributions prior to the effective time of the merger, (ii) convert into a new Energy Transfer security that has substantially similar terms, including with respect to economics and structural protections, as the Preferred Units, as such Preferred Unit terms may be amended if the requisite consents are obtained in connection with this consent solicitation or (iii) be redeemed in exchange for cash or Common Units, at the sole discretion of the Managing General Partner, at a price of (x) $9.218573 per Preferred Unit or (y) if the requisite consents are obtained in this consent solicitation, $0.182546 per Preferred Unit, in each case, plus accrued and unpaid distributions to the date of such redemption. If no election is made by a holder of our Preferred Units, such holder will be deemed to have elected to receive the new Energy Transfer securities. We have agreed to cause the Managing General Partner to elect to pay cash for any Preferred Units whose holders have elected to have such Preferred Units redeemed as described in clause (iii) above. Holders of our Preferred Units that receive our Common Units pursuant to the foregoing clause (i) will be entitled to receive 2.07 common units of Energy Transfer, each representing a limited partner interest in Energy Transfer, in exchange for each such Common Unit at the effective time of the merger.
In connection with the merger and at the direction of Energy Transfer, pursuant to the merger agreement, the Partnership and Crestwood Equity GP LLC, a Delaware Basinlimited liability company acting in its capacity as managing general partner of the Partnership (the “Managing General Partner”), are conducting a consent solicitation (the “Consent Solicitation”) pursuant to which we are soliciting consents (“Consents”) from the holders (“Preferred Holders”) of the Partnership’s issued and Powder River Basin. Our operationsoutstanding Preferred Units representing limited partner interests (the “Preferred Units”) to approve an amendment of the Partnership’s Sixth Amended and financialRestated Agreement of Limited Partnership, effective as of August 20, 2021 (the “Partnership Agreement”), as such amendment is set forth on Annex A to this Consent Solicitation Statement (the “Proposed Amendment”).
If the Proposed Amendment is approved by the requisite holders of Preferred Units, the consideration you may elect to receive in the merger, as a holder of Preferred Units, will be affected in the following ways: (a) if you elect to receive a new security of Energy Transfer, such security will have terms reflecting the Proposed Amendment, and (b) if you make a cash redemption election, the cash redemption price will increase from $9.218573 to $9.857484 per Preferred Unit. We will announce the results are divided into three segments that include Gathering & Processing North, Gathering & Processing South and Storage & Logistics.of the consent solicitation as promptly as possible following the Expiration Date (as defined below), which announcement is anticipated to be at least 10 days before the deadline to make a merger consideration election for your Preferred Units, assuming the Expiration Date is not extended.
The Proposed Amendment would amend Section 5.8 of the Partnership Agreement as follows:
| 1. | Section 5.8(e)(ii)(D) of the Partnership Agreement provides holders the right to have Preferred Units redeemed at a price equal to 101% of the Preferred Unit Price (as defined in the Partnership Agreement) in the event of a Change of Control (other than a Cash COC Event) (as such terms are defined in the Partnership Agreement). The Proposed Amendment would permit us to increase the redemption price payable to holders making a cash redemption election pursuant to Section 5.8(e)(ii)(D) of the Partnership Agreement in connection with the merger from 101% of the Preferred Unit Price (or $9.218573 per Preferred Unit) to 108% of the Preferred Unit Price (or $9.857484 per Preferred Unit); |
| 2. | Section 5.8(c)(i) of the Partnership Agreement provides that in the event the Partnership fails to pay in full in cash any distribution (or portion thereof) which a Preferred Holder is entitled to receive for a quarter under the Partnership Agreement, (i) then the Preferred Unit Distribution Amount (as defined in the Partnership Agreement) for the immediately following quarter will be $0.2567 per quarter (the “Deficiency Rate”) and (ii) any accrued and unpaid distributions will increase at a rate of 2.8125% per quarter. The Proposed Amendment would eliminate the application of (a) the Deficiency Rate with respect to distributions payable to the Preferred Holders during any quarter in which distributions are accrued and unpaid and (b) the 2.8125% rate of increase per quarter to any accrued and unpaid distributions; |
KEY CORPORATE HIGHLIGHTS
| 3. | Section 5.8(c)(i) of the Partnership Agreement provides that each Preferred Unit is entitled to share in any special distributions by the Partnership of cash, securities or other property pro rata with the Partnership’s common units (the “Common Units”) as if the Preferred Units had converted into Common Units. Special distributions do not include regular quarterly distributions paid in the normal course pursuant to the Partnership Agreement, so long as such distributions are not in excess of 130% of the quarterly distribution rate for the prior quarter. The Proposed Amendment would provide Preferred Holders the right to receive (and share pro rata with holders of Common Units in) any portion of any quarterly cash distribution made in the normal course to holders of Common Units that is in excess of an amount that is the greater of (i) the amount of the highest previously paid quarterly cash distribution after the date of the merger and (ii) the amount equal to 115% of the quarterly cash distribution for the immediately preceding quarter; and |
| 4. | Section 5.8(d) of the Partnership Agreement provides that Preferred Holders are entitled to vote as a separate class on any matter that adversely affects the rights, powers, privileges or preferences of the Preferred Units in relation to other classes of Partnership Interests (as defined in the Partnership Agreement). The affirmative vote of a majority of the Preferred Units is required to approve such matters, except that the affirmative vote of two-thirds of the Preferred Units is required (such applicable threshold, the “Voting Threshold”) to approve matters (i) that alter the rights and obligations of the Preferred Units in any material respect, increase or decrease the authorized number of Preferred Units, or otherwise adversely affect the Preferred Units or (ii) when the three largest Preferred Holders collectively own two-thirds of the Preferred Units or certain of our initial Preferred Holders own at least 35% of the Preferred Units. Section 5.8(d) of the Partnership Agreement also provides that the Partnership may, without the affirmative vote of two-thirds of the Preferred Units, create and issue Junior Securities (as defined in the Partnership Agreement) and Parity Securities (as defined in the Partnership Agreement) in an unlimited amount, with respect to Junior Securities, and, with respect to Parity Securities, in an amount not to exceed $300 million in aggregate face value and that shall not be convertible into more than 48,125,000 Common Units, subject to certain restrictions set forth in the Partnership Agreement. The Proposed Amendment would conform the voting rights of Preferred Holders to the voting rights of holders of Energy Transfer’s other outstanding series of preferred units by (a) eliminating the right of Preferred Holders to vote together, on an as-converted basis, with the Common Units as a single class, (b) providing that the affirmative vote of holders of at least two-thirds of the outstanding Preferred Units, voting as a separate class, is required to adopt any amendment to the Partnership Agreement that the Managing General Partner determines would have a material and adverse effect on the rights of the Preferred Units, and (c) providing that the affirmative vote of holders of at least two-thirds of the outstanding Preferred Units, voting together as a class with other parity securities, is required to (1) create or issue any Parity Securities if cumulative distributions on the Preferred Units are in arrears or (2) create or issue any Senior Securities (as defined in the Partnership Agreement). |
The foregoing is only a summary of the Proposed Amendment. You are urged to read the full text of the Proposed Amendment, which is set forth in Annex A.
If the Requisite Consents (as defined below) are received by the Tabulation Agent (as defined below) through The Depository Trust Company’s (“DTC”) Automated Tender Offer Program (“ATOP”) (and not revoked) at or prior to 5:00 p.m., Eastern Time, on October 17, 2023 (as may be earlier concluded, terminated or extended, the “Expiration Date”), and the Merger Conditions (as described below) are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated, then:
the Partnership will, as promptly as practicable after, and only if, the Merger Conditions are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated, pay to the Preferred Holders from whom properly submitted Consents are received by the Tabulation Agent through ATOP on or prior to the Expiration Date (the “Consenting Holders”) a fee in cash (the “Consent Fee”) equal to $0.182546 for each Preferred Unit with respect to which consents are received (and not revoked) on or prior to the Expiration Date;
the Managing General Partner will execute a First Amendment to the Partnership Agreement (the “First Amendment”), which will contain the Proposed Amendment;
the Proposed Amendment will become effective immediately upon execution of the First Amendment by the Managing General Partner, which is anticipated to be immediately prior to the closing of the merger (the time of such execution, the “Effective Time”); and
in connection with the closing of the merger, (i) Preferred Holders making a redemption election in connection with the consideration they receive in the merger would receive such cash redemption price as increased pursuant to the First Amendment and (ii) Preferred Holders electing to receive a new security of Energy Transfer (“ET Preferred Units”) with substantially similar terms as the Preferred Units as consideration in the merger will receive ET Preferred Units with terms reflecting the First Amendment.
Once the First Amendment is executed by the Managing General Partner, the Partnership Agreement will be amended by the First Amendment, and the Partnership Agreement as so amended shall be in effect until the closing of the merger.
If the Requisite Consents are received by the Tabulation Agent through ATOP (and not revoked) at or prior to the Expiration Date and the Merger Conditions are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated, then upon the Effective Time, the First Amendment will become effective and all holders of the Preferred Units will be bound by the terms and conditions of the Partnership Agreement as so amended by the First Amendment until the closing of the merger (i.e., the Partnership Agreement, inclusive of the Proposed Amendment, will govern the terms of the Preferred Units held by all holders and their transferees, regardless of whether such holders have consented to the Proposed Amendment). If the Requisite Consents are received but the Merger Conditions are not satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated then the First Amendment will not become effective and the Consent Fee will not be paid. Receipt of the Requisite Consents is not a Merger Condition.
We have established the close of business on September 22, 2023 as the record date (the “Record Date”) for determining those Preferred Holders entitled to submit Consents with respect to the Proposed Amendment. For the Proposed Amendment to be approved, Consents must be received by the Tabulation Agent through ATOP from holders of at least two-thirds of the issued and outstanding Preferred Units.
To be counted, your properly submitted Consent must be received by the Tabulation Agent on or before the Expiration Date, subject to earlier conclusion, termination or extension of the Expiration Date at the discretion of the Managing General Partner. CONSENTS MAY BE REVOKED IN ACCORDANCE WITH THE TERMS AND CONDITIONS SET FORTH HEREIN AT ANY TIME PRIOR TO THE EXPIRATION DATE, BUT NOT THEREAFTER.
In addition, separately from the solicitation of consents pursuant to this Consent Solicitation Statement, we will be soliciting votes from holders of Common Units and Preferred Holders (collectively, “Crestwood unitholders”) to approve the completion of the merger (the “Merger Approvals”). Such solicitation will be conducted by the Partnership pursuant to a separate proxy statement on Schedule 14A (the “Merger Proxy Statement”). The preliminary Merger Proxy Statement is contained in the Registration Statement on Form S-4 (File No. 333-274526), filed by Energy Transfer with the U.S. Securities and Exchange Commission (the “SEC”) on September 27, 2023 (the “Merger S-4”). Following effectiveness of the Merger S-4, the Partnership will file and mail the definitive Merger Proxy Statement to the Crestwood unitholders. The merger is subject to a number of conditions to closing as specified in the merger agreement (the “Merger Conditions”). The Merger Conditions include, among others, (i) approval of a proposal to approve and adopt the merger agreement by Crestwood unitholders, (ii) the absence of any legal order preventing consummation of the merger, (iii) the expiration or termination of any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iv) receipt of legal opinions regarding certain tax-related matters, (v) the absence of a material adverse effect on Energy Transfer or the Partnership, and (vi) the Merger S-4 having been declared effective under the Securities Act of 1933 and no stop order suspending the effectiveness of such registration statement having been issued by the SEC, nor proceedings seeking a stop order having been initiated or threatened by the SEC. If the merger is completed, each Preferred Unit outstanding immediately prior to the effective time of the merger will, at the election of the Preferred Holder, in accordance with the Partnership Agreement then in effect, (i) convert into Common Units at the then-applicable Conversion Ratio, subject to the payment of any accrued but unpaid distributions prior to such merger effective time, (ii) convert into a new Energy Transfer security that has substantially similar terms, including with respect to economics and structural protections, as the Preferred Units, as such Preferred Unit terms may be amended if the Requisite Consents are obtained in connection with this Consent Solicitation or (iii) be redeemed in exchange for cash or Common Units, at the sole discretion of the Managing General Partner at a price of (x) $9.218573 per Preferred Unit or (y) if the Requisite Consents are obtained in this Consent Solicitation, $9.857484 per Preferred Unit, in each case, plus accrued and unpaid distributions to the date of such redemption. If no election is made by a holder of Preferred Units,such holder will be deemed to have elected to receive new ET Preferred Units. The Partnership has agreed to cause the Managing General Partner to elect to pay cash for any Preferred Units whose holders have elected to have such Preferred Units redeemed as described in clause (iii) above.
We urge you to read the definitive Merger Proxy Statement as it contains important information about the merger, the terms of the ET Preferred Units to be issued to those preferred unitholders who elect to receive such preferred units in the merger, the risks inherent in owning such preferred units, the Merger Conditions, the special meeting of unitholders to be held for the purpose of obtaining the Merger Approvals, and how to make an election regarding the consideration to be received in the merger. All questions and inquiries regarding the merger should be directed in accordance with the instructions set out in the definitive Merger Proxy Statement.
The Preferred Units trade on the New York Stock Exchange under the symbol “CEQP-P.” The total number of Preferred Units issued and outstanding at September 22, 2023 was 71,257,445. On September 22, 2023, the closing price of the Preferred Units was $9.57 per Preferred Unit.
See “Risk Factors” beginning on page 8 for a discussion of risks that you should consider with respect to the Consent Solicitation.
THE CONSENT SOLICITATION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION, OR THE SIMILAR COMMISSION OR GOVERNMENTAL AGENCY OF ANY FOREIGN JURISDICTION, NOR HAS THE SEC, ANY STATE SECURITIES COMMISSION, OR THE SIMILAR COMMISSION OR GOVERNMENTAL AGENCY OF ANY FOREIGN JURISDICTION DETERMINED WHETHER THE INFORMATION IN THIS CONSENT SOLICITATION STATEMENT IS TRUTHFUL OR COMPLETE. NONE OF THE SEC, ANY STATE SECURITIES COMMISSION, OR ANY SIMILAR COMMISSION OR GOVERNMENTAL AGENCY OF ANY FOREIGN JURISDICTION HAS PASSED UPON THE MERITS OR FAIRNESS OF THE CONSENT SOLICITATION, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE CONTAINED IN THIS CONSENT SOLICITATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We have appointed D.F. King & Co., Inc. as information agent (the “Information Agent”) and the tabulation agent (the “Tabulation Agent” and in both such capacities, the “Information and Tabulation Agent”) in connection with the Consent Solicitation. Its address appears on the back cover of this Consent Solicitation Statement. The Information and Tabulation Agent makes no recommendation as to whether Preferred Holders should deliver Consents in response to the Consent Solicitation.
Requests for assistance in submitting Consents, or for additional copies of this Consent Solicitation Statement, should be directed to the Information Agent. Similarly, questions concerning the terms of the Consent Solicitation should be directed to the Information Agent. The Information and Tabulation Agent’s contact information is set forth on the back cover of this Consent Solicitation Statement.
The Partnership will pay registered brokers and dealers in the United States that deliver consents in the Consent Solicitation from DTC participants and persons resident in the United States (the “Retail SolicitingDealers”) retail soliciting fees. Each Retail Soliciting Dealer that successfully delivers Consents from a retail beneficial owner of the Preferred Units will be eligible to receive a fee (the “Retail Soliciting Fee”) from the Partnership equal to $0.0456365 per Preferred Unit for which a Consent is validly delivered and not revoked by or on behalf of such retail beneficial owner, except for any Preferred Units for which Consents are delivered by a Retail Soliciting Dealer for its own account. The Retail Soliciting Fee will only be paid to each Retail Soliciting Dealer in respect of beneficial owners who deliver Consents in respect of Preferred Units in an aggregate amount of 25,000 Preferred Units or fewer.
The Solicitation Agent for the Consent Solicitation is:
BofA Securities
The date of this Consent Solicitation Statement is September 27, 2023 and is first being mailed to the Preferred Holders on or about September 27, 2023.
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The Proposed Amendment constitutes a single proposal for purposes of this Consent Solicitation, and a consenting Preferred Holder may only consent to the Proposed Amendment in its entirety and may not consent selectively. The Consent Solicitation is being made upon the terms and subject to the conditions contained in this Consent Solicitation Statement. The Record Date for purposes of the Consent Solicitation is the close of business on September 22, 2023. In the sole discretion of the Managing General Partner, however, we may establish a new date that, when chosen, will be deemed to be the “Record Date” for purposes of the Consent Solicitation. Only Preferred Holders on the Record Date will be entitled to consent to the Proposed Amendment. For purposes of book-entry Preferred Units, only the DTC participants (“DTC Participants”) listed on the official DTC position listing as of the Record Date will be entitled to execute the Consent as the registered holder thereof. When we refer to this “Consent Solicitation Statement,” we are referring not only to this Consent Solicitation Statement, but also to the exhibits and other documents that we refer to in, and incorporate by reference into, this document.
In making your decision, you should rely only on the information contained in this Consent Solicitation Statement or the definitive Merger Proxy Statement or information incorporated herein or therein by reference. We have not, and the Information and Tabulation Agent has not, authorized anyone to provide you with any different or supplemental information. If you receive any such information, you should not rely on it. You should not assume that the information in this Consent Solicitation Statement is accurate as of any date other than the date on the cover page or that information we have incorporated by reference is accurate as of any date other than the date of the document incorporated by reference. The delivery of this Consent Solicitation Statement shall not, under any circumstances, create any implication that the information contained in it is correct as of any time subsequent to the date on the cover page or that there has been no change in the information contained in, or incorporated by reference into, this Consent Solicitation Statement. By delivering your Consent to the Tabulation Agent, you represent that you are consenting to the Proposed Amendment based solely on the information contained in, or incorporated by reference into, this Consent Solicitation Statement and your own examination of it and the terms of the Proposed Amendment.
The contents of this Consent Solicitation Statement should not be construed as legal, business, or tax advice. You should consult your own attorney, business advisor, and tax advisor as to those matters. This Consent Solicitation Statement does not constitute a solicitation of Consents in any jurisdiction in which, or to or from any person to or from whom, it is unlawful to make the Consent Solicitation. Persons who receive this Consent Solicitation Statement must inform themselves about and observe any applicable restrictions on the distribution and solicitation of Consents.
This Consent Solicitation Statement is not an offer to purchase securities nor is it a solicitation of Consents from Preferred Holders, nor will Consents be accepted from or on behalf of such Preferred Holders, in any jurisdiction in which, or to or from any person to or from whom, it is unlawful to make such a consent solicitation under applicable securities or “blue sky” laws.
DO NOT FOR ANY REASON DELIVER YOUR PREFERRED UNITS TO US, THE MANAGING GENERAL PARTNER, OR THE INFORMATION AND TABULATION AGENT AT THIS TIME.
CRESTWOOD’S COMMITMENT TO EXCELLENCE
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Notice of 2022 Annual Meeting of
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By Order of the Board of Directors,
Robert G. Phillips
Founder, Chairman and Chief Executive Officer
Houston, Texas
March 31, 2023
Important Notice Regarding the Availability of Proxy Materials for the Crestwood Equity
Partners LP Unitholder Meeting to be Held on May 11, 2023. The Proxy
Certain information set forth in this Consent Solicitation Statement and documents incorporated herein by reference may contain forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our 2022future plans, strategies, and expectations, can generally be identified by the use of forward-looking terms such as “believe,” “expect,” “may,” “will,” “should,” “could,” “would,” “seek,” “intend,” “plan,” “goal,” “project,” “estimate,” “anticipate” “strategy,” “future,” “likely” or other comparable terms and references to future periods. All statements other than statements of historical facts included in this Consent Solicitation Statement and documents incorporated herein by reference regarding our strategies, prospects, financial condition, operations, costs, plans, and objectives are forward-looking statements.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans, and strategies, projections, anticipated events, and trends, the economy, and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Important factors that could cause our actual results, financial condition, or intentions to take certain corporate actions to differ materially from those indicated in the forward-looking statements include, in addition to those described in the “Risk Factors” and in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections in our Annual Report on Form 10-K are for the fiscal year ended December 31, 2022, the inability to secure the Requisite Consents for the Proposed Amendment, market conditions, and potential litigation challenging the Proposed Amendment. In addition, the merger is subject to (i) the satisfaction or waiver of the Merger Conditions, as applicable, by the parties to the merger agreement and the absence of events that could give rise to the termination of the merger agreement, (ii) the possibility that the merger does not close, (iii) risks that the proposed merger disrupts current plans and operations and business relationships or poses difficulties in attracting or retaining employees, (iv) the possibility that the costs or difficulties related to the integration of the Partnership and Energy Transfer will be greater than expected and (v) the possibility that the anticipated benefits from the merger cannot or will not be fully realized.
Any forward-looking statement in this Consent Solicitation Statement or any document incorporated herein by reference is based only on information currently available at www.proxydocs.com/CEQPto us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral that may be made from time to time, whether as a result of new information, future developments, or otherwise, except as may be required under applicable law. You should read this Consent Solicitation Statement completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
THIS CONSENT SOLICITATION STATEMENT (INCLUDING THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN) CONTAINS IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE CONSENT SOLICITATION.
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Summary
This summary highlights some information about us and this ProxyConsent Solicitation Statement. It may not contain all of the information that is important to you. You should read this ProxyConsent Solicitation Statement in its entirety together with the definitive Merger Proxy Statement and the more detailed information found in the documents we file with the SEC, including those listed under the heading “Incorporation of Documents by Reference.” You should assume that the information in this ProxyConsent Solicitation Statement is accurate only as of the date of this ProxyConsent Solicitation Statement, or, in the case of documents we previously filed with the SEC and incorporated by reference, as of the date of those documents. Our business, financial condition, results of operations, and prospects may have changed since those dates. In this Proxy Statement, unless specifically noted otherwise, “we,” “us”, “our,”
About the “Company”Partnership
The Partnership, a Delaware limited partnership formed in March 2001, is a master limited partnership that develops, acquires, owns or the “Partnership” refer to Crestwood Equity Partners LPcontrols, and its subsidiaries.
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Summary
Integrated Approach to Risk Management
Crestwood is committed to enterprise risk management practices that are inclusive of all disciplinesoperations within the organizationenergy midstream sector. Headquartered in Houston, Texas, we provide broad-ranging infrastructure solutions across the value chain to service premier liquids-rich natural gas and support our goalcrude oil shale plays across the United States. We own and operate a diversified portfolio of shaping ESG in the midstream sector.
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Summary
Corporate Governance Highlights
We remain committed to strong corporate governancenatural gas liquids, crude oil, natural gas, and we demonstrate our corporate responsibility by adhering to the highest ethical standards. Crestwood’s policiesproduced water gathering, processing, storage, disposal, and transportation assets that connect fundamental energy supply with energy demand across North America. Our Common Units are designed to promote exceptional business behavior with a commitment to transparency.
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Board Composition
Mix of director tenure, skills and background provides a balance of experience and institutional knowledge with fresh perspectives
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| 89% | INDEPENDENT DIRECTORS | 33% | WOMEN DIRECTORS | 44% | THREE YEARS OR LESS TENURE | |||||
(100% independent directors on all Board committees) | 22% | RACIAL AND ETHNIC GROUP REPRESENTATION | ||||||||
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Table of Contents
This document includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current facts, including statements regarding our environmental and other sustainability plans and goals, made in this document are forward-looking. We use words such as anticipates, believes, expects, future, intends, and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons. Risks and uncertainties that could cause our actual results to differ significantly from management’s expectations are described in our 2022 Annual Report on Form 10-K. Website references throughout this document are provided for convenience only, and the contentlisted on the referenced websites is not incorporated by reference into this document.
Annual Meeting Information
General
The enclosed proxy is solicited byNYSE under the Board of Directors of the General Partner for the Annual Meeting of Unitholders to be held at 2:00 p.m., Central Time, on May 11, 2023,symbol “CEQP” and any adjournment or postponement thereof. We will conduct a virtual online Annual Meeting, so our unitholders can participate from any geographic location with Internet connectivity. We believe this enhances accessibility to our Annual Meeting for all our unitholders and employees. Unitholders may participate in the Annual Meeting by registering at www.proxydocs.com/CEQP and entering the control numberPreferred Units are listed on your Notice of Internet Availability of Proxy Materials, proxy card, or voting instruction form,and may submit questions during, or in advance, of the Annual Meeting. NYSE under the symbol “CEQP-P.”
Our principal executive office is located at 811 Main Street, Suite 3400, Houston, Texas 77002. This proxy statement77002, and our telephone number is first being made available(832) 519-2200. Our website address is https://www.crestwoodlp.com. The information on our website is not part of this Consent Solicitation Statement.
Purpose of the Consent Solicitation
On August 16, 2023, the Partnership and Energy Transfer, among other parties, entered into the merger agreement, pursuant to our unitholderswhich the Partnership will merge with and into Merger Sub, with Merger Sub surviving the merger as a direct wholly owned subsidiary of Energy Transfer. In connection with the merger and at the direction of Energy Transfer, pursuant to the merger agreement, the Partnership and the Managing General Partner are soliciting Consents from the Preferred Holders to approve the amendment of the Partnership Agreement as set forth in the Proposed Amendment contained in Annex A to this Consent Solicitation Statement. The purpose of the Consent Solicitation is to (i) increase the cash redemption price for the Preferred Units in connection with a cash redemption election in the merger, and (ii) conform certain terms of the Preferred Units with Energy Transfer’s other outstanding series of preferred units in order to simplify Energy Transfer’s capital structure following the merger. The Proposed Amendment would amend Section 5.8 of the Partnership Agreement as follows:
| 1. | Section 5.8(e)(ii)(D) of the Partnership Agreement provides holders the right to have Preferred Units redeemed at a price equal to 101% of the Preferred Unit Price in the event of a Change of Control (other than a Cash COC Event). The Proposed Amendment would permit us to increase the redemption price payable to holders making a cash redemption election pursuant to Section 5.8(e)(ii)(D) of the Partnership Agreement in connection with the merger from 101% of the Preferred Unit Price (or $9.218573 per Preferred Unit) to 108% of the Preferred Unit Price (or $9.857484 per Preferred Unit); |
| 2. | Section 5.8(c)(i) of the Partnership Agreement provides that in the event the Partnership fails to pay in full in cash any distribution (or portion thereof) which a Preferred Holder is entitled to receive for a quarter under the Partnership Agreement, (i) then the Preferred Unit Distribution Amount for the immediately following quarter will be the Deficiency Rate and (ii) any accrued and unpaid distributions will increase at a rate of 2.8125% per quarter. The Proposed Amendment would eliminate the application of (a) the Deficiency |
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| Rate with respect to distributions payable to the Preferred Holders during any quarter in which distributions are accrued and unpaid and (b) the 2.8125% rate of increase per quarter to any accrued and unpaid distributions; |
| 3. | Section 5.8(c)(i) of the Partnership Agreement provides that each Preferred Unit is entitled to share in any special distributions by the Partnership of cash, securities or other property pro rata with the Partnership’s Common Units as if the Preferred Units had converted into Common Units. Special distributions do not include regular quarterly distributions paid in the normal course pursuant to the Partnership Agreement, so long as such distributions are not in excess of 130% of the quarterly distribution rate for the prior quarter. The Proposed Amendment would provide Preferred Holders the right to receive (and share pro rata with holders of Common Units in) any portion of any quarterly cash distribution made in the normal course to holders of Common Units that is in excess of an amount that is the greater of (i) the amount of the highest previously paid quarterly cash distribution after the date of the merger and (ii) the amount equal to 115% of the quarterly cash distribution for the immediately preceding quarter; and |
| 4. | Section 5.8(d) of the Partnership Agreement provides that Preferred Holders are entitled to vote as a separate class on any matter that adversely affects the rights, powers, privileges or preferences of the Preferred Units in relation to other classes of Partnership Interests. The current Voting Threshold provides that the affirmative vote of a majority of the Preferred Units is required to approve such matters, except that the affirmative vote of two-thirds of the Preferred Units is required to approve matters (i) that alter the rights and obligations of the Preferred Units in any material respect, increase or decrease the authorized number of Preferred Units, or otherwise adversely affect the Preferred Units or (ii) when the three largest Preferred Holders collectively own two-thirds of the Preferred Units or certain of our initial Preferred Holders own at least 35% of the Preferred Units. Section 5.8(d) of the Partnership Agreement also provides that the Partnership may, without the affirmative vote of two-thirds of the Preferred Units, create and issue Junior Securities and Parity Securities in an unlimited amount, with respect to Junior Securities, and, with respect to Parity Securities, in an amount not to exceed $300 million in aggregate face value and that shall not be convertible into more than 48,125,000 Common Units, subject to certain restrictions set forth in the Partnership Agreement. The Proposed Amendment would conform the voting rights of Preferred Holders to the voting rights of holders of Energy Transfer’s other outstanding series of preferred units by (a) eliminating the right of Preferred Holders to vote together, on an as-converted basis, with the Common Units as a single class, (b) providing that the affirmative vote of holders of at least two-thirds of the outstanding Preferred Units, voting as a separate class, is required to adopt any amendment to the Partnership Agreement that the Managing General Partner determines would have a material and adverse effect on the rights of the Preferred Units, and (c) providing that the affirmative vote of holders of at least two-thirds of the outstanding Preferred Units, voting together as a class with other parity securities, is required to (1) create or issue any Parity Securities if cumulative distributions on the Preferred Units are in arrears or (2) create or issue any Senior Securities. |
If the First Amendment becomes operative in connection with the closing of the merger, (i) Preferred Holders making a redemption election in connection with the consideration they receive in the merger would receive such cash redemption price as increased pursuant to the First Amendment and (ii) Preferred Holders electing to receive ET Preferred Units with substantially similar terms as the Preferred Units as consideration in the merger will receive such ET Preferred Units with terms reflecting the First Amendment. We will announce the results of the consent solicitation as promptly as possible following the Expiration Date, which announcement is anticipated to be at least 10 days before the deadline to make a merger consideration election for your Preferred Units, assuming the Expiration Date is not extended.
Requisite Consents
The adoption of the Proposed Amendment requires the consent of Preferred Holders holding at least two-thirds of the issued and outstanding Preferred Units as of the Record Date (the “Requisite Consents”). See “The Consent Solicitation—Requisite Consents.”
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How to Consent
Preferred Holders who wish to consent to the Proposed Amendment must deliver their properly submitted Consent in accordance with DTC’s ATOP procedures so that it is received on or about March 31, 2023. Referencesbefore the Expiration Date. Do not, for any reason, deliver your Preferred Units to “the Company,” “the Partnership,” “CEQP,” “we,” “us,” “our,” “ours”us, the Managing General Partneror the Information and similar terms referTabulation Agent at this time and do not deliver the Consent to Crestwood Equity Partners LP.any person other than as specified in DTC’s ATOP procedures. See “The Consent Solicitation—How to Consent.”
Outstanding SecuritiesExpiration Date
The Expiration Date is 5:00 p.m., Eastern Time, on October 17, 2023, unless earlier concluded, terminated or extended as provided for in this Consent Solicitation Statement. We may conclude the Consent Solicitation at the earlier of the Expiration Date or the date on which the Tabulation Agent has received the Requisite Consents.
Consent Fee
If the Requisite Consents are received by the Tabulation Agent through ATOP (and not revoked) at or prior to the Expiration Date and Quorum
Onlythe Merger Conditions are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated, then the Partnership will, as promptly as practicable after, and only if, the Merger Conditions are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated, pay to the Consenting Holders from whom properly submitted Consents are received by the Tabulation Agent on or prior to the Expiration Date a Consent Fee equal to $0.182546 for each Preferred Unit with respect to which consents are received (and not revoked) on or prior to the Expiration Date. No Consent Fee will be paid with respect to any Preferred Units for which no Consent is delivered on or prior to the Expiration Date, even though the Proposed Amendment, if approved, will bind all holders of recordsuch Preferred Units and their transferees upon the effectiveness of our common unitsthe Proposed Amendment.
Conditions to the Consent Solicitation
The Proposed Amendment will not become operative unless and preferred units (collectively, “Units”) atuntil the closeRequisite Consents are obtained and the Merger Conditions are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated. If the Requisite Consents are received but the Merger Conditions are not satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated, the First Amendment will not become effective and the Consent Fee will not be paid. Receipt of businessthe Requisite Consents is not a Merger Condition. See “The Consent Solicitation—Conditions to the Consent Solicitation.”
Revocation of Consents
Prior to the Consent Effective Date (as defined below), any Preferred Holder may revoke any Consent given as to its Preferred Units or any portion of such Preferred Units. Only a Preferred Holder on March 15, 2023, the record date,Record Date may deliver a Consent or revoke any Consent previously delivered by such Preferred Holder. Any person or entity that becomes a holder of the Preferred Units after the Record Date will not have the authority to deliver a Consent to the Proposed Amendment or to revoke any Consent previously delivered by a Preferred Holder relating to the Preferred Units held by the subsequent holder. Preferred Holders who wish to exercise their right of revocation with respect to a Consent must give a properly transmitted “Requested Message” through ATOP, which must be received by the Tabulation Agent through ATOP, prior to the Consent Effective Date. See “The Consent Solicitation—Record Date” and “The Consent Solicitation—Revocation of Consents.”
Appraisal Rights
You will not be entitled to rights of an objecting unitholder or appraisal rights under Delaware law in connection with the Proposed Amendment or this Consent Solicitation. See “The Consent Solicitation—No Appraisal Rights.”
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NYSE Listing of ET Units
It is a condition to the closing of the merger that the ET Common Units (as defined below) and new ET Preferred Units to be issued in the merger to Preferred Holders be approved for listing on the NYSE, subject to official notice of and to vote at,issuance. Although the Annual Meeting. Onmerger agreement requires that date, we had 105,354,037 common units outstanding and 71,257,445preferred units outstanding and entitled to vote. Each common unit is entitled to one vote for each director nominee and one vote for each other itemnew ET Preferred Units issued in connection with the merger be listed on the NYSE, there can be no assurance that such new ET Preferred Units will continue to be voted on atlisted in the Annual Meeting. Each preferred unitholder is entitledfuture.
Additional Information
Requests for assistance in submitting the Consent, or for additional copies of this Consent Solicitation Statement, should be directed to vote on a 1-for-10 as converted basis with every ten preferred units entitled to one vote for each director nominee and one vote for each other item to be voted on at the Annual Meeting. A majorityInformation Agent. Similarly, questions concerning the terms of the aggregate outstanding UnitsConsent Solicitation should be directed to the Information Agent. The Information and Tabulation Agent’s contact information appears on the back cover of this Consent Solicitation Statement. The Information and Tabulation Agent makes no recommendation as to whether Preferred Holders should deliver Consents in response to the Consent Solicitation.
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QUESTIONS AND ANSWERS ABOUT THE CONSENT SOLICITATION
The following are some questions regarding the Consent Solicitation that you may have as a Preferred Holder and the answers to those questions. We urge you to read carefully the entire Consent Solicitation Statement, including the section entitled to vote, present or represented by proxy, constitutes a quorum for the transaction of business at the Annual Meeting. Abstentions and broker nonvotes will be included in determining the presence of a quorum for the Annual Meeting.
Internet Availability of Proxy Materials
We are furnishing proxy materials to some of our unitholders via the Internet by mailing a Notice of Internet Availability of Proxy Materials, instead of mailing or e-mailing copies of those materials. The Notice of Internet Availability of Proxy Materials directs unitholders to a website where they can access our proxy materials, including our Proxy Statement“Risk Factors” and our Annual Report on Form 10-K for the year ended December 31, 2022 and view instructions on how to vote viaany subsequent quarterly or current reports filed with the Internet, mobile device, or by telephone. If you received a Notice of Internet Availability of Proxy Materials and would prefer to receive a paper copy of our proxy materials, please follow the instructions includedSEC. Additional important information is contained in the Noticeremainder of Internet Availabilitythis Consent Solicitation.
What is the purpose of Proxy Materials. If you have previously electedthe Consent Solicitation?
As announced on August 16, 2023, the Partnership entered into a definitive merger agreement with Energy Transfer pursuant to receive our proxy materials via e-mail, youwhich Energy Transfer will continue to receive access to those materials electronically unless you elect otherwise.
We encourage you to register to receive all future unitholder communications electronically, insteadacquire the Partnership. In connection with the merger, at the direction of in print. This means that accessEnergy Transfer pursuant to the Annual Report on Form 10-K, Proxy Statement,merger agreement, we are soliciting consents from Preferred Holders to approve the Proposed Amendment. The Proposed Amendment would, among other things, (i) permit us to increase the redemption price payable to Preferred Holders that make a cash redemption election in connection with the merger, (ii) eliminate the application of a Deficiency Rate with respect to distributions payable to the Preferred Holders during any quarter in which distributions are accrued and unpaid; (iii) modify the right of Preferred Holders to participate in special distributions made to holders of Common Units; and (iv) conform the voting rights of Preferred Holders to the voting rights of holders of Energy Transfer’s other correspondenceoutstanding series of preferred units. The purpose of the Consent Solicitation is to (i) increase the cash redemption price for the Preferred Units in connection with a cash redemption election in the merger, and (ii) conform certain terms of the Preferred Units with Energy Transfer’s other outstanding series of preferred units in order to simplify Energy Transfer’s capital structure following the merger.
If the Requisite Consents are obtained and the merger is completed, what will be deliveredPreferred Holders receive for their Preferred Units in the merger?
If the merger is completed, each Preferred Unit outstanding immediately prior to you via e-mail.
Proxy Voting
Units that are properly voted via the Internet, mobile device, or by telephone or for which proxy cards are properly executed and returnedeffective time of the merger will, be voted at the Annual Meetingelection of the Preferred Holder, in accordance with the directions givenPartnership Agreement, either (i) convert into Common Units at the then-applicable Conversion Ratio, subject to the payment of any accrued but unpaid distributions prior to the effective time of the merger, (ii) convert into a new Energy Transfer security that has substantially similar terms, including with respect to economics and structural protections, as the Preferred Units, as such Preferred Unit terms may be amended if the Requisite Consents are obtained in connection with this Consent Solicitation or (iii) be redeemed in exchange for cash or Common Units, at the absencesole discretion of directions,the Managing General Partner, at a price of (x) $9.218573 per Preferred Unit or (y) if the Requisite Consents are obtained in this Consent Solicitation, $9.857484 per Preferred Unit, in each case, plus accrued and unpaid distributions to the date of such redemption. If no election is made by a holder of Preferred Units, such holder will be voted in accordance withdeemed to have elected to receive new ET Preferred Units. The Partnership has agreed to cause the Board’s recommendations as follows: “FOR” the election of each of the nomineesManaging General Partner to the Board named herein; “FOR” the ratification of the appointment of our independent auditors; “FOR” approval, on
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an advisory basis, of our executive compensationelect to pay cash for any Preferred Units whose holders have elected to have such Preferred Units redeemed as described in this proxy statement and “FORclause (iii) above. Preferred Unitholders that receive Common Units of the amendmentPartnership pursuant to our 2018 Long-Term Incentive Plan. Itthe foregoing clause (i) will be entitled to receive 2.07 common units of Energy Transfer (the “ET Common Units”), each representing a limited partner interest in Energy Transfer, in exchange for each such Common Unit of the Partnership at the effective time of the merger. We will announce the results of the consent solicitation as promptly as possible following the Expiration Date, which announcement is anticipated to be at least 10 days before the deadline to make a merger consideration election for your Preferred Units, assuming the Expiration Date is not expected that anyextended. For additional matters will be brought before the Annual Meeting, but if other matters are properly presented, the persons named as proxies in the proxy card or their substitutes will vote in their discretion on such matters.
Voting via the Internet, mobile device, or by telephone helps save money by reducing postage and proxy tabulation costs. To vote by any of these methods, read this proxy statement, have your Notice of Internet Availability of Proxy Materials, proxy card, or voting instruction form in hand, and follow the instructions below for your preferred method of voting. Each of these voting methods is available 24 hours per day, seven days per week.
We encourage you to cast your vote by one of the following methods:
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The way your Units may be voted depends on how your Units are held. If you own Units of record, meaning that your Units are represented by certificates or book entries in your name so that you appear as a unitholder on the records of American Stock Transfer & Trust Company, LLC, our transfer agent, you may vote by proxy, meaning you authorize individuals named in the proxy card to vote your Units. You may provide this authorization by voting via the Internet, mobile device, by telephone, or (if you have received paper copies of our proxy materials) by returning a proxy card. You also may participate in and vote during the Annual Meeting. If you own Units of record and you do not vote by proxy or at the Annual Meeting, your Units will not be voted.
If you own Units in street name, meaning that your Units are held by a bank, brokerage firm, or other nominee, you may instruct that institutioninformation on how to vote your shares. You may provide these instructions by voting viamake an election regarding the Internet, mobile device, by telephone, or (if you haveconsideration to be received paper copies of proxy materials through your bank, brokerage firm, or other nominee) by returning a voting instruction form received from that institution. You also may participate in and vote during the Annual Meeting. If you own Units in street name and do not either provide voting instructions or vote duringmerger, please see the Annual Meeting, the institution that holds your Units cannot vote your Units at the Annual Meeting.definitive Merger Proxy Statement.
Voting Standard
A nominee for director shall be elected to the Board by a plurality of the votes cast, in person or by proxy, by the holders of outstanding Units, voting as a single class. The conversion ratio of preferred units to common unitsWhat consent threshold is currently 10-to-1, but may be adjusted to account for unpaid distributions on such preferred units as needed. Abstentions and broker nonvotes will have no effect on the outcome of the election. Broker non-votes occur when a person holding Units in street name, such as through a brokerage firm, does not provide instructions as to how to vote those common units and the broker does not then vote those Units on the unitholder’s behalf.
For all other matters proposed for a vote at the Annual Meeting, the affirmative vote of a majority of the outstanding Units present or represented by proxy and entitled to vote on the matter is
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Annual Meeting Information
required to approve the matter. Proposed Amendment?
For these matters, abstentions arethe Proposed Amendment to be approved, Consents must be received by the Tabulation Agent through ATOP at or prior to the Expiration Date (and not counted as affirmative votes on a matter but are counted as presentrevoked) from holders of at least two-thirds of the issued and entitled to vote, and broker nonvotes, if any,outstanding Preferred Units.
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If the Proposed Amendment is approved, when will have no effect on the outcome of these matters.
RevocationProposed Amendment become effective?
If you own Units of record, you may revoke your proxythe Requisite Consents are received by the Tabulation Agent through ATOP (and not revoked) at or change your voting instructions at any time before your Units are voted at the Annual Meeting by deliveringprior to the Expiration Date and the Merger Conditions are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated, the Managing General Partner will execute a written noticeFirst Amendment to the Partnership Agreement, which will contain the Proposed Amendment. The Proposed Amendment will become effective immediately upon execution of revocationthe First Amendment by the Managing General Partner, which is anticipated to be immediately prior to the closing of the merger.
If I do not approve the Proposed Amendment, but the Proposed Amendment is approved by the requisite number of Preferred Units, how will my Preferred Units be affected?
If the Requisite Consents are received by the Tabulation Agent through ATOP (and not revoked) at or a dulyprior to the Expiration Date, the Merger Conditions are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated, and the First Amendment is executed proxy (viaby the Internet, mobile device, or telephone or by returning a proxy card) bearing a later date or by participating in and voting during the Annual Meeting. A unitholder owning Units in street name may revoke or change voting instructions by contacting the bank, brokerage firm, or other nominee holding the Units or by participating in and voting during the Annual Meeting.
Participating in the Annual Meeting
This year’s Annual Meeting will be accessible through the Internet. We are conducting a virtual online Annual Meeting so our unitholders can participate from any geographic location with Internet connectivity. We believe this enhances accessibility to our Annual Meeting for all of our unitholders and employees.
You are entitled to participate in the Annual MeetingManaging General Partner, even if you weredo not approve the Proposed Amendment by submitting a unitholder asConsent, you will still be subject to and bound by the First Amendment until the closing of the close of business on March 15, 2023, the record date, or hold a valid proxy for the meeting. To participate in the Annual Meeting, including to vote and to view the list of registered unitholders as of the record date during the meeting, unitholders of record must access the meeting websitemerger, at www.proxydocs.com/CEQP and enter the control number found on the Notice of Internet Availability of Proxy Materials or on the proxy card provided to you with this Proxy Statement, or that is set forth within the body of the email sent to you with the link to this Proxy Statement. If your Units are held in street name and your Notice of Internet Availability of Proxy Materials or voting instruction form indicates that you may vote those common units through the www.proxypush.com/CEQP website, then you may access, participate in, and vote at the Annual Meeting with the control number indicated on that Notice of Internet Availability of Proxy Materials or voting instruction form. Otherwise, unitholders who hold their Units in street name should contact their bank, broker, or other nominee (preferably at least five days before the Annual Meeting) and obtain a “legal proxy” to be able to attend, participate in, or vote at the Annual Meeting.
Regardless of whether you plan to participate in the Annual Meeting, it is important that your Units be represented and voted at the Annual Meeting. Accordingly, we encourage you to vote in advance of the Annual Meeting.
Unitholders are able to submit questions for the Annual Meeting’s question and answer session during the meeting. Unitholders who have been provided or obtained a control number may submit a question in advance of the meeting at www.proxydocs.com/CEQP after logging in with that control number. We also will post a replay of the Annual Meeting on our investor relations website, which will be available following the meeting. Additional information regarding the rules and procedures for participating in the Annual Meeting (including any adjournment thereof) will be set forth in our meeting rules of conduct, which unitholders can view during the meeting. The meeting rules, procedures and code of conduct will be posted 15 minutes before the meeting start.
We encourage you to access the Annual Meeting before it begins. Online check-in will be available at 1:45pm CT,approximately 15 minutes before the meeting starts on May 11, 2023. If you have difficulty accessing the meeting, please call the technical support number that will be posted in your instructional emailtime you will receive after registering to attend the Annual Meeting. We willconsideration you have technicians available to assist you.
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Proposal 1 — Election of Class II Directors
Board and Governance Structure
General Overview and Board Makeup
The Board currently has nine members, including the CEO, who currently serves as Chairman of the Board. The Board is divided into three staggered classes, as set forth below. At each annual meeting, only the eligible directors of a class whose term is expiring will be up for election and, upon election, the elected directors in that class will serve for a term of three years, subject to a director’s earlier resignation, death or removal. If a director is elected to the Board to fill a vacancy, that director will have the same remaining term as his or her predecessor.
Our governing documents require that at least a majority of directors must meet the independence requirements of the national securities exchange on which the securities of the Partnership are listed (currently New York Stock Exchange or NYSE).
Class II Directors Standing for Election at the 2023 Annual Meeting
The Board has currently fixed the number of directors constituting the Board at nine. The Board, based on the recommendation of the Nominating and Governance Committee, proposed that the following three nominees be elected at the Annual Meeting, each of whom will hold office until the 2026 annual meeting of unitholders or until his or her successor shall have been elected and qualified:
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Gary Reaves was appointedreceive pursuant to the Boardmerger agreement (or default consideration if no election is made). See “If the Requisite Consents are obtained and the merger is completed, what will Preferred Holders receive for their Preferred Units in the merger?”
How do I deliver my consent to the Proposed Amendment?
Preferred Holders who wish to consent to the Proposed Amendment must deliver their properly submitted Consent in accordance DTC’s ATOP procedures so that it is received by the Tabulation Agent on September 15, 2022, pursuantor before the Expiration Date. Do not, for any reason, deliver your Preferred Units to a Director Nomination and Voting Support Agreement betweenus, the Company and FR XIII Crestwood Permian Basin Holding LLC, a subsidiary of First Reserve (“First Reserve”). The Director Nomination and Voting Support Agreement grants First Reserve certain designation rights pursuant to which First Reserve may cause the Board to nominate a designee selected by First Reserve, subject to ongoing ownership thresholds.
Each of the nominees is currently a director of theManaging General Partner, and has been elected to hold office until the 2023 Annual Meeting or until his or her successor has been elected and qualified. Mr. Lumpkins was appointed to the Board in 2015 and Ms. Vallejo was appointed to the Board in 2021. Both Mr. Lumpkins and Ms. Vallejo were classified as Class II directors on August, 20, 2021. Mr. Reaves was appointed to the Board in 2022 and classified as a Class II director on November 10, 2022. Biographical and related information on each nominee is set forth below.
The Board expects that the three nominees will be available to serve as directors. However, if any of them should be unwilling or unable to serve, the Board may nominate and elect substitute nominees, and the proxies will be voted in favor of any such substitute nominees.
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Board of Directors Information
In evaluating the nominees for the Board of Directors, the Board and the Nominating and Governance Committee took into account the qualities they seek for directors, and the directors’ individual qualifications, skills, and background that enable the directors to effectively and productively contribute to the Board’s oversight of the Partnership, as discussed below in each biography and under “Director Nominee Tenure, Skills, and Characteristics.” When evaluating re-nomination of existing directors, the Nominating and Governance Committee also considers the nominees’ past and ongoing effectiveness on the Board and their independence.
Director Biographical Information
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Board of Directors Information
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Board of Directors Information
Class III Directors (term expires by 2024 annual meeting of unitholders)
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Board of Directors Information
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Board of Directors Information
Class I Directors (terms expire by 2025 annual meeting of unitholders)
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Board of Directors Information
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Board of Directors Information
Board Skills & Diversity
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Board of Directors Information
Director Nominee Tenure, Skills, and Characteristics
In 2021, we established a Nominating and Governance Committee, which meets at least quarterly and reviews the performance, and contributions of existing Board members to the extent they are candidates for re-election and considers all aspects of each candidate’s qualifications and skills in the context of the Partnership’s needs at that point in time. The Nominating and Governance Committee includes, and has any search firm that it engages include, women and individuals from underrepresented racial/ethnic groups in the pool from which the Committee selects director candidates. When considering candidates as potential Board members, the Board and the Nominating and Governance Committee will evaluate the candidates’ ability to contribute to such diversity. The Board assesses its effectiveness in this regard as part of its Board and director evaluation process. Currently, of our three director nominees, one is a woman, all are independent, and two have served for five years or less. The Board’s composition also represents a balanced approach to director tenure, allowing the Board to benefit from the experience of longer-serving directors combined with fresh perspectives from newer directors. The tenure range of our Board is as follows:
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Among the qualifications and skills of a candidate considered important by the Nominating and Governance Committee are:
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Corporate Governance
Board Leadership
The Board is responsible for the control and direction of the Partnership. The Board represents the unitholders and its primary purpose is to build long-term unitholder value. The Board has no policy that requires that the positions of the Chairman of the Board (the Chairman) and the Chief Executive Officer (CEO) be separate or that they be held by the same individual. The Board believes that this determination should be based on circumstances existing from time to time, including the composition, skills and experience of the Board and its members, specific challenges faced by us or the industry in which it operates,Information and governance efficiency.
The Chair of the Board is selected by the BoardTabulation Agent, and currently is our Founder and CEO, Robert G. Phillips. The Board believes that this leadership structure is appropriate given Mr. Phillips’ role in founding the Partnership and his significant ownership stake. The Board believes that this leadership structure improves the Board’s ability to focus on key policy and operational issues and helps the Partnership operate in the long-term interests of unitholders.
In addition, the independent directors on the Board have appointed a Lead Director from the Board’s independent directors, currently Warren Gfeller, in order to promote independent leadership of the Board. The lead director presides over the executive sessions of the independent directors (which occur at least once a year), chairs Board meetings in the Chair’s absence, works with management and the independent directors to approve agendas, schedules, information, and
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Board of Directors Information
materials for Board meetings, and is available to engage directly with major shareholders where appropriate. In addition, the lead director confers with the Chair of the Board and the independent directors and reviews, as appropriate, the annual schedule of regular Board meetings and major Board meeting agenda topics. The guidance and direction provided by the Lead Director reinforce the Board’s independent oversight of management and contribute to communication among members of the Board.
Director Independence
Because we are a limited partnership, the listing standards of the NYSE do not require that we have a majority of independent directors ondeliver the Board, nor that the Partnership establish or maintain a Nominating and Governance Committee or Compensation Committee of the Board. We are, however, requiredConsent to have an Audit Committee consisting of at least three members, all of whom are required to be independent as defined by the NYSE. The Board has determined that, Warren Gfeller, Janeen Judah, David Lumpkins, Angela Minas, Gary Reaves, John Sherman, Frances Vallejo, and Clay Williams qualify as independent pursuant to independence standards established by the NYSE as set forth in Section 303A.02 of the NYSE Listed Company Manual. To be considered an independent director under the NYSE listing standards, the Board must affirmatively determine that a director has no material relationship with usany person other than as a director. In making this determination,specified in DTC’s ATOP procedures. See “The Consent Solicitation — How to Consent.”
When will the Board adheresConsent Fee be paid?
If the Requisite Consents are received by the Tabulation Agent through ATOP (and not revoked) at or prior to the Expiration Date and the Merger Conditions are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated, then the Partnership will, as promptly as practicable after, and only if, the Merger Conditions are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated, pay to the Consenting Holders the Consent Fee for each Preferred Unit with respect to which consents are received (and not revoked) on or prior to the Expiration Date. No Consent Fee will be paid with respect to any Preferred Units for which no Consent is delivered on or prior to the Expiration Date, even though the Proposed Amendment, if approved, will bind all holders of such Preferred Units and their transferees upon the effectiveness of the specific tests for independence included inProposed Amendment.
What are the NYSE listing standards and considers all other facts and circumstances it deems necessary or advisable.
A director need not be a memberexpected U.S. federal income tax consequences to Preferred Holders upon the receipt of the General Partner or a Limited Partner; however, a majority of the Directors comprising the Board of Directors must meet the independence standards required of directors who serve on a board of directors established by the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations of the U.S. Securities and Exchange Commission (the “Commission”) thereunder and by the National Securities Exchange on which the common units are listed or admitted to trading (or if no such National Securities Exchange, the NYSE).
Risk OversightConsent Fee?
The Partnership facesintends to report the Consent Fee as ordinary income paid to Preferred Holders as consideration for their Consents. See “Expected U.S. Federal Income Tax Consequences to Preferred Holders upon Receipt of the Consent Fee.”
For a numberdescription of risks, including environmentalthe material U.S. federal income tax consequences of the merger, see the section titled “Material U.S. Federal Income Tax Consequences of the Merger” in the definitive Merger Proxy Statement.
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The Partnership, a Delaware limited partnership formed in March 2001, is a master limited partnership that develops, acquires, owns or controls, and regulatory risks,operates primarily fee-based assets and others, such asoperations within the impactenergy midstream sector. Headquartered in Houston, Texas, we provide broad-ranging infrastructure solutions across the value chain to service premier liquids-rich natural gas and crude oil shale plays across the United States. We own and operate a diversified portfolio of competition. Management is responsible fornatural gas liquids, crude oil, natural gas, and produced water gathering, processing, storage, disposal, and transportation assets that connect fundamental energy supply with energy demand across North America. Our Common Units are listed on the day-to-day management of risksNYSE under the Partnership faces, whilesymbol “CEQP” and our Preferred Units are listed on the Board, as a whole and through its committees, has responsibility forNYSE under the oversight of risk management. In fulfilling its risk oversight role, the Board must determine whether risk management processes designed and implemented by our management are adequate and functioning as designed. Senior management regularly delivers presentations to the Board on strategic matters, operations, risk management and other matters, and is available to address any questions or concerns raised by the Board.symbol “CEQP-P.”
Our board committees assist the Board in fulfilling its oversight responsibilities in certain areas of risk. The Audit Committee assists with risk management oversight including in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements and our risk management policy related to our commodity price risk management activities. The Compensation Committee assists the Board with risk management related to our compensation policies and programs. The Sustainability Committee assists the Board on matters relating to sustainability, which include environmental risks and opportunities, social responsibility and impacts, employee, contractor and community health and safety, and activities related to stakeholder engagement and community investment. The Finance Committee assists the Board in fulfilling its oversight responsibilities across the principal areas of corporate finance and financial risk management. The Nominating and Governance Committee assists the Board on matters related to the evaluation of the Board and its standing committees, succession planning of the CEO and key executive officers and oversight responsibilities regarding the governance of the Partnership.
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Board of Directors Information
Oversight of Cybersecurity Risk
As with any key operational risk, the Company has a robust governance structure around cybersecurity. Our programoffice is governed at the Board level through the Audit Committee where our Senior Vice President of Internal Audit, Technology and Implementation Services provides quarterly updates to the committee and executive management. Internally, a Cybersecurity Steering Committee, which is represented by a cross-section of leaders, meets on a frequent basis and is responsible for developing the Company’s cybersecurity goals and objectives, reviewing the results of penetration testing and drills, and monitoring current trends and threats. Our framework extends to all stakeholders at the Company where our goal is to protect privacy, equipment and sensitive information in both the corporate network and throughout our field operations.
Risk Assessment in Compensation Programs
During the year our Compensation Committee conducted an analysis of potential risks posed by the Company’s compensation program, asking, in essence, whether the program might encourage the executive officers to take unnecessary or excessive risks, or whether the program might encourage the manipulation of reported earnings. As part of its analysis, the Compensation Committee also considered mitigating factors and controls. Based on its analysis, the Compensation Committee determined that our compensation program is unlikely to motivate inappropriate risk-taking.
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Board Evaluation
On an annual basis we conduct a comprehensive Board self-evaluation to assess the effectiveness of our Board, committees, and members. The Board conducts annual evaluations through the use of both individual interviews by the Lead Director with each Board member and a written questionnaire completed by all Board members that covers a broad range of matters relating to governance, meetings, materials, and other agenda topics.
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Board of Directors Information
The Board and senior executives then review and discuss the evaluation results and any actions to be taken. The results are used to inform Board and committee composition and refreshment, including potential expansion and refinement of the attributes and experience criteria for Board membership, and to address the evolving needs of the Company. The evaluation aims (1) to find opportunities where the Board and committees can improve their performance and effectiveness, (2) to assess any need to evolve the composition and expertise of the Board, and (3) to assure that our Board and committees are operating in accordance with our Corporate Governance Guidelines, committee charters and best practices.
Code of Ethics
Crestwood is committed to running an ethical business, which is supported by our clearly articulated policies and rigorous management systems and processes. We have adopted a Code of Business Conduct and Ethics that outlines our guiding principles and expectations, which can be found at www.crestwoodlp.com/investors/governance.
Each officer, director and employee is responsible for upholding our standards for ethics and integrity as set forth in the Code. Every two years all directors and employees are required to complete ethics training on our Code.
Any employee witnessing a violation of the Code is asked to report their concern through our independent Ethics Hotline, which is available 24 hours a day, seven days a week. All employees receive regular communication about the hotline to ensure that everyone knows their reporting options and understands Crestwood’s commitment to ethics and integrity. Our compliance team takes all concerns seriously and follows the necessary protocols and processes to quickly resolve them. We maintain absolute anonymity, to the extent possible, and empower any employee reporting a violation to discuss their concern without fear of retaliation.
We track the number of requests made and the length of time from reporting to resolution to evaluate the success of the hotline. Any ethics violations and results of the whistleblower hotline are reported to the Audit Committee by our Chief Compliance Officer, who also shares quarterly general ethics updates with the Board.
Corporate Governance Guidelines
The Board has adopted a robust set of Corporate Governance Guidelines that addresses the goals and expectations with respect to key corporate governance matters. The Guidelines address the following topics:
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Director Common Unit Ownership Guidelines
Directors who are not also executive officers of the Company are required to hold common units with a value equal to five times the amount of the annual retainer paid to directors. Until such guideline is met, a director is required to retain 100% of all vested equity awards under the Company’s director compensation program.
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Board of Directors Information
Communications with Directors
Parties wishing to send written communications to the Board, other than sales-related communications, should send a letter addressed to the member or members of the Board to whom the communication is directed, care of the Corporate Secretary, 811 Main St., Suite 3400, Houston, Texas 77002. All such communications will be forwarded to the Board member or members specified.
Director Attendance at Annual Meetings
The Company does not have a formal policy with respect to director attendance at annual unitholder meetings. In 2022, all members of the Board were in attendance at the annual meeting.
Please visit our investor relations website at www.crestwoodlp.com/investors, “Governance,” for additional information on our corporate governance.
Board Meetings and Committees
The Board meets in regularly scheduled sessions and holds special meetings and acts by unanimous written consent whenever circumstances require such meetings. Our independent directors meet in executive session at least once a year. During 2022, there were 13 total meetings of the Board. All incumbent directors attended at least 97% of the aggregate of the meetings of the Board and committees on which they served occurring during 2022.
The Board has established an Audit Committee, a Compensation Committee, a Finance Committee, a Nominating and Governance Committee and a Sustainability Committee, each of which is comprised entirely of directors who meet the applicable independence requirements of the NYSE rules. The committees keep the Board informed of their actions and provide assistance to the Board in fulfilling its oversight responsibility to unitholders. The table below provides current board membership information as well as committee meeting information for the last fiscal year.
Name | Audit Committee | Compensation Committee | Finance Committee | Nominating and Governance Committee | Sustainability Committee | |||||
Robert G. Phillips | ||||||||||
Warren H. Gfeller |
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David Lumpkins |  |
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Angela A. Minas | | | ||||||||
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Clay C. Williams | | | ||||||||
Total Meetings in 2022 | 8 | 5 | 7 | 4 | 4 | |||||
2022 Attendance Percentage | 100% | 100% | 90% | 100% | 100% | |||||
Committee Chair
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Board of Directors Information
The functions performed by these committees, which are set forth in more detail in their charters, are summarized below.
Committee Oversight
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Board of Directors Information
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Board of Directors Information
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Director Nominations
Pursuant to Section 13.4(b)(vi) of our Partnership Agreement, nominations of persons for election of directors to the Board may be made at an annual meeting of the Partnership (a) by or at the direction of a majority of the directors then in office or (b) by a limited partner (i.e. a unitholder) or group of limited partners (a “limited partner group”), that holds or beneficially owns, and has continuously held without interruption for the prior two years, at least 10% of the outstanding common units or outstanding preferred units that on a converted basis represent at least 10% of the outstanding common units, or any combination thereof.
Any eligible unitholders or limited partner group that wishes to submit a director nomination for the 2023 Annual Meeting must deliver written notice thereof to the General Partnerlocated at 811 Main Street, Suite 3400, Houston, Texas 77002.77002, and our telephone number is (832) 519-2200. Our website address is https://www.crestwoodlp.com. The written notice must comply with Section 13.4(b)(vi)(A)(2)information on our website is not part of our Partnership Agreementthis Consent Solicitation Statement.
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You should carefully consider the risks and uncertainties described throughout this Consent Solicitation Statement, including those described below, and the proceduresrisk factors set forth in Section 13.4(b)(vi)(C)our annual and periodic reports that we file with the SEC regarding the risks of investment in our securities, before you decide whether to Consent to the Proposed Amendment. You should also read the definitive Merger Proxy Statement for risks relating to the merger.
Risks Related to the Consent Solicitation
The merger as well as the Proposed Amendment may result in reduced liquidity for Preferred Holders electing to receive new ET Preferred Units in the merger.
Although the merger agreement requires that new ET Preferred Unitsissued in connection with the merger be listed on the NYSE, there can be no assurance that such new ET Preferred Units will continue to be listed in the future. Also, if the Proposed Amendment to the Partnership Agreement includingis approved and becomes effective, more Preferred Holders may either (i) convert their Preferred Units into Common Units prior to the information requirements includedcompletion of the merger and therefore receive ET Common Units or (ii) make a cash redemption election in 13.4(b)(vi)(A)(2)connection with the consideration they elect to receive in the merger, which collectively would reduce the aggregate number of our Partnership Agreement. new ET Preferred Units that may be outstanding after the completion of the merger. As a result of any of the foregoing factors, the trading market for such new ET Preferred Units would become more limited than the existing trading market for Preferred Units or the trading market for such units if the Proposed Amendment does not become effective. In addition, after the completion of the merger, Energy Transfer could elect to conduct one or more tender offers for the new ET Preferred Units, which would have the effect of further limiting the trading market for the new ET Preferred Units. A more limited trading market might adversely affect the liquidity and market price of such securities.
The Chairman designatedProposed Amendment will reduce protections afforded to Preferred Holders electing to receive new ET Preferred Units in the merger.
If the Proposed Amendment becomes effective, the terms of the new ET Preferred Units to be received by Preferred Holders electing to receive such units as consideration in the merger will be less restrictive and will afford reduced protection to holders of such units compared to those currently in place and those applicable to the Preferred Units. The Proposed Amendment would (i) eliminate the application of a Deficiency Rate with respect to distributions payable to the Preferred Holders during any quarter in which distributions are accrued and unpaid; (ii) modify the right of Preferred Holders to participate in special distributions made to holders of Common Units; and (iii) conform the voting rights of the holders of Preferred Units to the voting rights of holders of Energy Transfer’s other outstanding series of preferred units.
We have not obtained a third-party determination concerning the fairness of the Proposed Amendment.
We have not retained, and do not intend to retain, any unaffiliated representative to act solely on behalf of the Preferred Holders for purposes of negotiating the Consent Solicitation or preparing a report concerning the fairness of the Proposed Amendment or this Consent Solicitation.
If the Requisite Consents are received on or prior to the Expiration Date, the Merger Conditions are satisfied or waived, as applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated and the Proposed Amendment becomes effective, all holders of the Preferred Units will be bound by the Proposed Amendment even if they did not approve the Proposed Amendment by submitting their Consent.
The Proposed Amendment is set forth in Annex A to this Consent Solicitation Statement. If the Requisite Consents are received on or prior to the Expiration Date, the Merger Conditions are satisfied or waived, as
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applicable, by the parties to the merger agreement and the merger agreement is not otherwise terminated and the Proposed Amendment becomes effective by execution of the First Amendment by the Managing General Partner, pursuantall holders of the Preferred Units will be bound by the Proposed Amendment even if they did not approve the Proposed Amendment by submitting their Consent.
If the Requisite Consents are received on a date that is prior to Section 13.10the Expiration Date, the Consent Solicitation may be concluded on that date and the Consent Fee will only be paid with respect to Preferred Units for which Consents were delivered on or prior to that date.
The Expiration Date is 5:00 p.m., Eastern Time, on October 17, 2023, unless earlier concluded, terminated or extended as provided for in this Consent Solicitation Statement. We may, at the Managing General Partner’s sole discretion, conclude the Consent Solicitation at the earlier of ourthe Expiration Date or the date on which the Tabulation Agent has received the Requisite Consents. If the Tabulation Agent receives the Requisite Consents on a date that is prior to the Expiration Date, then the Consent Solicitation may be concluded on that date and Preferred Holders would no longer be able to deliver a Consent. Such early conclusion of the Consent Solicitation would limit the right of such Preferred Holders to receive the Consent Fee, even if such Preferred Holders would otherwise have delivered Consents with respect to their Preferred Units prior to the Expiration Date.
The Consent Fee would be payable only if the Proposed Amendment becomes effective.
The Partnership Agreement shall havewill not pay a Consent Fee unless the powerProposed Amendment becomes effective by execution of the First Amendment by the Managing General Partner. As a result, even if a Preferred Holder provides its Consent on or prior to the Expiration Date and dutythe Partnership receives the Requisite Consents, if the Managing General Partner does not execute the First Amendment, no Consent Fee will be paid. This could be the case if the Merger Conditions are not satisfied or waived, as applicable, by the parties to (a) determine whether a nomination was madethe merger agreement or if the parties otherwise terminate the merger agreement in accordance with the above proceduresterms thereof.
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DESCRIPTION OF THE EQUITY INTERESTS IN THE PARTNERSHIP
For a complete description of the equity interests in the Partnership, you should refer to the Partnership Agreement, the Proposed Amendment as set forth in Annex A hereto, and (b) declare thatto the applicable provisions of Delaware law. For purposes of this section of this Consent Solicitation Statement, the term “Partnership Agreement” shall refer to the Partnership Agreement prior to the Effective Time, and the description of the Partnership Agreement contained in this section does not give effect to the Proposed Amendment. Upon the closing of the merger, the holders of Preferred Units electing to receive new ET Preferred Units will receive such nomination shall be disregardednew ET Preferred Units with terms reflecting the Proposed Amendment if any proposed nomination was not madethe Requisite Consents are obtained in complianceconnection with Section 13.4(b)this Consent Solicitation.
Common Units
Our Common Units represent limited partner interests in the Partnership. The holders of ourCommon Units are entitled to participate in Partnership distributions and exercise the rights or privileges available to limited partners under the Partnership Agreement.
IfNumber of Common Units
As of September 22, 2023, the Partnership had 105,096,104 Common Units outstanding, 75,537,671 of which are held by the public and 29,558,433 of which are held by affiliates of the Partnership.
Where the Common Units are Traded
The Partnership’s outstanding Common Units are listed on the NYSE under the symbol “CEQP.”
Cash Distributions
The Partnership Agreement requires that, within 45 days after the end of each quarter, the Partnership distribute all of its “Available Cash” to unitholders of record on the applicable record date.
Available cash for any quarter consists of all cash and cash equivalents of the Partnership, the Managing General Partner, Crestwood Midstream Partners LP and any subsidiary of any such entity, treated as a consolidated entity (the “Partnership Group”), on hand at the end of that quarter:
less, the amount of cash reserves that is necessary or appropriate in the reasonable discretion of the Managing General Partner to:
provide for the proper conduct of the business of the Partnership Group subsequent to such quarter;
comply with applicable law or any loan agreement, security agreement, mortgage, debt instrument or other agreement or obligation to which any member of the Partnership Group is a party, or by which it is bound or its assets are subject; or
provide funds for future distributions to limited partner group (orpartners for any one or more of the next four quarters;
plus, all additional cash and cash equivalents of the Partnership Group on hand on the date of determination of Available Cash for the quarter resulting from working capital borrowings made subsequent to the end of the quarter. Working capital borrowings are generally borrowings that are made under a qualified representative of each member) does not appear at the annual meeting to present a nomination, such nomination shall be disregarded notwithstandingcredit facility or other similar arrangement and, in all cases, are used solely for working capital purposes;
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provided, however, that proxies in respect of such vote may have been receiveddisbursements made by the General Partner or the Partnership. To be considered a qualified representative of aany member of the Partnership Group or cash reserves established, increased or reduced after the end of such quarter but on or before the date of determination of Available Cash with respect to such quarter shall be deemed to have been made, established, increased or reduced, for purposes of determining Available Cash, within such quarter if the Managing General Partner so determines.
Notwithstanding the foregoing, Available Cash does not include any cash and cash equivalents on hand derived from or attributable to our ownership of, or sale or other disposition of, the shares of common stock of IPCH Acquisition Corp. and the membership interests of Crestwood Partners, LLC.
Transfer Agent and Registrar
Equiniti Trust Company, LLC (“Equiniti”) serves as the registrar and transfer agent for the Common Units. The Partnership will pay all fees charged by Equiniti for transfers of Common Units except for the following fees which must be paid by the holders of Common Units: surety bond premiums to replace lost or stolen certificates; taxes and other governmental charges; special charges for services requested by a holder of a Common Unit; and other similar fees or charges.
There is no charge to holders of Common Units for disbursements of the Partnership’s cash distributions.
Transfer of Common Units
Upon the transfer of a Common Unit in accordance with the Partnership Agreement, the transferee of the Common Unit will be admitted as a limited partner group, a person must be a duly authorized officer, manager or partner ofwith respect to the Common Units transferred when such limited partner or must be authorized by a writing executed by such limited partner or an electronic transmission delivered by such limited partner to act for such limited partner as proxy at the meeting of limited partnerstransfer and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission at the meeting of limited partners.
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Board of Directors Informationadmission are reflected in our books and records. Each transferee:
Compensationrepresents that the transferee has the capacity, power, and authority to become bound by the Partnership Agreement;
automatically becomes bound by the terms and conditions of, Directorsand is deemed to have executed, the Partnership Agreement; and
Officers
gives the consents, waivers, and approvals contained in the Partnership Agreement.
In addition to other rights acquired upon transfer, the transferor gives the transferee the right to become a substituted limited partner in the Partnership for the transferred Common Units. A transferee will become a substituted limited partner of the Partnership for the transferred Common Units automatically upon the recording of the transfer on our books and records. Our Managing General Partner who also serve as directors, such as Mr. Phillips, do not receive additional compensation. Allwill cause any transfers to be recorded on our books and records no less frequently than quarterly.
Until a Common Unit has been transferred on our books, we and the transfer agent may treat the record holder of the non-employee directorsCommon Unit as the absolute owner for all purposes, except for Mr. Reaves receives cash compensationas otherwise required by law or stock exchange regulations.
We may, at our discretion, treat the nominee holder of $100,000 per year for serving ona Common Unit as the Board. absolute owner. In that case, the beneficial holder’s rights are limited solely to those that it has against the nominee holder as a result of any agreement between the beneficial owner and the nominee holder.
Common Units are securities, and any transfers of Common Units are subject to the laws governing the transfer of securities.
Preferred Units
The Lead Director, Audit Committee chairperson, Finance Committee chairperson, Compensation Committee chairperson, Nominating and Governance Committee chairperson and Sustainability Committee chairperson each receive additional cash compensationPreferred Units represent a separate class of $20,000 per year. In August 2022,our limited partner interests.
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Number Outstanding
As of September 22, 2023, there were 71,257,445 Preferred Units outstanding, which are convertible, as described below, into approximately 7,125,745 Common Units, with fractional units rounded to the Compensation Committee approved additional annual compensation in the amount of $10,000 be paid to any non-employee director that serves on threenearest whole unit.
Conversion
One or more board committees. All cash compensation is paidPreferred Holders may elect, each in its own discretion, (i) to the non-employee directors in quarterly installments. Additionally, each non-employee director receives an annual grant of restricted units under our long-term incentive plan equal to approximately $110,000 in value that vests on the first anniversary of the date of issuance. Each grant compensates for future performance, and generally no portion of a restricted unit vests until the year after it is granted. If a director leaves the Board prior to a vest date for any reason other than a Change of Control (as defined under our long-term incentive plan), death or Permanent Disability, he or she will forfeitconvert all or any portion of the restricted units that hasPreferred Units held by such unitholders, in an aggregate amount equaling or exceeding (a) a number of Preferred Units having an aggregate value of $20.0 million, which value is calculated by multiplying the number of Preferred Units to be converted by $9.1273 or (b) if the value of the Preferred Units (calculated in accordance with clause (a) above) to be converted by the unitholder requesting conversion does not previously vested, unless vesting is otherwise acceleratedequal or exceed $20.0 million, then all of the Preferred Units held by such unitholder, into Common Units, at ratio of 1 Common Unit for 10 Preferred Units, subject to adjustment from time to time (the “Conversion Ratio”), subject to the payment of any accrued but unpaid distributions to the date of such conversion and (ii) in the event of our voluntary liquidation, dissolution or winding up, to convert all or any portion of the Preferred Units held by such Preferred Holders into Common Units, at the discretionthen applicable Conversion Ratio, subject to payment of any accrued but unpaid distributions to the date of conversion.
At any time, subject to certain liquidity requirements set forth in the Partnership Agreement, if the volume-weighted average trading price of the Compensation Committee. common units on the national securities exchange on which the common units are then listed (the “VWAP Price”) for 20 trading days over the 30-trading day period ending on the close of trading on the day immediately preceding the date notice is given by the Partnership of election of its conversion right is greater than the quotient of (i) $13.69095 divided by (ii) the then applicable Conversion Ratio (or currently $136.9095), the Managing General Partner, in its sole discretion, may convert all or a portion of the outstanding Preferred Units into Common Units, at the then applicable Conversion Ratio, subject to the payment of any accrued but unpaid distributions to the date of conversion. Also, subject to certain liquidity requirements set forth in the Partnership Agreement, if the VWAP Price of the common units for 20 trading days over the 30-trading day period ending on the close of trading on the day immediately preceding the date notice is given by the Partnership of the exercise of its conversion right is greater than the quotient of (i) $9.1273 divided by (ii) the then applicable Conversion Ratio (or currently $91.273), the Managing General Partner, in its sole discretion, may convert all, but not less than all, of the outstanding Preferred Units into a number of Common Units equal to the Adjusted Conversion Amount (as defined in the Partnership Agreement).
Cash Distributions
Each Preferred Unit is entitled to a preferred cash distribution of $0.2111 per quarter, subject to certain adjustments (the “Distribution Amount”).
Such distributions are to be paid in cash at the Distribution Amount unless, subject to certain exceptions, (i) there is no distribution being paid on Parity Securities and Junior Securities (which include the Common Units) and (ii) the Partnership’s Available Cash, excluding any deductions to provide funds for distributions of Available Cash to holders of Common Units in respect of any one or more of the next four quarters, is insufficient to pay the distribution to Preferred Holders. If we fail to pay such distribution in full in cash for any quarter, then until such time as all accrued and unpaid distributions to Preferred Holders are paid in full in cash (i) the Distribution Amount will increase to $0.2567 per quarter and (ii) we will not be permitted to declare or make (a) any distributions in respect of any Junior Securities (including the Common Units) and (b) subject to certain exceptions, any distributions in respect of any Parity Securities.
If the director’s service relationship endsPartnership fails to pay in full any distribution to its Preferred Holders, the amount of such unpaid distribution will accrue and accumulate from the last day of the quarter for which such distribution is due until paid in full. Any accrued and unpaid distributions will increase at a rate of 2.8125% per quarter.
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The Partnership will not declare or make any distributions in respect of any Junior Securities (which include the Common Units) or any Parity Securities, subject to certain limited exceptions, unless and until all accrued and unpaid distributions on the Preferred Units have been paid in full in cash.
Rights upon a Change of Control
In the event of any transaction pursuant to which (i) the Managing General Partner or any affiliate of the director’s deathManaging General Partner exercises its rights to purchase all of the outstanding Common Units pursuant to the Partnership Agreement or Permanent Disability,(ii) any person or group of persons acquires in one or more series of related transactions all of the outstanding Common Units, in each case where the consideration received by the holders of Common Units is comprised of at least 90% cash (each, a “Cash COC Event”), the Preferred Holders shall convert the outstanding Preferred Units into Common Units immediately prior to the closing of such Cash COC Event at a conversion ratio equal to the greater of (i) the then applicable Conversion Ratio and (ii) the forfeiture restrictions lapse andquotient of (1) the award vests in full. Permanent Disability meansproduct of (a) $9.1273 multiplied by (b) 101%, divided by (2) the director’s inability, withVWAP Price of the Common Units for the 10 consecutive trading days ending immediately prior to the date of closing of the Cash COC Event, subject to a $10.00 per unit floor on Common Units received, subject to the payment of any accrued but unpaid distributions to the date of conversion.
Upon the occurrence of (a) the Common Units no longer being listed or without reasonable accommodation, by reason of illness, incapacity,admitted for trading on the NYSE or another national securities exchange, (b) any direct or indirect sale, lease, transfer, conveyance or other disability,disposition, in one or more series of related transactions, of all or substantially all of the properties or assets of the Partnership to perform hisany person or her duties, as determined by(c) any dissolution or liquidation of the Board for a cumulative total of 180 days in any 12-month period. Each non-employee director is reimbursed for out-of-pocket expensesPartnership (other than in connection with attending meetingsa bankruptcy proceeding or a statutory winding up) (any of the Boarditems (a) through (c), or committees.a Cash COC Event, a “Change of Control”), then each Preferred Holder shall, at its sole discretion:
The following table sets forth, for the year ended December 31, 2022, all compensation reportable for directors who served during 2022, as determined by SEC rules.
Director Compensation for 2022
Name | Fee Earned or Paid in Cash ($) | Unit Awards ($)(1) | Total ($) | ||||||||||||
Alvin Bledsoe(2) | 120,000 | 111,209 | 231,209 | ||||||||||||
Warren H. Gfeller | 140,000 | 111,209 | 251,209 | ||||||||||||
Janeen S. Judah | 120,000 | 111,209 | 231,209 | ||||||||||||
David Lumpkins | 120,000 | 111,209 | 231,209 | ||||||||||||
Angela A. Minas | 120,000 | 111,209 | 231,209 | ||||||||||||
John J. Sherman | 100,000 | 111,209 | 211,209 | ||||||||||||
Frances M. Vallejo | 105,000 | 111,209 | 216,209 | ||||||||||||
Clay C. Williams | 120,000 | 111,209 | 231,209 | ||||||||||||
Gary D. Reaves | — | 27,475 | 27,475 | ||||||||||||
John Jacobi(3) | 50,000 | — | 50,000 | ||||||||||||
N. John Lancaster, Jr.(3) | 50,000 | — | 50,000 | ||||||||||||
Samantha Holroyd(4) | 25,000 | — | 25,000 | ||||||||||||
Paul Korus(4) | 25,000 | — | 25,000 | ||||||||||||
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Voting
The Preferred Units have voting rights that are identical to the voting rights of the Common Units and shall vote with the Common Units as a single class, with each Preferred Unit being entitled to one vote for each Common Unit into which such Preferred Unit is convertible at the then-applicable Conversion Ratio, except that the Preferred Units (subject to certain exclusions) shall be entitled to vote as a separate class on any matter on which all unitholders are entitled to vote that adversely affects the rights, powers, privileges or preferences of the Preferred Units in relation to the Partnership’s other securities or as required by law. Subject to certain
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exceptions, (i) if (a) the three largest Preferred Holders, together with all affiliates of such Preferred Holders that hold Preferred Units, collectively constitute at least two-thirds (2/3) of the outstanding Preferred Units and (b) GSO COF II Holdings Partners (Facility) LP and Magnetar Financial LLC, and each of their respective affiliates, collectively own at least 35% of the outstanding Preferred Units, then the approval of at least two-thirds (2/3) of the outstanding Preferred Units (subject to certain exclusions) shall be required to approve any matter for which the Preferred Holders are entitled to vote as a separate class, and otherwise, (ii) the approval of a majority of the outstanding Preferred Units (subject to certain exclusions) shall be required to approve any matter for which the Preferred Holders are entitled to vote as a separate class (each of (i) and (ii), a “Voting Threshold”).
A Change of Control in which consideration to be received by the holders of Common Units has a value of less than $10.00 per Common Unit requires approval of the Preferred Holders at the then-applicable Voting Threshold.
Transfer Agent and Registrar
Equiniti currently serves as transfer agent and registrar for the Preferred Units.
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PURPOSE OF THE CONSENT SOLICITATION
On August 16, 2023, the Partnership and Energy Transfer, among other parties, entered into the merger agreement, pursuant to which the Partnership will merge with and into Merger Sub, with Merger Sub surviving the merger as a direct wholly owned subsidiary of Energy Transfer. Pursuant to the merger agreement, the Partnership has agreed, at the request of Energy Transfer, to cooperate with Energy Transfer in respect of any plans of Energy Transfer to (a) commence one or more tender offers to purchase any or all of the outstanding Preferred Units prior to the closing of the merger for cash and (b) conduct one or more consent solicitations to obtain from the requisite holders of Preferred Units consent to certain amendments to the terms of the Preferred Units. In connection with the merger and at the direction of Energy Transfer, pursuant to the merger agreement, the Partnership and the Managing General Partner are soliciting Consents from the Preferred Holders to approve the amendment of the Partnership Agreement as set forth in the Proposed Amendment contained in Annex A to this Consent Solicitation Statement.
Reasons for the Consent Solicitation
The purpose of the Consent Solicitation is to (i) increase the cash redemption price for the Preferred Units in connection with a cash redemption election in the merger, and (ii) conform certain terms of the Preferred Units with Energy Transfer’s other outstanding series of preferred units in order to simplify Energy Transfer’s capital structure following the merger.
The Proposed Amendment is contained in Annex A and, if approved, would amend Section 5.8 of the Partnership Agreement as follows:
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