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Underwriting | Proceeds to | |||||||||||
Price to | Discounts and | Selling | ||||||||||
Public | Commissions | Unitholders | ||||||||||
Per Common Unit | $ | 31.70 | $ | 1.268 | $ | 30.432 | ||||||
Total | $ | 232,569,840 | $ | 9,302,794 | $ | 223,267,046 |
MORGAN STANLEY |
CITI |
UBS INVESTMENT BANK |
CREDIT SUISSE |
Prospectus Supplement | Page | |||
S-1 | ||||
S-11 | ||||
S-14 | ||||
S-44 | ||||
S-44 | ||||
S-45 | ||||
S-46 | ||||
S-83 | ||||
S-86 | ||||
S-87 | ||||
S-89 | ||||
S-92 | ||||
S-92 | ||||
S-92 | ||||
S-93 | ||||
S-94 |
Base Prospectus | Page | |||
About this Prospectus | 1 | |||
Energy Transfer Equity, L.P. | 1 | |||
Energy Transfer Partners, L.P. | 1 | |||
Cautionary Statement Concerning Forward-Looking Statements | 1 | |||
Risk Factors | 4 | |||
Use of Proceeds | 34 | |||
Description of Our Common Units | 35 | |||
Our Cash Distribution Policy | 39 | |||
ETP’s Cash Distribution Policy | 42 | |||
Material Provisions of Our Partnership Agreement | 46 | |||
Material Provisions of ETP’s Partnership Agreement | 57 | |||
Material Tax Consequences | 63 | |||
Selling Unitholders | 77 | |||
Plan of Distribution | 82 | |||
Legal Matters | 83 | |||
Experts | 83 | |||
Where You Can Find More Information | 83 | |||
Incorporation of Certain Documents by Reference | 84 |
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• | the 2% general partner interest in ETP, which ETE holds through its ownership interests in ETP GP; | |
• | 100% of the outstanding incentive distribution rights in ETP, which ETE holds through its ownership interests in ETP GP; and | |
• | approximately 62.5 million common units of ETP, all of which are held directly by ETE. |
• | 13.0% of all incremental cash distributed in a quarter after $0.275 has been distributed in respect of each common unit of ETP for that quarter; | |
• | 23.0% of all incremental cash distributed in a quarter after $0.3175 has been distributed in respect of each common unit of ETP for that quarter; and | |
• | the maximum sharing level of 48.0% of all incremental cash distributed in a quarter after $0.4125 has been distributed in respect of each common unit of ETP for that quarter. |
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• | The Southeast Texas System, a 4,300-mile integrated system located in southeast Texas that gathers, compresses, treats, processes and transports natural gas from the Austin Chalk trend. The Southeast Texas System is a large natural gas gathering system covering thirteen counties between Austin and Houston. The system includes the La Grange processing plant, five treating facilities and three conditioning facilities. This system is connected to the Katy Hub through the168-mile East Texas pipeline and is also connected to the Oasis pipeline, as well as two power plants. |
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• | The North Texas System, a160-mile integrated system located in four counties in North Texas that gathers, compresses, treats, processes and transports natural gas from the Barnett Shale trend. The system includes our Godley plant, as discussed below. |
• | The Canyon Gathering System consists of approximately 1,800 miles of gathering pipeline ranging in diameters from two inches to 16 inches in the Piceance-Uinta Basin of Colorado and Utah and six conditioning plants with an aggregated processing capacity of90 MMcf/d. The system currently gathers approximately 130,000 MMBtu/d from 1,400 wells and is connected to five major pipeline systems. | |
• | Interests in various midstream assets located in Texas and Louisiana, including the Vantex System, the Rusk County Gathering System, the Whiskey Bay System, and the Chalkley Transmission System. On a combined basis, these assets have a capacity of approximately550 MMcf/d. | |
• | Marketing operations through ETP’s producer services business, in which ETP markets the natural gas that flows through its pipeline systems, referred to as on-system gas, and attract other customers by marketing volumes of natural gas that do not move through its pipeline systems, referred to as off-system gas. For both on-system and off-system gas, ETP purchases natural gas from natural gas producers and other supply points and sells the natural gas to utilities, industrial consumers, other marketers and pipeline companies, thereby generating gross margins based upon the difference between the purchase and resale prices. |
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• | The ET Fuel System, which serves some of the most active drilling areas in the United States, is comprised of approximately 2,200 miles of intrastate natural gas pipeline and related natural gas storage facilities. With approximately 460 receiptand/or delivery points, including interconnects with pipelines providing direct access to power plants and interconnects with other intrastate and interstate pipelines, the ET Fuel System is strategically located near high-growth production areas and provides access to the Waha Hub near Midland, Texas, the Katy Hub near Houston, Texas and the Carthage Hub in east Texas, the three major natural gas trading centers in Texas. The ET Fuel System has total system throughput capacity of approximately 3.3 Bcf/d of natural gas and total working storage capacity of 12.4 Bcf of natural gas. |
• | The Oasis pipeline, a583-mile natural gas pipeline that directly connects the Waha Hub to the Katy Hub. The Oasis pipeline is primarily a36-inch diameter natural gas pipeline. It has bi-directional capability with approximately 1.2 Bcf/d of throughput capacity moving west-to-east and greater than750 MMcf/d of throughput capacity moving east-to-west. The Oasis pipeline has many interconnections with other pipelines, power plants, processing facilities, municipalities and producers. |
• | providing ETP with the ability to bypass the La Grange processing plant when processing margins are unfavorable; | |
• | providing access for natural gas on the Southeast Texas System to other third party supply and market points and interconnecting pipelines; and | |
• | allowing ETP to bypass our treating facilities on the Southeast Texas System and blend untreated natural gas from the Southeast Texas System with gas on the Oasis pipeline while continuing to meet pipeline quality specifications. |
• | The HPL System is comprised of approximately 4,400 miles of intrastate natural gas pipeline with an aggregate capacity of 4.4 Bcf/d, six treating facilities with aggregate capacity of280 MMcf/d, the underground Bammel storage reservoir and related transportation assets. The system has access to multiple sources of historically significant natural gas supply reserves from south Texas, the Gulf Coast of Texas, east Texas and the western Gulf of Mexico, and is directly connected to major gas distribution, electric and industrial load centers in Houston, Corpus Christi, Texas City and other cities located along the Gulf Coast of Texas. The HPL System also includes 32 miles of the Cleburne to Carthage pipeline from ETP’s Texoma pipeline interconnect to the Carthage Hub. The HPL System is well situated to gather gas in many of the major gas producing areas in Texas and has a particularly strong presence in the key Houston Ship Channel and Katy Hub markets, which significantly contributes to ETP’s overall ability to play an important role in the Texas natural gas markets. The HPL System is also well positioned to capitalize upon off-system opportunities due to its numerous interconnections with other pipeline systems, its direct access to multiple |
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• | The East Texas pipeline is a168-mile natural gas pipeline that connects three treating facilities, one of which ETP owns, with its Southeast Texas System. This pipeline was the first phase of a multi-phased project that increased service to producers in East and North Central Texas and provided access to the Katy Hub. The East Texas pipeline expansion had an initial capacity of over400 MMcf/d which increased to the current capacity of675 MMcf/d with the addition of the Grimes County Compressor Station. Over500 MMcf/d of pipeline capacity is contracted under long-term agreements. |
• | The Transwestern pipeline, an open-access natural gas interstate pipeline extending approximately 2,400 miles from the gas producing regions of West Texas, eastern and northwest New Mexico, and southern Colorado primarily to pipeline interconnects off the east end of its system and to pipeline interconnects at the California border. The Transwestern pipeline has access to three significant gas basins: the Permian Basin in West Texas and eastern New Mexico; the San Juan Basin in northwest New Mexico and southern Colorado; and the Anadarko Basin in the Texas and Oklahoma panhandle. Natural gas sources from the San Juan Basin and surrounding producing areas can be delivered eastward to Texas intrastate and mid-continent connecting pipelines and natural gas market hubs as well as westward to markets like Arizona, Nevada and California. Transwestern’s customers include local distribution companies, producers, marketers, electric power generators and industrial end-users. Transwestern transports natural gas in interstate commerce. As a result, Transwestern qualifies as a “natural gas company” under the Natural Gas Act, or NGA, and is subject to the regulatory jurisdiction of the Federal Energy Regulatory Commission, or FERC, which regulates our interstate natural gas pipeline interests. The operating results for Transwestern are included in our results on a consolidated basis as of the acquisition date (December 1, 2006). |
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• | A joint development with Kinder Morgan Energy Partners, L.P. for ETP’s 50% interest in Midcontinent Express Pipeline, or MEP, an approximately500-mile interstate natural gas pipeline scheduled to be in service during the second calendar quarter of 2009, that will originate near Bennington, Oklahoma, be routed through Perryville, Louisiana, and terminate at an interconnect with Transco’s interstate natural gas pipeline in Butler, Alabama, that transports natural gas to the significant natural gas markets in the northeast portion of the United States. |
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• | ETP’s enhanced access to capital and financial flexibility will allow it to compete more effectively in acquiring assets and expanding its systems. We expect that ETP’s credit facilities will increase its financial flexibility and enhance its access to capital. We believe this will allow ETP to implement its operating strategies in a timely manner and more effectively compete in acquiring additional assets or expanding its existing systems. | |
• | ETP’s experienced management team has an established reputation as highly-effective, strategic operators within its operating segments. In the past, the management teams of each of its operating segments have been successful in identifying and consummating strategic acquisitions that enhance its businesses. In addition, ETP’s management team has a substantial equity ownership in us and is motivated through performance-based incentive compensation programs of ETP to effectively and efficiently manage ETP’s business operations. |
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• | ETP’s assets provide marketing flexibility through its access to numerous markets and customers. | |
• | ETP has a significant market presence in each of its operating areas. | |
• | ETP’s Southeast Texas System has additional capacity, which provides opportunities for higher levels of utilization. | |
• | ETP’s ability to bypass its La Grange and Godley processing plants reduces its commodity price risk. |
• | ETP has a geographically diverse retail propane network. | |
• | ETP has experience in identifying, evaluating and completing acquisitions. | |
• | ETP’s operations are focused in areas experiencing higher-than-average population growth. |
• | ETE received distributions from ETP of $175.0 million, $12.7 million and $183.1 million related to its limited partner interests, general partner interests and incentive distribution rights, respectively. | |
• | On a consolidated basis, we had revenues of approximately $7.0 billion, operating income of approximately $810.0 million and net income of approximately $319.0 million. | |
• | ETP’s acquisition of the Transwestern pipeline on December 1, 2006. | |
• | ETP’s execution of an agreement with Kinder Morgan Energy Partners, L.P. for a 50/50 joint development of MEP. | |
• | ETP’s completion of the Cleburne to Carthage pipeline. | |
• | The commencement of construction by ETP of its Southeast Bossier pipeline, approximately 157 miles of predominately42-inch pipe connecting ETP’s East Texas and Cleburne to Carthage pipelines with the Texoma pipeline (which is a part of ETP’s HPL System) north of Beaumont, Texas, which ETP expects to complete by the second calendar quarter of 2008. | |
• | The commencement of construction by ETP of its Paris Loop pipeline, a 135 mile pipeline connecting ETP’s existing pipelines in the Barnett Shale region to its Texoma pipeline in Lamar County, Texas, which ETP expects to complete in the second calendar quarter of 2008. | |
• | ETP’s initiation of the Phoenix project, a planned expansion of the Transwestern pipeline. | |
• | ETP’s completion of the first phase of the natural gas processing plant in Godley, Texas. |
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• | Our general partner will continue to own a 0.3% general partner interest in us. | |
• | Our public unitholders will own approximately 99.7 million common units representing a 44.6% limited partner interest in us. | |
• | We will continue to own approximately 62.5 million common units of ETP. | |
• | We will continue to hold the 2% general partner interest in ETP through our ownership of equity interests in ETP GP. | |
• | We will continue to hold 100% of the incentive distribution rights in ETP through our ownership of equity interests in ETP GP. |
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Public Common Units | 44.6 | % | ||
General Partner Units | 0.3 | % | ||
Management & Other Affiliates of Energy Transfer Equity | 55.1 | % | ||
100.0 | % | |||
(1) | LE GP, LLC, as our general partner, has the right, but not the obligation to contribute capital to Energy Transfer Equity, L.P. to maintain its proportionate general partner interest. Our general partner’s general partner interest is represented by 692,065 general partner units. | |
(2) | Class A limited partner interests are entitled to receive cash distributions related to the 2.0% general partner interest owned by Energy Transfer Partners GP, L.P. in Energy Transfer Partners, L.P. | |
(3) | Class B limited partner interests are entitled to receive their pro rata share of cash distributions related to the incentive distribution rights owned by Energy Transfer Partners GP, L.P. in Energy Transfer Partners, L.P. | |
(4) | Includes approximately 1.1 million common units owned by management of Energy Transfer Partners, L.P. |
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Common units offered | 7,336,588 common units; 8,437,077 common units if the underwriters exercise their over-allotment option in full. | |
Units outstanding after this offering | 222,829,956 common units; 222,829,956 common units if the underwriters exercise their over-allotment option in full. | |
Use of proceeds | We will not receive any proceeds from this offering. | |
Cash distributions | Under our partnership agreement, we must distribute all of our cash on hand at the end of each quarter, less reserves established by our general partner. We refer to this cash as “available cash,” and we define its meaning in our partnership agreement. We declared a quarterly cash distribution for our fourth quarter of fiscal 2007 (ending August 31, 2007) of $0.39 per unit per common, or $1.56 on an annualized basis. We paid this cash distribution on October 19, 2007 to unitholders of record at the close of business on October 5, 2007. | |
We plan to change our fiscal year, which currently ends on August 31, to the calendar year. In connection with this change, we expect that we will transition to making quarterly cash distributions on a calendar quarter basis that will be paid within 50 days following the end of each calendar quarter. To facilitate this transition, we will not make a cash distribution for the three month period ending November 30, 2007, but instead will make a cash distribution for the four month period ending December 31, 2007 that would be paid no later than February 19, 2008. | ||
Limited call right | If at any time our affiliates own more than 90% of our outstanding units, our general partner has the right, but not the obligation, to purchase all of the remaining units at a price not less than the then-current market price of the units. Management and other affiliates of our general partner currently own approximately 55.1% of our common units on a fully diluted basis. The provision of our partnership agreement that grants this limited call right cannot be amended without the approval of the holders of at least 90% of the outstanding units. | |
Limited voting rights | Our general partner manages and operates us. Unlike the holders of common stock in a corporation, you will have only limited voting rights on matters affecting our business. You will have no right to elect our general partner or its officers or directors. Our general partner may not be removed except by a vote of the holders of at least 662/3% of the outstanding units, including units owned by our general partner and its affiliates, voting together as a single class. Management and other affiliates of our general partner currently own approximately 55.1% of our outstanding common units. This ownership level will enable our general partner and these affiliates to prevent our general partner’s involuntary removal. | |
Estimated ratio of taxable income to distributions | We estimate that if you own the common units you purchase in this offering through December 31, 2009, you will be allocated, on a cumulative basis, an amount of federal taxable income for that period that will be less than 10% of the cash distributed with respect to that period. For the basis of this estimate, see “Material Tax Considerations — Ratio of Taxable Income to Distributions.” |
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Exchange listing | Our common units are listed on the New York Stock Exchange under the symbol “ETE.” | |
Affiliate purchases | Certain of our officers, directors and other affiliates may, but are not obligated to, purchase common units in this offering at the price to public set forth on the cover page of this prospectus supplement. | |
Risk factors | Investing in the notes involves risks. See “Risk Factors” beginning onpage S-14 of this prospectus supplement and on page 4 of the accompanying base prospectus and the other risks identified in the documents incorporated by reference herein for information regarding risks you should consider before investing in the common units. | |
The FERC and the Commodity Futures Trading Commission, or CFTC, are pursuing legal actions against ETP relating to certain natural gas trading and transportation activities, and related third party claims have been filed against ETE and ETP. For a discussion of these matters, see “Risk Factors — Risks Related to Energy Transfer Partners’ Business — “The FERC and CFTC are pursuing legal actions against ETP relating to certain natural gas trading and transportation activities, and related third party claims have been filed against ETE and ETP.” |
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Year Ended August 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Statement of Operations Data: | ||||||||||||
Revenues: | ||||||||||||
Midstream segment | 2,853,496 | 4,223,544 | 3,246,772 | |||||||||
Intrastate transportation and storage segment | 3,915,932 | 5,013,224 | 2,608,108 | |||||||||
Interstate transportation segment | 178,663 | — | — | |||||||||
Eliminations | (1,562,199 | ) | (2,359,256 | ) | (471,255 | ) | ||||||
Retail propane segment | 1,284,867 | 879,556 | 709,473 | |||||||||
Other | 121,278 | 102,028 | 75,700 | |||||||||
Total revenues | 6,792,037 | 7,859,096 | 6,168,798 | |||||||||
Gross margin | 1,713,831 | 1,290,780 | 787,283 | |||||||||
Depreciation and amortization | 191,383 | 129,636 | 105,751 | |||||||||
Operating income | 809,336 | 575,540 | 297,921 | |||||||||
Interest expense | 279,986 | 150,646 | 101,061 | |||||||||
Income from continuing operations before income tax expense and minority interest | 563,359 | 433,907 | 201,795 | |||||||||
Income tax expense(a) | 11,391 | 23,015 | 4,397 | |||||||||
Minority interests in income from continuing operations | (232,608 | ) | (303,752 | ) | (96,946 | ) | ||||||
Income from continuing operations | 319,360 | 107,140 | 100,452 | |||||||||
Basic income from continuing operations per limited partner unit(b) | 1.56 | 0.80 | 0.89 | |||||||||
Diluted income from continuing operations per limited partner unit(b) | 1.55 | 0.79 | 0.75 | |||||||||
Cash distribution per unit | 1.46 | 2.56 | 2.66 | |||||||||
Balance Sheet Data (at period end): | ||||||||||||
Current assets | 1,050,578 | 1,302,736 | 1,453,730 | |||||||||
Total assets | 8,183,089 | 5,924,141 | 4,905,672 | |||||||||
Current liabilities | 932,815 | 1,020,787 | 1,244,785 | |||||||||
Long-term debt (less current maturities) | 5,198,676 | 3,205,646 | 2,275,965 | |||||||||
Partners’ capital (deficit) | (47,132 | ) | 45,751 | (88,137 | ) | |||||||
Other Financial Data: | ||||||||||||
Cash flow provided by operating activities | 754,497 | 310,782 | 38,133 | |||||||||
Cash flow used in investing activities | (2,158,090 | ) | (1,244,406 | ) | (1,131,117 | ) | ||||||
Cash flow provided by financing activities | 1,454,739 | 926,369 | 1,043,591 | |||||||||
Capital expenditures: | ||||||||||||
Maintenance | 89,226 | 51,826 | 41,054 | |||||||||
Growth | 998,075 | 677,861 | 155,405 | |||||||||
Acquisition | 90,695 | 586,185 | 1,131,844 |
(a) | As a partnership, we are not generally subject to income taxes. However, three of our subsidiaries, Oasis Pipe Line, Heritage Holdings, Heritage Service Corporation and Titan Propane Services, Inc., are corporations subject to income taxes. | |
(b) | See Note 4 to our consolidated financial statements incorporated by reference in this prospectus supplement for a discussion of the computation of earnings per unit. |
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• | the amount of natural gas transported through ETP’s transportation pipelines and gathering systems; | |
• | the level of throughput in its processing and treating operations; | |
• | the fees it charges and the margins it realizes for its gathering, treating, processing, storage and transportation services; | |
• | the price of natural gas; | |
• | the relationship between natural gas and NGL prices; | |
• | the weather in its operating areas; | |
• | the cost of the propane it buys for resale and the prices it receives for its propane; | |
• | the level of competition from other midstream companies, interstate pipeline companies, propane companies and other energy providers; | |
• | the level of its operating costs; | |
• | prevailing economic conditions; and | |
• | the level of ETP’s hedging activities. |
• | the level of capital expenditures it makes; | |
• | the level of costs related to litigation and regulatory compliance matters; | |
• | the cost of acquisitions, if any; | |
• | the levels of any margin calls that result from changes in commodity prices; | |
• | its debt service requirements; | |
• | fluctuations in its working capital needs; | |
• | its ability to make working capital borrowings under its credit facilities to make distributions; | |
• | its ability to access capital markets; | |
• | restrictions on distributions contained in its debt agreements; and | |
• | the amount, if any, of cash reserves established by its general partner in its discretion for the proper conduct of ETP’s business. |
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• | interest expense and principal payments on our indebtedness; | |
• | restrictions on distributions contained in any current or future debt agreements; | |
• | our general and administrative expenses; | |
• | expenses of our subsidiaries other than ETP, including tax liabilities, if any; | |
• | capital contributions to maintain our 2% general partner interest in ETP as required by the partnership agreement of ETP upon the issuance of additional partnership securities by ETP; and | |
• | reserves our general partner believes prudent for us to maintain for the proper conduct of our business or to provide for future distributions. |
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• | a significant portion of our and ETP’s cash flow from operations will be dedicated to the payment of principal and interest on outstanding debt and will not be available for other purposes, including payment of distributions; | |
• | covenants contained in our and ETP’s existing debt arrangements require us to meet financial tests that may adversely affect our flexibility in planning for and reacting to changes in our business; | |
• | our ability to obtain additional financing for working capital, capital expenditures, acquisitions and general partnership purposes may be limited; | |
• | we may be at a competitive disadvantage relative to similar companies that have less debt; | |
• | we may be more vulnerable to adverse economic and industry conditions as a result of our significant debt level; and | |
• | failure to comply with the various restrictive and affirmative covenants of the credit agreements could negatively impact our ability and the ability of our subsidiaries to incur additional debt and to pay distributions. We are required to measure these financial tests and covenants quarterly and, as of August 31, 2007, we were in compliance with all financial requirements, tests, limitations, and covenants related to financial ratios under our existing credit agreements. |
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• | our unitholders’ current proportionate ownership interest in us will decrease; | |
• | the amount of cash available for distribution on each common unit or partnership security may decrease; | |
• | the ratio of taxable income to distributions may increase; | |
• | the relative voting strength of each previously outstanding common unit may be diminished; and | |
• | the market price of our common units may decline. |
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• | a court or government agency determined that we were conducting business in a state but had not complied with that particular state’s partnership statute; or | |
• | Your right to act with other unitholders to take other actions under our partnership agreement is found to constitute “control” of our business. |
• | voluntarily withdraws from the partnership by giving notice to the other partners; | |
• | transfers all, but not less than all, of its partnership interests to another entity in accordance with the terms of ETP’s partnership agreement; |
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• | makes a general assignment for the benefit of creditors, files a voluntary bankruptcy petition, seeks to liquidate, acquiesces in the appointment of a trustee, receiver or liquidator, or becomes subject to an involuntary bankruptcy petition; or | |
• | dissolves itself under Delaware law without reinstatement within the requisite period. |
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• | the allocation of shared overhead expenses to ETP and us; | |
• | the interpretation and enforcement of contractual obligations between us and our affiliates, on the one hand, and ETP, on the other hand; | |
• | the determination of the amount of cash to be distributed to ETP’s partners and the amount of cash to be reserved for the future conduct of ETP’s business; | |
• | the determination whether to make borrowings under ETP’s revolving working capital facility to pay distributions to ETP’s partners; and | |
• | any decision we make in the future to engage in business activities independent of ETP. |
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• | Our general partner is allowed to take into account the interests of parties other than us, including ETP and its affiliates and any general partners and limited partnerships acquired in the future, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders. | |
• | Our general partner has limited its liability and reduced its fiduciary duties under the terms of our partnership agreement, while also restricting the remedies available to our unitholders for actions that, without these limitations, might constitute breaches of fiduciary duty. As a result of purchasing our units, unitholders consent to various actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state law. | |
• | Our general partner determines the amount and timing of our investment transactions, borrowings, issuances of additional partnership securities and reserves, each of which can affect the amount of cash that is available for distribution to our unitholders. | |
• | Our general partner determines which costs it and its affiliates have incurred are reimbursable by us. | |
• | Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered, or from entering into additional contractual arrangements with any of these entities on our behalf, so long as the terms of any such payments or additional contractual arrangements are fair and reasonable to us. | |
• | Our general partner controls the enforcement of obligations owed to us by it and its affiliates. | |
• | Our general partner decides whether to retain separate counsel, accountants or others to perform services for us. |
• | permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or any limited partner; | |
• | provides that our general partner is entitled to make other decisions in “good faith” if it reasonably believes that the decisions are in our best interests; | |
• | generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the Audit and Conflicts Committee of the Board of Directors of our general partner and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from |
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• | provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the general partner or those other persons acted in bad faith or engaged in fraud, willful misconduct or gross negligence. |
• | our unitholders’ proportionate ownership interest in ETP will decrease; | |
• | the amount of cash available for distribution on each common unit may decrease; and |
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• | the market price of our common units may decline. |
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• | the impact of weather on the demand for oil and natural gas; | |
• | the level of domestic oil and natural gas production; | |
• | the availability of imported oil and natural gas; | |
• | actions taken by foreign oil and gas producing nations; | |
• | the availability of local, intrastate and interstate transportation systems; | |
• | the price, availability and marketing of competitive fuels; | |
• | the demand for electricity; | |
• | the impact of energy conservation efforts; and | |
• | the extent of governmental regulation and taxation. |
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• | because ETP is unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts with them; | |
• | because ETP is unable to raise financing for such acquisitions on economically acceptable terms; or | |
• | because ETP is outbid by competitors, some of which are substantially larger than ETP and have greater financial resources and lower costs of capital then it does. |
• | fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements; | |
• | decrease its liquidity by using a significant portion of its available cash or borrowing capacity to finance acquisitions; | |
• | significantly increase its interest expense or financial leverage if ETP incurs additional debt to finance acquisitions; | |
• | encounter difficulties operating in new geographic areas or new lines of business; | |
• | incur or assume unanticipated liabilities, losses or costs associated with the business or assets acquired for which ETP is not indemnified or for which the indemnity is inadequate; | |
• | be unable to hire, train or retrain qualified personnel to manage and operate its growing business and assets; | |
• | less effectively manage its historical assets, due to the diversion of ETP management’s attention from other business concerns; or | |
• | incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges. |
• | ETP is unable to identify pipeline construction opportunities with favorable projected financial returns; | |
• | ETP is unable to raise financing for its identified pipeline construction opportunities; or | |
• | ETP is unable to secure sufficient natural gas transportation commitments from potential customers due to competition from other pipeline construction projects or for other reasons. |
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• | operating terms and conditions of service; | |
• | the types of services Transwestern may offer to its customers; | |
• | construction of new facilities; | |
• | acquisition, extension or abandonment of services or facilities; | |
• | reporting and information posting requirements; | |
• | accounts and records; and | |
• | relationships with affiliated companies involved in all aspects of the natural gas and energy businesses. |
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• | price, | |
• | reliability and quality of service, | |
• | responsiveness to customer needs, | |
• | safety concerns, | |
• | long-standing customer relationships, | |
• | the inconvenience of switching tanks and suppliers, and | |
• | the lack of growth in the industry. |
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Price Range | Cash Distribution | |||||||||||
High | Low | per Unit | ||||||||||
Year ended August 31, 2006: | ||||||||||||
Second Quarter | $ | 23.29 | $ | 21.50 | $ | 0.2000 | (1) | |||||
Third Quarter | $ | 27.65 | $ | 21.41 | $ | 0.2375 | ||||||
Fourth Quarter | $ | 27.16 | $ | 24.98 | $ | 0.3125 | ||||||
Year ended August 31, 2007: | ||||||||||||
First Quarter | $ | 29.99 | $ | 26.04 | $ | 0.3400 | ||||||
Second Quarter | $ | 33.70 | $ | 28.80 | $ | 0.3560 | ||||||
Third Quarter | $ | 41.06 | $ | 33.20 | $ | 0.3725 | ||||||
Fourth Quarter | $ | 42.95 | $ | 29.82 | $ | 0.3900 | ||||||
Year ended August 31, 2008: | ||||||||||||
First Quarter (through November 7, 2007) | $ | 37.35 | $ | 31.60 | (2) |
(1) | The initial quarterly cash distribution was prorated based upon the number of days the units were publicly traded during the quarter. The resulting amount of this prorated distribution was $0.0578 per unit for the26-day period from February 3 to 28, 2006. | |
(2) | We plan to change our fiscal year, which currently ends on August 31, to the calendar year. In connection with this change, we expect that we will transition to making quarterly cash distributions on a calendar quarter basis that will be paid within 50 days following the end of each calendar quarter. To facilitate this transition, we will not make a cash distribution for the three month period ending November 30, 2007, but instead will make a cash distribution for the four month period ending December 31, 2007 that would be paid no later than February 19, 2008. |
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Eleven | ||||||||||||||||||||
Months | ||||||||||||||||||||
Ended | ||||||||||||||||||||
Year Ended August 31, | August 31, | |||||||||||||||||||
2007 | 2006 | 2005 | 2004 | 2003(a) | ||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Midstream segment | 2,853,496 | 4,223,544 | 3,246,772 | 1,880,663 | 899,086 | |||||||||||||||
Intrastate transportation and storage segment | 3,915,932 | 5,013,224 | 2,608,108 | 113,938 | 41,500 | |||||||||||||||
Interstate transportation segment | 178,663 | — | — | — | — | |||||||||||||||
Eliminations | (1,562,199 | ) | (2,359,256 | ) | (471,255 | ) | (27,798 | ) | (9,559 | ) | ||||||||||
Retail propane segment | 1,284,867 | 879,556 | 709,473 | 349,344 | — | |||||||||||||||
Other | 121,278 | �� | 102,028 | 75,700 | 30,810 | — | ||||||||||||||
Total revenues | 6,792,037 | 7,859,096 | 6,168,798 | 2,346,957 | 931,027 | |||||||||||||||
Gross margin | 1,713,831 | 1,290,780 | 787,283 | 365,533 | 105,589 | |||||||||||||||
Depreciation and amortization | 191,383 | 129,636 | 105,751 | 56,242 | 11,870 | |||||||||||||||
Operating income | 809,336 | 575,540 | 297,921 | 130,806 | 55,501 | |||||||||||||||
Interest expense | 279,986 | 150,646 | 101,061 | 41,217 | 12,453 | |||||||||||||||
Gain on Energy Transfer Transactions | — | — | — | 395,253 | — | |||||||||||||||
Income from continuing operations before income tax expense and minority interest | 563,359 | 433,907 | 201,795 | 484,715 | 44,673 | |||||||||||||||
Income tax expense(b) | 11,391 | 23,015 | 4,397 | 2,792 | 4,432 | |||||||||||||||
Minority interests in income from continuing operations | (232,608 | ) | (303,752 | ) | (96,946 | ) | (35,164 | ) | — | |||||||||||
Income from continuing operations | 319,360 | 107,140 | 100,452 | 446,759 | 40,241 | |||||||||||||||
Basic income from continuing operations per limited partner unit(c) | 1.56 | 0.80 | 0.89 | 4.54 | 0.47 | |||||||||||||||
Diluted income from continuing operations per limited partner unit(c) | 1.55 | 0.79 | 0.75 | 3.35 | 0.30 | |||||||||||||||
Cash distribution per unit | 1.46 | 2.56 | 2.66 | 1.36 | 0.03 | |||||||||||||||
Balance Sheet Data (at period end): | ||||||||||||||||||||
Current assets | 1,050,578 | 1,302,736 | 1,453,730 | 481,868 | 223,897 | |||||||||||||||
Total assets | 8,183,089 | 5,924,141 | 4,905,672 | 2,865,191 | 604,140 | |||||||||||||||
Current liabilities | 932,815 | 1,020,787 | 1,244,785 | 404,917 | 169,967 | |||||||||||||||
Long-term debt (less current maturities) | 5,198,676 | 3,205,646 | 2,275,965 | 1,071,158 | 196,000 | |||||||||||||||
Partners’ capital (deficit) | (47,132 | ) | 45,751 | (88,137 | ) | 368,325 | 182,631 | |||||||||||||
Other Financial Data: | ||||||||||||||||||||
Cash flow provided by operating activities | 754,497 | 310,782 | 38,133 | 122,098 | 70,675 | |||||||||||||||
Cash flow used in investing activities | (2,158,090 | ) | (1,244,406 | ) | (1,131,117 | ) | (731,831 | ) | (341,258 | ) | ||||||||||
Cash flow provided by financing activities | 1,454,739 | 926,369 | 1,043,591 | 637,513 | 325,655 | |||||||||||||||
Capital expenditures: | ||||||||||||||||||||
Maintenance | 89,226 | 51,826 | 41,054 | 22,514 | 7,691 | |||||||||||||||
Growth | 998,075 | 677,861 | 155,405 | 87,174 | 4,223 | |||||||||||||||
Acquisition | 90,695 | 586,185 | 1,131,844 | 622,929 | 340,187 |
(a) | On December 27, 2002, ETC OLP purchased the remaining 50% of Oasis Pipe Line. Prior to December 27, 2002, the interest in Oasis Pipe Line was treated as an equity method investment. After such date, Oasis Pipe Line’s results of operations are consolidated with ETC OLP as a wholly-owned subsidiary. | |
(b) | As a partnership, we are not generally subject to income taxes. However, our subsidiaries, Oasis Pipe Line, Heritage Holdings, Heritage Service Corporation, and Titan Propane Services, Inc. are corporations subject to income taxes. | |
(c) | See Note 4 to our consolidated financial statements incorporated by reference in this prospectus supplement for a discussion of the computation of earnings per unit. |
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• | ET Fuel System in June 2004 | |
• | HPL System in January 2005 |
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• | Titan Propane in June 2006 | |
• | Transwestern in December 2006 |
• | Midstream | |
• | Intrastate transportation and storage | |
• | Interstate transportation | |
• | Retail propane |
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Years Ended August 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Natural gas MMBtu/d | 941,140 | 1,552,753 | 1,578,833 | |||||||||
NGLs Bbls/d | 25,657 | 10,425 | 12,707 |
• | For the year ended August 31, 2007, the decrease in natural gas volumes sold was principally due to less favorable market conditions during fiscal 2007 and increased utilization of capacity on our transportation pipelines by third parties resulting in lower sales volumes conducted by our producer services’ operations. The increase in NGL sales volumes was principally due to the completion of our Godley plant during 2007 and favorable market conditions to process and extract NGLs during fiscal 2007 compared to the same period last year. |
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• | For the year ended August 31, 2006, natural gas sales volumes decreased compared to the year ended August 31, 2005 principally due to less marketing activity by our producer services’ operations towards the latter half of fiscal year 2006 and a change in contract mix with one of our major producers where we now charge a fee to gather, process and transport natural gas rather than buying and selling the natural gas on our behalf. Our NGL sales volumes vary due to our ability to by-pass our processing plants when conditions exist that make it less favorable to process and extract NGLs from our processing plants. The decrease in NGL sales volumes is principally due to a change in contract mix as noted above and the election to by-pass our processing plant as a result of less favorable market conditions during the second fiscal quarter of the year ended August 31, 2006. |
Years Ended August 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Natural gas MMBtu/d — transported | 6,124,423 | 4,633,069 | 3,495,434 | |||||||||
Natural gas MMBtu/d — sold | 1,400,753 | 1,580,638 | 1,361,729 |
• | For the year ended August 31, 2007, transported natural gas volumes increased due to our continued efforts to secure more long-term shipper contracts, the completion of the Cleburne to Carthage pipeline, and increased demand to transport gas out of the Barnett Shale and Bossier Sands producing regions. Natural gas sales volumes on the HPL System for the year ended August 31, 2007 decreased principally due to less volumes sold to east Texas markets as a result of lower price differentials and due to the new CenterPoint contract that commenced on April 1, 2007. Under the previous contract, we sold and delivered natural gas to CenterPoint for a bundled price. Under the terms of the new agreement, CenterPoint has contracted for 129 Bcf per year of firm transportation capacity combined with 10 Bcf of working gas capacity in our Bammel storage facility. As such, we now account for these activities as natural gas transported rather than natural gas sold. | |
• | For the year ended August 31, 2006, transported natural gas volumes increased by 1,137,635 MMBtu/d. The increase in transportation volumes is principally due to the increased volumes experienced in the Oasis pipeline, ET Fuel System and East Texas pipeline as a result of our effort to secure firm commitments on our transportation assets and a higher price differential between the Waha and Katy market hubs during the periods presented. Additionally, warmer weather during the 2006 fiscal year resulted in an increase in demand for natural gas. The higher temperatures required more demand for natural gas to be used by electricity-producing power plants connected to our assets. Natural gas sales volumes on the HPL System for the year ended August 31, 2006 increased 218,909 MMBtu/d compared to the year ended August 31, 2005, principally due to increased marketing efforts with our existing and new customers and increased well connects which has increased our supply on the HPL System. |
Years Ended August 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Natural gas MMBtu/d — transported | 1,802,109 | — | — | |||||||||
Natural gas MMBtu/d — sold | 19,680 | — | — |
• | The increase was due to the 100% acquisition of Transwestern on December 1, 2006. |
Years Ended August 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Retail propane gallons sold (in thousands) | 604,269 | 429,118 | 406,334 |
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• | The retail propane operations realized significant increases in gallons sold in the year ended August 31, 2007 as compared to the year ended August 31, 2006 (a 175.2 million net gallon increase) primarily due to the Titan acquisition in June 2006. The combination of below normal degree days, customer conservation, and the slow down of new home construction in our propane markets has contributed to a decrease in expected volumes sold and slowed internal growth. The overall weather in our areas of operations during the year ended August 31, 2007 was 10.6% warmer than the year ended August 31, 2006 and 7.2% warmer than normal. | |
• | The 22.8 million net gallon increase in retail propane gallons sold for the year ended August 31, 2006, compared to the year ended August 31, 2005, includes a 24.5 million gallon increase due to the Titan acquisition for the months of June, July and August 2006, 15.9 million gallons were added through other propane acquisitions, offset by a decrease of 17.6 million gallons related to warm weather and higher propane commodity prices. The weather in our areas of operations during the year ended August 31, 2007 was 3.5% warmer than the year ended August 31, 2005 and 10.6% warmer than normal. |
Years Ended August 31, | Amount of Change | |||||||||||||||||||
2007 | 2006 | 2005 | 2007-2006 | 2006-2005 | ||||||||||||||||
Equity in earnings of affiliates | $ | 435,247 | $ | 204,987 | $ | 141,260 | $ | 230,260 | $ | 63,727 | ||||||||||
General and administrative expense | 8,496 | 55,374 | 1,051 | (46,878 | ) | 54,323 | ||||||||||||||
Interest expense | 104,405 | 36,773 | 9,529 | 67,632 | 27,244 | |||||||||||||||
Loss on extinguishment of debt | — | 5,060 | — | (5,060 | ) | 5,060 | ||||||||||||||
Interest and other income (expense), net | (2,356 | ) | (638 | ) | 16,066 | (1,718 | ) | (16,704 | ) |
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Limited | General | |||||||||||
Partner | Partner | |||||||||||
Interest | IDRs | Interest | ||||||||||
Interests prior to December 2005 | 31 | % | 100 | % | 2 | % | ||||||
December 2005 distribution to ETI | — | (50 | )% | — | ||||||||
Purchase of ETP Common and Class F Units in February 2006 | 2 | % | — | — | ||||||||
Purchase of ETP Class G Units in November 2006 | 13 | % | — | — | ||||||||
Purchase of IDRs from ETI in November 2006 | — | 50 | % | — | ||||||||
Interests as of August 31, 2007 | 46 | % | 100 | % | 2 | % |
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Years Ended August 31, | Amount of Change | |||||||||||||||||||
2007 | 2006 | 2005 | 2007-2006 | 2006-2005 | ||||||||||||||||
Consolidated Information: | ||||||||||||||||||||
Revenues | $ | 6,792,037 | $ | 7,859,096 | $ | 6,168,798 | $ | (1,067,059 | ) | $ | 1,690,298 | |||||||||
Cost of sales | 5,078,206 | 6,568,316 | 5,381,515 | (1,490,110 | ) | 1,186,801 | ||||||||||||||
Gross margin | 1,713,831 | 1,290,780 | 787,283 | 423,051 | 503,497 | |||||||||||||||
Operating expenses | 559,600 | 422,989 | 319,554 | 136,611 | 103,435 | |||||||||||||||
Selling, general and administrative | 153,512 | 162,615 | 64,057 | (9,103 | ) | 98,558 | ||||||||||||||
Depreciation and amortization | 191,383 | 129,636 | 105,751 | 61,747 | 23,885 | |||||||||||||||
Operating income | 809,336 | 575,540 | 297,921 | 233,796 | 277,619 | |||||||||||||||
Interest expense | (279,986 | ) | (150,646 | ) | (101,061 | ) | (129,340 | ) | (49,585 | ) | ||||||||||
Loss on extinguishment of debt | — | (5,060 | ) | (6,550 | ) | 5,060 | 1,490 | |||||||||||||
Equity in earnings (losses) of affiliates | 5,161 | (479 | ) | (376 | ) | 5,640 | (103 | ) | ||||||||||||
Gain (loss) on disposal of assets | (6,310 | ) | 851 | (330 | ) | (7,161 | ) | 1,181 | ||||||||||||
Interest and other income, net | 35,158 | 13,701 | 12,191 | 21,457 | 1,510 | |||||||||||||||
Income tax expense | (11,391 | ) | (23,015 | ) | (4,397 | ) | 11,624 | (18,618 | ) | |||||||||||
Minority interests | (232,608 | ) | (303,752 | ) | (96,946 | ) | 71,144 | (206,806 | ) | |||||||||||
Income from continuing operations | $ | 319,360 | $ | 107,140 | $ | 100,452 | $ | 212,220 | $ | 6,688 | ||||||||||
Income from discontinued operations, net of income tax expense | — | — | 46,294 | — | (46,294 | ) | ||||||||||||||
Net income | $ | 319,360 | $ | 107,140 | $ | 146,746 | $ | 212,220 | $ | (39,606 | ) | |||||||||
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Years Ended August 31, | Amount of Change | |||||||||||||||||||
2007 | 2006 | 2005 | 2007-2006 | 2006-2005 | ||||||||||||||||
Midstream | $ | 119,233 | $ | 147,564 | $ | 94,603 | $ | (28,331 | ) | $ | 52,961 | |||||||||
Intrastate Transportation and Storage | 479,820 | 422,420 | 151,819 | 57,400 | 270,601 | |||||||||||||||
Interstate Transportation | 95,650 | — | — | 95,650 | — | |||||||||||||||
Retail Propane | 124,263 | 76,055 | 66,902 | 48,208 | 9,153 | |||||||||||||||
Other | 1,735 | 1,899 | (683 | ) | (164 | ) | 2,582 | |||||||||||||
Unallocated selling, general and administrative expenses | (11,365 | ) | (72,398 | ) | (14,720 | ) | 61,033 | (57,678 | ) | |||||||||||
Operating income | $ | 809,336 | $ | 575,540 | $ | 297,921 | $ | 233,796 | $ | 277,619 | ||||||||||
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Years Ended August 31, | Amount of Change | |||||||||||||||||||
2007 | 2006 | 2005 | 2007-2006 | 2006-2005 | ||||||||||||||||
Revenues | $ | 2,853,496 | $ | 4,223,544 | $ | 3,246,772 | $ | (1,370,048 | ) | $ | 976,772 | |||||||||
Cost of sales | 2,632,187 | 4,000,461 | 3,102,539 | (1,368,274 | ) | 897,922 | ||||||||||||||
Gross margin | 221,309 | 223,083 | 144,233 | (1,774 | ) | 78,850 | ||||||||||||||
Operating expenses | 39,148 | 31,910 | 22,835 | 7,238 | 9,075 | |||||||||||||||
Selling, general and administrative | 35,597 | 23,922 | 9,685 | 11,675 | 14,237 | |||||||||||||||
Depreciation and amortization | 27,331 | 19,687 | 17,110 | 7,644 | 2,577 | |||||||||||||||
Segment operating income | $ | 119,233 | $ | 147,564 | $ | 94,603 | $ | (28,331 | ) | $ | 52,961 | |||||||||
• | Decrease in net trading revenues of $17.9 million. During the fiscal 2006 period, we recognized trading gains resulting principally from commodities futures positions that benefited from market anomalies following the hurricanes that struck the Texas and Louisiana coasts in August and September 2005. Trading activities during the year ended August 31, 2007 resulted in a net gain of $2.2 million; | |
• | Decrease in non-trading margin from our marketing activities of $36.0 million. Market conditions, including lower basis differentials between the west and east Texas markets and increased third-party utilization of our transportation pipeline capacity, resulted in lower sales volumes conducted by our producer services’ operations; and | |
• | Increase in processing margin and fee-based revenue. The increase was due to the completion of our Godley plant in the first quarter of 2007, the acquisition of three gathering systems during fiscal 2007, and favorable processing conditions during fiscal 2007 compared to the same period last year at our Southeast Texas System. |
• | Trading gains recognized during the 2006 fiscal year resulting from commodities futures positions that benefited from market anomalies following the hurricanes that struck the Texas and Louisiana coasts in August and September 2005; and | |
• | Increased processing margins on our Southeast Texas System as a result of favorable processing conditions during the year ended August 31, 2006 compared to the year ended August 31, 2005. |
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Years Ended August 31, | Amount of Change | |||||||||||||||||||
2007 | 2006 | 2005 | 2007-2006 | 2006-2005 | ||||||||||||||||
Revenues | $ | 3,915,932 | $ | 5,013,224 | $ | 2,608,108 | $ | (1,097,292 | ) | $ | 2,405,116 | |||||||||
Cost of sales | 3,137,712 | 4,322,217 | 2,280,082 | (1,184,505 | ) | 2,042,135 | ||||||||||||||
Gross margin | 778,220 | 691,007 | 328,026 | 87,213 | 362,981 | |||||||||||||||
Operating expenses | 181,133 | 171,312 | 113,166 | 9,821 | 58,146 | |||||||||||||||
Selling, general and administrative | 52,844 | 46,520 | 27,021 | 6,324 | 19,499 | |||||||||||||||
Depreciation and amortization | 64,423 | 50,755 | 36,020 | 13,668 | 14,735 | |||||||||||||||
Segment operating income | $ | 479,820 | $ | 422,420 | $ | 151,819 | $ | 57,400 | $ | 270,601 | ||||||||||
• | Volumes. Overall volumes on our transportation pipelines were higher during fiscal 2007 compared to fiscal 2006 due to the completion of the Cleburne to Carthage pipeline, continued efforts to secure long-term shipper contracts, increased demand to transport natural gas from the Barnett Shale and Bossier Sands producing regions, and a colder winter in fiscal 2007. Transportation fees increased approximately |
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$61.0 million for the year ended August 31, 2007 compared to the year ended August 31, 2006. Retention revenue increased approximately $35.1 million due to increased volumes transported on our pipelines; |
• | Lower natural gas prices. Excluding the impact of volumetric changes, our fuel retention fees are directly impacted by changes in natural gas prices. Increases in natural gas prices tend to increase our fuel retention fees and decreases in natural gas prices tend to decrease our fuel retention fees. Our average natural gas prices for retained fuel decreased from a range of $5.00 to $12.00/MMBtu during the year ended August 31, 2006 to $4.00 to $7.00/MMBtu during the same period this year resulting in a decrease in revenue by $28.8 million; | |
• | Increase in storage margin of $26.0 million. The increase was due to approximately $40.0 million in margin recognized on 17.5 Bcf more volume withdrawn from our Bammel storage facility in fiscal 2007 than in fiscal 2006 and a significant loss on settled derivatives during fiscal 2006. These increases were offset by approximately $18.0 million in margin on gas sold from our Bammel storage facility and delivered to a customer in September 2005. There were no similar sales during the year ended August 31, 2007; and | |
• | Decrease in margin of $28.7 million related to well head volumes. As discussed above, we purchase natural gas from producers at a discount to a specified price and resell to customers at an index price. We experienced lower volumes and lower natural gas prices during the year ended August 31, 2007 compared to the same period last year. |
• | Increased volumes and prices. The increase is principally due to the increase in average natural gas prices period to period which promotes shippers to transport natural gas to more liquid markets such as the Katy Hub and our strategy to pursue additional volumes on our transportation pipeline systems. The price differential between the Waha and Katy market hubs increased between the 2005 and 2006 fiscal years, thereby influencing shippers to transport natural gas to regions where natural gas prices are more favorable. We also successfully secured more firm contracts as evidenced by our transportation agreement with XTO (see Note 10 to our consolidated financial statements incorporated by reference in this prospectus supplement). In addition, our Fort Worth Basin expansion, completed in May 2005, allowed shippers to move more gas from the Barnett Shale. Our margins for the year ended August 31, 2006 were also affected favorably by higher than normal temperatures during the year ended August 31, 2006 in regions where our assets are located. The higher temperatures increased demand for natural gas to be used by electricity-producing power plants connected to these assets. Furthermore, our margin was favorably impacted by an increase in fuel retention fees due to the increase in volumes on our transportation pipelines and an increase in average natural gas prices during the 2006 fiscal year compared to the 2005 fiscal year. Excluding the impact of volumetric changes, our fuel retention fees are directly impacted by changes in natural gas prices. Increases in natural gas prices tend to increase our fuel retention fees and decreases in natural gas prices tend to decrease our fuel retention fees; | |
• | The acquisition of the HPL System in January 2005. The results for the year ended August 31, 2005 contain seven months of the HPL System’s operating results as compared to twelve months of the HPL System operating results included in fiscal year 2006. For the year ended August 31, 2006, the HPL System margin was principally affected by the sale of natural gas held in storage during the winter months when demand for natural gas is strong, increased margins resulting from favorable pricing between the west and east markets in the Houston Ship Channel, and hedging gains as noted below. The favorable pricing was attributed to the effects of the hurricanes that struck the east Texas and Louisiana coastlines in August and September 2005; and | |
• | Discontinued Hedge Accounting. In January and February 2006, we discontinued application of hedge accounting in connection with certain derivative financial instruments that were qualified for and designated as cash flow hedges related to forecasted sales of natural gas stored in our Bammel storage facilities. The discontinuation resulted from our determination that the originally forecasted sales of natural gas from the storage facilities were no longer probable to occur by the end of the originally specified time period, or |
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within an additional two-month period of time thereafter. The determination was made principally due to the unseasonably warm weather that occurred during January 2006 through March 2006. As a result, during the year ended August 31, 2006, we recognized previously deferred unrealized gains of approximately $84.7 million from the discontinuation of hedge accounting. |
Years Ended August 31, | Amount of | |||||||||||
2007 | 2006 | Change | ||||||||||
Revenues | $ | 178,663 | $ | — | $ | 178,663 | ||||||
Operating expenses | 36,295 | — | 36,295 | |||||||||
Selling, general and administrative | 18,746 | — | 18,746 | |||||||||
Depreciation and amortization | 27,972 | — | 27,972 | |||||||||
Segment operating income | $ | 95,650 | $ | — | $ | 95,650 | ||||||
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Years Ended August 31, | Amount of Change | |||||||||||||||||||
2007 | 2006 | 2005 | 2007-2006 | 2006-2005 | ||||||||||||||||
Retail propane revenues | $ | 1,179,073 | $ | 799,358 | $ | 641,071 | $ | 379,715 | $ | 158,287 | ||||||||||
Other retail propane related revenues | 105,794 | 80,198 | 68,402 | 25,596 | 11,796 | |||||||||||||||
Retail propane cost of sales | 734,204 | 493,642 | 384,186 | 240,562 | 109,456 | |||||||||||||||
Other retail propane related cost of sales | 25,430 | 21,776 | 19,554 | 3,654 | 2,222 | |||||||||||||||
Gross margin | 525,233 | 364,138 | 305,733 | 161,095 | 58,405 | |||||||||||||||
Operating expenses | 297,469 | 212,188 | 176,277 | 85,281 | 35,911 | |||||||||||||||
Selling, general and administrative | 32,668 | 17,859 | 11,067 | 14,809 | 6,792 | |||||||||||||||
Depreciation and amortization | 70,833 | 58,036 | 51,487 | 12,797 | 6,549 | |||||||||||||||
Segment operating income | $ | 124,263 | $ | 76,055 | $ | 66,902 | $ | 48,208 | $ | 9,153 | ||||||||||
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Years Ended August 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Federal statutory tax rate | 35.00 | % | 35.00 | % | 35.00 | % | ||||||
State income tax rate net of federal benefit | 1.25 | % | 3.10 | % | 3.56 | % | ||||||
Earnings not subject to tax at the Partnership level | (34.23 | )% | (32.80 | )% | (36.58 | )% | ||||||
Effective tax rate | 2.02 | % | 5.30 | % | 1.98 | % | ||||||
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Years Ended August 31, | ||||||||||||
2007 | 2006 | 2005 | ||||||||||
Continuing operations | ||||||||||||
Current provision: | ||||||||||||
Federal | $ | 7,896 | $ | 27,640 | $ | 5,042 | ||||||
State | 10,432 | 1,987 | 963 | |||||||||
18,328 | 29,627 | 6,005 | ||||||||||
Deferred provision (benefit): | ||||||||||||
Federal | (7,494 | ) | (6,227 | ) | (2,015 | ) | ||||||
State | 557 | (385 | ) | 407 | ||||||||
Total tax provision on continuing operations | (6,937 | ) | (6,612 | ) | (1,608 | ) | ||||||
11,391 | 23,015 | 4,397 | ||||||||||
Discontinued operations | ||||||||||||
Current income tax expense: | ||||||||||||
Federal | — | — | 1,570 | |||||||||
State | 259 | |||||||||||
Total Tax Provision | $ | 11,391 | $ | 23,015 | $ | 6,226 | ||||||
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• | maintenance capital expenditures, which include capital expenditures made to connect additional wells to its natural gas systems in order to maintain or increase throughput on existing assets, for which we expect to expend approximately $70 million in the next fiscal year and capital expenditures to extend the useful lives of ETP’s propane assets in order to sustain its operations, including vehicle replacements on its propane vehicle fleet for which ETP expects to expend approximately $35 million in the next fiscal year; |
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• | growth capital expenditures, mainly for constructing new pipelines, processing plants, treating plants and compression for the midstream and intrastate transportation and storage segment for which we expect to expend approximately $1.0 billion in the next fiscal year. We also expect to spend approximately $800 million in our interstate segment for constructing new pipelines and pipeline expansion and approximately $30 million for customer propane tanks in the next fiscal year; and | |
• | acquisition capital expenditures including acquisition of new pipeline systems and propane operations. As a partnership practice, we do not budget for acquisitions. |
• | maintenance capital expenditures may be financed by the proceeds of borrowings under the existing credit facilities described below, which will be repaid by subsequent seasonal reductions in inventory and accounts receivable; | |
• | growth capital expenditures may be financed by the proceeds of borrowings under the existing ETP credit facilities, long-term debt, the issuance of additional common units or a combination thereof; and | |
• | acquisition capital expenditures may be financed by the proceeds of borrowings under the existing ETP credit facilities, other ETP lines of credit, long-term debt, the issuance of additional common units or a combination thereof. |
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5.39% Notes due November 17, 2014 | $ | 270,000 | ||
5.54% Notes due November 17, 2016 | 250,000 | |||
Total long-term debt outstanding | 520,000 | |||
Unamortized debt discount | (623 | ) | ||
Total long-term debt assumed | $ | 519,377 | ||
Principal | Interest Rate | Maturity Date | ||||||||
$ | 82,000 | 5.64 | % | May 24, 2017 | ||||||
150,000 | 5.89 | % | May 24, 2022 | |||||||
75,000 | 6.16 | % | May 24, 2037 |
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• | incur indebtedness; | |
• | grant liens; | |
• | enter into mergers; | |
• | dispose of assets; | |
• | make certain investments; | |
• | make Distributions during certain Defaults and during any Event of Default; | |
• | engage in business substantially different in nature than the business currently conducted by the Partnership and its subsidiaries; | |
• | engage in transactions with affiliates; | |
• | enter into restrictive agreements; and | |
• | enter into speculative hedging contracts. |
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Payments Due by Period | ||||||||||||||||||||
Less Than 1 | More Than 5 | |||||||||||||||||||
Contractual Obligations | Total | Year | 1-3 Years | 3-5 Years | Years | |||||||||||||||
Long-term debt | $ | 5,245,739 | $ | 47,063 | $ | 85,955 | $ | 1,144,908 | $ | 3,967,813 | ||||||||||
Interest on fixed rate long-term debt(a) | 1,952,088 | 167,744 | 354,086 | 340,718 | 1,089,540 | |||||||||||||||
Payments on derivatives | 6,197 | 5,233 | 964 | — | — | |||||||||||||||
Purchase commitments(b) | 717,350 | 607,854 | 109,496 | — | — | |||||||||||||||
Operating lease obligations | 98,788 | 13,492 | 27,249 | 29,877 | 28,170 | |||||||||||||||
Totals | $ | 8,020,162 | $ | 841,386 | $ | 577,750 | $ | 1,515,503 | $ | 5,085,523 | ||||||||||
(a) | Fixed rate interest on long-term debt includes the amount of interest due on our fixed rate long-term debt. These amounts do not include interest on our variable rate debt obligations which include our Revolving Credit Facilities and Revolving Credit Facility Swingline Loan options. As of August 31, 2007, variable rate interest on our outstanding balance of variable rate debt of $2.5 billion would be $180.6 million on an annual basis. See Note 6 — “Debt Obligations” to the consolidated financial statements incorporated by reference in this prospectus supplement for further discussion of the long-term debt classifications and the maturity dates and interest rates related to long-term debt. | |
(b) | We define a purchase commitment as an agreement to purchase goods or services that is enforceable and legally binding (unconditional) on us that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transactions. We have long and short-term product purchase obligations for propane and energy commodities with third-party suppliers. These purchase obligations are entered into at either variable or fixed prices. The purchase prices that we are obligated to pay under variable price contracts approximate market prices at the time we take delivery of the volumes. Our estimated future variable price contract payment obligations are based on the August 31, 2007 market price of the applicable commodity applied to future volume commitments. Actual future payment obligations may vary depending on market prices at the time of delivery. The purchase prices that we are obligated to pay under fixed price contracts are established at the inception of the contract. Our estimated future fixed price contract payment obligations are based on the contracted fixed price under each commodity contract. Quantities shown in the table represent our volume commitments and estimated payment obligations under these contracts for the periods indicated. |
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Record Date | Payment Date | Amount per Unit | ||||||
Fiscal Year 2007 | July 2, 2007 | July 19, 2007 | $ | 0.3725 | ||||
April 9, 2007 | April 16, 2007 | 0.3560 | ||||||
January 4, 2007 | January 19, 2007 | 0.3400 | ||||||
October 5, 2006 | October 19, 2006 | 0.3125 | ||||||
Fiscal Year 2006 | June 30, 2006 | July 19, 2006 | $ | 0.2375 | ||||
March 31, 2006 | April 19, 2006 | 0.0578 |
2007 | 2006 | 2005 | ||||||||||
Limited Partners | ||||||||||||
Limited Partners(a) | $ | — | $ | 34,010 | $ | 666,751 | ||||||
Common Units | 246,136 | 65,905 | — | |||||||||
Class B Units | 1,645 | 745 | — | |||||||||
Class C Units | 28,261 | — | — | |||||||||
General Partner | 955 | 599 | 4,861 | |||||||||
Total distributions declared | $ | 276,997 | $ | 101,259 | $ | 671,612 | ||||||
(a) | Represents distributions prior to the Parent Company’s initial public offering. |
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2007 | 2006 | 2005 | ||||||||||
Limited Partners Interests | $ | 174,969 | $ | 80,203 | $ | 57,671 | ||||||
General Partner Interest | 12,701 | 6,931 | 4,237 | |||||||||
Incentive Distribution Rights | 183,056 | 64,436 | 27,971 | |||||||||
Less holdback(a) | — | (2,287 | ) | (8,182 | ) | |||||||
Total distributions received from ETP | $ | 370,726 | $ | 149,283 | $ | 81,697 | ||||||
(a) | Represents amounts held back for reimbursement of expenses and contributions required to maintain ETP GP’s 2% general partner interest in ETP. |
Record Date | Payment Date | Amount per Unit | ||||||
Fiscal Year 2007 | July 2, 2007 | July 16, 2007 | $ | 0.80625 | ||||
April 6, 2007 | April 13, 2007 | 0.78750 | ||||||
January 4, 2007 | January 15, 2007 | 0.76875 | ||||||
October 5, 2006 | October 16, 2006 | 0.75000 | ||||||
Fiscal Year 2006 | June 30, 2006 | July 14, 2006 | $ | 0.63750 | ||||
June 30, 2006(1) | July 14, 2006 | 0.03250 | ||||||
March 24, 2006 | April 14, 2006 | 0.58750 | ||||||
January 4, 2006 | January 13, 2006 | 0.55000 | ||||||
September 30, 2005 | October 14, 2005 | 0.50000 | ||||||
Fiscal Year 2005 | July 8, 2005 | July 14, 2005 | $ | 0.48750 | ||||
March 16, 2005 | April 14, 2005 | 0.46250 | ||||||
January 5, 2005 | January 14, 2005 | 0.43750 | ||||||
October 7, 2004 | October 15, 2004 | 0.41250 |
(1) | Special SCANA distribution — On June 20, 2006, the Board of Directors of ETP’s general partner declared a special distribution of $0.0325 per limited partner unit related to the proceeds we received in connection with the SCANA litigation settlement. This distribution was paid on July 14, 2006 to the holders of record of ETP’s common and Class F units as of the close of business on June 30, 2006. This special one-time payment was approved following a determination of the Litigation Committee of ETP’s general partner to distribute all the net distributable litigation proceeds we received in accordance with the partnership agreement. The special distribution also included a payment distribution of $3.6 million to the holder of ETP’s Class C units for that amount that would otherwise have been distributed to its general partner. |
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2007 | 2006 | 2005 | ||||||||||
Limited Partners — | ||||||||||||
Common Units | $ | 366,180 | $ | 248,237 | $ | 173,802 | ||||||
Class C Units(1) | — | 3,599 | — | |||||||||
Class F Units | — | 3,232 | — | |||||||||
Class G Units | 40,598 | — | — | |||||||||
General Partners — | ||||||||||||
2% Ownership | 12,701 | 6,981 | 4,390 | |||||||||
Incentive Distribution Rights | 203,069 | 81,722 | 28,847 | |||||||||
$ | 622,548 | $ | 343,771 | $ | 207,039 | |||||||
(1) | Special SCANA distribution — see discussion above. |
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Notional | ||||||||||||
Volume | Fair | |||||||||||
Commodity | MMBTU | Maturity | Value | |||||||||
Mark to Market Derivatives | ||||||||||||
(Non-Trading) | ||||||||||||
Basis Swaps IFERC/NYMEX | Gas | 14,195,262 | 2007-2009 | $ | 5,551 | |||||||
Swing Swaps IFERC | Gas | 7,282,500 | 2007-2008 | (514 | ) | |||||||
Fixed Swaps/Futures | Gas | (590,000 | ) | 2007-2009 | 1,298 | |||||||
Forward Physical Contracts | Gas | (6,437,413 | ) | 2007-2008 | 343 | |||||||
Options | Gas | (976,000 | ) | 2007-2008 | (346 | ) | ||||||
Forward/Swaps — in Gallons | Propane/Ethane | 8,862,000 | 2007-2008 | 777 | ||||||||
(Trading) | ||||||||||||
Basis Swaps IFERC/NYMEX | Gas | (4,922,500 | ) | 2007-2008 | $ | 2,390 | ||||||
Swing Swaps IFERC | Gas | (21,250,000 | ) | 2007 | (33 | ) | ||||||
Forward Physical Contracts | Gas | — | 2007 | 323 | ||||||||
Fixed Swaps/Futures | Gas | (10,275,000 | ) | 2007 | (177 | ) | ||||||
Cash Flow Hedging Derivatives | ||||||||||||
(Non-Trading) | ||||||||||||
Basis Swaps IFERC/NYMEX | Gas | (10,962,500 | ) | 2007-2008 | $ | 124 | ||||||
Fixed Swaps/Futures | Gas | (11,230,000 | ) | 2007-2009 | 23,078 |
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Notional | Effect of | |||||||||||
Volume | Hypothetical | |||||||||||
MMBTU | Fair Value | 10% Change | ||||||||||
Non-Trading Derivatives | ||||||||||||
Fixed Swaps/Futures | (11,820,000 | ) | $ | 24,376 | $ | 10,929 | ||||||
Basis Swaps IFERC/NYMEX | 3,232,762 | 5,675 | 1,091 | |||||||||
Swing Swaps IFERC | 7,282,500 | (514 | ) | 467 | ||||||||
Options | (976,000 | ) | (346 | ) | 190 | |||||||
Forward Physical Contracts’ | (6,437,413 | ) | 343 | 3,442 | ||||||||
Propane Forwards/Swaps (in Gallons) | 8,862,000 | 777 | 3,495 | |||||||||
Trading Derivatives | ||||||||||||
Swing Swaps IFERC | (21,250,000 | ) | (33 | ) | 1,737 | |||||||
Basic Swaps IFERC/NYMEX | (4,922,500 | ) | 2,390 | 17 | ||||||||
Forward Physical Contracts | — | 323 | 2,980 | |||||||||
Fixed Swaps/Futures | (10,275,000 | ) | (177 | ) | 5,579 |
Notional | Effect of | |||||||||||
Volume | Hypothetical | |||||||||||
MMBTU | Fair Value | 10% Change | ||||||||||
Non-Trading Derivatives | ||||||||||||
Fixed Swaps/Futures | (34,265,000 | ) | $ | 1,873 | $ | 42,615 | ||||||
Basis Swaps IFERC/NYMEX | (873,860 | ) | (9,234 | ) | 1,594 | |||||||
Swing Swaps IFERC | (37,220,448 | ) | 2,618 | 514 | ||||||||
Options | (1,046,000 | ) | 21,653 | 5,189 | ||||||||
Forward Physical Contracts | (7,986,000 | ) | (21,653 | ) | 5,189 | |||||||
Propane Forwards/Swaps (in Gallons) | 24,066,000 | 199 | 2,766 | |||||||||
Trading Derivatives | ||||||||||||
Swing Swaps IFERC | — | (31 | ) | 205 | ||||||||
Basic Swaps IFERC/NYMEX | (2,572,500 | ) | 21,995 | 701 | ||||||||
Forward Physical Contracts | (455,000 | ) | (68 | ) | 75 |
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Name | Age | Position with Our General Partner | ||||
John W. McReynolds | 56 | Director, President and Chief Financial Officer | ||||
Kelcy L. Warren | 51 | Director and Chairman of the Board | ||||
Ray C. Davis | 65 | Director | ||||
Kenneth A. Hersh | 44 | Director | ||||
David R. Albin | 48 | Director | ||||
K. Rick Turner | 49 | Director | ||||
Bill W. Byrne | 77 | Director | ||||
Paul E. Glaske | 74 | Director | ||||
John D. Harkey, Jr | 47 | Director |
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Common Units | Common Units | |||||||||||||||||||
Beneficially | Beneficially | |||||||||||||||||||
Owned Immediately | Owned Immediately | |||||||||||||||||||
Prior to this Offering | Common | after this Offering(1) | ||||||||||||||||||
Common | Units to be | Common | ||||||||||||||||||
Name of Selling Unitholder | Units | Percent | Offered | Units | Percent | |||||||||||||||
Kellen Holdings, LLC(2) | 7,437,077 | 3.34 | % | 6,467,023 | 970,054 | * | ||||||||||||||
PH Investments, LLC(3) | 4,383,071 | 1.97 | % | 869,565 | 3,513,506 | 1.58 | % | |||||||||||||
Totals | 11,820,148 | — | 7,336,588 | 4,483,560 | — | |||||||||||||||
* | Less than 1%. | |
(1) | Assumes that the underwriters do not exercise their over-allotment option. If the underwriters exercise their over-allotment option in full, Kellen Holdings, LLC will sell an additional 970,054 common units and PH Investments, LLC will sell an additional 130,435 common units. | |
(2) | Kellen Holdings, LLC, a Delaware limited liability company, is a direct subsidiary of Liberty Energy Holdings, LLC, a Delaware LLC, or LEH, and is an indirect subsidiary of Liberty Mutual Holding Company Inc., a Massachusetts mutual holding company. Liberty Mutual Holding Company Inc. is the ultimate controlling person of Kellen Holdings, LLC. Liberty Mutual Holding Company Inc. is a mutual holding company wherein its members are entitled to vote at meetings of the company. No such member is entitled to cast 10% or more of the votes. Liberty Mutual Holding Company Inc. has issued no voting securities. | |
(3) | PH Investments LLC is an investment vehicle which is managed by Amos B. Hostetter, Jr. Amos B. Hostetter, Jr. is the sole managing member of PH Investments, LLC. Amos B. Hostetter is the only person deemed to have beneficial ownership of the securities. |
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Number of | ||||
Underwriter | Common Units | |||
Morgan Stanley & Co. Incorporated | 2,261,870 | |||
Citigroup Global Markets Inc. | 2,261,870 | |||
UBS Securities LLC | 2,261,870 | |||
Credit Suisse Securities (USA) LLC | 550,978 | |||
Total | 7,336,588 | |||
Total | ||||||||||||
Without | With | |||||||||||
Over-Allotment | Over-Allotment | |||||||||||
Per Unit | Option | Option | ||||||||||
Public offering price | $ | 31.70 | $ | 232,569,840 | $ | 267,455,341 | ||||||
Underwriting discounts and commissions | $ | 1.268 | $ | 9,302,794 | $ | 10,698,214 | ||||||
Proceeds, before expenses, to Selling Unitholders | $ | 30.432 | $ | 223,267,046 | $ | 256,757,127 |
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• | offer, pledge, 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 common units or any securities convertible into or exercisable or exchangeable for common units or file any registration statement under the Securities Act of 1933 with respect to the foregoing; | |
• | or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common units, |
• | the sale of units to the underwriters pursuant to the underwriting agreement; | |
• | the issuance by us of common units upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus supplement of which the underwriters have been advised in writing; | |
• | the filing of any registration statements by us for the benefit of any unitholder pursuant to any registration obligations existing on the date hereof; or | |
• | transactions by any person other than us relating to common units or other securities acquired in open market transactions after the completion of the offering of the units. |
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• | the amount of natural gas transported on ETP’s pipelines and gathering systems; | |
• | the level of throughput in ETP’s natural gas processing and treating facilities; | |
• | the fees ETP charges and the margins it realizes for its gathering, treating, processing, storage and transportation services; | |
• | the prices and market demand for, and the relationship between, natural gas and NGLs; | |
• | energy prices generally; | |
• | the prices of natural gas and propane compared to the price of alternative and competing fuels; | |
• | the general level of petroleum product demand and the availability and price of propane supplies; | |
• | the level of domestic oil, propane and natural gas production; | |
• | the availability of imported oil and natural gas; | |
• | the ability to obtain adequate supplies of propane for retail sale in the event of an interruption in supply or transportation and the availability of capacity to transport propane to market areas; | |
• | actions taken by foreign oil and gas producing nations; | |
• | the political and economic stability of petroleum producing nations; | |
• | the effect of weather conditions on demand for oil, natural gas and propane; | |
• | availability of local, intrastate and interstate transportation systems; | |
• | the continued ability to find and contract for new sources of natural gas supply; |
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• | availability and marketing of competitive fuels; | |
• | the impact of energy conservation efforts; | |
• | energy efficiencies and technological trends; | |
• | governmental regulation and taxation; | |
• | changes to, and the application of, regulation of tariff rates and operational requirements related to our interstate and intrastate pipelines; | |
• | hazards or operating risks incidental to the gathering, treating, processing and transporting of natural gas and NGLs or to the transporting, storing and distributing of propane that may not be fully covered by insurance; | |
• | the maturity of the propane industry and competition from other propane distributors; | |
• | competition from other midstream companies, interstate pipeline companies and propane distribution companies; | |
• | loss of key personnel; | |
• | loss of key natural gas producers or the providers of fractionation services; | |
• | reductions in the capacity or allocations of third party pipelines that connect with ETP’s pipelines and facilities; | |
• | the effectiveness of risk-management policies and procedures and the ability of ETP’s liquids marketing counterparties to satisfy their financial commitments; | |
• | the nonpayment or nonperformance by ETP’s customers; | |
• | regulatory, environmental, political and legal uncertainties that may affect the timing and cost of our internal growth projects, such as our construction of additional pipeline systems; | |
• | risks associated with the construction of new pipelines and treating and processing facilities or additions to ETP’s existing pipelines and facilities; | |
• | the availability and cost of capital and ETP’s ability to access certain capital sources; | |
• | the ability to successfully identify and consummate strategic acquisitions at purchase prices that are accretive to ETP’s financial results and to successfully integrate acquired businesses; | |
• | changes in laws and regulations to which we are subject, including tax, environmental, transportation and employment regulations or new interpretations by regulatory agencies concerning such laws and regulations; and | |
• | the costs and effects of legal and administrative proceedings. |
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• | our annual report onForm 10-K for the year ended August 31, 2007; | |
• | our current report onForm 8-K filed with the SEC on November 2, 2007; and | |
• | the description of our common units contained in our Registration Statement on From8-A filed with the SEC on January 31, 2006. |
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• | the amount of natural gas transported on ETP’s pipelines and gathering systems; | |
• | the level of throughput in ETP’s natural gas processing and treating facilities; | |
• | the fees ETP charges and the margins it realizes for its gathering, treating, processing, storage and transportation services; | |
• | the prices and market demand for, and the relationship between, natural gas and natural gas liquids, or NGLs; | |
• | energy prices generally; | |
• | the prices of natural gas and propane compared to the price of alternative and competing fuels; | |
• | the general level of petroleum product demand and the availability and price of propane supplies; | |
• | the level of domestic oil, propane and natural gas production; | |
• | the availability of imported oil and natural gas; | |
• | the ability to obtain adequate supplies of propane for retail sale in the event of an interruption in supply or transportation and the availability of capacity to transport propane to market areas; | |
• | actions taken by foreign oil and gas producing nations; | |
• | the political and economic stability of petroleum producing nations; | |
• | the effect of weather conditions on demand for oil, natural gas and propane; | |
• | availability of local, intrastate and interstate transportation systems; | |
• | the continued ability to find and contract for new sources of natural gas supply; | |
• | availability and marketing of competitive fuels; | |
• | the impact of energy conservation efforts; | |
• | energy efficiencies and technological trends; | |
• | of governmental regulation and taxation; | |
• | changes to, and the application of, regulation of tariff rates and operational requirements related to our interstate and intrastate pipelines; | |
• | hazards or operating risks incidental to the gathering, treating, processing and transporting of natural gas and NGLs or to the transporting, storing and distributing of propane that may not be fully covered by insurance; | |
• | the maturity of the propane industry and competition from other propane distributors; | |
• | competition from other midstream companies, interstate pipeline companies and propane distribution companies; | |
• | loss of key personnel; | |
• | loss of key natural gas producers or the providers of fractionation services; | |
• | reductions in the capacity or allocations of third party pipelines that connect with ETP’s pipelines and facilities; | |
• | the effectiveness of risk-management policies and procedures and the ability of ETP’s liquids marketing counterparties to satisfy their financial commitments; | |
• | the nonpayment or nonperformance by ETP’s customers; |
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• | regulatory, environmental, political and legal uncertainties that may affect the timing and cost of our internal growth projects, such as our construction of additional pipeline systems; | |
• | risks associated with the construction of new pipelines and treating and processing facilities or additions to ETP’s existing pipelines and facilities; | |
• | the availability and cost of capital and ETP’s ability to access certain capital sources; | |
• | the ability to successfully identify and consummate strategic acquisitions at purchase prices that are accretive to ETP’s financial results and to successfully integrate acquired businesses; | |
• | changes in laws and regulations to which we are subject, including tax, environmental, transportation and employment regulations or new interpretations by regulatory agencies concerning such laws and regulations; and | |
• | the costs and effects of legal and administrative proceedings. |
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• | the amount of natural gas transported in ETP’s pipelines and gathering systems; | |
• | the level of throughput in its processing and treating operations; | |
• | the fees it charges and the margins it realizes for its gathering, treating, processing, storage and transportation services; | |
• | the price of natural gas; | |
• | the relationship between natural gas and NGL prices; | |
• | the weather in its operating areas; | |
• | the cost of the propane it buys for resale and the prices it receives for its propane; | |
• | the level of competition from other midstream companies, interstate pipeline companies, propane companies and other energy providers; | |
• | the level of its operating costs; | |
• | prevailing economic conditions; and | |
• | the level of ETP’s hedging activities. |
• | the level of capital expenditures it makes; | |
• | the level of non-operating costs related to litigation and regulatory compliance matters; | |
• | the cost of acquisitions, if any; | |
• | the levels of any margin calls that result from changes in commodity prices; | |
• | its debt service requirements; | |
• | fluctuations in its working capital needs; | |
• | its ability to make working capital borrowings under its credit facilities to make distributions; | |
• | its ability to access capital markets; | |
• | restrictions on distributions contained in its debt agreements; and | |
• | the amount, if any, of cash reserves established by its general partner in its discretion for the proper conduct of ETP’s business. |
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• | interest expense and principal payments on our indebtedness; | |
• | restrictions on distributions contained in any current or future debt agreements; | |
• | our general and administrative expenses; | |
• | expenses of our subsidiaries other than ETP, including tax liabilities of our corporate subsidiaries, if any; | |
• | capital contributions to maintain our 2% general partner interest in ETP as required by the partnership agreement of ETP upon the issuance of additional partnership securities by ETP; and | |
• | reserves our general partner believes prudent for us to maintain for the proper conduct of our business or to provide for future distributions. |
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• | a significant portion of our and ETP’s cash flow from operations will be dedicated to the payment of principal and interest on outstanding debt and will not be available for other purposes, including payment of distributions; | |
• | covenants contained in our and ETP’s existing debt arrangements require us to meet financial tests that may adversely affect our flexibility in planning for and reacting to changes in our and ETP’s business; | |
• | our ability to obtain additional financing for working capital, capital expenditures, acquisitions and general partnership purposes may be limited; | |
• | we may be at a competitive disadvantage relative to similar companies that have less debt; | |
• | we may be more vulnerable to adverse economic and industry conditions as a result of our significant debt level; and | |
• | failure to comply with the various restrictive and affirmative covenants of the credit agreements could negatively impact our ability and the ability of our subsidiaries to incur additional debt and to pay distributions. We are required to measure these financial tests and covenants quarterly and, as of May 31, 2007, we were in compliance with all financial requirements, tests, limitations, and covenants related to financial ratios under our existing credit agreements. |
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• | our unitholders’ current proportionate ownership interest in us will decrease; | |
• | the amount of cash available for distribution on each common unit or partnership security may decrease; | |
• | the ratio of taxable income to distributions may increase; | |
• | the relative voting strength of each previously outstanding common unit may be diminished; and | |
• | the market price of our common units may decline. |
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• | a court or government agency determined that we were conducting business in a state but had not complied with that particular state’s partnership statute; or | |
• | your right to act with other unitholders to take other actions under our partnership agreement is found to constitute “control” of our business. |
• | voluntarily withdraws from the partnership by giving notice to the other partners; | |
• | transfers all, but not less than all, of its partnership interests to another entity in accordance with the terms of ETP’s partnership agreement; | |
• | makes a general assignment for the benefit of creditors, files a voluntary bankruptcy petition, seeks to liquidate, acquiesces in the appointment of a trustee, receiver or liquidator, or becomes subject to an involuntary bankruptcy petition; or | |
• | dissolves itself under Delaware law without reinstatement within the requisite period. |
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• | the allocation of shared overhead expenses to ETP and us; | |
• | the interpretation and enforcement of contractual obligations between us and our affiliates, on the one hand, and ETP, on the other hand; | |
• | the determination of the amount of cash to be distributed to ETP’s partners and the amount of cash to be reserved for the future conduct of ETP’s business; | |
• | the determination of whether to make borrowings under ETP’s revolving working capital facility to pay distributions to ETP’s partners; and | |
• | any decision we make in the future to engage in business activities independent of ETP. |
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• | Our general partner is allowed to take into account the interests of parties other than us, including ETP and its affiliates and any general partners and limited partnerships acquired in the future, in resolving conflicts of interest, which has the effect of limiting its fiduciary duties to our unitholders. | |
• | Our general partner has limited its liability and reduced its fiduciary duties under the terms of our partnership agreement, while also restricting the remedies available to our unitholders for actions that, without these limitations, might constitute breaches of fiduciary duty. As a result of purchasing our units, unitholders consent to various actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state law. | |
• | Our general partner determines the amount and timing of our investment transactions, borrowings, issuances of additional partnership securities and reserves, each of which can affect the amount of cash that is available for distribution to our unitholders. | |
• | Our general partner determines which costs it and its affiliates have incurred are reimbursable by us. | |
• | Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered, or from entering into additional contractual arrangements with any of these entities on our behalf, so long as the terms of any such payments or additional contractual arrangements are fair and reasonable to us. | |
• | Our general partner controls the enforcement of obligations owed to us by it and its affiliates. | |
• | Our general partner decides whether to retain separate counsel, accountants or others to perform services for us. |
• | permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or any limited partner; | |
• | provides that our general partner is entitled to make other decisions in “good faith” if it reasonably believes that the decisions are in our best interests; | |
• | generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the audit and conflicts committee of the board of directors of our general partner and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or be “fair and reasonable” to us and that, in determining whether a transaction or resolution is “fair and reasonable,” our general partner may consider the totality of the relationships among the parties involved, including other transactions that may be particularly advantageous or beneficial to us; and | |
• | provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the general partner or those other persons acted in bad faith or engaged in fraud, willful misconduct or gross negligence. |
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• | our unitholders’ proportionate ownership interest in ETP will decrease; | |
• | the amount of cash available for distribution on each common unit may decrease; and | |
• | the market price of our common units may decline. |
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• | the impact of weather on the demand for oil and natural gas; | |
• | the level of domestic oil and natural gas production; | |
• | the availability of imported oil and natural gas; | |
• | actions taken by foreign oil and gas producing nations; | |
• | the availability of local, intrastate and interstate transportation systems; | |
• | the price, availability and marketing of competitive fuels; | |
• | the demand for electricity; | |
• | the impact of energy conservation efforts; and | |
• | the extent of governmental regulation and taxation. |
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• | because ETP is unable to identify attractive acquisition candidates or negotiate acceptable purchase contracts with them; | |
• | because ETP is unable to raise financing for such acquisitions on economically acceptable terms; or | |
• | because ETP is outbid by competitors, some of which are substantially larger than ETP and have greater financial resources and lower costs of capital then it does. |
• | fail to realize anticipated benefits, such as new customer relationships, cost-savings or cash flow enhancements; | |
• | decrease its liquidity by using a significant portion of its available cash or borrowing capacity to finance acquisitions; | |
• | significantly increase its interest expense or financial leverage if ETP incurs additional debt to finance acquisitions; | |
• | encounter difficulties operating in new geographic areas or new lines of business; | |
• | incur or assume unanticipated liabilities, losses or costs associated with the business or assets acquired for which ETP is not indemnified or for which the indemnity is inadequate; | |
• | be unable to hire, train or retrain qualified personnel to manage and operate its growing business and assets; | |
• | less effectively manage its historical assets, due to the diversion of ETP management’s attention from other business concerns; or | |
• | incur other significant charges, such as impairment of goodwill or other intangible assets, asset devaluation or restructuring charges. |
• | ETP is unable to identify pipeline construction opportunities with favorable projected financial returns; | |
• | ETP is unable to raise financing for its identified pipeline construction opportunities; or | |
• | ETP is unable to secure sufficient natural gas transportation commitments from potential customers due to competition from other pipeline construction projects or for other reasons. |
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• | operating terms and conditions of service; | |
• | the types of services Transwestern may offer to its customers; | |
• | construction of new facilities; | |
• | acquisition, extension or abandonment of services or facilities; | |
• | reporting and information posting requirements; | |
• | accounts and records; and | |
• | relationships with affiliated companies involved in all aspects of the natural gas and energy businesses. |
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• | price, | |
• | reliability and quality of service, | |
• | responsiveness to customer needs, | |
• | safety concerns, | |
• | long-standing customer relationships, | |
• | the inconvenience of switching tanks and suppliers, and | |
• | the lack of growth in the industry. |
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• | surety bond premiums to replace lost or stolen certificates, taxes and other governmental charges; | |
• | special charges for services requested by a holder of a common unit; and | |
• | other similar fees or charges. |
• | represents that the transferee has the capacity, power and authority to become bound by our partnership agreement; | |
• | automatically agrees to be bound by the terms and conditions of, and is deemed to have executed, our partnership agreement; and | |
• | gives the consents and approvals contained in our partnership agreement, such as the approval of all transactions and agreements that we are entering into in connection with our formation and this offering. |
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• | 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. |
• | becomes the record holder of the common units and is an assignee until admitted into our partnership as a substituted limited partner; | |
• | automatically requests admission as a substituted limited partner in our partnership; | |
• | executes and agrees to be bound by the terms and conditions of our partnership agreement; | |
• | represent that the transferee has the capacity, power and authority to enter into our partnership agreement; | |
• | grants powers of attorney to the officers of our general partner and any liquidator of us as specified in our partnership agreement; | |
• | gives the consents, covenants, representations and approvals contained in our partnership agreement; and | |
• | certifies: |
• | that the transferee is an individual or is an entity subject to United States federal income taxation on the income generated by us; or | |
• | that, if the transferee 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. |
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• | the right to assign the common unit to a purchaser or other transferee; and | |
• | the right to transfer the right to seek admission as a substituted limited partner in our partnership for the transferred common units. |
• | will not receive cash distributions; | |
• | will not be allocated any of our income, gain, deduction, losses or credits for federal income tax or other tax purposes; | |
• | may not receive some federal income tax information or reports furnished to record holders of common units; and | |
• | will have no voting rights; | |
• | unless the common units are held in a nominee or “street name” account and the nominee or broker has executed and delivered a transfer application and certification as to itself and any beneficial holders. |
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ETP’s Common Units | Our Common Units | |||
Taxation of Entity and Entity Owners | ETP is a flow-through entity that is not subject to an entity-level federal income tax. | Similarly, we are a flow-through entity that is not subject to an entity-level federal income tax. | ||
ETP common unitholders generally will be allocated an amount of federal taxable income for the cumulative period ending December 31, 2008 related to ETP’s operations that is expected to be less than the cumulative amount of cash distributions that they receive with respect to that period. | Similarly, our common unitholders will be allocated an amount of federal taxable income for the cumulative period ending December 31, 2008 related to our operations that is expected to be less than the amount of cash distributions that they receive with respect to that period, although the ratio of taxable income allocated to our unitholders in relation to our cash distributions will be greater than the ratio of taxable income allocated to ETP’s unitholders in relation to its cash distributions. | |||
ETP common unitholders will receive Schedule K-1s from ETP reflecting the unitholders’ share of ETP’s items of income, gain, loss and deduction at the end of each calendar year. | Our common unitholders also will receive Schedule K-1s from us reflecting the unitholders’ share of our items of income, gain, loss and deduction at the end of each calendar year. | |||
Sources of Cash Flow | ETP is our subsidiary and may engage in acquisition and development activities that expand its business and operations. | Our cash-generating assets consist of our partnership interests in ETP, including incentive distribution rights, and we currently have no independent operations. Accordingly, our financial performance and our ability to pay cash distributions to our unitholders is currently directly dependent upon the performance of ETP. In the future, if we elect to develop independent operations, we may own assets or engage in businesses that compete directly or indirectly with ETP, except that ETP’s partnership agreement prohibits us from engaging in the retail propane business in the United States. | ||
Limitation on Issuance of Additional Units | ETP may issue an unlimited number of additional partnership interests and other equity securities without obtaining unitholder approval. | Similarly, we may issue an unlimited number of additional partnership interests and other equity securities without obtaining unitholder approval. |
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• | less the amount of cash reserves necessary or appropriate, as determined in good faith by our general partner, to: |
• | satisfy general, administrative and other expenses and debt service requirements; | |
• | permit Energy Transfer Partners GP to make capital contributions to ETP in order to maintain its 2% general partner interest as required by ETP’s partnership agreement upon the issuance of additional partnership securities by ETP; | |
• | comply with applicable law or any debt instrument or other agreement; | |
• | provide funds for distributions to unitholders and our general partner in respect of any one or more of the next four quarters; and | |
• | otherwise provide for the proper conduct of our business; |
• | plus all cash on hand immediately prior to the date of the distribution of available cash for the quarter. |
• | Our distribution policy is subject to restrictions on distributions under our credit facilities. Specifically, our credit facilities contain material financial tests and covenants that we will be required to satisfy. Should we be unable to comply with the restrictions under our credit facilities, we would be prohibited from making cash distributions to you notwithstanding our stated distribution policy. | |
• | ETP’s distribution policy is subject to restrictions on distributions under its credit agreements. Specifically, ETP’s credit agreements contain material financial tests and covenants that it must satisfy. Should ETP be unable to comply with the restrictions under its credit agreements, ETP would be prohibited from making cash distributions to us, which in turn would prevent us from making cash distributions to you notwithstanding our stated distribution policy. In addition, ETP would enter into new credit agreements containing financial tests and covenants that are more difficult to satisfy than those described in this prospectus. |
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• | The board of directors of our general partner has the authority under our partnership agreement to establish reserves for the prudent conduct of our business and for future cash distributions to our unitholders, and the establishment of those reserves could result in a reduction in cash distributions to you from levels we currently anticipate pursuant to our stated distribution policy. | |
• | The board of directors of ETP’ s general partner has the authority under ETP’ s partnership agreement to establish reserves for the prudent conduct of ETP’s business and for future cash distributions to ETP’s unitholders, and the establishment of those reserves could result in a reduction in cash distributions that we would otherwise anticipate receiving from ETP, which in turn could result in a reduction in cash distributions to you from levels we currently anticipate pursuant to our stated distribution policy. | |
• | While our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including our cash distribution policy contained therein, may be amended by a vote of the holders of a majority of our common units. As of May 31, 2007, our affiliates, excluding Enterprise GP Holdings L.P., own approximately 37.4% of our outstanding common units. | |
• | Even if our cash distribution policy is not modified or revoked, the amount of distributions paid under our cash distribution policy is subject to the determination of our general partner, taking into consideration the terms of our partnership agreement. | |
• | The amount of distributions paid under ETP’s cash distribution policy is subject to the determination of ETP’s general partner, taking into consideration the terms of its partnership agreement. | |
• | UnderSection 17-607 of the Delaware Revised Uniform Limited Partnership Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets. | |
• | We may lack sufficient cash to pay distributions to our unitholders due to increases in general and administrative expenses, principal and interest payments on our outstanding debt, tax expenses, working capital requirements and anticipated cash needs of us or ETP and its subsidiaries. |
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• | less the amount of cash reserves that are necessary or appropriate in the reasonable discretion of the general partner of ETP to: | |
• | provide for the proper conduct of its business; | |
• | comply with applicable law or any debt instrument or other agreement (including reserves for future capital expenditures and for its future credit needs); or | |
• | provide funds for distributions to ETP’s unitholders and its general partner in respect of any one or more of the next four quarters; | |
• | plus all of ETP’s cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings of ETP made after the end of the quarter. Working capital borrowings are generally borrowings that are made under ETP’s credit facilities and in all cases are used solely for working capital purposes or to pay distributions to ETP’s partners. |
• | its cash balance on the closing date of its initial public offering in 1996; plus | |
• | $10.0 million (as described below); plus | |
• | all of ETP’s cash receipts since the closing of its initial public offering, excluding cash from interim capital transactions such as borrowings that are not working capital borrowings, sales of equity and debt securities and sales or other dispositions of assets outside the ordinary course of business; plus | |
• | ETP’s working capital borrowings made after the end of a quarter but before the date of determination of operating surplus for the quarter; less | |
• | all of ETP’s operating expenditures after the closing of its initial public offering, including the repayment of working capital borrowings, but not the repayment of other borrowings, and including maintenance capital expenditures; less | |
• | the amount of ETP’s cash reserves that the general partner of ETP deems necessary or advisable to provide funds for future operating expenditures. |
• | borrowings other than working capital borrowings; | |
• | sales of ETP’s of debt and equity securities; and |
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• | ETP’s sales or other disposition of assets for cash, other than inventory, accounts receivable and other current assets sold in the ordinary course of business or as part of normal retirements or replacements of assets. |
• | First, 98% to all common, class E unitholders of ETP, in accordance with their percentage interests, and 2% to the general partner, until each common unit has received $0.25 per unit for such quarter (the “minimum quarterly distribution”); | |
• | Second, 98% to all common, class E unitholders of ETP, in accordance with their percentage interests, and 2% to the general partner, until each common unit has received $0.275 per unit for such quarter (the “first target cash distribution”); | |
• | Third, 85% to all common, class E unitholders of ETP, in accordance with their percentage interests, 13% to the holders of incentive distribution rights, pro rata, and 2% to the general partner, until each common unit has received $0.3175 per unit for such quarter (the “second target cash distribution”); | |
• | Fourth, 75% to all common, class E unitholders of ETP, in accordance with their percentage interests, 23% to the holders of incentive distribution rights, pro rata, and 2% to the general partner, until each common unit has received $0.4125 per unit for such quarter (the “third target cash distribution”); and | |
• | Fifth, thereafter, 50% to all common, class E unitholders of ETP, in accordance with their percentage interests, 48% to the holders of incentive distribution rights, pro rata, and 2% to the general partner. |
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• | First, 98% to all of its unitholders, pro rata, and 2% to its general partner, until ETP distributes for each ETP common unit, an amount of available cash from capital surplus equal to its initial public offering price; and | |
• | Thereafter, ETP will make all distributions of its available cash from capital surplus as if they were from operating surplus. |
• | First, to the general partner and the holders of units of ETP who have negative balances in their capital accounts to the extent of and in proportion to those negative balances; | |
• | Second, 98% to the common unitholders of ETP, pro rata, and 2% to the general partner of ETP, until the capital account for each common unit is equal to the sum of: |
• | its unrecovered capital; and | |
• | the amount of the minimum quarterly distribution of ETP for the quarter during which our liquidation occurs; |
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• | Third, 98% to all unitholders of ETP, pro rata, and 2% to the general partner of ETP, until we allocate under this paragraph an amount per ETP unit equal to: |
• | the sum of the excess of the first target cash distribution per ETP unit over the minimum quarterly distribution per ETP unit for each quarter of our existence; less | |
• | the cumulative amount per ETP unit of any distributions of ETP’s available cash from operating surplus in excess of the minimum quarterly distribution per ETP unit that it distributed 98% to its unitholders, pro rata, and 2% to its general partner, for each quarter of its existence; |
• | Fourth, 85% to all unitholders of ETP, pro rata, 13% to the holders of the incentive distribution rights of ETP, pro rata, and 2% to the general partner of ETP, until ETP allocates under this paragraph an amount per ETP unit equal to: |
• | the sum of the excess of the second target cash distribution per ETP unit over the first target cash distribution per ETP unit for each quarter of ETP’s existence; less | |
• | the cumulative amount per ETP unit of any distributions of ETP’s available cash from operating surplus in excess of the first target cash distribution per ETP unit that it distributed 85% to the unitholders of ETP, pro rata, 13% to the holders of the incentive distribution rights of ETP, pro rata, and 2% to the general partner of ETP for each quarter of its existence; |
• | Fifth, 75% to all unitholders of ETP, pro rata, 23% to the holders of the incentive distribution rights of ETP, pro rata, and 2% to the general partner of ETP, until ETP allocates under this paragraph an amount per ETP unit equal to: |
• | the sum of the excess of the third target cash distribution per ETP unit over the second target cash distribution per ETP unit for each quarter of its existence; less | |
• | the cumulative amount per ETP unit of any distributions of ETP’s available cash from operating surplus in excess of the second target cash distribution per ETP unit that it distributed 75% to the unitholders of ETP, pro rata, 23% to the holders of the incentive distribution rights of ETP, pro rata, and 2% to the general partner of ETP for each quarter of its existence; and |
• | Sixth, thereafter, 50% to all unitholders of ETP, pro rata, 48% to the holders of the incentive distribution rights of ETP, pro rata, and 2% to the general partner of ETP. |
• | First, 98% to the holders of common units of ETP in proportion to the positive balances in their capital accounts and 2% to the general partner of ETP, until the capital accounts of the common unitholders of ETP have been reduced to zero; and | |
• | Second, thereafter, 100% to the general partner of ETP. |
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• | with regard to rights of holders of units, please read “Description of Our Common Units;” and | |
• | with regard to allocations of taxable income and other matters, please read “Material Tax Consequences.” |
• | to remove or replace the general partner; | |
• | to approve some amendments to the partnership agreement; or | |
• | to take other action under the partnership agreement; |
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Issuance of additional units | No approval right. | |
Amendment of our partnership agreement | Certain amendments may be made by our general partner without the approval of our unitholders. Other amendments generally require the approval of a majority of our outstanding units. Please read “— Amendments to Our Partnership Agreement.” | |
Merger of our partnership or the sale of all or substantially all of our assets | A majority of our outstanding units in certain circumstances. Please read “— Merger, Sale or Other Disposition of Assets.” | |
Dissolution of our partnership | A majority of our outstanding units. Please read “— Termination or Dissolution.” | |
Reconstitution of our partnership upon dissolution | A majority of our outstanding units. Please read “— Termination or Dissolution.” | |
Withdrawal of our general partner | Under most circumstances, the approval of a majority of the units, excluding units held by our general partner and its affiliates, is required for the withdrawal of the general partner prior to June 30, 2015 in a manner that would cause a dissolution of our partnership. Please read “— Withdrawal or Removal of Our general partner.” |
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Removal of our general partner | Not less than 662/3 of the outstanding units, including units held by our general partner and its affiliates. Please read “— Withdrawal or Removal of Our general partner.” | |
Transfer of the general partner interest | Our general partner may transfer all, but not less than all, of its general partner interest in us without a vote of our unitholders to (i) an affiliate (other than an individual) or (ii) another entity 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 units, excluding units held by the general partner and its affiliates, is required in other circumstances for a transfer of the general partner interest to a third party prior to December 31, 2015. Please read “— Transfer of General Partner Interest.” | |
Transfer of ownership interests in our general partner | No approval required at any time. Please read “— Transfer of Ownership Interests in our general partner.” |
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• | the action would not result in the loss of limited liability of any limited partner; and | |
• | neither our partnership nor Energy Transfer Partners 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. |
• | first, towards the payment of all of our creditors and the creation of a reserve for contingent liabilities; and | |
• | then, to all partners in accordance with the positive balance in the respective capital accounts. |
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• | an affiliate of the general partner (other than an individual); or | |
• | another entity as part of the merger or consolidation of the general partner with or into another entity or the transfer by the general partner of all or substantially all of its assets to another entity, |
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• | the highest cash price paid by either our general partner or any of its affiliates for any limited partners interests of the class purchased within the 90 days preceding the date our general partner first mails notice of its election to purchase the limited partner interests; and | |
• | the current market price of the limited partner interests of the class as of the date three days prior to the date that notice is mailed. |
• | 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. |
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• | fail to furnish a transfer application containing the required certification; | |
• | fail to furnish a re-certification containing the required certification within 30 days after request; or | |
• | is unable to provide a certification to the effect set forth in one of the two bullet points in the second preceding paragraph; then |
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• | a current list of the name and last known address of each partner; | |
• | a copy of our tax returns; | |
• | information as to the amount of cash and a description and statement of the agreed value of any other property or services, contributed or to be contributed by each partner and the date on which each became a partner; | |
• | copies of our partnership agreement, our certificate of limited partnership, amendments to either of them and powers of attorney which have been executed under our partnership agreement; | |
• | information regarding the status of our business and financial condition; and | |
• | any other information regarding our affairs as is just and reasonable. |
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• | a merger of ETP; | |
• | a sale or exchange of all or substantially all of the assets of ETP; | |
• | dissolution or reconstitution of ETP upon dissolution; | |
• | certain amendments to ETP’s partnership agreement; and | |
• | the transfer to another person of ETP’s incentive distribution rights at any time, except for transfers to affiliates of the general partner or transfers in connection with the general partner’s merger or consolidation with or into, or sale of all or substantially all of its assets to, another person. |
• | a merger of our partnership; | |
• | a sale or exchange of all or substantially all of our assets; |
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• | dissolution or reconstitution of our partnership upon dissolution; | |
• | certain amendments to the partnership agreement; and | |
• | the transfer to another person of our incentive distribution rights at any time, except for transfers to affiliates of the general partner or transfers in connection with the general partner’s merger or consolidation with or into, or sale of all or substantially all of its assets to, another person. |
• | a change in ETP’s name, the location of its principal place of business, its registered agent or its registered office; | |
• | the admission, substitution, withdrawal or removal of partners; | |
• | a change to qualify or continue ETP’s qualification as a limited partnership or a partnership in which its limited partners have limited liability under the laws of any state or to ensure that neither ETP or HOLP will be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes; | |
• | a change that does not adversely affect ETP’s unitholders in any material respect; |
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• | a change to (i) 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, (ii) facilitate the trading of ETP’s common units or comply with any rule, regulation, guideline or requirement of any national securities exchange on which its common units are or will be listed for trading, (iii) that is necessary or advisable in connection with action taken by ETP’s general partner with respect to subdivision and combination of its securities or (iv) that is required to effect the intent expressed in ETP’s partnership agreement; | |
• | a change in ETP’s fiscal year or taxable year and any changes that are necessary or advisable as a result of a change in its fiscal year or taxable year; | |
• | an amendment that is necessary to prevent ETP, or its general partner or its general partner’s directors, officers, trustees or agents from being subjected to the provisions of the Investment Company Act of 1940, as amended, the Investment Advisers Act of 1940, as amended, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, as amended; | |
• | an amendment that is necessary or advisable in connection with the authorization or issuance of any class or series of ETP’s securities; | |
• | any amendment expressly permitted in ETP’s partnership agreement to be made by its general partner acting alone; | |
• | an amendment effected, necessitated or contemplated by a merger agreement approved in accordance with its partnership agreement; | |
• | an amendment that is necessary or advisable to reflect, account for and deal with appropriately ETP’s formation of, or investment in, any corporation, partnership, joint venture, limited liability company or other entity other than its operating partnership, in connection with its conduct of activities permitted by its partnership agreement; | |
• | a merger or conveyance to effect a change in ETP’s legal form; or | |
• | any other amendments substantially similar to the foregoing. |
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• | the action would not result in the loss of limited liability of any limited partner; and | |
• | none of the partnership, the reconstituted limited partnership, ETP’s operating partnership nor any of its other 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. |
• | first, towards the payment of all of ETP’s creditors and the creation of a reserve for contingent liabilities; and | |
• | then, to all partners in accordance with the positive balance in the respective capital accounts. |
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• | any units held by a person that owns 20% or more of any class of ETP’s units then outstanding, other than its general partner and its affiliates, cannot be voted on any matter; and | |
• | the partnership agreement contains provisions limiting the ability of unitholders to call meetings or to acquire information about ETP’s operations, as well as other provisions limiting the unitholders’ ability to influence the manner or direction of management. |
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• | Neither we nor ETP has elected or will elect to be treated as a corporation; and | |
• | For each taxable year, more than 90% of our gross income has been and will be income that Vinson & Elkins L.L.P. has opined or will opine is “qualifying income” within the meaning of Section 7704(d) of the Internal Revenue Code. |
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• | assignees who have executed and delivered transfer applications, and are awaiting admission as limited partners; and | |
• | unitholders whose units are held in street name or by a nominee and who have the right to direct the nominee in the exercise of all substantive rights attendant to the ownership of their units |
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• | 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. |
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• | 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. |
• | 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 | |
• | all of these distributions would appear to be ordinary income. |
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• | a short sale; | |
• | an offsetting notional principal contract; or | |
• | a futures or forward contract with respect to the partnership interest or substantially identical property. |
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• | the name, address and taxpayer identification number of the beneficial owner and the nominee; | |
• | whether the beneficial owner is: |
• | 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 sales. |
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• | accuracy-related penalties with a broader scope, significantly narrower exceptions, and potentially greater amounts than described above at “— Accuracy-Related Penalties,” | |
• | for those persons otherwise entitled to deduct interest on federal tax deficiencies, nondeductibility of interest on any resulting tax liability and | |
• | in the case of a listed transaction, an extended statute of limitations. |
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Number of | ||||||||||||||||
Percentage of | Number of | Common Units | ||||||||||||||
Number of | Common Units | Common Units | Beneficially | |||||||||||||
Common Units | Beneficially | That | Owned | |||||||||||||
Name of Selling Unitholder | Beneficially Owned | Owned | May be Sold(1) | After Offering | ||||||||||||
Agile Performance Fund, LLC(2) | 37,547 | * | 37,547 | — | ||||||||||||
Anderson, Steven R | 186,404 | * | 186,404 | — | ||||||||||||
Ben Van de Bunt and Laura Fox Living Trust(2) | 36,484 | * | 36,484 | — | ||||||||||||
Brantley, Jr., David W | 235,736 | * | 102,646 | 133,090 | ||||||||||||
Burrow, Jeffrey Woodley | 401,471 | * | 205,293 | 196,178 | ||||||||||||
Continental Casualty Company(3) | 274,250 | * | 109,450 | 164,800 | ||||||||||||
The Cushing GP Strategies Fund, LP(3) | 367,729 | * | 200,657 | 167,072 | ||||||||||||
The Cushing MLP Opportunity Fund I,LP(3) | 1,813,444 | * | 1,355,444 | 458,000 | ||||||||||||
DBB Energy Limited Partnership(4) | 783,218 | * | 341,037 | 442,181 | ||||||||||||
Denham Commodity Partners Fund LP(5) | 4,394,636 | 1.97 | % | 4,394,636 | — | |||||||||||
ET Company Ltd.(6) | 49,126 | * | 49,126 | — | ||||||||||||
ET GP, LLC(6) | 6,796 | * | 6,796 | — | ||||||||||||
ETC Investors, Ltd.(6) | 1,454,140 | * | 1,454,140 | — | ||||||||||||
FHM Investments LLC(7) | 1,790,444 | * | 1,790,444 | — | ||||||||||||
GPS High Yield Equities Fund LP(2) | 180,181 | * | 180,181 | — | ||||||||||||
GPS Income Fund LP(2) | 735,491 | * | 735,491 | — | ||||||||||||
GPS New Equity Fund LP(2) | 230,036 | * | 230,036 | — | ||||||||||||
Greenhill Capital Partners, L.P.(8) | 2,092,079 | * | 2,092,079 | — | ||||||||||||
Greenhill Capital Partners (Cayman), L.P.(8) | 298,936 | * | 298,936 | — | ||||||||||||
Greenhill Capital Partners (Executives), L.P.(8) | 330,203 | * | 330,203 | — | ||||||||||||
Greenhill Capital, L.P.(8) | 659,271 | * | 659,271 | — | ||||||||||||
Hartz Capital MLP, LLC(9) | 912,076 | * | 912,076 | — | ||||||||||||
HFR RVA GPS Master Trust(2) | 131,338 | * | 131,338 | — | ||||||||||||
Kayne Anderson Capital Income Partners (QP), L.P.(10) | 78,223 | * | 78,223 | — | ||||||||||||
Kayne Anderson MLP Fund, L.P.(10) | 703,692 | * | 703,692 | — | ||||||||||||
Kayne Anderson MLP Investment Company(10) | 364,831 | * | 364,831 | — | ||||||||||||
Kellen Holdings, LLC(11) | 7,437,077 | 3.34 | % | 7,437,077 | — | |||||||||||
Kile, Lon | 169,398 | * | 169,398 | — | ||||||||||||
Knee Family Trust(2) | 18,242 | * | 18,242 | — | ||||||||||||
Kutch, George Clayton | 471,472 | * | 205,293 | 266,179 | ||||||||||||
Kutch, Tracy | 205,293 | * | 205,293 | — | ||||||||||||
Lorenz, Renee Y | 410,586 | * | 410,586 | — |
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Number of | ||||||||||||||||
Percentage of | Number of | Common Units | ||||||||||||||
Number of | Common Units | Common Units | Beneficially | |||||||||||||
Common Units | Beneficially | That | Owned | |||||||||||||
Name of Selling Unitholder | Beneficially Owned | Owned | May be Sold(1) | After Offering | ||||||||||||
L&E McMillian Family Partnership Ltd(12) | 205,293 | * | 205,293 | — | ||||||||||||
McCambro, Ltd.(13) | 136,586 | * | 136,586 | — | ||||||||||||
McReynolds Energy Partners, L.P.(14) | 4,359,553 | 1.96 | % | 4,359,553 | — | |||||||||||
Nolan, John | 404,476 | * | 404,476 | — | ||||||||||||
Oasis Gas Partners LLC(15) | 6,084,881 | 2.73 | % | 6,084,881 | — | |||||||||||
PH Investments, LLC(16) | 2,191,535 | * | 2,191,535 | — | ||||||||||||
Phillips Oil & Gas, Inc.(17) | 388,178 | * | 169,024 | 219,154 | ||||||||||||
Rainbow Investments Company(18) | 62,135 | * | 62,135 | — | ||||||||||||
The Renker Family Trust(2) | 36,484 | * | 36,484 | — | ||||||||||||
RMS-VMS, Ltd.(13) | 1,210,742 | * | 584,621 | 626,121 | ||||||||||||
Royal Bank of Canada(19) | 5,741,789 | 2.58 | % | 5,397,698 | 344,091 | |||||||||||
Stallcup, John M | 15,534 | * | 15,534 | — | ||||||||||||
Swank MLP Convergence Fund, LP(3) | 364,831 | * | 364,831 | — | ||||||||||||
Tortoise Energy Capital Corporation(20) | 547,246 | * | 547,246 | — | ||||||||||||
Tortoise Energy Infrastructure Corporation(20) | 729,661 | * | 729,661 | — | ||||||||||||
UNC Investment Fund, LLC(21) | 605,658 | * | 405,658 | 200,000 | ||||||||||||
Kelcy Warren Partners, L.P.(22) | 17,264,898 | 7.75 | % | 17,136,398 | 128,500 | |||||||||||
WH Energy Investors, L.L.C.(23) | 1,014,147 | * | 1,014,147 | — | ||||||||||||
The William P. and Jane C. Williams Family Partnership, Ltd.(24) | 721,207 | * | 721,207 | — | ||||||||||||
ZLP Fund, L.P.(25) | 625,782 | * | 625,782 | — | ||||||||||||
Totals | 69,970,466 | 31.40 | % | 66,625,100 | 3,345,366 | |||||||||||
* | Less than 1% | |
(1) | Because the selling unitholders may sell all or a portion of the common units registered hereby, we cannot estimate the number or percentage of common units that the selling unitholders will hold upon completion of the offering. Accordingly, the information presented in this table assumes that the selling unitholders will sell all of their common units registered pursuant hereto. | |
(2) | This selling unitholder has advised that the natural person with voting and dispositive power over the common units beneficially owned by the selling unitholder is Steven Sugarman of GPS Partners LLC. | |
(3) | This selling unitholder has advised that the natural person with voting and dispositive power over the common units beneficially owned by the selling unitholder is Jerry V. Swank as Managing Partner of Swank Energy Income Advisors, LP. | |
(4) | DBB Energy Limited Partnership is a limited partnership owned by David W. Brantley, Jr. who may be deemed to beneficially own the limited partner interests held by DBB Energy Limited Partnership to the extent of his interest therein. | |
(5) | Denham Commodity Partners Fund LP is an investment vehicle which is managed by Denham Commodity Partners GP LP as investment adviser. Denham GP LLC is the sole general partner of Denham Commodity Partners GP LP. Stuart Porter is the managing member of Denham GP LLC. Each of these persons may be deemed to have beneficial ownership of the securities. | |
(6) | Ray C. Davis, Kelcy L. Warren and Natural Gas Partners VI, L.P. (“NGP”) are the sole members of ET GP, LLC. Therefore, each of Messrs. Davis and Warren and NGP may be deemed to have beneficial ownership of the common units owned by ETC GP, LLC to the extent of their ownership interests therein. G.F.W. Energy VI L.P. and GFW VI, L.L.C. may be deemed to beneficially own the common units owned of record by NGP, by virtue of GFW VI, L.L.C. being the sole general partner of G.F.W. |
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Energy VI L.P. G.F.W. Energy VI, L.P., being the sole general partner of NGP. Messrs. Kenneth A. Hersh and David R. Albin, who constitute a majority of the members of such entity, may also be deemed to share power to vote or to direct the vote and to dispose or to direct the disposition of, the common units. The general partner of ETC Investors, Ltd. is ET Company, Ltd., a limited partnership owned by Messrs. Davis and Warren. | ||
(7) | FHM Investments is owned by a group of former senior executive officers of ETP and one current senior executive officer of ETP. | |
(8) | GCP Managing Partner, L.P., the managing general partners of the GCP Funds, as well as Greenhill Capital Partners, LLC, its general partner and Greenhill & Co., Inc., the sole member of Greenhill Capital Partners, LLC, may be deemed to beneficially own the units held by the Funds. Decisions regarding the investments by the Funds are made by an investment committee, the composition of which may change from time to time. The current members of the investment committee are Robert H. Niehaus, Scott L. Bok, Robert F. Greenhill, Simon A. Borrows, Kevin A. Bousquette and V. Frank Pottow, each of whom disclaims beneficial ownership of the units held by the Funds except to the extent of his pecuniary interest therein. In addition, with respect to decisions to dispose of the units held by the Funds, GCP Managing Partner, L.P. requires the consent of GCP, L.P., the general partner of which is GCP 2000, LLC, which in turn is controlled by its senior members, Messrs. Niehaus, Bok, Greenhill and Pottow. GCP, L.P. and GCP 2000, LLC may also be deemed to beneficially own the units held by the Funds. The address of the Funds is 300 Park Avenue, New York, New York 10022. Each of the Funds is an affiliate of a registered broker dealer and has informed us that it acquired the units in the ordinary course of its business and at the time the units were acquired, it had no agreements or understandings, directly or indirectly, with us or any of our affiliates or any person acting on our behalf or on behalf of our affiliates to distribute these shares. | |
(9) | Edward J. Stern, Ronald J. Bangs and Jonathan B. Schindel, in their capacity as officers of Hartz Capital, Inc., which is the sole manager of Hartz Capital MLP, LLC, share voting and investment control over the shares held by Hartz Capital MLP, LLC. Each of Messers. Bangs and Schindel disclaims beneficial ownership of all of such shares. | |
(10) | The number of common units is as of July 19, 2007 and does not include an aggregate of 1,304,223 common units owned by accounts managed by Kayne Anderson Capital Advisors, L.P. or KA Fund Advisors, L.P., each of which is an affiliate of the selling shareholder. Richard A. Kayne, in his capacity as the majority shareholder of Kayne Anderson Capital Advisors, L.P., holds voting and dispositive power with respect to the securities held by the selling unitholder. KA Associates, Inc., an affiliate of the selling unitholder, is a broker-dealer registered pursuant to Section 15(b) of the Exchange Act and is a member of the NASD. The selling unitholder (i) purchased the securities for the selling unitholder’s own account, not as a nominee or agent, in the ordinary course of business and with no intention of selling or otherwise distributing securities in any transaction in violation of securities laws and (ii) at the time of purchase, the selling unitholder did not have any agreement or understanding, direct or indirect, with any other person to sell or otherwise distribute the purchased securities. | |
(11) | Kellen Holdings, LLC, a Delaware limited liability company, is a direct subsidiary of Liberty Energy Holdings, LLC, a Delaware LLC (“LEH”), and is an indirect subsidiary of Liberty Mutual Holding Company Inc., a Massachusetts mutual holding company. Liberty Mutual Holding Company Inc. is the ultimate controlling person of Kellen Holdings, LLC. Liberty Mutual Holding Company Inc. is a mutual holding company wherein its members are entitled to vote at meetings of the company. No such member is entitled to cast 10% or more of the votes. Liberty Mutual Holding Company Inc. has issued no voting securities. | |
(12) | L&e McMillian Family Partnership Ltd is a limited partnership owned by Leonard McMillian, who may be deemed to beneficially own the limited partner interests held by the L&e McMillian Family Partnership Ltd to the extent of his interest therein. |
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(13) | McCambro, Ltd. and RMS-VMS, Ltd. are limited partnerships owned by Roger M. Smith who may be deemed to beneficially own the limited partner interests held by McCambro, Ltd. and RMS-VMS, Ltd., to the extent of his interest therein. | |
(14) | McReynolds Energy Partners, L.P. is owned by Mr. McReynolds who may be deemed to beneficially own the limited partner interests held by McReynolds Energy Partners, L.P. to the extent of his respective interests therein. | |
(15) | SF Holding Corp. may be deemed to beneficially own the common units owned of record by Oasis Gas Partners LLC, because SF Holding Corp. is the sole manager of Oasis Gas Partners LLC. The natural persons who hold voting and dispositive power over the units are the board of directors of SF Holdings Corp., Warren A. Stephens, W.R. Stephens Jr., Elizabeth Stephens Campbell, and Douglas H. Martin. | |
(16) | PH Investments LLC is an investment vehicle which is managed by Amos B. Hostetter, Jr. Amos B. Hostetter, Jr. is the sole managing member of PH Investments, LLC. Amos B. Hostetter is the only person deemed to have beneficial ownership of the securities. | |
(17) | This selling unitholder has advised that the natural person with voting and dispositive power over the common units beneficially owned by the selling unitholder is Fred L. Phillips, President of Phillips Oil & Gas, Inc. | |
(18) | Rainbow Investments Company is an investment company controlled by Mr. Steven G. Herbst. Mr. Herbst may be deemed to have beneficial ownership of the securities. | |
(19) | This unitholder has advised us that the unitholder is an affiliate of a U.S. registered broker-dealer; however, the unitholder acquired the common units in the ordinary course of business and, at the time of the acquisition, had no agreements or understandings, directly or indirectly, with any party to distribute the common units held by this unitholder. | |
(20) | This unitholder has advised that Tortoise Capital Advisors, L.L.C. serves as the investment advisor to this unitholder and that, pursuant to an investment advisory agreement entered into with the unitholder, Tortoise Capital Advisors, L.L.C. holds voting and dispositive power with respect to the common units held by the unitholder. The unitholder has advised us that the investment committee of Tortoise Capital Advisors, L.L.C. is responsible for the investment management of the unitholder’s portfolio, such investment committee being comprised of H. Kevin Birzer, Zachary A. Hamel, Kenneth P. Malvey, Terry Matlack and David J. Schutle. | |
(21) | This selling unitholder has advised that the natural person with voting and dispositive power over the common units beneficially owned by the selling unitholder is Jonathon C. King, President and Chief Executive Officer of UNC Management Company, Inc., the managing member of UNC Investment Fund, LLC. | |
(22) | Kelcy Warren Partners, L.P., is a limited partnership owned by Mr. Warren. Mr. Warren disclaims beneficial ownership of the reported common units except to the extent of his pecuniary interest therein. | |
(23) | WH Energy Investors, L.L.C. is an investment vehicle which is managed by its members consisting of A. Keith Weber, Ed Hawes and Sterling Holdings, LLC, a Kansas limited liability company. Leslie L. Webber and Patricia C. Webber are the sole owners of Sterling Holdings, LLC. Each of these persons may be deemed to have beneficial ownership of the securities. | |
(24) | The William P. and Jane C. Williams Family Partnership, Ltd. is a limited partnership owned by William P. Williams who may be deemed to beneficially own the limited partner interests held by The William P. and Jane C. Williams Family Partnership, Ltd. to the extent of his interest therein. | |
(25) | This selling unitholder has advised that the natural persons with voting and dispositive power over the common units beneficially owned by the selling unitholder are Stuart Zimmer and Greg Lucas of Zimmer Lucas Capital, LLC. |
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• | the name of the selling unitholders; | |
• | the nature of the position, office or other material relationship which the selling unitholders will have had within the prior three years with us or any of our affiliates; | |
• | the number of common units owned by the selling unitholders prior to the offering; | |
• | the amount or number of common units to be offered for the selling unitholders’ account; and | |
• | the amount and (if one percent or more) the percentage of common units to be owned by the selling unitholders after the completion of the offering. |
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• | a block trade (which may involve crosses) in which the broker or dealer so engaged will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction; | |
• | purchases by a broker or dealer as principal and resale by such broker or dealer for its own account pursuant to this prospectus; | |
• | exchange distributionsand/or secondary distributions; | |
• | sales in the over-the-counter market; | |
• | underwritten transactions; | |
• | short sales; | |
• | broker-dealers may agree with the selling unitholders to sell a specified number of such common units at a stipulated price per unit; | |
• | ordinary brokerage transactions and transactions in which the broker solicits purchasers; | |
• | privately negotiated transactions; | |
• | a combination of any such methods of sale; and | |
• | any other method permitted pursuant to applicable law. |
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• | our annual report onForm 10-K for the year ended August 31, 2006; | |
• | our quarterly reports onForm 10-Q for the periods ended November 30, 2006, February 28, 2007 and May 31, 2007; and | |
• | our current reports onForm 8-K filed September 19, 2006, September 25, 2006, October 2, 2006, November 2, 2006, November 30, 2006, as amended, December 5, 2006, December 21, 2006, December 26, 2006, January 8, 2007, January 17, 2007, February 23, 2007, March 5, 2007, March 29, 2007, May 8, 2007, June 6, 2007, June 11, 2007, June 21, 2007, July 26, 2007, August 17, 2007, both on September 26, 2007, both on October 9, 2007 and October 15, 2007. |
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