October 25, 2019
FORM S-3
Delaware | ||||||
(State or other jurisdiction of incorporation or organization) | 2331 CityWest Boulevard Houston, Texas 77042 (855) 283-9237 (Address, including zip code, and telephone number, including area code, of each | |||||
registrant's principal executive offices) | 38-3899432 (I.R.S. Employer Identification No.) |
Paula A. Johnson
Vice President, General Counsel and Secretary
2331 CityWest Boulevard
Houston, Texas 77042
(855) 283-9237
(Name, address, including zip code, and telephone number, including area code, of agent for service)
William N. Finnegan IV
Large accelerated filer | Accelerated filer | Non-accelerated filer (Do not check if a smaller reporting company) | Smaller reporting company Emerging growth company |
Title of Each Class of Securities | Amount to be Registered(1)(2) | Proposed Maximum Aggregate Offering Price Per Unit | Proposed Maximum Aggregate Offering Price | Amount of Registration Fee | ||||||||||||
Series A Perpetual Convertible Preferred Units | 15,201,775 | $ | 54.27 | (3)(4) | $ | 825,000,329.25 | (4) | $ | 102,712.54 | |||||||
Common Units | 6,304,204 | $ | 50.69 | (3)(5) | $ | 319,560,100.76 | (5) | $ | 39,785.23 |
Title of Each Class of Securities to Be Registered | Proposed Maximum Aggregate Offering Price(1) | Amount of Registration Fee(2) |
Common Units Representing Limited Partner Interests | $250,000,000 | $32,450 |
(1) |
(2) |
SUBJECT TO COMPLETION, DATED NOVEMBER 3, 2017
permitted.
15,201,775 Series A Perpetual Convertible Preferred Units
6,304,204
This prospectus relates to
We are not sellingand arrangements with any units under this prospectus andunderwriters, dealers or agents will not receive any proceeds from the sale of units owned by the selling unitholders. For more information relating to the selling unitholders, please read “Selling Unitholders.”
The units to which this prospectus relates may be offered and sold from time to time directly by the selling unitholdersincluded in the open market or through negotiated transactions or, alternatively, through underwriters or broker-dealers or agents, or a combination of these methods. The units may be sold in one or more transactions, at fixed prices, at prevailing market prices at the time of sale or at negotiated prices. Please refer to “Plan of Distribution.” The selling unitholders will be responsible for underwriting commissions, discounts and fees, if any, and any transfer taxes applicable to the units. We will be responsible for all other offering expenses, other than the fees and expenses of legal counsel that are incurred by any selling unitholder.
You should carefully read this prospectus, any prospectus supplement and the documents incorporated by reference herein and therein before you invest in any of our securities. You should also read the documents we referthat relates to in the “Where You Can Find More Information” section of this prospectus for information on us and our financial statements.
that offering.
Investing in our unitssecurities involves risks. You should carefully consider the factors described under “Risk Factors” beginning on page 2 of this prospectus and any similar section contained in the applicable prospectus supplement before you make an investment in our units.
securities.
Phillips 66 Partners LP, Attention: Investor Relations, 2331 CityWest Blvd., Houston, Texas 77042, (855) 283-9237, or investorrelations@p66partners.com. We also post on our website our governance guidelines, code of business ethics and conduct, and the charter for the audit committee of our general Ratio of Earnings to Combined Fixed Charges and Preferred Unit Distributions (1) “PSXP.” PROVISIONS OF OUR PARTNERSHIP AGREEMENT RELATING TO CASH DISTRIBUTIONS Distributions of Available Cash Series A preferred unit distributions Common Unitholders Adjustments to capital accounts Capital Contributions Under the Delaware Act, a limited partnership may not make a distribution to a partner if, after the distribution, all liabilities of the limited partnership, other than liabilities to partners on account of their limited partner interests and liabilities for which the recourse of creditors is limited to specific property of the partnership, would exceed the fair value of the assets of the limited partnership, except that the fair value of property that is subject to a liability for which the recourse of creditors is limited is included in the assets of the limited partnership only to the extent that the fair value of that property exceeds that liability. For the purpose of determining the fair value of the assets of a limited partnership, the Delaware Act provides that the fair value of property subject to liability for which recourse of creditors is limited shall be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds the nonrecourse liability. The Delaware Act provides that a limited partner who receives a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware Act shall be liable to the limited partnership for the amount of the distribution for three years. Under the Delaware Act, a substituted limited partner of a limited partnership is liable for the obligations of its assignor to make contributions to the partnership, except that such person is not obligated for liabilities unknown to it at the time it became a limited partner and that could not be ascertained from the partnership agreement. Amendment of Our Partnership Agreement In addition to the above restrictions, any amendment that would have a material adverse effect on the rights or preferences of any type or class of partnership interests in relation to other classes of partnership interests will require the approval of at least a majority of the type or class of partnership interests so affected. Any amendment that would reduce the percentage of units required to take any action, other than to remove our general partner or call a meeting of unitholders, must be approved by the affirmative vote of limited partners whose aggregate outstanding units constitute not less than the percentage sought to be reduced. Any amendment that would increase the percentage of units required to remove our general partner must be approved by the affirmative vote of limited partners whose aggregate outstanding units constitute not less than 90% of outstanding common units and Series A preferred units (on an as-converted basis at the then applicable conversion rate), voting as a single class. Any amendment that would increase the percentage of units required to call a meeting of unitholders must be approved by the affirmative vote of limited partners whose aggregate outstanding units constitute at least Our general partner may not be removed unless that removal is approved by the vote of the holders of at least 66 removal, our general partner will have the right to receive cash in exchange for its general partner interests based on the fair market value of such interests as of the effective date of its removal. Our general partner and its affiliates may at any time transfer units to one or more persons, without unitholder approval. Redemption of Ineligible Holders recertify: Our general partner does not anticipate that any meeting of unitholders will be called in the foreseeable future. Any action that is required or permitted to be taken by the unitholders may be taken either at a meeting of the unitholders or, if authorized by our general partner, without a meeting if consents in writing describing the action so taken are signed by holders of the number of units that would be necessary to authorize or take that action at a meeting where all limited partners were present and voted. Meetings of the unitholders may be called by our general partner or by unitholders owning at least 20% of the outstanding units of the class for which a meeting is proposed. Unitholders may vote either in person or by proxy at meetings. The holders of a majority of the outstanding units of the class or classes for which a meeting has been called, represented in person or by proxy, will constitute a quorum unless any action by the unitholders requires approval by holders of a greater percentage of the units, in which case the quorum will be the greater percentage. The units representing our general partner interest are units for distribution and allocation purposes, but do not entitle our general partner to any vote other than its rights as general partner under our partnership agreement, will not be entitled to vote on any action required or permitted to be taken by the unitholders and will not count toward or be considered outstanding when calculating required votes, determining the presence of a quorum, or for similar purposes. Registration Rights laws, including the impact of recently enacted U.S. tax reform legislation. Partnership Status If we were treated as an association taxable as a corporation in any taxable year, either as a result of a failure to meet the Qualifying Income Exception or otherwise, our items of income, gain, loss and deduction would be reflected only on our tax return rather than being passed through to our unitholders, and our net income would be taxed to us at corporate rates. In addition, any distribution made to a unitholder would be treated as taxable dividend income, to the extent of our current and accumulated earnings and profits, or, in the absence of earnings and profits, a nontaxable return of capital, to the extent of the ” Treatment of Distributions ” Limitations on Deductibility of Losses Specified items of our income, gain, loss and deduction will be allocated to account for any difference between the tax basis and fair market value of any property contributed to us that exists at the time of such contribution, referred to in this discussion as the ” In addition, a 3.8% Medicare tax (NIIT) is imposed on certain net investment income earned by individuals, estates and trusts. For these purposes, net investment income generally includes a ” on a liquidating distribution of property to a unitholder, there would be a negative basis adjustment to our assets in excess of $250,000 if a Section 754 election were in place. ” ” If we dispose of depreciable property by sale, foreclosure or otherwise, all or a portion of any gain, determined by reference to the amount of depreciation previously deducted and the nature of the property, may be subject to the recapture rules and taxed as ordinary income rather than capital gain. Similarly, a unitholder who has taken cost recovery or depreciation deductions with respect to property ” The IRS has ruled that a partner who acquires interests in a partnership in separate transactions must combine those interests and maintain a single adjusted tax basis for all those interests. Upon a sale or other disposition of less than all of those interests, a portion of that tax basis must be allocated to the interests sold using an Notification Requirements Uniformity of Units ” In addition, as described above under “— Tax Consequences of Unit Ownership — Allocation of Income, Gain, Loss and Deduction,” if we aggregate multiple issuances of common units for purposes of making adjustments to “book” basis and the related tax allocations, we will treat each of our common units as having the same capital account balance, regardless of the price actually paid by each purchaser of common units in the aggregated offerings. Latham & Watkins LLP is unable to opine as to the validity of such an approach. We do not expect the number of affected common units, or the differences between the purchase price of a common unit and the initial capital account balance assigned to the common unit, to be material, and we do not expect this convention will have a material effect upon the trading of our common units. Further, a tax-exempt organization with more than one unrelated trade or business (including by attribution from investments in a partnership, such as us, that is engaged in one or more unrelated trades or businesses) must compute its unrelated business taxable income separately for each such trade or business, including for purposes of determining any net operating loss deduction. As a result, it may not be possible for tax-exempt organizations to use losses from an investment in us to offset taxable income from another unrelated trade or business. In addition, because a foreign corporation that owns units will be treated as engaged in a U.S. trade or business, that corporation may be subject to the U.S. branch profits tax at a rate of 30%, in addition to regular U.S. federal income tax, on its share of our earnings and profits, as adjusted for changes in the foreign ” These rules generally apply to payments of FDAP Income currently and, while these rules generally Recent Legislative Developments Our assets should not be considered “plan assets” under these regulations because it is expected that the investment will satisfy the requirements in (a) and (b) above. provided, however, that paragraphs (i), (ii) and (iii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act that are incorporated by reference in this registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement. Kevin J. MitchellTABLE OF CONTENTS Neither we nor any of the selling unitholders have authorized anyone to provideIn making your investment decision, you with information different from that contained or incorporated by reference in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by us orshould rely only on our behalf. Neither we nor any of the selling unitholders take any responsibility for, or can provide any assurance as to the reliability of, any information other than the information contained or incorporated by reference in this prospectus,prospectus. We have not authorized anyone to provide you with any amendmentother information. If anyone provides you with different or supplement toinconsistent information, you should not rely on it.oris accurate as of any free writingdate other than the date on the front cover of this prospectus. You should not assume that the information contained in the documents incorporated by reference in this prospectus prepared by us or on our behalf.We have filed the registration statement for this shelf registration process pursuant to a registration rights agreement dated October 6, 2017 among us and the selling unitholders. Under this shelf registration process, the selling unitholderswe may, from time to time, offer and sell any combinationup to $250,000,000 of theour common units described in this prospectus in one or more offerings.the selling unitholders.us. Each time we sell any selling unitholder sellscommon units offered by this prospectus, such selling unitholder is required towe will provide you with this prospectus and any relateda prospectus supplement containingthat will contain specific information about the terms of that offering. A prospectus supplement may also add to, update or change information in this prospectus.offering and the common units being offered. To the extent information in this prospectus is inconsistent with the information contained in a prospectus supplement, you should rely on the information in the prospectus supplement. of the documents referred to herein have been filed or will be filed or incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described under the heading “Where You Can Find More Information.”·• 2016,2018, which was filed with the SEC on February 17, 2017; 22, 2019;·• ReportsReport on Form 10-Q for the quartersquarter ended March 31, 2017, June 30, 2017 and September 30, 2017 which were2019, filed with the SEC on May 5, 2017, August 1, 2017 and October 27, 2017, respectively;April 30, 2019;ii·• • • ReportsReport on Form 8-K as filed with the SEC on January 18, 2017,22, 2019; Current Report on Form 8-K filed with the SEC on February 3, 2017,8, 2019; Current Report on Form 8-K filed with the SEC on March 22, 2019; Current Report on Form 8-K filed with the SEC on April 19, 2017, April 28, 2017,17, 2019; Current Report on Form 8-K filed with the SEC on July 19, 2017,17, 2019; Current Report on Form 8-K filed with the SEC on July 26, 2019; Current Report on Form 8-K filed with the SEC on August 1, 2019; Current Report on Form 8-K filed with the SEC on August 1, 2019; Current Report on Form 8-K filed with the SEC on August 2, 2019; Current Report on Form 8-K filed with the SEC on September 25, 2017,6, 2019; and Current Report on Form 8-K filed with the SEC on October 10, 2017, October 13, 2017 and October 18, 201716, 2019 (excluding any information furnished pursuant to Items 2.02 or 7.01 of any such Current Report on Form 8-K); and·• Boulevard,Blvd., Houston, Texas 77042, and our telephone number is (855) 283-9237. Our common units trade on the New York Stock Exchange under the symbol “PSXP.” We file annual, quarterly and other reports and other information with the SEC. You may read and copy any document that we file with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the public on the SEC'sSEC’s website at http://www.sec.gov. We also make available, free of charge on our website at http://www.phillips66partners.com , all materials that we electronically file with the SEC, including our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, Section 16 reports, and amendments to these reports as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information on our website, however, is not, and should not be deemed to be, a part of this prospectus. You may request a copy of any document incorporated by reference in this prospectus (including exhibits to those documents specifically incorporated by reference in this prospectus), free of charge by contacting us atBoulevardinvestorrelations@p66partners.com.partner’spartner's board of directors.forward-lookingforward - looking statements. You can identify our forward-looking statements by the words “anticipate,” “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and similar expressions.·The continued ability of Phillips 66 to satisfy its obligations under our commercial and other agreements.·The volume of crude oil, natural gas liquids (“NGL”) and refined petroleum products we transport, fractionate, process, terminal and store.iii·The tariff rates with respect to volumes that we transport through our regulated assets, which rates are subject to review and possible adjustment by federal and state regulators.·Changes in revenue we realize under the loss allowance provisions of our regulated tariffs resulting from changes in underlying commodity prices.·Fluctuations in the prices for crude oil, NGL and refined petroleum products.·Changes in global economic conditions and the effects of a global economic downturn on the business of Phillips 66 and the business of its suppliers, customers, business partners and credit lenders.·Liabilities associated with the risks and operational hazards inherent in transporting, fractionating, processing, terminaling and storing crude oil, NGL and refined petroleum products.·Curtailment of operations due to severe weather disruption; riots, strikes, lockouts or other industrial disturbances; or failure of information technology systems due to various causes, including unauthorized access or attack.·Inability to obtain or maintain permits in a timely manner, if at all, including those necessary for capital projects, or the revocation or modification of existing permits.·Inability to comply with government regulations or make capital expenditures required to maintain compliance.·Failure to timely complete construction of announced and future capital projects.·The operation, financing and distribution decisions of our joint ventures.·Costs or liabilities associated with federal, state, and local laws and regulations relating to environmental protection and safety, including spills, releases and pipeline integrity.·Costs associated with compliance with evolving environmental laws and regulations on climate change.·Costs associated with compliance with safety regulations, including pipeline integrity management program testing and related repairs.·Changes in the cost or availability of third-party vessels, pipelines, railcars and other means of delivering and transporting crude oil, NGL and refined petroleum products.·Direct or indirect effects on our business resulting from actual or threatened terrorist incidents or acts of war.ivproductproducts and NGL pipelinesnatural gas liquids (NGL) transportation, processing, terminaling and terminals, as well as other midstream assets.storage facilities and systems. We are managed and operated by the executive officers of our general partner, with oversight provided by its board of directors. Neither we nor our subsidiaries have any employees. Our general partner has the sole responsibility for providing the employees and other personnel necessary to conduct our operations.multipleentered into long-term, fee-based commercial agreements with Phillips 66 includingto provide transportation, services agreements, terminal services agreements,terminaling, storage, services agreements, stevedoring, services agreements, a fractionation, services agreement, a tolling services agreement,processing, and rail terminal services agreements.services. Under many of these agreements, Phillips 66 commits to provide us with minimum quarterlytransportation, throughput or storage volumes, or minimum monthly capacity or service fees. If Phillips 66 does not meet its minimum volume commitments, Phillips 66 pays us deficiency payments based on the calculations described in the agreements. We believe these agreements promote stable and predictable cash flows, and they are the source of a substantial portion of our revenue.1the unitsour securities involves risks. Before you invest in the units,our securities, you should carefully consider the risk factors below, as well as the risk factors included in our most recent annual report on Form 10-K, subsequent quarterly reports on Form 10-Q, current reports on Form 8-K and those that may be included in or incorporated by reference in any applicable prospectus supplement, as well as risks described in “Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and cautionary notes regarding forward-looking statements included or incorporated by reference in this prospectus, together with all of the other information included or incorporated by reference in this prospectus, any prospectus supplement and the documents we incorporate by reference.Risks RelatedSeries A preferred units and this offeringThe Series A preferred units are subordinated to our existing and future debt obligations, and your interests could be diluted by the issuance of additional units, including additional Series A preferred units, and by other transactions.The Series A preferred units are subordinated to all of our existing and future indebtedness (including indebtedness outstanding under our revolving credit facility and our outstanding senior notes). As of November 1, 2017, we had approximately $2.9 billion of consolidated indebtedness. We may incur additional debt under our revolving credit facility. The payment of principal and interest on our debt reduces cash available for distribution to us and on our units, including the Series A preferred units.The issuance of additional unitspari passu with or senior to the Series A preferred units would dilute the interests of the holders of the Series A preferred units with the requisite approval of the holders of Series A preferred units, and any issuance of such securities or additional indebtedness could affect our ability to pay distributions on, redeem or pay the liquidation preference on, the Series A preferred units.The Series A preferred units do not havecontrary in an established trading market and will not be listed on a national securities exchange.The Series A preferred units do not have an established trading market, which may negatively affect their market value and your ability to transfer or sell your units. Further, the Series A preferred units are not listed for trading on the NYSE or any other national securities exchange and we have no intention of listing the Series A preferred units on any national securities exchange in the future.The Internal Revenue Service could challenge our treatment of the holders of Series A preferred units as partners for tax purposes, and if such challenge were sustained, certain holders of Series A preferred units could be adversely impacted.The IRS may disagree with our treatment of the Series A preferred units as equity for federal income tax purposes, and no assurance can be given that our treatment will be sustained. If the IRS were to successfully characterize the Series A preferred units as indebtedness for tax purposes, certain holders of Series A preferred units may be subject to additional withholding and reporting requirements (please read “Material U.S. Federal Income Tax Consequences—Administrative Matters—Additional Withholding Requirements”). Further, if the Series A preferred units were treated as indebtedness for federal income tax purposes, rather than equity, distributions likely would be treated as payments of interest by us to the holders of Series A preferred units. Holders of Series A preferred units are encouraged to consult their tax advisors regarding the tax consequences applicable to the recharacterization of the Series A preferred units as indebtedness for tax purposes.2Sales by the selling unitholders of common units that are covered by this prospectus could adversely affect the trading price of our common units.We are registering for resale an aggregate of 6,304,204 common units that may be held by the selling unitholders, which represent approximately 5% of our currently outstanding common units as of November 1, 2017. Subject to certain exceptions, we are obligated to keep this prospectus current so that the common units can be sold in the public market at any time. The resale of all or a substantial portion of the common units in the public market, or the perception that these sales might occur, could cause the market price of our common units to decrease and may make it more difficult for us to sell our equity securities in the future at a time and upon terms that we deem appropriate.3RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED UNIT DISTRIBUTIONSThe following table sets forth our ratio of earnings to fixed charges for the periods indicated on a consolidated historical basis. For purposes of computing the ratio of earnings to fixed charges, “earnings” are defined as income before taxes adjusted for undistributed equity earnings, plus fixed charges less capitalized interest. “Fixed charges” consist of interest expensed and capitalized, amortization of deferred loan costs and an estimate of interest within rent expense. Nine Months Ended
September 30 Years Ended December 31 2017 2016 2015 2014 2013 2012 Ratio of Earnings to Fixed Charges 5.2x 8.0x 5.1x 20.9x N/A N/A (1)No preferred units were outstanding during any of the periods presented and therefore, no historical ratio of earnings to combined fixed charges and preferred unit distributions are presented for these periods.4The units to be offered and sold pursuant to this prospectus or any applicable prospectus supplement, we will be offered and sold byuse the selling unitholders. We will not receive anynet proceeds from the sale of unitsthe securities covered by the selling unitholders. We have agreedthis prospectus for general partnership purposes, which may include debt repayment, future acquisitions, capital expenditures and additions to pay certain expensesworking capital.selling unitholders in connection withnet proceeds of an offering of securities to a specific purpose will be determined at the saletime of the units offered by this prospectus. Please read “Plan of Distribution.”
offering and will be described in a prospectus supplement.5The following description of our common units is not complete and may not contain all of the information you should consider before investing in our common units. This description is summarized from, and qualified in its entirety by reference to, our Second Amended and Restated Agreement of Limited Partnership, which we refer to herein as the “partnership agreement.” We urge you to read the full text of the partnership agreement, which has been publicly filed with the SEC, as the partnership agreement, and not this prospectus, governs the Partnership, the common units and the Series A preferred units.Generalorand privileges available to limited partners under our partnership agreement. The holders of Series A preferred units have rights, preferences and privileges that are not held by, and are preferentialagreement, which has been filed as an exhibit to the rightsForm S-3 registration statement of holders of common units.which this prospectus forms a part. For a description of the relative rights and preferences of holders of common units in and to partnership distributions, please read this section and “Provisions of Ourour Partnership Agreement Relating to Cash Distributions.” For a description of the rights and privileges of limited partnersholders of common units under our partnership agreement,the Partnership Agreement, including voting rights, please read “Our Partnership Agreement.” We urge you to read our partnership agreement, as our partnership agreement, and not this description, governs our common units.outstandingPreferred Units—Series A Preferred Units.” The Series A preferred units constituted an approximate 5.7% limited partner interest in the Partnership on an as-converted basis and assuming a one-to-one conversion ratio as of September 30, 2019.NYSENew York Stock Exchange under the symbol “PSXP” and any additional common units we issue will also be listed on the NYSE under such symbol. As of November 1, 2017, 121,522,819 common units were outstanding.·surety bond premiums to replace lost or stolen certificates, or to cover related taxes and other governmental charges; ·special charges for services requested by a holder of a common unit; and 6Contentsa common unit; and·other similar fees or charges.·automatically agrees to be bound by the terms and conditions of, and is deemed to have executed, our partnership agreement; ·represents and warrants that the transferee has the right, power, authority, and capacity to enter into our partnership agreement; and ·gives the consents, waivers and approvals contained in our partnership agreement.holder'sholder’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. 7DESCRIPTION OF OUR SERIES A PREFERRED UNITSThe following description of our Series A preferred units is not complete and may not contain all of the information you should consider before investing in our Series A preferred units. This description is summarized from, and qualified in its entirety by reference to, our partnership agreement. For a description of our partnership agreement, please read “Our Partnership Agreement.” We urge you to read the full text of the partnership agreement, which has been publicly filed with the SEC, as the partnership agreement, and not this prospectus, governs the Partnership and the Series A preferred units. Capitalized terms used but not defined herein shall have the meanings ascribed thereto in our partnership agreement.8GeneralAs of the date of this prospectus, we have 13,819,791 Series A preferred units issued and outstanding. These Series A preferred units were sold by us to the selling unitholders in a private placement on October 6, 2017 at a price of $54.27 per Series A preferred unit (the “Series A Issue Price”).The Series A preferred units represent limited partner interests in us and, unlike our indebtedness, will not give rise to a claim for payment of a principal amount at a particular date. As such, the Series A preferred units rank junior to all of our current and future indebtedness (including indebtedness outstanding under our revolving credit facility and our outstanding senior notes) and other liabilities with respect to assets available to satisfy claims against us.The Series A preferred units rank senior to our common units with respect to the payment of distributions and distribution of assets upon liquidation, dissolution and winding up. For a description of the relative rights and preferences of holders of our Series A preferred units and common units, please read this section and “Provisions of our Partnership Agreement Relating to Cash Distributions.”The holders of Series A preferred units are entitled to receive cumulative quarterly distributions equal to $0.678375 per Series A preferred unit for any quarter ending on or before September 30, 2020, and thereafter the quarterly distributions on each Series A preferred unit will equal the greater of (1) $0.678375 per unit and (2) the amount that such Series A preferred unit would have otherwise received if it had been converted into common units immediately prior to the record date for the quarter in respect of which such distributions are being paid at the then applicable conversion rate (as defined below). We may not pay any distributions for any quarter on any junior securities, including any common units and the incentive distribution rights, unless the distribution payable to the Series A preferred units with respect to such quarter, together with any previously accrued but unpaid distributions to the Series A preferred units, have been paid in full.RankingThe Series A preferred units, with respect to anticipated quarterly distributions, rank:·senior to any class or series of partnership interests in us that, with respect to the payment of distributions and distribution of assets upon liquidation, dissolution and winding up, ranks junior to the Series A preferred units (“Series A Junior Securities”), including our common units and the incentive distribution rights;·pari passu with any class or series of partnership interests in us that, with respect to the payment of distributions and distribution of assets upon liquidation, dissolution and winding up, rankspari passu with the Series A preferred units (“Series A Parity Securities”);·junior to all of our existing and future indebtedness (including indebtedness outstanding under our revolving credit facility and our outstanding senior notes) and other liabilities with respect to assets available to satisfy claims against us; and·junior to any class or series of partnership interests in us that, with respect to the payment of distributions and distribution of assets upon liquidation, dissolution and winding up, ranks senior to the Series A preferred units (“Series A Senior Securities”).Under our partnership agreement, we may issue Series A Junior Securities from time to time in one or more series without the consent of the holders of the Series A preferred units. The board of directors of our general partner has the authority to determine the preferences, powers, qualifications, limitations, restrictions and special or relative rights or privileges, if any, of any such series before the issuance of any units of that series. The board of directors of our general partner will also determine the number of units constituting each series of Series A Junior Securities. Our ability to issue additional Series A Parity Securities in certain circumstances or Series A Senior Securities is limited as described under “Our Partnership Agreement—Voting Rights.”9DistributionsDistributions on each Series A preferred unit will be cumulative and will accrue at the Series A Distribution Amount (as defined below) from October 6, 2017 until such time as the Series A preferred units are converted into common units in accordance with our partnership agreement, whether or not quarterly distributions with respect to Series A preferred units (the “Series A Quarterly Distributions”) shall have been declared, and distributions will accrue on the amount of Series A Quarterly Distributions in arrears. Holders of Series A preferred units will be entitled to receive Series A Quarterly Distributions from time to time when, as, and if declared by our general partner. Distributions, when, as and if declared by our general partner to be paid by us in accordance with our partnership agreement, will be paid quarterly on each Series A Distribution Payment Date (as defined below).As used herein, “Series A Distribution Payment Date” means the date that is no later than the earlier of 60 days after the end of the applicable quarter and the payment date of distributions, if any, on any Series A Parity Securities and Series A Junior Securities.As used herein, “Series A Distribution Amount” means (1) with respect to any quarter ending on or before September 30, 2020, an amount per Series A preferred unit equal to $0.678375 for such quarter, and (2) with respect to any quarter ending after September 30, 2020, an amount per quarter per Series A preferred unit equal to the greater of (a) $0.678375 and (b) an amount equal to the distributions that would have been payable with respect to such Series A preferred unit if such Series A preferred unit had converted immediately prior to the record date for such quarter in respect of which such distributions are being paid into the number of common units into which such Series A preferred unit would be convertible at the then applicable conversion rate.With respect to any quarter ending on or before September 30, 2019 (the “Series A PIK Distribution Period”), distributions may be paid in cash, in-kind in the form of Series A PIK Units, or in a combination thereof, at the election of our general partner. If we elect to pay some or all of a Series A Distribution Amount in Series A PIK Units, we shall publicly announce that election on or before the record date for which such election has been made and shall state in the announcement the amount of Series A PIK Units or combination of cash and Series A PIK Units to be paid per Series A preferred unit in connection with the Series A Quarterly Distribution. Any issuance of Series A PIK Units as a distribution will be made in accordance with our partnership agreement (the date of issuance of such Series A PIK Units, the “Series A PIK Payment Date”). On the Series A PIK Payment Date, we will issue to holders of Series A preferred units a certificate or certificates for the number of Series A PIK Units to which such Series A preferred unitholders shall be entitled, or, at our option, a notation in book-entry form in the books of the transfer agent. With respect to any quarter distributions made after the Series A PIK Distribution Period shall be paid in cash.For purposes of maintaining Capital Accounts (as defined in our partnership agreement), if we issue one or more Series A PIK Units with respect to a Series A preferred unit, (i) we shall be treated as distributing cash with respect to such Series A preferred unit in an amount equal to the Series A Issue Price of the Series A PIK Units issued in payment of the Series A Quarterly Distribution and (ii) the holder of such Series A preferred unit shall be treated as having contributed to us in exchange for such newly issued Series A PIK Unit an amount of cash equal to the Series A Issue Price.ConversionEach holder of Series A preferred units may elect to convert all or any portion of the Series A preferred units owned by such holder into common units initially on a one-for-one basis, subject to customary anti-dilution adjustments and an adjustment for any distributions that have accrued on such Series A preferred units but not been paid when due (which we refer to as the “conversion rate”), at any time (but not more often than once per quarter) after October 6, 2019 (or upon an earlier liquidation of the Partnership, in which case the conversion rate shall be the rate described in the first paragraph under “—Series A Change of Control” below), provided that any conversion involves an aggregate number of Series A preferred units with an underlying value of common units equal to or greater than $50 million (calculated based on the Series A Issue Price) or such lesser amount if such conversion relates to all of a holder’s remaining Series A preferred units.10We may elect to convert all or any portion of the Series A preferred units into common units at any time (but not more often than once per quarter) after October 6, 2020 if (i) the common units are listed or admitted for trading on a national securities exchange, (ii) the average volume weighted average price (“VWAP”) of the common units is greater than $73.2645 for the preceding 20 trading days, (iii) the average daily trading volume of the common units exceeds 100,000 (as adjusted to reflect splits, combinations or similar events) for the preceding 20 trading days and (iv) we have an effective registration statement on file covering resales of the underlying common units to be received by the holders upon conversion of the Series A preferred units, however, we will not be able to make any such election unless the conversion involves an aggregate number of Series A preferred units with an underlying value of common units equal to or greater than $50 million (calculated based on the Series A Issue Price) or a lesser amount if such conversion relates to all of the then outstanding Series A preferred units. The Series A preferred units will be converted at the conversion rate (adjusted to give the holders of such converted Series A preferred units the benefit of a Partial Period Distribution (as defined below)) if the VWAP of the common units for the 20 trading days preceding the notice of conversion (the “Conversion VWAP”) is equal or greater to $74.62125, and at a ratio of one common unit for each 0.975 Series A preferred unit (subject to customary anti-dilution adjustments, an adjustment for any distributions that have accrued on such Series A preferred units but not been paid when due and a Partial Period Distribution) if the Conversion VWAP is less than $74.62125. We also may elect, on and after October 6, 2020, rather than converting the Series A preferred units, to redeem the Series A preferred units at a redemption price equal to the Conversion VWAP plus any distributions that have accrued on such Series A preferred units but not been paid when due and a Partial Period Distribution if the conditions described in clauses (i) through (iv) above have been met.No fractional common units will be issued upon conversion of Series A preferred units, and each fractional common unit otherwise issuable shall be rounded to the nearest whole common unit (and a 0.5 common unit shall be rounded to the next higher common unit).With respect to Series A preferred units that are converted into common units, the holder thereof will not be entitled to receive a Series A Quarterly Distribution and a common unit distribution with respect to the same period, but will be entitled to receive only the distribution to be paid based upon the class of units held as of the close of business on the applicable record date, together with all accrued but unpaid distributions on the converted Series A preferred units.Upon conversion, the rights of a holder of converted Series A preferred units as a Series A preferred unitholder shall cease with respect to such converted Series A preferred units, including any rights under our partnership agreement with respect to a Series A preferred unitholder, and such person shall continue to be a limited partner and have the rights of a holder of common units under our partnership agreement. Each Series A preferred unit shall, upon its conversion be deemed to be transferred to, and cancelled by, us in exchange for the issuance of the common units into which such Series A preferred unit is converted. Notwithstanding the foregoing, as a result of a conversion, a holder shall not lose or relinquish any claims or rights of action such holder may then or thereafter have as a result of such holder’s previous ownership of Series A preferred units.If we:(1)make a distribution on our common units payable in common units or other partnership units,(2)subdivide or split our outstanding common units into a greater number of common units,(3)combine or reclassify our common units into a lesser number of common units,(4)issue by reclassification of our common units any partnership interests (including any reclassification in connection with a merger, consolidation or business combination in which we are the surviving person),11(5)effect a pro rata repurchase of common units (other than in connection with a Series A Change in Control (as defined in our partnership agreement)),(6)issue to common unitholders rights, options or warrants entitling them to subscribe for or purchase common units at less than the market value thereof,(7)distribute to common unitholders evidences of indebtedness, partnership interests (other than common units) or other assets (including securities, but excluding common units referred to in clause (1) above, rights or warrants referred to in clause (6) above, consideration payable in a tender offer or exchange offer made by the Partnership or any of its subsidiaries, and any class or series of partnership interests in the case of a spin-off described in clause (8) below), or(8)consummate a spin-off in which the Partnership makes a distribution to all common unitholders of units of any class or series, or similar equity interests of, or relating to, a subsidiary or other business unit of the Partnership,then the applicable conversion rate and redemption rate in effect at the time of the record date for such distribution described in clause (1) above, or of the effective date of such subdivision, split, combination, or reclassification described in clauses (2) through (4) above, shall be proportionately adjusted so that the conversion of the Series A preferred units after such time shall entitle the holder to receive the aggregate number of common units (or shares of any partnership interests into which such common units would have been combined, consolidated, merged or reclassified) that such holder would have been entitled to receive if the Series A preferred units had been converted into common units immediately prior to such record date or effective date, as the case may be, and in the case of a merger, consolidation or business combination in which we are the surviving person, we shall provide effective provisions to ensure that the provisions of our partnership agreement relating to the Series A preferred units shall not be abridged or amended and that the Series A preferred units shall thereafter retain the same powers, preferences and relative participating, optional and other special rights, and the qualifications, limitations and restrictions thereon, that the Series A preferred units had immediately prior to such transaction or event. In the event of a repurchase, issuance, distribution or spin-off as described in clauses (5) through (8), above, our general partner, in its reasonable discretion, shall proportionately adjust the applicable conversion rate and redemption price to appropriately ensure that the Series A preferred units are convertible into an economically equivalent number of common units after taking into account the events described in those clauses. Any such adjustment made pursuant to our partnership agreement shall become effective immediately after the record date in the case of a distribution and shall become effective immediately after the effective date in the case of a subdivision, combination, reclassification (including any reclassification in connection with a merger, consolidation or business combination in which we are the surviving person) or split. Such adjustment shall be made successively whenever any event described above shall occur. No adjustment to any then applicable conversion rate shall be made upon cash distributions by us on our common units (unless made in breach of the prohibition in our partnership agreement on distributions to Series A Junior Securities prior to distributions to Series A preferred units).Series A Change of ControlUpon certain events involving a Series A Change of Control in which more than 90% of the consideration payable to the holders of the common units is payable in cash, the Series A preferred units will automatically convert into common units at a conversion ratio equal to the higher of (a) the then applicable conversion rate and (b) the quotient of (i) the sum of (A) the Series A Issue Price (plus any accrued and unpaid distributions on the Series A preferred units) multiplied by a premium factor (ranging from 115% to 101% depending on when such transaction occurs) plus (B) a Partial Period Distribution for the quarter in which the conversion occurs, divided by (ii) the VWAP of the common units for the 30 trading days prior to the execution of definitive documentation relating to such Series A Change of Control.12In connection with other Series A Change of Control transactions that do not meet the 90% cash consideration threshold described above, each holder of the Series A preferred units may elect to (a) convert its Series A preferred units to common units at the then applicable conversion rate, (b) if we are not the surviving entity in such transaction (or if we are the surviving entity but our common units will cease to be listed on a national securities exchange), require us to use commercially reasonable efforts to cause the surviving entity in any such transaction to issue a substantially equivalent security (or if we are unable to cause such substantially equivalent securities to be issued, convert into common units at a premium based on a specified formula subject to aggregate return limitations, convert into common units in accordance with clause (a) above or be redeemed in accordance with clause (d) below), (c) if we are the surviving entity in such transaction, continue to hold the Series A preferred units or (d) require us to redeem the Series A preferred units at a price per unit equal to 101% of the sum of the Series A Issue Price, plus accrued and unpaid distributions on the applicable Series A preferred units plus a Partial Period Distribution for the quarter in which the redemption occurs, which may be payable in cash, in common units or in a combination thereof at the election of our general partner (and, if payable in common units, will be paid in common units issued at 95% of the VWAP for the 30 trading days ending on the fifth trading day preceding the consummation of the Series A Change of Control).Upon conversion at our election or at the election of the holder of a Series A preferred unit, or conversion or redemption paid in common units in connection with a Series A Change of Control, the rights of a holder of the Series A preferred units shall cease with respect to such converted Series A preferred units and such person shall continue to be a partner and have the rights of a holder of common units under our partnership agreement. Each Series A preferred unit will, upon its applicable conversion or redemption date, be deemed to be transferred to, and cancelled by, us in exchange for the issuance of common units in respect of such Series A preferred unit. Notwithstanding the foregoing, as a result of a conversion, a holder shall not lose or relinquish any claims or rights of action such holder may then or thereafter have as a result of such holder’s previous ownership of Series A preferred units.All common units delivered upon any conversion or redemption of the Series A preferred units will be duly authorized, validly issued, fully paid and non-assessable limited partner interests in us, except as such non-assessability may be affected by Section 17-303, 17-607 or 17-804 of the Delaware Revised Uniform Limited Partnership Act (the “Delaware Act”), and shall be free and clear of any liens, claims, rights or encumbrances, other than those arising under the Delaware Act or our partnership agreement.We will comply with all applicable securities laws regulating the offer and delivery of any common units upon conversion of Series A preferred units and, if the common units are then listed or quoted on a national securities exchange or other market, shall list or cause to have quoted and keep listed and quoted the common units issued upon conversion of the Series A preferred units to the extent permitted or required by the rules of such exchange or market.Voting RightsIn addition to the voting rights provided below, the Series A preferred units will have voting rights that are identical to the voting rights of the common units and will vote with the common units as a single class, so that each Series A preferred unit will be entitled to one vote for each common unit into which such Series A preferred unit would be converted at the then applicable conversion rate (regardless of whether the Series A preferred units are then convertible) on each matter with respect to which each common unit is entitled to vote. Please read “Our Partnership Agreement – Voting Rights.”The affirmative vote or consent of 662/3% of the outstanding Series A preferred units, voting separately as a class with one vote per Series A preferred unit (the “Series A Required Voting Percentage”), will be necessary for any amendments to our partnership agreement or our certificate of limited partnership that are adverse (other than in ade minimis manner) to the rights, preferences and privileges of the Series A preferred units. Without limiting the generality of the foregoing, any amendment shall be deemed to have an adverse impact that is notde minimis if such amendment would:(1)reduce the Series A Distribution Amount, change the form of payment of distributions on the Series A preferred units, defer the date from which distributions on the Series A preferred units will accrue, cancel any accrued and unpaid distributions on the Series A preferred units (including any Partial Period Distributions or Series A PIK Units), or change the seniority rights of the Series A preferred unitholders as to the payment of distributions in relation to the holders of any other class or series of partnership interests in us;(2)reduce the amount payable or change the form of payment to the holders of the Series A preferred units upon the voluntary or involuntary liquidation, dissolution or winding up, or sale of all or substantially all of the assets, of the partnership, or change the seniority of the liquidation preferences of the holders of the Series A preferred units in relation to the rights of the holders of any other class or series of partnership interests in us upon our liquidation, dissolution and winding up; or(3)make the Series A preferred units redeemable or convertible at our option other than as set forth in our partnership agreement.The affirmative vote or consent of the Series A Required Voting Percentage will be necessary for the Partnership to declare or pay any distribution from Capital Surplus (as defined in our partnership agreement). 13Liquidation RightsWe will liquidate in accordance with capital accounts. A holder of outstanding Series A preferred units will be specially allocated items of our gross income and gain in a manner designed to achieve, in the event of any liquidation, dissolution or winding up of our affairs, whether voluntary or involuntary, a liquidation preference equal to the Series A Issue Price plus all unpaid distributions on such Series A preferred units as of such date. If the amount of our gross income and gain available to be specially allocated to the Series A preferred units is not sufficient to cause the capital account of a Series A preferred unit to equal the liquidation preference of a Series A preferred unit, then the amount that a holder of Series A preferred units would receive upon liquidation may be less than the Series A preferred unit liquidation preference. Any accumulated and unpaid distributions on the Series A preferred units will be paid prior to any distributions in liquidation made in accordance with capital accounts.Restrictions on Transfers of Series A Preferred UnitsSubject to certain restrictions in our partnership agreement, each holder of Series A preferred units shall be permitted to transfer its Series A preferred units to any of its affiliates or to any other holder of Series A preferred units. With limited exceptions, without the prior written consent of our general partner, each holder of Series A preferred units shall not (i) prior to October 6, 2018, offer, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any of its Series A preferred units; (ii) prior to October 6, 2019, directly or indirectly engage in any short sales or other derivative or hedging transactions with respect to the Series A preferred units or the common units that are designed to, or that might reasonably be expected to, result in the transfer to another person, in whole or in part, any of the economic consequences of ownership of any Series A preferred units; (iii) transfer any Series A preferred units to any non-U.S. resident individual, non-U.S. corporation or partnership, or any other non-U.S. entity, including any foreign governmental entity, including by means of any swap or other transaction or arrangement that transfers or that is designed to, or that might reasonably be expected to, result in the transfer to another, in whole or in part, any of the economic consequences of ownership of any Series A preferred units (subject to certain exceptions in our partnership agreement); or (iv) effect any transfer of Series A preferred units or any common units received by such holder in respect of Series A preferred units in a manner that violates the terms of our partnership agreement; provided, however, that any holder of Series A preferred units may at any time pledge all or any portion of its Series A preferred units to any holders of obligations owed by such holder. Any transferee receiving any Series A preferred units shall be obligated to agree to the transfer restrictions above as a condition to such transfer.At any time after October 6, 2018, holders of Series A preferred units may freely transfer their Series A preferred units (subject to the restrictions contained in clauses (ii) through (iv) above), provided that each such transfer involves an aggregate number of Series A preferred units with an underlying value of common units equal to or greater than $50 million (based on the Series A Issue Price) or a lesser underlying value if such transfer (1) will result in the transfer of all of the Series A preferred units held by such holder and its affiliates or (2) has been approved by our general partner.No Sinking FundThe Series A preferred units will not have the benefit of any sinking fund.Book-Entry SystemThe Series A preferred units have been directly registered with the transfer agent and are expected to continue to be held in direct registration. 1415·less, the amount of cash reserves established by our general partner to: ·provide for the proper conduct of our business (including reserves for our future capital expenditures, future acquisitions, anticipated future debt service requirements and refunds of collected rates reasonably likely to be refunded as a result of a settlement or hearing related to FERC rate proceedings or rate proceedings under applicable law subsequent to that quarter); ·comply with applicable law, any of our or our subsidiaries' debt instruments or other agreements; or ·provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters (provided that our general partner may not establish cash reserves for distributions if the effect of the establishment of such reserves will prevent us from distributing the minimum quarterly distribution on all common units and any cumulative arrearages on such common units for the current quarter); ·plus, if our general partner so determines, all or any portion of the cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made subsequent to the end of such quarter.thea minimum quarterly distributionthea minimum quarterly distribution to the holders of our common units of $0.2125 per unit, or $0.85 per unit on an annualized basis, to the extent we have sufficient available cash after the establishment of cash reserves. Our most recentThis minimum quarterly distribution declared byis subject to proportionate adjustment in the boardevent of directorsany distribution, combination or subdivision of our general partner, which was for the three months ended September 30, 2017, was $0.646 per unit,common units or $2.584 per unit on an annualized basis.other partnership securities. However, there is no guarantee that we will pay thesuch minimum quarterly distribution on our units in any quarter. The amount of distributions paid under our cash distribution policy and the decision to make any distribution will be determined by our general partner, in accordance with the terms of our partnership agreement.General partner interest and incentive distribution rightsAs of the date of this prospectus, our general partner is entitled to approximately 2% of all quarterly distributions that we make prior to our liquidation, other than with respect to any distributions we make on our Series A preferred units. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us to maintain its current general partner interest. The general partner interest in these distributions will be reduced if we issue additional units in the future and our general partner does not contribute a proportionate amount of capital to us to maintain its 2% general partner interest.16Our general partner also currently holds incentive distribution rights that entitle it to receive increasing percentages, up to a maximum of 48%, of the available cash we distribute from operating surplus (as defined below) in excess of $0.244375 per unit per quarter. The maximum distribution of 48% does not include any distributions that our general partner or its affiliates may receive on common units or general partner units that they own. Please read “—General Partner Interest and Incentive Distribution Rights” for additional information.rate.rate (as defined below). We may not pay any distributions for any quarter on any Series A Junior Securities (as defined below), including any common units, and the incentive distribution rights, unless the distribution payable to the Series A preferred units with respect to such quarter, together with any previously accrued but unpaid distributions to the Series A preferred units, have been paid in full.·$60.0 million (as described below); plus·all of our cash receipts, excluding cash from interim capital transactions (as defined below), and the termination of commodity hedge or interest rate hedge contracts, provided that cash receipts from the termination of a commodity hedge or interest rate hedge prior to its specified termination date shall be included in operating surplus in equal quarterly installments over the remaining scheduled life of such commodity hedge or interest rate hedge; plus·working capital borrowings made after the end of a quarter but on or before the date of determination of operating surplus for that quarter; plus·cash distributions (including incremental distributions on incentive distribution rights) paid in respect of equity issued to finance all or a portion of expansion capital expenditures in respect of the period from the date that we enter into a binding obligation to commence the construction, development, replacement, improvement or expansion of a capital asset and ending on the earlier to occur of the date the capital asset commences commercial service and the date that it is abandoned or disposed of; less·all of our operating expenditures (as defined below); less·the amount of cash reserves established by our general partner to provide funds for future operating expenditures; less·all working capital borrowings not repaid within twelve months after having been incurred, or repaid within such 12-month period with the proceeds of additional working capital borrowings.17Contentsour cash receipts, excluding cash from interim capital transactions (as defined below), and the termination of commodity hedge or interest rate hedge contracts, provided that cash receipts from the termination of a commodity hedge or interest rate hedge prior to its specified termination date shall be included in operating surplus in equal quarterly installments over the remaining scheduled life of such commodity hedge or interest rate hedge; plus·repayments of working capital borrowings where such borrowings have previously been deemed to have been repaid (as described above); ·payments (including prepayments and prepayment penalties) of principal of and premium on indebtedness other than working capital borrowings; ·expansion capital expenditures; ·payment of transaction expenses (including taxes) relating to interim capital transactions;·distributions to our partners; or·repurchases of partnership interests (excluding repurchases we make to satisfy obligations under employee benefit plans). 18Contentsour equity and debt securities;·borrowings other than working capital borrowings; ·sales of our equity and debt securities; ·sales or other dispositions of assets, other than inventory, accounts receivable and other assets sold in the ordinary course of business or as part of ordinary course retirement or replacement of assets; and ·capital contributions received.the repayment of the initial unit price from our initial public offering and as a return of capital. We do not anticipate that we will make any distributions from capital surplus.during the Seriesending prior to September 30, 2019 (the “Series A PIK Distribution Period,Period”), our general partner has the option to pay such distribution in cash, in-kind in the form of additional Series A preferred units (“Series A PIK Units,Units”), or in a combination thereof. Distributions made after the Series A PIK Distribution Period shall be paid in cash. If we fail to pay in full the Series A Distribution Amount during the Series A PIK Distribution Period, the unitholders entitled to such unpaid portion of the Series A Distribution Amount shall be deemed to have nonetheless received the amount of such unpaid portion in the form of Series A PIK units. If we fail to pay in full the Series A Distribution Amount after the Series A PIK Distribution Period, the amount of the unpaid portion of the Series A Distribution Amount will continue to accrue and accumulate until such amount is paid in full, and shall be paid to the Series A preferred unitholders before any distribution can be made to holders of Series A Junior Securities or Series A Parity Securities, including our general partner (with respect to the incentive distribution rights) or common unitholders (with respect to the common units).19Distributions of Available Cash from Operating SurplusAfter payment of the cumulative quarterly distributionsAs used herein, “Series A Distribution Amount” means (1) with respect to any quarter ending on theor before September 30, 2020, an amount per Series A preferred units, assuming our general partner maintains its 2% general partner interestunit equal to $0.678375 for such quarter, and we do not issue additional classes of equity securities, we will make distributions of available cash from operating surplus for any quarter in the following manner:·first, 98% to all common unitholders, pro rata, and 2% to our general partner, until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter; and ·thereafter, in the manner described in “—General Partner Interest and Incentive Distribution Rights” below.General Partner Interest and Incentive Distribution RightsOur partnership agreement provides that, after paying the full Series A Quarterly Distribution and any previously accrued and unpaid distributions(2) with respect to theany quarter ending after September 30, 2020, an amount per quarter per Series A preferred units, our general partner initially will be entitled to 2% of all distributions that we make prior to our liquidation. Our general partner has the right, but not the obligation, to contribute a proportionate amount of capital to us in order to maintain its 2% general partner interest if we issue additional units. Our general partner’s 2% interest, and the percentage of our cash distributions to which it is entitled from such 2% interest, will be proportionately reduced if we issue additional units in the future (other than the issuance of common units upon a reset of the incentive distribution rights) and our general partner does not contribute a proportionate amount of capital to us in order to maintain its 2% general partner interest. Our partnership agreement does not require that our general partner fund its capital contribution with cash. Our general partner may instead fund its capital contribution by the contribution to us of common units or other property.Incentive distribution rights represent the right to receive an increasing percentage (13%, 23% and 48%) of quarterly distributions of available cash from operating surplus after the minimum quarterly distribution and the target distribution levels have been achieved. Our general partner currently holds the incentive distribution rights, but may transfer these rights separately from its general partner interest.The following discussion assumes that our general partner maintains its 2% general partner interest, and that our general partner continues to own the incentive distribution rights.If for any quarter we have:·paid the full Series A Distribution Amount and any previously accrued and unpaid distributions with respect to the Series A preferred units;·distributed available cash from operating surplus to the common unitholders in an amount equal to the minimum quarterly distribution; and ·distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution;20then, we will distribute any additional available cash from operating surplus for that quarter among the common unitholders and our general partner in the following manner:·first, 98% to all common unitholders, pro rata, and 2% to our general partner, until each common unitholder receives a total of $0.244375 per common unit for that quarter (the “first target distribution”); ·second, 85% to all common unitholders, pro rata, and 15% to our general partner, until each common unitholder receives a total of $0.265625 per common unit for that quarter (the “second target distribution”); ·third, 75% to all common unitholders, pro rata, and 25% to our general partner, until each common unitholder receives a total of $0.318750 per common unit for that quarter (the “third target distribution”); and ·thereafter, 50% to all common unitholders, pro rata, and 50% to our general partner.Percentage Allocations of Available Cash from Operating SurplusThe following table illustrates the percentage allocations of available cash from operating surplus between the common unitholders and our general partner based on the specified target distribution levels. The amounts set forth under “Marginal percentage interest in distributions” are the percentage interests of our general partner and the unitholders in any available cash from operating surplus we distribute up to and including the corresponding amount in the column “Total quarterly distribution per unit target amount.” The percentage interests shown for our common unitholders and our general partner for the minimum quarterly distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below for our general partner include its 2% general partner interest and assume that our general partner has contributed any additional capital necessary to maintain its 2% general partner interest, our general partner has not transferred its incentive distribution rights and that there are no arrearages on common units. Marginal percentage
interest in
distributions Total quarterly distribution per unit
target amount General
Partner Minimum Quarterly Distribution $0.2125 98 % 2 % First Target Distribution above $0.2125 up to $0.244375 98 % 2 % Second Target Distribution above $0.244375 up to $0.265625 85 % 15 % Third Target Distribution above $0.265625 up to $0.318750 75 % 25 % Thereafter above $0.318750 50 % 50 % General Partner's Right to Reset Incentive Distribution LevelsOur general partner, as the initial holder of our incentive distribution rights, has the right under our partnership agreement, subject to certain conditions, to elect to relinquish the right to receive incentive distribution payments based on the initial target distribution levels and to reset, at higher levels, the minimum quarterly distribution amount and target distribution levels upon which the incentive distribution payments to our general partner would be set. If our general partner transfers all or a portion of the incentive distribution rights in the future, then the holder or holders of a majority of our incentive distribution rights will be entitled to exercise this right. The following discussion assumes that our general partner holds all of the incentive distribution rights at the time that a reset election is made. Our general partner's right to reset the minimum quarterly distribution amount and the target distribution levels upon which the incentive distributions payable to our general partner are based may be exercised, without approval of our unitholders or the conflicts committee, at any time when we have made cash distributions to the holders of the incentive distribution rights at the highest level of incentive distributions for each of the four consecutive fiscal quarters immediately preceding such time and the amount of each such distribution did not exceed adjusted operating surplus for such quarter. If our general partner and its affiliates are not the holders of a majority of the incentive distribution rights at the time an election is made to reset the minimum quarterly distribution amount and the target distribution levels, then the proposed reset will be subject to the prior written concurrence of our general partner that the conditions described above have been satisfied. The reset minimum quarterly distribution amount and target distribution levels will be higher than the minimum quarterly distribution amount and the target distribution levels prior to the reset such that the holder of the incentive distribution rights will not receive any incentive distributions under the reset target distribution levels until cash distributions per unit following this event increase as described below. We anticipate that our general partner would exercise this reset right in order to facilitate acquisitions or internal growth projects that would otherwise not be sufficiently accretive to cash distributions per common unit, taking into account the existing levels of incentive distribution payments being made to our general partner.21In connection with the resetting of the minimum quarterly distribution amount and the target distribution levels and the corresponding relinquishment by our general partner of incentive distribution payments based on the target distributions prior to the reset, our general partner will be entitled to receive a number of newly issued common units based on a predetermined formula described below that takes into account the “cash parity” value of the average cash distributions related to the incentive distribution rights received by our general partner for the two quarters immediately preceding the reset event as compared to the average cash distributions per common unit during that two-quarter period. In addition, our general partner will be issued the number of general partner units necessary to maintain our general partner's interest in us immediately prior to the reset election.The number of common units that our general partner (or the then-holder of the incentive distribution rights, if other than our general partner) would be entitled to receive from us in connection with a resetting of the minimum quarterly distribution amount and the target distribution levels then in effect would be equal to the quotient determined by dividing (x) the average aggregate amountgreater of cash distributions received by our general partner in respect of its incentive distribution rights during the two consecutive fiscal quarters ended immediately prior to the date of such reset election by (y) the average of the aggregate amount of cash distributed per common unit during each of these two quarters.Following a reset election, the minimum quarterly distribution amount will be reset to(a) $0.678375 and (b) an amount equal to the average cash distribution amount per common unit for the two fiscal quarters immediately preceding the reset election (which amount we refer to as the “reset minimum quarterly distribution”) and the target distribution levels will be reset to be correspondingly higher suchdistributions that following payment of the full Series A Distribution Amount and any previously accrued and unpaid distributionswould have been payable with respect to thesuch Series A preferred units, we would distribute all of our available cash from operating surplus for each quarter thereafter as follows:·first, 98% to all common unitholders, pro rata, and 2% to our general partner, until each common unitholder receives an amount equal to 115% of the reset minimum quarterly distribution for that quarter; ·second, 85% to all common unitholders, pro rata, and 15% to our general partner, until each common unitholder receives an amount per unit equal to 125% of the reset minimum quarterly distribution for the quarter;·third, 75% to all common unitholders, pro rata, and 25% to our general partner, until each common unitholder receives an amount per unit equal to 150% of the reset minimum quarterly distribution for the quarter; and ·thereafter, 50% to all common unitholders, pro rata, and 50% to our general partner.Our general partner will be entitled to cause the minimum quarterly distribution amount and the target distribution levels to be reset on more than one occasion, provided that it may not make a reset election except at a time when it has received incentive distributions for the immediately preceding four consecutive fiscal quarters based on the highest level of incentive distributions that it is entitled to receive under our partnership agreement.Distributions from Capital SurplusHow distributions from capital surplus will be madeAssuming our general partner maintains its 2% general partner interest and we do not issue additional classes of equity securities, following payment of the full Series A Distribution Amount and any previously accrued and unpaid distributions with respect to theunit if such Series A preferred units, we will make distributionsunit had converted immediately prior to the record date for such quarter in respect of available cash from capital surplus, if any, in the following manner:22·first,98% to all common unitholders, pro rata, and 2% to our general partner, until we distribute for each common unit that was issued in our initial public offering, an amount of available cash from capital surplus equal to the initial public offering price; ·second, 98% to all common unitholders, pro rata, and 2% to our general partner, until we distribute for each common unit, an amount of available cash from capital surplus equal to any unpaid arrearages in payment of the minimum quarterly distribution on the outstanding common units; and ·thereafter, as if they were from operating surplus.Effect of a distribution from capital surplusOur partnership agreement treats a distribution of capital surplus as the repayment of the initial unit price from our initial public offering, which is a return of capital. The initial public offering price less any distributions of capital surplus per unit is referred to as the “unrecovered initial unit price.” Each time a distribution of capital surplus is made, the minimum quarterly distribution and the target distribution levels will be reduced in the same proportion as the corresponding reduction in the unrecovered initial unit price. Because distributions of capital surplus will reduce the minimum quarterly distribution after any of thesesuch distributions are made,being paid into the effectsnumber of distributions of capital surplus may make it easier for our general partner to receive incentive distributions. However, any distribution of capital surplus before the unrecovered initial unit price is reduced to zero cannot be applied to the payment of the minimum quarterly distribution or any arrearages.Once we distribute capital surplus on a unit issued in our initial public offering in an amount equal to the initial unit price, we will reduce the minimum quarterly distribution and the target distribution levels to zero. Then, after distributing an amount of capital surplus for each common unit equal to any unpaid arrearages of the minimum quarterly distributions on outstanding common units and paying the full Series A Distribution Amount and any previously accrued and unpaid distributions with respect to theinto which such Series A preferred units, we will make all future distributions from operating surplus, with 50% being paid to the common unitholders, pro rata, and 2% to our general partner and 48% to the holder of our incentive distribution rights.Adjustment to the Minimum Quarterly Distribution and Target Distribution LevelsIn addition to adjusting the minimum quarterly distribution and target distribution levels to reflect a distribution of capital surplus, if we combine our units into fewer units or subdivide our units into a greater number of units, we will proportionately adjust:·the minimum quarterly distribution; ·target distribution levels;·the unrecovered initial unit price; ·the number of general partner units comprising our general partner interest; and ·the arrearages per common unit in payment of the minimum quarterly distribution on the common units.For example, if a two-for-one split of the common units should occur, the minimum quarterly distribution, the target distribution levels and the unrecovered initial unit price would each be reduced to 50% of its initial level, and each general partner unit would be split into two units. We will not make any adjustment by reason ofconvertible at the issuance of additional units for cash or property (including additional common units issued under any compensation or benefit plans).
then applicable conversion rate.23In addition, if legislation is enacted or if the official interpretation of existing law is modified by a governmental authority, so that we become taxable as a corporation or otherwise subject to taxation as an entity for federal, state or local income tax purposes, our partnership agreement specifies that the minimum quarterly distribution and the target distribution levels for each quarter may be reduced by multiplying each distribution level by a fraction, the numerator of which is available cash for that quarter (reduced by the amount of the estimated tax liability for such quarter payable by reason of such legislation or interpretation) and the denominator of which is the sum of available cash for that quarter (reduced by the amount of the estimated tax liability for such quarter payable by reason of such legislation or interpretation) plus our general partner's estimate of our aggregate liability for the quarter for such income taxes payable by reason of such legislation or interpretation. To the extent that the actual tax liability differs from the estimated tax liability for any quarter, the difference may be accounted for in subsequent quarters. Any further net gain recognized upon liquidation will be allocated in a manner that takes into account the incentive distribution rights of our general partner.·first, to our general partner to the extent of any negative balance in its capital account;·second,to the Series A preferred unitholders, pro rata, until the capital accounts equal to the Series A Issue Price of $54.27, plus any arrearages per Series A preferred unit in payment of the quarterly distributions on the Series A preferred unit or, if greater, the product of (a) the per unit capital account with respect to an initial common unit then outstanding and (b) the then applicable conversion rate;·third, 98% to the common unitholders, pro rata, and 2% to our general partner, until the capital account for each common unit is equal to the sum of: (1)the unrecovered initial unit price; and(2)the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs;24·fourth, 98% to the common unitholders, pro rata, and 2% to our general partner, until we allocate under this paragraph an amount per unit equal to: (1)the sum of the excess of the first target distribution per unit over the minimum quarterly distribution per unit for each quarter of our existence; less(2)the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit that we distributed 98% to the unitholders, pro rata, and 2% to our general partner, for each quarter of our existence; ·fifth, 85% to the common unitholders, pro rata, and 15% to our general partner, until we allocate under this paragraph an amount per unit equal to: (1)the sum of the excess of the second target distribution per unit over the first target distribution per unit for each quarter of our existence; less(2)the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit that we distributed 85% to the unitholders, pro rata, and 15% to our general partner for each quarter of our existence; ·sixth, 75% to the common unitholders, pro rata, and 25% to our general partner, until we allocate under this paragraph an amount per unit equal to: (1)the sum of the excess of the third target distribution per unit over the second target distribution per unit for each quarter of our existence; less(2)the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the second target distribution per unit that we distributed 75% to the unitholders, pro rata, and 25% to our general partner for each quarter of our existence; and ·thereafter, 50% to the common unitholders, pro rata, and 50% to our general partner.The percentages set forth above are based on the assumption that our general partner maintains its 2% general partner interest and has not transferred its incentive distribution rights and that we do not issue additional classes of equity securities.·first, 98% to the holders of common units in proportion to the positive balances in their capital accounts and 2% to our general partner, until the capital accounts of the common unitholders have been reduced to zero;·second,to the Series A preferred unitholders, to the extent of and in proportion to the positive balances in their capital accounts; and ·thereafter, 100% to our general partner.percentages set forth above arepreceding discussion is based on the assumption that our general partner maintains its 2% general partner interest and has not transferred its incentive distribution rights and that we do not issue additional classes of equity securities.25partners'partners’ capital account balances equaling the amount that they would have been if no earlier positive adjustments to the capital accounts had been made. In contrast to the allocations of gain, and except as provided above, we generally will allocate any unrealized and unrecognized loss resulting from the adjustments to capital accounts upon the issuance of additional units to the unitholders and our general partner based on their respective percentage ownership of us. If we make negative adjustments to the capital accounts as a result of such loss, future positive adjustments resulting from the issuance of additional units will be allocated in a manner designed to reverse the prior negative adjustments, and special allocations will be made upon liquidation in a manner that results, to the extent possible, in our unitholders'unitholders’ capital account balances equaling the amounts they would have been if no earlier adjustments for loss had been made.26·with regard to distributions of available cash, please read “Provisions of Our Partnership Agreement Relating to Cash Distributions;” ·with regard to the transfer of common units, please read “Description of Our Common Units—Transfer of Common Units;” and ·with regard to allocations of taxable income and taxable loss, please read “Material U.S. Federal Income Tax Consequences.”Purpose27“—Limited“-Limited Liability.” For a discussion of our general partner's right to contribute capital to maintain its 2% general partner interest if we issue additional units, please read “—Issuance of Additional Securities.”"unit majority"“unit majority” require the approval of a majority of the outstanding common units, and, to the extent outstanding, the Series A preferred units, voting together with the common units as a single class on an as-converted basis (whether or not the Series A preferred units arePercentage.Percentage”).Issuance of additional units additional any class or series of partnership interests in us that, with respect to the payment of distributions and distribution of assets upon liquidation, dissolution and winding up, ranks senior to the Series A preferred units (“Series A Senior Securities, Securities”) or, subject to certain limitations, any class or series of partnership interests in us that, with respect to the payment of distributions and distribution of assets upon liquidation, dissolution and winding up, ranks pari passu with the Series A preferred units (“Series A Parity SecuritiesSecurities”) (with certain limited exceptions) or additional Series A preferred units (other than Series A PIK Units).Amendment of our partnership agreement “—Amendment“-Amendment of Our Partnership Agreement.”Merger of our partnership or the sale of all or substantially all of our assets Unit majority. Please read “—Merger,“-Merger, Consolidation, Conversion, Sale or Other Disposition of Assets.”Dissolution of our partnership Unit majority. Please read “—Termination“-Termination and Dissolution.”Continuation of our business upon dissolution Unit majority. Please read “—Termination“-Termination and Dissolution.”Withdrawal of our general partner Under most circumstances, the approval of unitholders holding at least a majority of the outstanding common units and Series A preferred units (on an as-converted basis at the then applicable conversion rate), voting as a single class, excluding units held by our general partner and its affiliates, is required for the withdrawal of our general partner prior to September 30, 2023, in a manner that would cause a dissolution of our partnership. Please read “—Withdrawal“-Withdrawal or Removal of Our General Partner.”28Removal of our general partner Not less than 66 2/66-2/3% of the outstanding common and Series A preferred units (on an as-converted basis at the then applicable conversion rate), voting as a single class, including units held by our general partner and its affiliates. Please read “—Withdrawal“-Withdrawal or Removal of Our General Partner.”Transfer of our general partner
interestOur general partner may transfer all, but not less than all, of its general partner interest in us without a vote of our unitholders to an affiliate or another person in connection with its merger or consolidation with or into, or sale of all or substantially all of its assets to, such person. The approval of a majority of the outstanding common units and Series A preferred units (on an as-converted basis at the then applicable conversion rate), voting as a single class, excluding units held by our general partner and its affiliates, is required in other circumstances for a transfer of our general partner interest to a third party prior to September 30, 2023. Please read “—Transfer“-Transfer of General Partner Interest.”Transfer of incentive distribution rightsOur general partner may transfer any or all of its incentive distribution rights to an affiliate or another person without a vote of our unitholders. Please read “—Transfer of Incentive Distribution Rights.”Reset of incentive distribution levelsNo approval right.Transfer of ownership interests
in our general partnerNo approval right. Please read “—Transfer“-Transfer of Ownership Interests in Our General Partner.”of, by the limited partners as a group:·to remove or replace our general partner; ·to approve some amendments to our partnership agreement; or ·to take other action under our partnership agreement;29Upon issuance of additional limited partner interests (other than the issuance of common units in connection with a reset of the incentive distribution target levels or the issuance of common units upon conversion of outstanding partnership interests), ourwill be entitled, but not required, to make additional capital contributions to the extent necessary to maintain its 2% general partner interest in us. Our general partner's 2% interest in us will be reduced if we issue additional units in the future and our general partner does not contribute a proportionate amount of capital to us to maintain its 2% general partner interest. Moreover, our general partner will havehas the right, which it may from time to time assign in whole or in part to any of its affiliates, to purchase common units or other partnership interests whenever, and on the same terms that, we issue those interests to persons other than our general partner and its affiliates, to the extent necessary to maintain the percentage interest of our general partner and its affiliates, including such interest represented by common units, that existed immediately prior to each issuance. The other holders of common units will not have preemptive rights to acquire additional common units or other partnership interests.30·enlarge the obligations of any limited partner without its consent, unless such is deemed to have occurred as a result of an amendment approved by at least a majority of the type or class of limited partner interests so affected; or ·enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by us to our general partner or any of its affiliates without its consent, which consent may be given or withheld at its option.the date of this prospectus,September 30, 2019, our general partner and its affiliates own approximately 56.6%74.6% of our total outstanding common units and approximately 51.7%70.3% of the combined number of outstanding common units and Series A preferred units (on an as-converted basis at the then applicable conversion rate).·a change in our name, the location of our principal office, our registered agent or our registered office; ·the admission, substitution, withdrawal or removal of partners in accordance with our partnership agreement; ·a change that our general partner determines to be necessary or appropriate to qualify or continue our qualification as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or to ensure that neither we nor any of our subsidiaries will be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes; 31·an amendment that is necessary, in the opinion of our counsel, to prevent us or our general partner or its directors, officers, agents or trustees from, in any manner, being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisors Act of 1940, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974 (“ERISA”), each as amended, whether or not substantially similar to plan asset regulations currently applied or proposed by the U.S. Department of Labor; ·an amendment that our general partner determines to be necessary or appropriate in connection with the authorization or issuance of additional partnership interests; ·any amendment expressly permitted in our partnership agreement to be made by our general partner acting alone; ·an amendment effected, necessitated or contemplated by a merger agreement or plan of conversion that has been approved under the terms of our partnership agreement; ·any amendment that our general partner determines to be necessary or appropriate to reflect and account for the formation by us of, or our investment in, any corporation, partnership or other entity, in connection with our conduct of activities permitted by our partnership agreement; ·a change in our fiscal year or taxable year and any other changes that our general partner determines to be necessary or appropriate as a result of such change;·mergers with, conveyances to or conversions into another limited liability entity that is newly formed and has no assets, liabilities or operations at the time of the merger, conveyance or conversion other than those it receives by way of the merger, conveyance or conversion; or ·any other amendments substantially similar to any of the matters described in the clauses above.·do not adversely affect in any material respect the limited partners considered as a whole or any particular class of partnership interests as compared to other classes of partnership interests; ·are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute; ·are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed or admitted to trading; ·are necessary or appropriate for any action taken by our general partner relating to splits or combinations of units under the provisions of our partnership agreement; or ·are required to effect the intent expressed in this prospectus or the intent of the provisions of our partnership agreement or are otherwise contemplated by our partnership agreement.
requirement of any securities exchange on which the limited partner interests are or will be listed or admitted to trading;3233·the withdrawal or removal of our general partner or any other event that results in its ceasing to be our general partner other than by reason of a transfer of its general partner interest in accordance with our partnership agreement or withdrawal or removal followed by approval and admission of a successor; ·the election of our general partner to dissolve us, if approved by the holders of units representing a unit majority; ·the entry of a decree of judicial dissolution of our partnership; or ·there being no limited partners, unless we are continued without dissolution in accordance with the Delaware Act.·the action would not result in the loss of limited liability of any limited partner; and ·neither our partnership nor any of our subsidiaries would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of that right to continue.Distributions—Distributions - Distributions of Cash Upon Liquidation.” The liquidator may defer liquidation or distribution of our assets for a reasonable period of time or distribute assets to partners in kind if it determines that a sale would be impractical or would cause undue loss to our partners.days'days’ written notice, and that withdrawal will not constitute a violation of our partnership agreement. Notwithstanding the information above, our general partner may withdraw without unitholder approval upon 90 days'days’ written notice to the limited partners if at least 50% of the outstanding units are held or controlled by one person and its affiliates other than our general partner and its affiliates. In addition, our partnership agreement permits our general partner in some instances to sell or otherwise transfer all of its general partner interest in us without the approval of the unitholders. Please read “—Transfer“-Transfer of General Partner Interest” and “—Transfer of Incentive Distribution Rights.Interest.”“—Termination“-Termination and Dissolution.”342/3% 2/3% of our outstanding common and Series A preferred units (on an as-converted basis at the then applicable conversion rate), voting together as a single class, including units held by our general partner and its affiliates, and we receive an opinion of counsel regarding limited liability and tax3%3% of the outstanding common units and Series A preferred units (on an as-converted basis at the then applicable conversion rate) by our general partner and its affiliates would give them the practical ability to prevent our general partner’s removal. As of the date of this prospectus,August 1, 2019, our general partner and its affiliates own approximately 51.7%75.0% of our total outstanding common units and Series A preferred units (on an as-converted basis at the then applicable conversion rate).removal:·any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and·our general partner will have the right to convert its general partner interest and its incentive distribution rights into common units or to receive cash in exchange for those interests based on the fair market value of those interests as of the effective date of its removal. and incentive distribution rights of the departing general partner for a cash payment equal to the fair market value of those interests. Under all other circumstances where our general partner withdraws or is removed by the limited partners, the departing general partner will have the option to require the successor general partner to purchase ourthe general partner interest of the departing general partner and its incentive distribution rights for fair market value. In each case, this fair market value will be determined by agreement between the departing general partner and the successor general partner. If no agreement is reached, an independent investment banking firm or other independent expert selected by the departing general partner and the successor general partner will determine the fair market value. Or, if the departing general partner and the successor general partner cannot agree upon an expert, then an expert chosen by agreement of the experts selected by each of them will determine the fair market value.and its incentive distribution rights will automatically convert into common units pursuant to a valuation of those interests as determined by an investment banking firm or other independent expert selected in the manner described in the preceding paragraph.35Transfer of Incentive Distribution RightsAt any time, our general partner may sell or transfer its incentive distribution rights to an affiliate or third party without the approval of the unitholders.“—Withdrawal“-Withdrawal or Removal of Our General Partner.”days'days’ written notice.·the highest cash price paid by either our general partner or any of its affiliates for any limited partner interests of the class purchased within the 90 days preceding the date on which our general partner first mails notice of its election to purchase those limited partner interests; and ·the current market price calculated in accordance with our partnership agreement as of the date three business days before the date the notice is mailed.partner'spartner’s right to purchase outstanding limited partner interests, a holder of limited partner interests may have his limited partner interests purchased at a price that may be lower than market prices at various times prior to such purchase or lower than a unitholder may anticipate the market price to be in the future. The tax consequences to a unitholder of the exercise of this call right are the same as a sale by that unitholder of his common units in the market. Please read “Material U.S. Federal Income Tax Consequences—DispositionConsequences-Disposition of Common Units.”Theare convertible in wholemay elect to convert all or part into common units at the holder’s election at the earlierany portion of (i) October 6, 2019 and (ii) immediately prior to our liquidation. Beginning on October 6, 2020, subject to the satisfaction of certain conditions, the Series A preferred units are convertible at our electionowned by such holder into common units initially on a one-for-one basis, subject to certain adjustments. We may also elect,customary anti-dilution adjustments and an adjustment for any distributions that have accrued on orsuch Series A preferred units but not been paid when due (which we refer to as the “conversion rate”), at any time (but not more often than once per quarter) after October 6, 2020, in lieu2019 (or earlier upon our liquidation), provided that any conversion involves an aggregate number of convertingSeries A preferred units with an underlying value of common units equal to or greater than $50 million (calculated based on a per unit price of $54.27 (the “Series A Issue Price”)) or such lesser amount if such conversion relates to all of a holder’s remaining Series A preferred units.redeemreflect splits, combinations or similar events) for the preceding 20 trading days and (iv) we have an effective registration statement on file covering resales of the underlying common units to be received by the holders upon conversion of the Series A preferred units, at a redemption price calculated as described in our partnership agreement, provided thathowever, we will not be able to make any such election unless the redemptionconversion involves an aggregate number of Series A preferred units with an underlying value of common units equal to or greater than $50 million (calculated based on the Series A Issue Price) or such lesser amount if such redemptionconversion relates to all of the then outstanding Series A preferred units. Upon certain events involving aThe Series A Change of Control in which more than 90% ofpreferred units will be converted at the consideration payable toconversion rate if the holdersVWAP of the common units for the 20 trading days preceding the notice of conversion (the “Conversion VWAP”) is payable in cash,equal or greater to $74.62125, and at a ratio of one common unit for each 0.975 Series A preferred unit if the Conversion VWAP is less than $74.62125. We also may elect, rather than converting the Series A preferred units, will automatically convert into common units at a conversion ratio calculated as described in our partnership agreement. For more information regarding the conversion and redemption ofto redeem the Series A preferred units please read “Description of Series A Preferred Units.”
at a redemption price equal to the Conversion VWAP if the conditions described in clauses (i) through (iv) above have been met.36re-certify:·that the transferee or unitholder is an individual or an entity subject to United States federal income taxation on the income generated by us; or ·that, if the transferee unitholder is an entity not subject to United States federal income taxation on the income generated by us, as in the case, for example, of a mutual fund taxed as a regulated investment company or a partnership, all the entity's owners are subject to United States federal income taxation on the income generated by us.Meetings;37“—Issuance“-Issuance of Additional Securities.” However, if at any time any person or group, other than (a) our general partner and its affiliates, (b) a direct transferee of our general partner and its affiliates, (c) a transferee of such direct transferee who is notified by our general partner that it will not lose its voting rights, (d) any person or group that acquired such beneficial ownership with the prior approval of the board of directors of our general partner, (e) the purchasers of the Series A preferred units with respect to their ownership (beneficial or of record) of the Series A preferred units or the common units into which the Series A preferred units are convertible or (f) any holder of Series A preferred units in connection with any vote, consent or approval of the Series A preferred units as a separate class, acquires, in the aggregate, beneficial ownership of 20% or more of any class of units then outstanding, that person or group will lose voting rights on all of its units and the units may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes, determining the presence of a quorum, or for other similar purposes. Common units held in nominee or street name account will be voted by the broker or other nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and its nominee provides otherwise. Any notice, demand, request, report or proxy material required or permitted to be given or made to record holders of common units under our partnership agreement will be delivered to the record holder by us or by the transfer agent.“—Limited“-Limited Liability,” the units will be fully paid, and unitholders will not be required to make additional contributions.Indemnification·our general partner; ·any departing general partner; ·any person who is or was an affiliate of our general partner or any departing general partner; ·any person who is or was a director, officer, managing member, manager, general partner, fiduciary or trustee of us or our subsidiaries, an affiliate of us or our subsidiaries or any entity set forth in the preceding three bullet points; ·any person who is or was serving as director, officer, managing member, manager, general partner, fiduciary or trustee of another person owing a fiduciary duty to us or any of our subsidiaries at the request of our general partner or any departing general partner or any of their affiliates, excluding any such person providing, on a fee-for-service basis, trustee, fiduciary or custodial services; and ·any person designated by our general partner because such person's status, service or relationship expose such person to potential claims or suits relating to our or our subsidiaries' business and affairs.38Contentsour general partner or any departing general partner;·a current list of the name and last known address of each record holder; ·copies of our partnership agreement and our certificate of limited partnership and all amendments thereto; and ·certain information regarding the status of our business and financial condition.39partner's,partner’s, directors, officers, or other employees, or owed by our general partner, to us or our partners, (4) asserting a claim against us arising pursuant to any provision of the Delaware Act or (5) asserting a claim against us governed by the internal affairs doctrine. Although we believe this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, the provision may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice of forum provisions in other companies'companies’ certificates of incorporation or similar governing documents have been challenged in legal proceedings, and it is possible that, in connection with any action, a court could find the choice of forum provisions contained in our partnership agreement to be inapplicable or unenforceable in such action.40holders of Series A preferred units and prospective holders of common unitsunitholders who are individual citizens or residents of the United States and, unless otherwise noted in the following discussion, is the opinion of Latham & Watkins LLP, counsel to our general partner and us, insofar as it relates to legal conclusions with respect to matters of U.S. federal income tax law. This section is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Internal“Internal Revenue Code"Code”), existing and proposed Treasury regulations promulgated under the Internal Revenue Code (the "Treasury Regulations"“Treasury Regulations”) and current administrative rulings and court decisions, all of which are subject to change. Later changes in these authorities may cause the tax consequences to vary substantially from the consequences described below. Unless the context otherwise requires, references in this section to "us"“us” or "we"“we” are references to Phillips 66 Partners LP and our operating subsidiaries.holders ofor our Series A preferred units or holders of our common unitsunitholders and does not describe the application of the alternative minimum tax that may be applicable to certain unitholders. Moreover, the discussion focuses on unitholders who are individual citizens or residents of the United States and has only limited application to corporations, estates, entities treated as partnerships for U.S. federal income tax purposes, trusts, nonresident aliens, U.S. expatriates and former citizens or long-term residents of the United States or other unitholders subject to specialized tax treatment, such as banks, insurance companies and other financial institutions, tax-exempt institutions, foreign persons (including, without limitation, controlled foreign corporations, passive foreign investment companies and foreign persons eligible for the benefits of an applicable income tax treaty with the United States), individual retirement accounts (IRAs), real estate investment trusts (REITs) or mutual funds, dealers in securities or currencies, traders in securities, U.S. persons whose "functional currency"“functional currency” is not the U.S. dollar, persons holding their units as part of a "straddle," "hedge," "conversion transaction"“straddle,” “hedge,” “conversion transaction” or other risk reduction transaction, persons subject to special tax accounting rules as a result of any item of gross income with respect to our common units being taken into account in an applicable financial statement, and persons deemed to sell their units under the constructive sale provisions of the Internal Revenue Code. In addition, the discussion only comments, to a limited extent, on state, local, and foreign tax consequences. Accordingly, we encourage each prospective holder of Series A preferred units and each prospective holder of common unitsunitholder to consult his own tax advisor in analyzing the state, local and foreign tax consequences particular to him of the ownership or disposition of Series A preferred units or common units and potential changes in applicable laws."IRS"“IRS”) regarding our characterization as a partnership for tax purposes. Instead, we will rely on opinions of Latham & Watkins LLP. Unlike a ruling, an opinion of counsel represents only that counsel'scounsel’s best legal judgment and does not bind the IRS or the courts. Accordingly, the opinions and statements made herein may not be sustained by a court if contested by the IRS. Any contest of this sort with the IRS may materially and adversely impact the market for our common units, including the prices at which suchour common units trade. In addition, the costs of any contest with the IRS, principally legal, accounting and related fees, will result in a reduction in cash available for distribution to our unitholders and our general partner and thus will be borne indirectly by our unitholders and our general partner. Furthermore, the tax treatment of us, or of an investment in us, may be significantly modified by future legislative or administrative changes or court decisions. Any modifications may or may not be retroactively applied."—“— Tax Consequences of Unit Ownership—Ownership — Treatment of Short Sales"Sales”); (ii) whether all aspects of our monthly method for allocating taxable income and losses is permitted by existing Treasury Regulations (please read "—“— Disposition of Units—Common Units — Allocations Between Transferors and Transferees"Transferees”); and (iii) whether our method for taking into account Section 743 adjustments is sustainable in certain cases (please read "—“— Tax Consequences of Unit Ownership—Ownership — Section 754 Election"Election” and "—“— Uniformity of Units"Units”); and (iv) whether our use of simplifying conventions for making adjustments to “book” basis and relevant allocations is permitted by existing Treasury Regulations (please read “— Tax Consequences of Unit Ownership — Allocation of Income, Gain, Loss and Deduction” and “—Uniformity of Units”).41partner'spartner’s adjusted basis in his partnership interest. Section 7704 of the Internal Revenue Code provides that publicly traded partnerships will, as a general rule, be taxed as corporations. However, an exception, referred to as the "Qualifying“Qualifying Income Exception,"” exists with respect to publicly traded partnerships of which 90% or more of the gross income for every taxable year consists of "qualifying“qualifying income."” Qualifying income includes income and gains derived from the transportation, processing, storage and marketing of certain minerals and natural resources, including crude oil, natural gas and other products of a type that are produced in a petroleum refinery or natural gas processing plant, the retail and wholesale marketing of propane, the transportation of propane and natural gas liquids, certain related hedging activities, certain activities that are intrinsic to other qualifying activities, and our allocable share of our subsidiaries’ income from these sources. Other types of qualifying income include interest (other than from a financial business), dividends, real property rents, gains from the sale of real property and gains from the sale or other disposition of capital assets held for the production of income that otherwise constitutes qualifying income. We estimate that less than 3% of our current gross income is not qualifying income; however, this estimate could change from time to time. Based upon and subject to this estimate, the factual representations made by us and our general partner and a review of the applicable legal authorities, Latham & Watkins LLP is of the opinion that at least 90% of our current gross income constitutes qualifying income. The portion of our income that is qualifying income may change from time to time.·we will be classified as a partnership for federal income tax purposes; and ·each of our subsidiaries, other than Phillips 66 Partners Finance Corporation, will be treated as a partnership or will be disregarded as an entity separate from us for federal income tax purposes.·neither we nor any of our subsidiaries, other than Phillips 66 Partners Finance Corporation, have elected or will elect to be treated, or is otherwise treated, as a corporation for federal income tax purposes; and ·for each taxable year, more than 90% of our gross income has been and will be income of the type that Latham & Watkins LLP has opined or will opine is "qualifying income" within the meaning of Section 7704(d) of the Internal Revenue Code.42unitholder'sunitholder’s tax basis in his common units, or taxable capital gain, after the unitholder'sunitholder’s tax basis in his common units is reduced to zero. Accordingly, taxation as a corporation would result in a material reduction in a unitholder'sunitholder’s cash flow and after-tax return and thus would likely result in a substantial reduction of the value of the units.LLP'sLLP’s opinion that we will be classified as a partnership for federal income tax purposes.Common unitholdersWe will treat holders of our Series A preferred units as partners for federal income tax purposes entitled to receive allocations of items of income, gain, loss and deduction of the partnership and of net loss. If the Series A preferred units are not partnership interests, they would likely constitute indebtedness for federal income tax purposes and distributions on the Series A preferred units would constitute ordinary interest income to the holders of such units. The remainder of this discussion assumes that our Series A preferred units are partnership interests and holders of Series A preferred units are unitholders for federal income tax purposes. of Series A preferred units or of common units whose units have been transferred to a short seller to complete a short sale would appear to lose his status as a partner with respect to those units for federal income tax purposes. Please read "—“— Tax Consequences of Unit Ownership—Ownership — Treatment of Short Sales.""unitholders"“unitholders” in the discussion that follows are to persons who are treated as partners in Phillips 66 Partners LP for federal income tax purposes."—“— Entity-Level Collections,"” we will not pay any federal income tax. Instead, each common unitholder will be required to report on his income tax return his share of our income, gains, losses and deductions without regard to whether we make cash distributions to him. Consequently, we may allocate income to a common unitholder even if he has not received a cash distribution. Each common unitholder will be required to include in income his allocable share of our income, gains, losses and deductions for our taxable year ending with or within his taxable year. Our taxable year ends on December 31.43For each calendar year in which the Series A preferred units are outstanding, unitholders holding a Series A preferred unit will be allocated items of gross income and gain of the partnership until the aggregate of such items allocated for the current and all previous taxable periods since issuance of the Series A preferred units is equal to the sum of (i) the aggregate amount of cash distributed with respect to such Series A preferred units for the current and previous taxable periods and (i) the aggregate net loss allocated to the unitholders in respect of Series A preferred units for the current and all previous taxable periods. Because we cannot match transferors and transferees of our common units, we must maintain uniformity of the economic and tax characteristics of our common units. Thus, at the Series A Conversion Date, each unitholder holding a common unit converted from a Series A preferred unit will receive a special allocation of book and taxable income, gain, loss or deduction so that the per unit capital account with respect to each common unit converted from a Series A preferred unit is equal to the per unit capital account with respect to the common units (other than such common units converted from Series A preferred units) then outstanding. For these purposes, the IRS has ruled that a partner who acquires interests in a partnership in separate transactions must combine those interests and maintain a single adjusted tax basis for all of those interests Our cash distributions in excess of a unitholder'sunitholder’s tax basis generally will be considered to be gain from the sale or exchange of the common units, taxable in accordance with the rules described under "—“— Disposition of Common Units."” Any reduction in a unitholder'sunitholder’s share of our liabilities for which no partner, including the general partner, bears the economic risk of loss, known as "nonrecourse“nonrecourse liabilities,"” will be treated as a distribution by us of cash to that unitholder. We will not allocate any share of our nonrecourse liabilities to the holders of Series A preferred units in respect of such units. To the extent our distributions cause a unitholder's "at-risk"unitholder’s “at-risk” amount to be less than zero at the end of any taxable year, he must recapture any losses deducted in previous years. Please read "—“— Limitations on Deductibility of Losses."unitholder'sunitholder’s percentage interest in us because of our issuance of additional common units will decrease his share of our nonrecourse liabilities, and thus will result in a corresponding deemed distribution of cash. This deemed distribution may constitute a non-pro rata distribution. A non-pro rata distribution of money or property may result in ordinary income to a unitholder, regardless of his tax basis in his common units, if the distribution reduces the unitholder'sunitholder’s share of our "unrealized“unrealized receivables,"” including depreciation, recapture and/or substantially appreciated "inventory“inventory items,"” each as defined in the Internal Revenue Code, and collectively, "Section“Section 751 Assets."” To that extent, the unitholder will be treated as having been distributed his proportionate share of the Section 751 Assets and then having exchanged those assets with us in return for the non-pro rata portion of the actual distribution made to him. This latter deemed exchange will generally result in the unitholder'sunitholder’s realization of ordinary income, which will equal the excess of (i) the non-pro rata portion of that distribution over (ii) the unitholder'sunitholder’s tax basis (often zero) for the share of Section 751 Assets deemed relinquished in the exchange.unitholder has a single, unified adjusted tax basis in his interests in us, which includes his common units and Series A preferred units. A unitholder'sunitholder’s initial tax basis for his common units will be the amount he paid for the (i) common units and (ii) Series A preferred units plus his share of our nonrecourse liabilities. We will not allocate any share of our nonrecourse liabilities to the holders of Series A preferred units in respect of such units. Such taxThat basis will be increased by the unitholder’shis share of our income, and by any increases in his share of our nonrecourse liabilities. Such taxliabilities, and, on the disposition of a common unit, by his share of certain items related to business interest not yet deductible by him due to applicable limitations. Please read “— Limitations on Interest Deductions.” That basis will be decreased, but not below zero, by distributions from us, by the unitholder'sunitholder’s share of our losses, by any decreases in his share of our nonrecourse liabilities, by his share of our excess business interest (generally, the excess of our business interest over the amount that is deductible) and by his share of our expenditures that are not deductible in computing taxable income and are not required to be capitalized. A unitholder will have no share of our debt that is recourse to our general partner to the extent of the general partner's "net value"partner’s “net value” as defined in the Treasury Regulations promulgated under Section 752 of the Internal Revenue Code, but will have a share, generally based on his share of profits, of our nonrecourse liabilities. Please read "—“— Disposition of Units—Common Units — Recognition of Gain or Loss."
”44unitholder'sunitholder’s stock is owned directly or indirectly by or for five or fewer individuals or some tax-exempt organizations), to the amount for which the unitholder is considered to be "at risk"“at risk” with respect to our activities, if that is less than his tax basis. A common unitholder subject to these limitations must recapture losses deducted in previous years to the extent that distributions cause his at-risk amount to be less than zero at the end of any taxable year. Losses disallowed to a unitholder or recaptured as a result of these limitations will carry forward and will be allowable as a deduction to the extent that his at-risk amount is subsequently increased, provided such losses do not exceed such unitholder'scommon unitholder’s tax basis in his common units. Upon the taxable disposition of a unit, any gain recognized by a unitholder can be offset by losses that were previously suspended by the at-risk limitation but may not be offset by losses suspended by the basis limitation. Any loss previously suspended by the at-risk limitation in excess of that gain would no longer be utilizable.unitholder'sunitholder’s at-risk amount will increase or decrease as the tax basis of the unitholder'sunitholder’s units increases or decreases, other than tax basis increases or decreases attributable to increases or decreases in his share of our nonrecourse liabilities.taxpayer'staxpayer’s income from those passive activities. The passive loss limitations are applied separately with respect to each publicly traded partnership. Consequently, any passive losses we generate will only be available to offset our passive income generated in the future and will not be available to offset income from other passive activities or investments, including our investments or a unitholder'sunitholder’s investments inunitholder'sunitholder’s salary, active business or other income. Passive losses that are not deductible because they exceed a unitholder'sunitholder’s share of income we generate may be deducted in full when he disposes of his entire investment in us in a fully taxable transaction with an unrelated party. The passive loss limitations are applied after other applicable limitations on deductions, including the at-risk rules and the basis limitation.unitholder'sunitholder’s share of our net income may be offset by any of our suspended passive losses, but it may not be offset by any other current or carryover losses from other passive activities, including those attributable to other publicly traded partnerships.holdernon-corporate unitholder will not be allowed to take a deduction for certain excess business losses in such taxable years. An excess business loss is the excess (if any) of Series A preferred units will only be allocated net lossa taxpayer’s aggregate deductions for the taxable year that are attributable to the extenttrades or businesses of such taxpayer (determined without regard to the capital accountsexcess business loss limitation) over the aggregate gross income or gain of such taxpayer for the common unitholders have been reducedtaxable year that is attributable to zero.such trades or businesses plus a threshold amount. The deductibilitythreshold amount is equal to $255,000, or $510,000 for taxpayers filing a joint return. Any losses disallowed in a taxable year due to the excess business loss limitation may be used by the applicable unitholder in the following taxable year if certain conditions are met. Unitholders to which this excess business loss limitation applies will take their allocable share of our items of income, gain, loss and deduction into account in determining this limitation. This excess business loss limitation will be applied to a non-corporate unitholder after the passive loss limitations and may limit such unitholders’ ability to utilize any losses we generate allocable to such allocationunitholder that are not otherwise limited by the basis, at-risk and passive loss limitations described above.byin certain circumstances. Should our ability to deduct business interest be limited, the rules above.Limitationsamount of taxable income allocated to our unitholders in the taxable year in which the limitation is in effect may increase. However, in certain circumstances, a unitholder may be able to utilize a portion of a business interest deduction subject to this limitation in future taxable years. Prospective unitholders should consult their tax advisors regarding the impact of this business interest deduction limitation on Interest DeductionsThean investment in our common units.taxpayer's "investmenttaxpayer’s “investment interest expense"expense” is generally limited to the amount of that taxpayer's "nettaxpayer’s “net investment income."” Investment interest expense includes:·interest on indebtedness properly allocable to property held for investment; ·our interest expense attributed to portfolio income; and ·the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income.45Contentsinterest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income.unitholder'sunitholder’s investment interest expense will take into account interest on any margin account borrowing or other loan incurred to purchase or carry a unit. Net investment income includes gross income from property held for investment and amounts treated as portfolio income under the passive loss rules, less deductible expenses, other than interest, directly connected with the productionunitholder'sunitholder’s share of our portfolio income will be treated as investment income.general partner and the common unitholders in accordance with their percentage interests in us. At any time that incentive distributions are made to our general partner, gross income will be allocated to the recipients to the extent of these distributions. If we have a net loss, that loss will be allocated first to our general partner and the common unitholders in accordance with their percentage interests in us to the extent of their positive capital accounts, as adjusted for certain items in accordance with applicable Treasury Regulations, second to holders of Series A preferred units to the extent of their positive capital accounts, and third to our general partner.For each calendar year in which the Series A preferred units are outstanding, unitholders holding a Series A preferred unit will be allocated items of gross income and gain of the partnership until the aggregate of such items allocated for the current and all previous taxable periods since issuance of the Series A preferred units is equal to the sum of (i) the aggregate amount of cash distributed with respect to such Series A preferred units for the current and previous taxable periods and (i) the aggregate net loss allocated to the unitholders in respect of Series A preferred units for the current and all previous taxable periods. Because we cannot match transferors and transferees of our common units, we must maintain uniformity of the economic and tax characteristics of our common units. Thus, at the Series A Conversion Date, each unitholder holding a common unit converted from a Series A preferred unit will receive a special allocation of book and taxable income, gain, loss or deduction so that the per unit capital account with respect to each common unit converted from a Series A preferred unit is equal to the per unit capital account with respect to the common units (other than such common units converted from Series A preferred units) then outstanding.
Regulations.46"Contributed“Contributed Property."” The effect of these allocations, referred to as Section 704(c) Allocations, to a unitholder purchasing common units from us in an offering will be essentially the same as if the tax bases of our assets were equal to their fair market values at the time of the offering. In the event we issue additional common units or engage in certain other transactions in the future, "reverse“reverse Section 704(c) Allocations,"” similar to the Section 704(c) Allocations described above, will be made to the general partner and all of our unitholders immediately prior to such issuance or other transactions to account for the difference between the "book"“book” basis for purposes of maintaining capital accounts and the fair market value of all property held by us at the time of such issuance or future transaction. However, it may not be administratively feasible to make the relevant adjustments to “book” basis and the relevant reverse Section 704(c) Allocations each time we issue common units, particularly in the case of small or frequent common unit issuances. If that is the case, we may use simplifying conventions to make those adjustments and allocations, which may include the aggregation of certain issuances of common units. Latham & Watkins LLP is unable to opine as to the validity of such conventions. In addition, items of recapture income will be allocated to the extent possible to the unitholder who was allocated the deduction giving rise to the treatment of that gain as recapture income in order to minimize the recognition of ordinary income by some unitholders. Finally, although we do not expect that our operations will result in the creation of negative capital accounts (subject to certain adjustments), if negative capital accounts (subject to certain adjustments) nevertheless result, items of our income and gain will be allocated in an amount and manner sufficient to eliminate such negative balance as quickly as possible.partner's "book"partner’s “book” capital account, credited with the fair market value of Contributed Property, and "tax"“tax” capital account, credited with the tax basis of Contributed Property, referred to in this discussion as the "Book-Tax“Book-Tax Disparity,"” will generally be given effect for federal income tax purposes in determining a partner'spartner’s share of an item of income, gain, loss or deduction only if the allocation has "substantial“substantial economic effect."” In any other case, a partner'spartner’s share of an item will be determined on the basis of his interest in us, which will be determined by taking into account all the facts and circumstances, including:·his relative contributions to us;·the interests of all the partners in profits and losses; ·the interest of all the partners in cash flow; and ·the rights of all the partners to distributions of capital upon liquidation."—“— Section 754 Election"Election” and "—“— Disposition of Units—Common Units — Allocations Between Transferors and Transferees,"” allocations under our partnership agreement will be given effect for federal income tax purposes in determining a partner'spartner’s share of an item of income, gain, loss or deduction."short seller"“short seller” to cover a short sale of units may be considered as having disposed of those units. If so, he would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and may recognize gain or loss from the disposition. As a result, during this period:·any of our income, gain, loss or deduction with respect to those units would not be reportable by the unitholder; ·any cash distributions received by the unitholder as to those units would be fully taxable; and ·while not entirely free from doubt, all of these distributions would appear to be ordinary income."—“— Disposition of Units—Common Units — Recognition of Gain or Loss."39.6%37% and the highest marginal U.S. federal income tax rate applicable to long-term capital47unitholder'sunitholder’s allocable share of our income and gain realized by a unitholder from a sale of units. In the case of an individual, the tax will be imposed on the lesser of (i) the unitholder'sunitholder’s net investment income or (ii) the amount by which the unitholder'sunitholder’s modified adjusted gross income exceeds $250,000 (if the unitholder is married and filing jointly or a surviving spouse), $125,000 (if the unitholder is married and filing separately) or $200,000 (in any other case). In the case of an estate or trust, the tax will be imposed on the lesser of (i) undistributed net investment income, or (ii) the excess adjusted gross income over the dollar amount at which the highest income tax bracket applicable to an estate or trust begins for such taxable year. The U.S. Department of the Treasury and the IRS have issued Treasury Regulations that provide guidance regarding the NIIT. Prospective common unitholders are urged to consult with their tax advisors as to the impact of the NIIT on an investment in our common units.IRS unless there is a constructive termination of the partnership. Please read "—Disposition of Units—Constructive Termination."IRS. The election generally permits us to adjust a common unit purchaser'spurchaser’s tax basis in our assets ("(“inside basis"basis”) under Section 743(b) of the Internal Revenue Code to reflect his purchase price. This election does not apply with respect to a person who purchases common units directly from us. The Section 743(b) adjustment belongs to the purchaser and not to other unitholders. For purposes of this discussion, the inside basis in our assets with respect to a unitholder will be considered to have two components: (i) his share of our tax basis in our assets ("(“common basis"basis”) and (ii) his Section 743(b) adjustment to that basis.property'sproperty’s unamortized Book-Tax Disparity. Under Treasury Regulation Section 1.167(c)-1(a)(6), a Section 743(b) adjustment attributable to property subject to depreciation under Section 167 of the Internal Revenue Code, rather"—“— Uniformity of Units."property'sproperty’s unamortized Book-Tax Disparity, or treat that portion as non-amortizable to the extent attributable to property that is not amortizable. This method is consistent with the methods employed by other publicly traded partnerships but is arguably inconsistent with Treasury Regulation Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our assets. To the extent this Section 743(b) adjustment is attributable to appreciation in value in excess of the unamortized Book-Tax Disparity, we will apply the rules described in the Treasury Regulations and legislative history. If we determine that this position cannot reasonably be taken, we may take a depreciation or amortization position under which all purchasers acquiring units in the same month would receive depreciation or amortization, whether attributable to common basis or a Section 743(b) adjustment, based upon the same applicable rate as if they had purchased a direct interest in our assets. This kind of aggregate approach may result in lower annual depreciation or amortization deductions than would otherwise be allowable to some unitholders. Please read "—“— Uniformity of Units."” A unitholder'sunitholder’s tax basis for his common units is reduced by his share of our deductions (whether or not such deductions were claimed on an individual'sindividual’s income tax return) so that any position we take that understates deductions will overstate such unitholder'sunitholder’s basis in his common units, which may cause the unitholder to understate gain or overstate loss on any sale of such units. Please read "—“— Disposition of Units—Common Units — Recognition of Gain or Loss."” Latham & Watkins LLP is unable to opine as to whether our method for taking into account Section 743 adjustments is sustainable for property subject to depreciation under Section 167 of the Internal Revenue Code or if we use an aggregate approach as described above, as there is no direct or indirect controlling authority addressing the validity of these positions. Moreover, the IRS may challenge our position with respect to depreciating or amortizing the Section 743(b) adjustment we take to preserve the uniformity of the units. If such a challenge were sustained, the gain from the sale of units might be increased without the benefit of additional deductions.48transferee'stransferee’s tax basis in his units is higher than the units'units’ share of the aggregate tax basis of our assets immediately prior to the transfer. Conversely, a Section 754 election is disadvantageous if the transferee'stransferee’s tax basis in his units is lower than those units'units’ share of the aggregate tax basis of our assets immediately prior to the transfer. Thus, the fair market value of the units may be affected either favorably or unfavorably by the election. A basis adjustment is required regardless of whether a Section 754 election is made in the case of a transfer of an interest in us if we have a substantial built-in loss immediately after the transfer. Generally, a built-in loss is substantial if (i) it exceeds $250,000 or (ii) the transferee would be allocated a net loss in excess of $250,000 on a hypothetical sale of our assets for their fair market value immediately after a transfer orof the interests at issue. In addition, a basis adjustment is required regardless of whether a Section 754 election is made ifGenerally, a built-in loss or aA substantial basis reduction is substantialexists if, it exceeds $250,000."—“— Disposition of Units—Common Units — Allocations Between Transferors and Transferees.""—“— Tax Consequences of Unit Ownership—Ownership — Allocation of Income, Gain, Loss and Deduction.""—“— Uniformity of Units."” Property we subsequently acquire or construct may be depreciated using accelerated methods permitted by the Internal Revenue Code.49"—“— Tax Consequences of Unit Ownership—Ownership — Allocation of Income, Gain, Loss and Deduction"Deduction” and "—“— Disposition of Units—Common Units — Recognition of Gain or Loss.""syndication expenses"“syndication expenses”) must be capitalized and cannot be deducted currently, ratably or upon our termination. There are uncertainties regarding the classification of costs as organization expenses, which may be amortized by us, and as syndication expenses, which may not be amortized by us. The underwriting discounts and commissions we incur will be treated as syndication expenses.unitholder'sunitholder’s tax basis for the units sold. A unitholder'sunitholder’s amount realized will be measured by the sum of the cash or the fair market value of other property received by him plus his share of our nonrecourse liabilities. Because the amount realized includes a unitholder'sunitholder’s share of our nonrecourse liabilities, the gain recognized on the sale of units could result in a tax liability in excess of any cash received from the sale.unitholder'sunitholder’s tax basis in that common unit will, in effect, become taxable income if the common unit is sold at a price greater than the unitholder'sunitholder’s tax basis in that common unit, even if the price received is less than his original cost."dealer"“dealer” in units, on the sale or exchange of a unit will generally be taxable as capital gain or loss. Capital gain recognized by an individual on the sale of units held for more than twelve months will generally be taxed at the U.S. federal income tax rate applicable to long-term capital gains. However, a portion of this gain or loss, which will likely be substantial, will be separately computed and taxed as ordinary income or loss under Section 751 of the Internal Revenue Code to the extent attributable to assets giving rise to "unrealized“unrealized receivables,"” including potential recapture items such as depreciation recapture, or to “inventory gains” we own. Ordinary income attributable to unrealized receivables and inventory items may exceed net taxable gain realized upon the sale of a unit and may be recognized even if there is a net taxable loss realized on the sale of a unit. Thus, a unitholder may recognize both ordinary income and a capital loss upon a sale of units. Capital losses may offset capital gains and no more than $3,000 of ordinary income, in the case of individuals, and may only be used to offset capital gains in the case of corporations."—“— Tax Consequences of Unit Ownership—Ownership — Tax Rates."
”50"equitable apportionment"“equitable apportionment” method, which generally means that the tax basis allocated to the interest sold equals an amount that bears the same relation to the partner'spartner’s tax basis in his entire interest in the partnership as the value of the interest sold bears to the value of the partner'spartner’s entire interest in the partnership. Treasury Regulations under Section 1223 of the Internal Revenue Code allow a selling unitholder who can identify common units transferred with an ascertainable holding period to elect to use the actual holding period of the common units transferred. Thus, according to the ruling discussed above, a common unitholder will be unable to select high or low basis common units to sell as would be the case with corporate stock, but, according to the Treasury Regulations, he may designate specific common units sold for purposes of determining the holding period of units transferred. A unitholder electing to use the actual holding period of common units transferred must consistently use that identification method for all subsequent sales or exchanges of suchcommon units. A unitholder considering the purchase of additional units or a sale of common units purchased in separate transactions is urged to consult his tax advisor as to the possible consequences of this ruling and application of the Treasury Regulations."appreciated"“appreciated” partnership interest, one in which gain would be recognized if it were sold, assigned or terminated at its fair market value, if the taxpayer or related persons enter(s) into:·a short sale; ·an offsetting notional principal contract; or ·a futures or forward contract;"Allocation“Allocation Date."” However, gain or loss realized on a sale or other disposition of our assets other than inauthorizedauthorize all aspects of the proration method we have adopted. Accordingly, Latham & Watkins LLP is unable to opine on the validity of this method of allocating income and deductions between transferor and transferee unitholders. If this method is not allowed under the Treasury Regulations, our taxable income or losses might be reallocated among the unitholders. We are authorized to revise our method of allocation between transferor and transferee unitholders, as well as unitholders whose interests vary during a taxable year.51Constructive TerminationWe will be considered to have technically terminated our partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a twelve-month period. For purposes of determining whether the 50% threshold has been met, multiple sales of the same interest will be counted only once. Our technical termination would, among other things, result in the closing of our taxable year for all unitholders, which would result in us filing two tax returns (and our unitholders could receive two Schedules K-1 if relief was not available, as described below) for one fiscal year and could result in a deferral of depreciation deductions allowable in computing our taxable income. In the case of a unitholder reporting on a taxable year other than a fiscal year ending December 31, the closing of our taxable year may also result in more than twelve months of our taxable income or loss being includable in his taxable income for the year of termination. Our termination currently would not affect our classification as a partnership for federal income tax purposes, but instead we would be treated as a new partnership for federal income tax purposes. If treated as a new partnership, we must make new tax elections, including a new election under Section 754 of the Internal Revenue Code, and could be subject to penalties if we are unable to determine that a termination occurred. The IRS administers a publicly traded partnership technical termination relief program whereby, if a publicly traded partnership that technically terminated requests publicly traded partnership technical termination relief and such relief is granted by the IRS, among other things, the partnership will only have to provide one Schedule K-1 to unitholders for the year notwithstanding two partnership tax years.Conversion of UnitsWe will adopt the principles of Treasury Regulations § 1.721-2 with respect to the conversion of Series A preferred units into common units. We expect that the conversion will be nontaxable to holders of Series A preferred units. At the time of conversion, we will revalue our assets and allocate book items of unrealized income, gain, loss and deduction to the extent necessary to reflect that partner’s right to share in partnership capital under the partnership agreement. If available book items of income, gain, loss and deduction are unable to be allocated in a manner that reflects the converting partner’s right to share in partnership capital under the partnership agreement, then we must reallocate partnership capital between the existing partners and the converting partner. Corrective allocations will be made until such capital reallocations are eliminated. Corrective allocations may result in the allocation of a greater amount of income, gain, loss or deduction to a particular unitholder for tax purposes, as compared to book purposes, which could cause a unitholder to have taxable income in connection with a conversion.Upon the conversion of Series A preferred units, a unitholder will receive a basis in the resulting common units equal to its existing basis in its Series A preferred units plus such unitholder’s initial allocable share of our liabilities in its capacity as a common unitholder. As a common unitholder, that basis will be will be (i) increased by the unitholder’s share of our income and any increases in such unitholder’s share of our liabilities, and (ii) decreased, but not below zero, by the amount of all distributions to the common unitholder, the common unitholder’s share of our losses, any decreases in the common unitholder’s share of our liabilities, and certain other items. The holding period of such common units will also include the period that holder held the converted Series A preferred units.52"—“— Tax Consequences of Unit Ownership—Ownership — Section 754 Election."” We depreciate the portion of a Section 743(b) adjustment attributable to unrealized appreciation in the value of Contributed Property, to the extent of any unamortized Book-Tax Disparity, using a rate of depreciation or amortization derived from the depreciation or amortization method and useful life applied to the property'sproperty’s unamortized Book-Tax Disparity, or treat that portion as nonamortizable, to the extent attributable to property the common basis of which is not amortizable, consistent with the regulations under Section 743 of the Internal Revenue Code, even though that position may be inconsistent with Treasury Regulation Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our assets. Please read "—“— Tax Consequences of Unit Ownership—Ownership — Section 754 Election."” To the extent that the Section 743(b) adjustment is attributable to appreciation in value in excess of the unamortized Book-Tax Disparity, we will apply the rules described in the Treasury Regulations and legislative history. If we determine that this position cannot reasonably be taken, we may adopt a depreciation and amortization position under which all purchasers acquiring units in the same month"—“— Tax Consequences of Unit Ownership—Ownership — Section 754 Election,"” Latham & Watkins LLP has not rendered an opinion with respect to these methods. Moreover, the IRS may challenge any method of depreciating the Section 743(b) adjustment described in this paragraph. If this challenge were sustained, the uniformity of units might be affected, and the gain from the sale of units might be increased without the benefit of additional deductions. Please read "—“— Disposition of Units—Common Units — Recognition of Gain or Loss."53corporation's "U.S.corporation’s “U.S. net equity,"” that is effectively connected with the conduct of a U.S. trade or business. That tax may be reduced or eliminated by an income tax treaty between the United States and the country in which the foreign corporate unitholder is a "qualified“qualified resident."” In addition, this type of unitholder is subject to special information reporting requirements under Section 6038C of the Internal Revenue Code.UnderGain on the sale or disposition of a ruling published bycommon unit will be treated as effectively connected with a U.S. trade or business to the IRS, interpreting the scope of "effectively connected income,"extent that a foreign unitholder would be considered to be engaged in a trade or business in the United States by virtue of the U.S. activities of the partnership, and part or all of that unitholder'srecognize gain would be effectively connected with that unitholder's indirect U.S. trade or business. However, in a recent decision, the United States Tax Court declined to follow this ruling and held that such gain is not effectively connected with a foreign unitholder’s United StatesU.S. trade or business and would onlyupon the hypothetical sale of our assets at fair market value on the date of the sale or exchange of that unit. Such gain shall be taxable to the extentreduced by certain amounts treated as effectively connected with a U.S. trade or business attributable to such unitholder’s share of the partnership’s United Statescertain real property interests. As this decision is still subject to appeal, its exact impact on foreign unitholders is uncertain. Prospective unitholders should consult their own tax advisors regardinginterests, as set forth in the potential impact of this decision on their investment in our units. Moreover, underfollowing paragraph. Recent changes in law"—“— Administrative Matters—Matters — Additional Withholding Requirements."unitholder'sunitholder’s share of income, gain, loss and deduction. We cannot assure you that those positions will yield a result that conforms to the requirements of the Internal Revenue Code, Treasury Regulations or administrative interpretations of the IRS. Neither we nor Latham & Watkins LLP can assure prospective common unitholders that the IRS will not successfully contend in court that those positions are impermissible. Any challenge by the IRS could negatively affect the value of the units.year'syear’s tax liability, and possibly may result in an audit of his return. Any audit of a unitholder'sunitholder’s return could result in adjustments not related to our returns as well as those related to our returns.TheFor taxable years beginning on or before December 31, 2017, the Internal Revenue Code requires that one partner be designated as the "Tax“Tax Matters Partner"Partner” for these purposes. Our partnership agreement names Phillips 66 Partners GP LLC as our Tax Matters Partner.54TheFor such taxable years, the Tax Matters Partner has made and will make some elections on our behalf and on behalf of unitholders. In addition, the Tax Matters Partner can extend the statute of limitations for assessment of tax deficiencies against unitholders for items in our returns. The Tax Matters Partner may bind a unitholder with less than a 1% profits interest in us to a settlement with the IRS unless that unitholder elects, by filing a statement with the IRS, not to give that authority to the Tax Matters Partner. The Tax Matters Partner may seek judicial review, by which all the unitholders are bound, of a final partnership administrative adjustment and, if the Tax Matters Partner fails to seek judicial review, judicial review may be sought by any unitholder having at least a 1% interest in profits or by any group of unitholders having in the aggregate at least a 5% interest in profits. However, only one action for judicial review will go forward, and each unitholder with an interest in the outcome may participate. its unitholders take any such audit adjustment into account in accordance with their interests in us during the taxable year under audit, but there can be no assurance that such election will be effective in all circumstances. With respect to audit adjustments as to an entity in which we are a member or partner, the Joint Committee on Taxation has stated that we would not be able to have our general partner and its unitholders take such audit adjustment into account. If we are unable to have our general partner and its unitholders take such audit adjustment into account in accordance with their interests in us during the taxable year under audit, our current unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if such unitholders did not own our units during the taxable year under audit. If, as a result of any such audit adjustment, we are required to make payments of taxes, penalties and interest, our cash available for distribution to our common unitholders might be substantially reduced. These rules are not applicable to us for taxable years beginning on or prior to December 31, 2017.currently anticipate that we will designate our general partner as the Partnership Representative. Further, any actions taken by us or by the Partnership Representative on our behalf with respect to, among other things, U.S. federal income tax audits and judicial review of administrative adjustments by the IRS, will be binding on us and all of the unitholders. These rules are not applicable to us for taxable years beginning on or prior to December 31, 2017."foreign“foreign financial institutions"institutions” (as specially defined in the Internal Revenue Code) and certain other foreign entities. Specifically, a 30% withholding tax may be imposed on interest, dividends and other fixed or determinable annual or periodical gains, profits and income from sources within the United States ("(“FDAP Income"Income”), or subject to the proposed Treasury Regulations discussed below, gross proceeds from the sale or other disposition of any property of a type that can produce interest or dividends from sources within the United States ("(“Gross Proceeds"Proceeds”) paid to a foreign financial institution or to a "non-financial“non-financial foreign entity"entity” (as specially defined in the Internal Revenue Code), unless (i) the foreign financial institution undertakes certain diligence and reporting, (ii) the non-financial foreign entity either certifies it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in clause (i) above, it must enter into an agreement with the U.S. Department of Treasury requiring, among other things, that it undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report certain information about such accounts, and withhold 30% on payments to noncompliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing these requirements may be subject to different rules.55will applywould have applied to payments of relevant Gross Proceeds made on or after January 1, 2019.2019, recently proposed Treasury Regulations eliminate these withholding taxes on payments of Gross Proceeds entirely. Unitholders generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued. Thus, to the extent we have FDAP Income, or have Gross Proceeds on or after January 1, 2019, that areis not treated as effectively connected with a U.S. trade or business (please read "—“— Tax-Exempt Organizations and Other Investors"Investors”), unitholders who are foreign financial institutions or certain other foreign entities, or persons that hold their common units through such foreign entities, may be subject to withholding on distributions they receive from us, or their distributive share of our income, pursuant to the rules described above.·the name, address and taxpayer identification number of the beneficial owner and the nominee; ·whether the beneficial owner is: ·◦a person that is not a U.S. person; ·◦ a foreign government, an international organization or any wholly owned agency or instrumentality of either of the foregoing; or ·◦ a tax-exempt entity; ·the amount and description of units held, acquired or transferred for the beneficial owner; and ·specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from dispositions.$250$270 per failure, up to a maximum of $3,000,000$3,339,000 per calendar year, is imposed by the Internal Revenue Code for failure to report that information to us. The nominee is required to supply the beneficial owner of the units with the information furnished to us."substantial authority"“substantial authority”; or (B) as to which there is a reasonable basis and the relevant facts of that position are adequately disclosed on the return. If any item of income, gain, loss or deduction included in the distributive shares of unitholders might result in that kind of an "understatement"“understatement” of income for which no "substantial authority"“substantial authority” exists, we must adequately disclose the relevant facts on our return. In addition, we will make a reasonable effort to56 Any"—“— Partnership Status."Status”. We are unable to predict whether any such changes will ultimately be enacted. However, it is possible that a change in law could affect us, and any such changes could negatively impact the value of an investment in our common units.unitholder'sunitholder’s income tax liability to the jurisdiction, generally does not relieve a nonresident unitholder from the obligation to file an income tax return. Amounts withheld will be treated as if distributed to unitholders for purposes of determining the amounts distributed by us."—“— Tax Consequences of Unit Ownership—Ownership — Entity-Level Collections."” Based on current law and our estimate of our future operations, our general partner anticipates that any amounts required to be withheld will not be material.57·whether the investment is prudent under Section 404(a)(1)(B) of ERISA; ·whether in making the investment, that plan will satisfy the diversification requirements of Section 404(a)(l)(C) of ERISA; and ·whether the investment will result in recognition of unrelated business taxable income by the plan and, if so, the potential after-tax investment return. Please read “Material Federal Income Tax Consequences—Tax-Exempt Organizations and Other Investors”; and ·whether making such an investment will comply with the delegation of control and prohibited transaction provisions of ERISA, the Internal Revenue Code and any other applicable Similar Laws.entity'sentity’s assets would not be considered to be “plan assets” if, among other things:(a) the equity interests acquired by the employee benefit plan are publicly offered securities—i.e., the equity interests are widely held by 100 or more investors independent of the issuer and each other, are freely transferable and are registered under certain provisions of the federal securities laws;58(a) the equity interests acquired by the employee benefit plan are publicly offered securities — i.e., the equity interests are widely held by 100 or more investors independent of the issuer and each other, are freely transferable and are registered under certain provisions of the federal securities laws; (b) the entity is an “operating company,”— i.e., it is primarily engaged in the production or sale of a product or service, other than the investment of capital, either directly or through a majority-owned subsidiary or subsidiaries; or (c) there is no significant investment by benefit plan investors, which is defined to mean that less than 25% of the value of each class of equity interest is held by the employee benefit plans referred to above that are subject to ERISA and IRAs and other similar vehicles that are subject to Section 4975 of the Internal Revenue Code. (b) the entity is an “operating company,”—i.e., it is primarily engaged in the production or sale of a product or service, other than the investment of capital, either directly or through a majority-owned subsidiary or subsidiaries; or(c) there is no significant investment by benefit plan investors, which is defined to mean that less than 25% of the value of each class of equity interest is held by the employee benefit plans referred to above that are subject to ERISA and IRAs and other similar vehicles that are subject to Section 4975 of the Internal Revenue Code.59Thisrelateswe intend to 6,304,204offer our common units and 13,819,791 Series A preferred units issued to the selling unitholders on October 6, 2017 and uppublic:an additional 1,381,984 Series A preferred units that may be issued purchasers; orus to the selling unitholders as payment in kind in lieua combination of cash distributions on the Series A preferred units they hold. For more information aboutany of these methods. relationships with the selling unitholders and their affiliates, see the Current Report on Form 8-K we filed with the SEC on October 10, 2017.The following table sets forth information about the maximum number of common units and Series A preferredat: that may be offered from time to time.byto time:selling unitholders under this prospectus. The selling unitholdersNYSE;currently holdreceive compensation in the form of underwriting discounts or acquire at any time common units or Series A preferred units in addition to those registered hereby. In addition, the selling unitholderscommissions and may sell, transfer, assign or otherwise dispose of some or all of their common units or Series A preferred units in transactions exemptreceive commissions from or not subject to the registration requirementspurchasers of the Securities Act. Accordingly, we cannot give an estimatesecurities for whom they may act as toagents. If any broker-dealer purchases the amountsecurities as principal, it may effect resales of common units or Series A preferred units that will be held by the selling unitholders upon termination of this offering. Information concerning the selling unitholders may changesecurities from time to time and, if necessary, we will supplement this prospectus accordingly.In the purchase agreement pursuant to which each of the selling unitholders initially acquired the common units and Series A preferred units being registered hereby, each such selling unitholder represented to the Partnership that it was purchasing such common units and Series A preferred units for its own account and not with a view toward distribution in violation of any securities laws.We have prepared the following table and the related notes based on information supplied to us by the selling unitholders on or prior to November 3, 2017. Other information about the selling unitholders may change over time.60Selling Unitholders Common
Units
Beneficially
Owned
Prior to the
Offering Maximum
Number of
Common
Units to be
Sold
Pursuant
to this
Prospectus Percentage of
Common
Units
Beneficially
Owned
Following the
Offering (1)(3) Series A
Preferred
Units
Beneficially
Owned
Prior to the
Offering (2) Maximum
Number of
Series A
Preferred
Units to be
Sold Pursuant
to this
Prospectus (2) Percentage
of Series A
Preferred
Units
Beneficially
Owned
Following
the Offering (1)(3) Stonepeak Screwdriver Holdings, LLC 1,050,701 1,050,701 — — — — Stonepeak Screwdriver SPV LLC — — — 12,769,488 12,769,488 — FR XIII Pantheon Holdings, L.L.C. (4) 3,152,102 3,152,102 — 2,026,903 2,026,903 — Tortoise Direct Opportunities Fund, LP (5) — — — 405,384 405,384 — Tortoise MLP & Pipeline Fund (6) 1,346,626 852,407 * — — — Tortoise VIP MLP & Pipeline Portfolio (6) 2,551 1,805 * — — — Tortoise Energy Infrastructure Corporation (6) 1,530,570 583,711 * — — — Tortoise MLP Fund, Inc. (6) 848,518 537,734 * — — — Tortoise Power and Energy Infrastructure Fund, Inc. (6) 53,422 28,667 * — — — Tortoise Pipeline & Energy Fund, Inc. (6) 73,200 37,151 * — — — Tortoise Energy Independence Fund, Inc. (6) 85,677 32,400 * — — — Texas Mutual Insurance Company (6) 98,077 27,526 * — — — *Less than 1%.(1)Based on 121,522,819 common units outstanding as of November 1, 2017.(2)Includes Series A preferred units initially issued to the selling unitholders in a private placement and Series A PIK Units that may be issued to the selling unitholders as payment in kind in lieu of quarterly cash distributions, which may be offered by the selling unitholders as follows: (i) Stonepeak Screwdriver SPV LLC: 11,608,624 Series A preferred units and 1,160,864 Series A PIK Units; FR XIII Pantheon Holdings, L.L.C.: 1,842,639 Series A preferred units and 184,264 Series A PIK Units; and Tortoise Direct Opportunities Fund, LP: 368,528 Series A preferred units and 36,856 Series A PIK Units. The number of Series A PIK Units that may be issued to each selling unitholder listed in this table was determined based on the number of Series A preferred units issued and outstanding as of the date hereof after giving effect to the receipt of Series A PIK Units in respect of such Series A preferred units for each quarter during the Series A PIK Distribution Period, but without giving effect to the receipt of additional Series A PIK Units received during any quarter as payment-in-kind distributions on issued and outstanding Series A PIK Units. Distributions may be paid in cash, in-kind in the form of Series A PIK Units, or in combination thereof, at the election of our general partner. Please read “Description of Our Series A Preferred Units – Distributions.”(3)Assumes that the selling unitholders will sell all of the common units and Series A preferred units offered pursuant to this prospectus. We cannot assure you that the selling unitholders will sell all or any of the units.(4)FR XIII Pantheon Holdings Parent, L.L.C. is the managing member of FR XIII Pantheon Holdings, L.L.C. FR XIII Charlie AIV, L.P. is the sole member of FR XIII Pantheon Holdings Parent, L.L.C. First Reserve GP XIII, L.P. is the general partner of FR XIII Charlie AIV, L.P. First Reserve GP XIII Limited is the general partner of First Reserve GP XIII, L.P. William E. Macaulay is the Executive Chairman of First Reserve GP XIII Limited and has the right to appoint a majority of the board of directors of First Reserve GP XIII Limited.(5)The Investment Adviser currently has five investment professionals who are primarily responsible for the origination and structuring of the Fund’s portfolio and for voting proxies for securities held by the Fund: Brian A. Kessens, James R. Mick, Stephen Pang, Matthew G.P. Sallee and Robert J. Thummel Jr.(6)The Investment Committee of Tortoise Capital Advisors, L.L.C. has voting or dispositive power and is comprised of H. Kevin Birzer, Terry Matlack, Kenneth P. Malvey, Zachary A. Hamel, Brian Kessens, James Mick, Matthew Sallee and Rob Thummel.61As of the date of this prospectus, we have not been advised by the selling unitholders as to any plan of distribution. The selling unitholders may choose not to sell any of their Series A preferred units or common units. Distributions of the Series A preferred units and common units by the selling unitholders, or by their partners, pledgees, donees, transferees or other successors in interest, may from time to time be offered for sale either directly by the selling unitholders or other persons, or through underwriters, dealers or agents or on any exchange on which the units may from time to time be traded, in the over-the-counter market, or in independently negotiated transactions or otherwise. The methods by which the Series A preferred units and common units may be sold include:·a block trade (which may involve crosses) in which the broker or dealer so engaged will attempt to sell the securities as agent or as riskless principal but may position and resell a portion of the block as principal to facilitate the transaction;·through brokers or dealers, who may act as agents or principals;·exchange distributions and/or secondary distributions;·sales on any national securities exchange or quotation service on which the units may be listed or quoted at the time of the sale, including the NYSE, in the over-the-counter market or through a market maker or into an existing trading market (on an exchange or otherwise) for the units;·underwritten transactions;·short sales, whether through a broker-dealer or otherwise;·in transactions in which broker-dealers may agree with the selling unitholders to sell a specified number of such units at a stipulated price per unit;62·privately negotiated transactions;·a combination of any such methods of sale; and·any other method permitted pursuant to applicable law.The selling unitholders may also sell the Series A preferred units or common units pursuant to an exemption from registration requirements under the Securities Act (including pursuant to the safe harbor provided by Rule 144), if available, rather than under this prospectus.The selling unitholders may effect such transactions by selling the Series A preferred units or common units to underwriters or to or through other broker-dealers, and such underwriters orother broker-dealers may receive compensation in the form of discountsconcessions or commissions from the selling unitholders and may receive commissions from the purchasers of the Series A preferred units or common unitssecurities for whom they may act as agents. Such transactionseffected bycalculated from, the selling unitholders at fixed prices, which may be changed, prevailing market prices at the time ofprospectus supplements. Any underwriters, brokers, dealers and agents who participate in any sale varying prices determined at the time of sale, or at negotiated prices. These prices will be determined by the holders of the securities or by agreement between the holders and any underwriters or broker-dealers who may receive fees or commissions in connection with the sale. The aggregate proceeds to the selling unitholders from the sale of the Series A preferred units or common units offered hereby will be the purchase price of the Series A preferred units or common units less discounts and commissions, if any. The selling unitholders may agree to indemnify any underwriter, broker-dealer or agent that participatesalso engage in transactions involving saleswith, or perform services for, us orthe unitstheir businesses. We may indemnify underwriters, brokers, dealers and agents against certainspecific liabilities, including liabilities arising under the Securities Act. In certain circumstances, we have agreed to register the units for sale under the Securities Act andof 1933.indemnify the selling unitholders and each person who participates as an underwriter in the offering of the units against certain liabilities, including certain liabilities under the Securities Act. We have agreed to pay all expenses of the registration of the Series A preferred units andpurchase common units offeredmay be solicited directly by this prospectus, other than the feesus and expenses of legal counsel that are incurred by the selling unitholders, but excluding underwriting discounts and commissions relating to the sale of the units.Subjectthereof may be made by us directly to certain limitations described in “Description of Series A Preferred Units —Restrictions on Transfers of Series A Preferred Units,” in connection with sales of the units under this prospectus, the selling unitholders may enter into derivative, hedging, forward sale, optioninstitutional investors or other types of transactions with broker-dealers or other financial institutions or third partiesothers, who may in turn engage in sales or short sales of the units in the course of hedging the positions they assume or other sales of the units.Subject to certain limitations described in “Description of Series A Preferred Units —Restrictions on Transfers of Series A Preferred Units,” the selling unitholders also may sell the units offered hereby short and deliver them to close out the short positions, or loan or pledge the units to broker-dealers or other financial institutions or other third parties who may from time to time effect distributions of the units or other interests in the units.The selling unitholders and any underwriters, broker-dealers or agents that participate in the distribution of the Series A preferred units or common units may be deemed to be “underwriters”underwriters within the meaning of the Securities Act. Act with respect to any resale thereof. The terms of any such sales will be described in the prospectus supplement relating thereto.anyrequired, this prospectus may be amended or supplemented from time to time to describe a specific plan of distribution. The place and time of delivery for the securities in respect of which this prospectus is delivered will be set forth in the accompanying prospectus supplement.selling unitholders are broker-dealers, they are, according to SEC interpretation, “underwriters” withincommon units at levels above those that might otherwise prevail in the meaningopen market. Specifically, underwriters, brokers or dealers may over-allot in connection with offerings, creating a short position in the securities for their own accounts. For the purpose of covering a syndicate short position or stabilizing the Securities Act. Underwriters are subject to the prospectus delivery requirements under the Securities Act. If the selling unitholders are deemed to be underwriters, the selling unitholders may be subject to certain statutory liabilities under the Securities Act and the Exchange Act.There can be no assurances that the selling unitholders will sell any or allprice of the securities, offered under this prospectus.
the underwriters, brokers or dealers may place bids for the securities or effect purchases of the securities in the open market. Finally, the underwriters may impose a penalty whereby selling concessions allowed to syndicate members or other brokers or dealers for distribution of the securities in offerings may be reclaimed by the syndicate if the syndicate repurchases previously distributed securities in transactions to cover short positions, in stabilization transactions or otherwise. These activities may stabilize, maintain or otherwise affect the market price of the securities, which may be higher than the price that might otherwise prevail in the open market, and, if commenced, may be discontinued at any time.636420162018 and 2015,2017, and for each of the three years in the period ended December 31, 2016,2018, and the effectiveness of Phillips 66 Partners LP’s internal control over financial reporting as of December 31, 2016,2018, appearing in Phillips 66 Partners LP’s Annual Report on Form 10-K for the year ended December 31, 2016,2018, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon, included therein, and incorporated herein by reference, which as to the consolidated financial statements for the years ended December 31, 20162018 and December 31, 2015,2017, are based in part on the reports of Deloitte & Touche LLP, and Grant Thornton LLP, independent registered public accounting firms, and which as to the consolidated financial statements for the year ended December 31, 2016, are also based in part on the report of Deloitte & Touche LLP, independent registered public accounting firm. The consolidated financial statements of DCP Sand Hills Pipeline, LLC (which Phillips 66 Partners LP accounts for using the equity method of accounting) as of December 31, 20162018 and 2015,2017, and for each of the yearthree years in the period ended December 31, 2016 and the period from March 2, 2015 through December 31, 2015,2018, and the consolidated financial statements of DCP Southern Hills Pipeline, LLC (which Phillips 66 Partners LP accounts for using the equity method of accounting) as of December 31, 2018 and 2017, and for each of the three years in the period ended December 31, 2016 and 2015,2018, have been audited by Deloitte & Touche LLP, as stated in their reports, which are incorporated herein by reference. The consolidated financial statements of Dakota Access, LLC (which Phillips 66 Partners LP accounts for using the equity method of accounting) as of and for the years ended December 31, 2018 and 2017, have been audited by Grant Thornton LLP, as stated in their report, which is incorporated herein by reference. The consolidated financial statements of Phillips 66 Partners LP, referred to above, are incorporated herein by reference in reliance upon such reports given on the authority of such firms as experts in accounting and auditing.65Table of Contents Amount SEC registration fee $ 142,498 FINRA filing fee * Legal fees and expenses * Accounting fees and expenses * Printing expenses * Transfer Agent fees * Miscellaneous * Total $ ** SEC registration fee $ 32,450 Legal fees and expenses * Accounting fees and expenses * Printing and engraving expenses * Transfer Agent fees * Miscellaneous * Total ** Agreement—Agreement — Indemnification” discloses that we will generally indemnify officers, directors and affiliates of our general partner to the fullest extent permitted by the law against all losses, claims, damages or similar events and is incorporated herein by reference.·our general partner; ·any departing general partner; ·any person who is or was an affiliate of our general partner or any departing general partner; ·any person who is or was a director, officer, managing member, manager, general partner, fiduciary or trustee of us or our subsidiaries, an affiliate of us or our subsidiaries or any entity set forth in the preceding three bullet points; ·any person who is or was serving as director, officer, managing member, manager, general partner, fiduciary or trustee of another person owing a fiduciary duty to us or any of our subsidiaries at the request of our general partner or any departing general partner or any of their affiliates, excluding any such person providing, on a fee-for-service basis, trustee, fiduciary or custodial services; and ·any person designated by our general partner because such person's status, service or relationship exposes such person to potential claims or suits relating to our or our subsidiaries' business and affairs.II-1Contentsour general partner or any departing general partner;ourthe general partner will provide indemnification similar to that in our partnership agreement for each of the following: (i) Phillips 66 Company, as the initial member of our general partner, and any person later admitted as a member of our general partner; (ii) any person who is or was an affiliate of our general partner (other than the Partnership and our subsidiaries); (iii) any person who is or was a member, partner, director, officer, fiduciary or trustee of our general partner or its affiliates (other than the partnership and its subsidiaries); (iv) any person who is or was serving at the request of our general partner or its affiliates as an officer, director, member, manager, partner, fiduciary or trustee of another person; provided, however, that a person shall not be entitled to indemnification solely by reason of providing, on a fee-for-services basis, trustee, fiduciary or custodial services; and (v) any person designated by the board of directors of our general partner.II-21.11.1** *—Form of Underwriting Agreement 4.1 4.14.2—4.3 4.2—4.4 4.34.54.6 —4.7 4.4—4.8 4.5—4.9 4.6—4.10 4.7—4.11 4.8—4.12 5.1*4.13 5.1* 8.1* 8.1*—23.1* 23.1*—23.2* 23.2*—23.3* 23.323.4**—24.1* *—PowerPowers of Attorney (included(contained on the signature page hereof)page)II-3(a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act; (ii) To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of the prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to the information in this registration statement; Item 17. Undertakings (a) The undersigned registrant hereby undertakes:(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;(ii) To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of the prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and(iii) To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to the information in this registration statement;(2) That, for the purpose of determining any liability under the Securities Act, each of the post-effective amendments shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof.(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.(4) That, for the purpose of determining liability under the Securities Act to any purchaser:(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.II-4(2) (5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that, in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser:(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.(c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to the provisions described in Item 15 above, or otherwise, the registrant has been advised that, in the opinion of the SEC, indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against any liability (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by a director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.(d) The undersigned registrant hereby undertakes that:(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.II-5(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.II-6(4) That, for the purpose of determining liability under the Securities Act to any purchaser: (i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and (ii) (5) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that, in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to the purchaser: (i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; (ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; (iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and (iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. (b) (c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers, and controlling persons of the registrant pursuant to the provisions described in Item 15 above, or otherwise, the registrant has been advised that, in the opinion of the SEC, indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against any liability (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by a director, officer, or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (d) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) November 3, 2017.October 25, 2019. PHILLIPS 66 PARTNERS LP By: Phillips 66 Partners GP LLC, its general partner November 3, 2017/s/ Kevin J. Mitchell Kevin J. Mitchell,Julie A. Pradel and each of them, either of whom may act without the joinder of the other, as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement and any Registration Statement (including any amendment thereto) for this offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933 and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or would do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them or their or his substitute and substitutes, may lawfully do or cause to be done by virtue hereof.ourthe general partner of the registrant, on November 3, 2017.October 25, 2019. SignatureTitleSignature Title /s/ Greg C. Garland Chairman of the Board of Directors Greg C. Garland and Chief Executive Officer (Principal executive officer) Phillips 66 Partners GP LLC /s/ Kevin J. Mitchell Vice President and Chief Financial Officer and Director (Principal financial officer) Phillips 66 Partners GP LLC /s/ Chukwuemeka A. Oyolu Vice President and Controller Chukwuemeka A. Oyolu (Principal accounting officer) Phillips 66 Partners GP LLC /s/ P.D. (David) Bairrington Director P.D. (David) Bairrington Phillips 66 Partners GP LLC /s/ Mark A. Haney Director Mark A. Haney Phillips 66 Partners GP LLC /s/ Robert A. Herman Director Robert A. Herman Phillips 66 Partners GP LLC /s/ Joseph W. O’Toole Director Joseph W. O’Toole Phillips 66 Partners GP LLC /s/ Timothy D. Roberts Director Timothy D. Roberts Phillips 66 Partners GP LLC /s/ Tim G. TaylorDirectorTim G. TaylorPhillips 66 Partners GP LLC