ET - Earnings call transcript Q1 2007

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Operator

Greetings, and welcome to the Energy Transfer Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. And as a reminder, this conference is being recorded. to Officer. conference like Long, to now Financial Chief would turn over the Tom I please ahead. you, Thank go

Tom Long

today also Yes. unit-for-unit Thank of Matt the very for Mason, management agreement you, yesterday’s Transfer one combine welcome by we to today. to Partners operator, ETP joined Warren, begin morning, and an of other after ETP the announcement and team, transaction. good partnership. and call. here today ETE This Tom in into Equity ETE Kelcy really John McReynolds, acquisition morning, whereby We I’ll overview have questions Energy of the appreciate and by Ramsey, will are entered prepared about providing your members senior all help into obviously transaction, we you I’m excited as remarks. Transfer with us our joining are a discuss everyone, Energy our one of and merger a answer who we

in strategic we of terms units an billion These implying unit common the key XXXX. Section for ETE assumptions a and public ETE stock. currently the us. will As price of the a the as of to ETP the is unit. the of the X.XX distribution closing be ETE structure. more approximately represents ETP will our immediately to a as expect each providing an previous to The times $XX we XX% transaction, transaction. transaction a Current into significantly merger ETP little of to and of Act closing price XX-day ETP with acquisition retain the by well a $XX.XX agreement ETE to per have unit available accretive This rationale will volume entered ETE the upon transaction for per of weighted based DCF price. receive for ETP ETE’s immediately coverage common within This maintain increase the cash this holders expected statements transaction A and reminder, information average beliefs, expected premium Exchange Starting day’s of ownership to is certain Securities prior based per DCF XXE overview on meaning the this XX% on are of premium simplified to price ETE’s and announcement forward-looking flow. making to be unit and the create bit

retained capital eliminating are our facilitate we deleveraging. which the cash to of cost continued overall simplification, the also It With to improves accelerate increases IDRs, growth.

times This funding equity external partnership X.X forma a coverage DCF of reduces rated approximately of annual and needs coverage, billion pro do expecting forward going ratio to expect greatly to retained the times we $X.X common be or investment We’re our cash. to X.X grade. which to billion equates $X preferred

to a the current A will ETE more of on will structure that be partner affiliates few such Class ETE. transaction. voting the GP new retain in of Turning ETE, details The its units interest the of issued and general the

shortly. this exchange pro economic whereby ETE expect similar an launching partnership which term senior ETP forma and unsecured. terms. at We loan does offer revolver; become little noteholders about the its with notes anticipate a refinance talk notes more ETE We exchange to notes could for will bit its point their

and greatly see, company our strengthens future credit growth. As sheet the you can structure positions profile balance for this and simplified financial

of Going a forward, ratio half we four leverage will to a and target times. four

to an over Mason Tom to turn for units. of Class the call the overview going A I’m Now,

Tom Mason

common amount others units XX% outstanding ETE Thanks, Tom. it’s of outstanding think people own matchup Davis, of Currently, the John the a Warren and I significant in Kelcy about unit. Ray as and know, McReynolds

control very in of a block obviously, a and voting in large So interest ETE.

significant significant a to number to in be holders, a merger, issued the XX.X% resulting the ownership which about that common of level therefore, the will units dilution this effectively and ETE With ETP voting reduces to there of group. interest

know, entity owns particularly, for therefore, Transfer business, assets the operating you combination through an ETP and a issuances. debt and transportation and that prior this of these Energy the was transaction, the As all midstream family, to projects equity financed

financing So control therefore, not particularly, much interest activities a being ETP. The equity group issuances of the issued by And issuer ETE ETP. was projects. was equity voting growth its post-merger the And ETE to finance as equity not did the of be of result, equity. issue at therefore, affected primarily historically the will the and

new discussed be recent Tom near-term cash’s funded coverage to due of time, a and debt growth need over are the retained will the But through levels to equity. that of of will equity not equity related there ETE issuances expected levels. the As ETE to earlier, the issuing because be be projects will Long expected in combination cash

recognized ETE which people going ETP therefore, ETE’s the potential wanted Boards general to issue, at partner, and track of control cognizant dilution and is this obviously, So, very, the Boards they level as the both which LE of GP, controls of a forward Warren ETE general ETE’s and preserve are partner. know successful the of both record Kelcy

the And to partnership factor under [interesting was common it So, as thinking its GP partner can right, relative can not was of other maintain ETE’s then general this units exercise is equity also GP’s ETE, the ETE LE [indiscernible] that the a because GP, again but result And whenever of part agreement, [ph] such interest, that the of purchase of LE an issues this well. right maintain units. the common only GP, that as ETE thought contractual LE units which can but of or is from equity calculation has – interest the concept voting the A concept] of LE – the process interest ETE. Class percentage that so interest it’s affiliates

affiliates would diluted and to down own its GP after the XX.X% to as about about merger. the and XX% giving ETE units outstanding LE the currently So be I it effect of earlier, common mentioned

waive will of ETE preemptive its attributes. A not issued be will in would lieu will limited called units right class its a merger and to to Class in of common be exercising units new that additional to in any any LE ETE, represent to is units, LE be not share in there So this interest the purchase pro-rata issued this effect other right of Class agree will units kind be partner that of distributions GP. cash that These will A have economic and GP entitled

vote unit interest. for single units units A voting with Class unitholders. purely be one and entitled ETE common a together on the all ETE the are will they matters will to class as The vote So per [indiscernible]

its As group affiliates maintain a combined result voting LE interest. GP will of control of and their current this, the

continuity post-merger, to and that percentage long-term preserve believe family. the the of record was of of Boards successful pre-merger So at and voting interest will top the the management strategy existing important the track again remain And and the same. overall

and units anti-dilution be So twist forever adjustment the this a that as just common then that would to subject a issuances ETE so is that where of to also will future provision by an the – there’s well. not last

Class A additional ETE units. that would So issue

prior affiliates long LE the in right GP This LE Kelcy voting its as to So or at still for – continue Director retain future would group it anti-dilution a they merger. the GP. control closing relative interest of will future, issuances Officer and same have the would of as the as is

a So that’s of you to in kind back Tom. nutshell and

Tom Long

up let’s call ahead for questions. Yes. Tom. remarks. and open Thank prepared that Operator, you, our go That really concludes

Operator

[Operator Instructions] Our the Gershuni first go question line ahead. from of Shneur comes Please UBS. with

Shneur Gershuni

to Nice have guys. morning, finally entity. good Hi, one

off, can your Just was talk start to metrics. if wondering I you targeted about leverage

target then understand I’m to X.X there the towards a kind of a or on X.XX the hit you get what You’re the Is of of that expectation once trying times times some and some pay obviously be down. BBB you you’re then mid? would you’re towards are accretion directing trying unitholders? at to directed of targeting debt or accretion to the be looking the from with just deal trying it there leverage

Tom Long

we four question. target our go a a very, can show that have obviously you range of look much the you are solid and so very that the meaning very of range. talk agencies them. have that mix actually are going It’s of that to When in we’re earnings ours sheet good we you size, a that’s about a times that here at XX% fee very, look we four same appreciate when and to on And balance you’re based these Yes. the forward is company probably rating The things to that. half at

and the fair we our half is pretty statement other you worded fund the last get it’s I that you of with and four, equity to four our is, et think a way cash. where can looking much our retained I probably the we’re of like CapEx we that excess equity as factors cash, that most – very at So capital the level say cetera question think part the that spend, can

all question on factors last your So the we’ll those of navigate the determining in distribution. part

Shneur Gershuni

to think was a out seen there strong coverage fairly and to And I top targeted higher enough. you we’ve second what to last for the XQ fair just Can Okay, drivers a I us could you the see be Does there through years? this of to quarter? imply question, the you CapEx are coverage think X.X, get of mentioned. was running the walk for invest just X.X you that range? a pace get similar end that at range it to two a you then have opportunities we And

Tom Long

call the know Yes. we’re from I Listen, away a that and today week having we’re earning. this

going ourselves to get of that. So we’re on ahead not

you we’ve together quarter, we we X.X analysis we’ve the else. stay is pull to these looking and that everything will X.X is, there went but been through that the the two I from we’ll all away what tell So range put at, out second as

thing coverage, expeditiously more where you’ll comes whenever we that’s I in And that our soon then getting from front other on Obviously want that’s rest possible. S-X. the the numbers. the that as will to have is of get don’t et to assured more filed projections, of so to coming cetera. that of move out, get going as And we’re see And the

Shneur Gershuni

guys. you Great. and appreciate back I’ll much, I that queue. in the jump very Thank

Operator

Morgan. J.P. is with Jeremy come the of Our next question Tonet line from

Jeremy Tonet

eagerly were morning. market been conversations the you rating. like the issues us stabilizing for and before they Congratulations, what has the looks Moody’s could there. wondering And just certainly I transaction Tom, focused things particular agencies the so congratulations certain on? with key was it rating looking in through Good is BaaX the if walk awaiting, the were

Tom Long

conferences, talking projects. out and at a now investor Yes. mean you had you think conversations meetings, a over know would lot of brings very with you in had But points et the see still that here bet. going that that have in on last of given are when all I agencies, coverage probably No, you leverage to compelling. range enough we’ve key with that of would cetera and you I primary we’ve – back we’ve emphasize the to the Well, coverage, is the can’t that know metrics of say we I – the on probably that we’re I stability good look the that companies all all quarters, likewise projects. contact updated you the that staying the the the you in guidance look our items. let’s that enterprise tell one about We combine been feel financial that close them, I the we’ve that keeping projects right and them as at two about the that conversation investor I

Jeremy Tonet

Great.

of mega the So it some projects to line finish these really sounds final like close here. are

Tom Long

so. what yes. good out, updates right – feel in now. those They’re we’ve so them, Then line Yes, with on everything we no put about

Jeremy Tonet

a any family That’s And influence thoughts today’s sense guess updated that just and question, on transaction then I one kind currency for last whether your just or does helpful, not the thoughts on C-Corp of thanks. point. establishing make could

Kelcy Warren

is Jeremy, Kelcy. this Hey

does not This We’re that open at all. minded still preclude very that. to

certainly economic driven much tax, don’t compelling as paying by so we’ll upon up if can of that’s that And the sidecar in to know. we at for if let’s we – unitholders. we think but to it We’re are that the us a say of then our of C you form, interest an that best like – C extent and or here act we all our whatever, looking there – just reason avoid was

Jeremy Tonet

your That’s for helpful. That’s me. very for Thanks answers. it

Operator

Mateer Our comes next line Barclays. the of question from Harry with

Harry Mateer

ETE the Tom ETP mechanics passu. for exchange mentioned little But put to similar potential can bit that talk between first, have with ETP morning. new the making questions, place also in bonds cross two about know pari and of look offer you you bonds terms. Two a Hi, going good bonds just I boxes. to the are you ETE guarantees

Tom Long

And where a done always - we’ve listen, we’ve like as thought tweak the put along. of into lot consolidations But move done, we we’ve obviously will on already. this them all we

So kind what is prepared we trigger the out term revolver remarks of no answer the at – is please loan. Right kind that up as security. in will this as I the well that now of to take are down is obviously then paying And the laid that. ETE level looking what

level. look offer at that an bring So down exchange ETP to everything at point, we the anticipating to that we’re would

but to little a bit and out we’re cross talk really dynamic, et was And through way wanted the this, cetera, it what a we’re of that to are. our going current know - of when we go that you lay what about necessity it take our don’t plans because ahead to guarantees, that I thought structure important but doing. So it’s lot there’s please –

Harry Mateer

Okay, the would revolver, of issuance? terms or thanks. ETE loan And you with new do term so in that refinancing then ETP

Tom Long

plan. the that’s yes, – That

Harry Mateer

of X.X Thanks the M&A. in about Okay. for the deal benefits of the putting press And talks to strategic which to release a you potentially X some one that. spot pulling pursue target hit then the thinking the on factor view better When when a limiting like yourselves of second, that think as should guys to the you before could times is that would do something? or M&A about in time is not ratio, trigger like a we terms leverage target of you about ratio

Tom Long

look fair. I forma like these is, to look pro any would that’s focused X you I you always know X.X at at what transaction. is the transactions as The numbers when you on. and think one of that add with thing the what to we’re And look that

Kelcy Warren

And opinions would way goal times M&A compelling I their then certainly if might be very that, it’s opportunity would things slightly rating agencies, to there we that towards with get of X.X as would the think view add, the things. negative our that doing a meet I to safe that X and a we’re to on we is certainly somehow our conclude –

conferred Energy rating major have the at As agencies. past, acquisition in done the we every we’ve Transfer, have we with

will We do continue that. to

be smart careful. to our about and going we’re so And M&A

us. So X.X X – the X.X, but like Tom said to is very important to

Harry Mateer

Thank both. Okay. you,

Operator

with question next of is Wells Ross Our Payne Fargo. from the line

Ross Payne

Congratulations guys combination. on the

of future that? Harry’s Just do ETE ETP. term bonds the Would refinance or of I revolver at that I be cash the thinking on pay of here, I guess thought actually have flow ETE kind on issuing you or going down loan. free to all, to and I’d following-up heard comment the And of ETP, at second our you question with bonds

Tom Long

the is your question, the part – be they cetera, where first and which it assets, issuing that of at would would bonds et be be. the will It ETP, would of No. – be with

Ross Payne

my on to the might you anticipate then you kind do question able S&P stable back Fitch. of of stable? outlooks And to obviously you And all for do second Okay. out timeline you second get think Moody’s, ratings, is you have of be any and –

Tom Long

We of out ever get don’t don’t Obviously them of want But expect reports they’ll in show those cetera. in of out with investment rating get to This front now. that that’s you et is do our out of the come want the metrics, – one front to grade. credit agencies. I all we’ll get to

theirs. has you’re I Moody’s already As come out think with saying,

anticipate then the those could out. probably wait shortly. to you And be two also other [indiscernible] let’s And we going to think close that it’s time coming waiting come the I until

Ross Payne

and Okay, great. again All guys, Thanks, congratulations. right.

Tom Long

Okay.

for Let quick real the Moody’s out, me a they just say with record. expected on just did they that just stable came that add that the

Ross Payne

Nice.

Tom Long

Okay.

Ross Payne

you. Thank

Operator

you. thank Okay,

Stanley Research. from come is question Keith next line with Our of the Wolfe

Keith Stanley

ask Hi, timing. to the good I on wanted morning.

the XXXX. go much just year? when on you better just about the So what accelerated being ago earlier Can since how it about changed saw of guess Are in of accelerated here timing from in kind things half six talks the I second you of fairly kind you sort what’s over talked earlier you’re thinking months expecting outlook results of then you and in here? the did you year,

Tom Long

going investor as Likewise, all calls, Kind during – of well in investment just on We’ve I that factor. clear the back to communications think once keep projects. Yes. I very, protecting continue these to fact was with to think – that we’ve been was very agencies these been the have as key to we meetings. rating had quarterly again on updated we’ve the grade the it the dialogue,

a you that As was real touch point. know, probably

in to have early quarters have in this there, the it’s In else. I you – looked is guidance question and wanted in quarter get reason giving be now, talk when into period. talk at out each because a anything something take we’ll those to we over will think it’ll XXXX, any would to you as the the we’ll have possible. think really fairness, do projections week, I that we the more you say projects And But call So but once get there we you about why as depth. up would of again, S-X or one soon not then your likewise able four to the would we and the going results or next even right then be it, for I’m the ramping if more able

Keith Stanley

times X.X is. that XXXX? assume Or we to should X.X that a coverage. the should that clarify you about could how Is that? And reference expectation, think for what What okay. we XXXX it, timeframe Got

Tom Long

once – staying where range. when and those currently think out, it’ll this you I you’ll coming S-X. terms ETE guess, got stay that at talk that’s kind in on, is it’s be I about within we’ve the where start going of that get out. the these But are. projections S-X based then that’s out. really We come as telling upon the exchange is distributions references That we X.XX in again, the more at that projects that And ratio, seeing, can we’re what closing

Keith Stanley

earlier. other about quick Great. And since a one just M&A talked on you one little

an notes currency for Just interest accretive the strategic better growth equity in having to and release press make deals. both

interest thoughts over optimism on year being on next execute updated on of you’re able level what any market. and in to just Just acquisitions the the seeing

Kelcy Warren

Yes. it’s Kelcy. first probably Well, know This in could right monkey all, you now, not money this Keith, is make hard. of this, a business

involved strategic those those be for So until that are fire for of involved are fits are but others now basins in players assets There there not but are things would in to be ridiculously are stops. time there’s on that good right are and just priced wrong music yet us basins, really, that and just some and kind us. buying will – sense we typically not assets the have make

be strategic, and we going aggressive So important I now like view think smart we very, right very a think don’t would is that be – to unitholders to an bargains we’re approach we M&A for there’s to that. maintain our M&A had and very any to

So will continue to do we that.

Keith Stanley

Thank you.

Operator

with Fargo. from Wells Michael line question of next Blum Our the comes

Michael Blum

Hey, everybody. good morning,

that’s of X first that to you do that question? level, leverage expect really the question hit When on because the target X.X. First to

Tom Long

able excited it. be know, on they start their to out to get of ramping that we said, as then know up. it. projections as Michael, win more up X, tough investment get grade agencies we’ll really to I kind be want tied out. in the projects, to seeing S-X there can talk, and keep to about. I like rating. as get think of depth part I our The obviously, targeting Projects, touching on protect I But we part that able and we’re in And you were below the sit you very these down to is, order start

cetera, start Rover, so MEXX, XXXX over And coming see you that MEX, et over, timeframe. as

up. You’ll start seeing that come

the that worth just with projects, it’s we’re all we’re doing EBITDA few once been again to that, years. last that our was deleveraging everyone the And think, occur. reminding we’ve due to see over I catching up the starting the now, occurring seeing funding

walk I get So we once S-X more or see you’ll these little bit projections to out detail we the be more, a through as when. able these get projects to little think and to get

Michael Blum

along Okay, the that and great. same I appreciate my question is line. next

trying distribution X.X you that long-term thoughts thinking something how coverage. I’ll you’ll would to ETE see to And before your you where distribution at leverage would X growth any growth get distribution helpful. this or can you’re kind just But much relative about is So on on to thoughts to target how share answer. there of you be want contemplate get to

Kelcy Warren

Yes, Michael, Kelcy.

think would feel latter your responsibility. a we level, the part is get of that question like to We I to accurate.

us As maintained you in this greatly felt deserve way going where grade, be do know, we’ve grade. we would to been investment transaction saying we certainly we we that wanted to as ourselves that, a that matters we’re that soon we conduct in as and to investment

our to then yes, our I have the what we do, that But part reward would kind a times. So have supposed like unitholders MLPs – to get are we unitholders. that’s question but think duty that. to Michael, I people those then we’re forgotten and most And to distributions. mean, our to of X.X supposed of is second increase

time. in will appropriate that the at resume fact We

Michael Blum

And thoughts really you any is, helpful. last happens on was my That question new once what different SUN. this I to through guess Great. transaction, get or Thanks.

Kelcy Warren

looking Kim here me. sitting and at Joe Well,

little of set love themselves reinvent more know a they to So management. love I’d SUN. a they’ve SUN, Transfer. need needs – – be we Energy of They has we for opportunity are and a that hard to wholesaler, bit. into SUN products And to company, the actually I’m them SUN them They as – see fantastic I assets, really got a seeing get view business this different great great be SUN and that. terminal very we with assets, Joe pipeliner have what knows from expectations. I’m want refined patient more And back pleased a and we’re coming of SUN very assets with more they to

Michael Blum

right. Kelcy. Thank All you,

Kelcy Warren

Thank you.

Operator

Our comes line with the from of Scotto RBC. next question Elvira

Elvira Scotto

Hey, good morning.

for So just questions me. three quick

is Energy over the for funding pro-forma absent long-term. be the – So goal M&A Transfer self Energy Transfer to equity

Tom Long

That’s it’s goal. have a team, very the situation a all – you commercial is dynamic as projects the the the on at That drawing constantly great look that board.

So a spend. to upon it’s be organic year, depended spend going lot each CapEx CapEx the

it be call but So the I excess funding. to dynamic, a let’s bit could equity little of be think covering the goal the cash, cash side is is retained for the it

Elvira Scotto

And event Thanks I this, I be this answer to will non-taxable for think then the a that. know ETP unitholders? to transaction but

Tom Long

That correct. is

Elvira Scotto

question final my then on does this transaction preferred? this think I the And on you ETP have but impact any touched Great. and

Tom Long

does impact any It have the preferred. No. not ETP on

Elvira Scotto

That’s thanks. had. I Great, all

Operator

And line Jean question Ann from our AllianceBernstein. of next comes Salisbury with

Jean Ann Salisbury

worry delays are a Hi, but impact unexpected and could MEX if have the you touched quarter to and Should good it timing. we further morning. And have you’ve on one I bit, that on Rover. just fourth

Tom Long

sorry, you very what? part. I’m see the about, can worried be Should we last

Jean Ann Salisbury

worried fourth could sort significantly you it back push the that those timing, back. impact Should to projects have we of like get two push if about quarter

Tom Long

Yes.

projects – break you started the of down. If let’s each

Rover. two-thirds demand you already As getting know charges the we’re over of on probably Rover,

some be comes you’re really to, I impact MEX. from on think, what I probably that. question mean, the there it is could And So down clearly yes,

a once obviously but or I’m forecast, business the in our to I get well. trying or projections into rest type you, not is year overall very again doing think base

and – be such get a going to you I very look manageable when So projects way kind great the that out online think and et able situation cetera, these that’s they’re you to of we’ve up, be look at look so. going ramp got to the at projects they’re and numbers, to

Jean Ann Salisbury

so That’s me. the one Thank only you That’s much. for great.

Operator

question And our from line of Dennis America. Bank with Coleman next comes of

Dennis Coleman

and me as congrats well. from Yes, good morning

of you’re see one Just I me a most try just if a how lot distribution this? well with X.X the coverage part dollars is one-time as coming this to and to X.X the And can, Was time? ETP distribution at of move been that transaction there have maybe big to and offset asked. any thinking thinking? back to out. about consideration for up policy, boost at to Transfer ever as having pointed a cut you it’s any the Equity Was of Energy

Kelcy Warren

– saying it thinking, everyone call, we of been as a and – we while for knows ETE Part this was on of we ETP. to the will time do again, yes, that consolidation but the

like said also know that ETE get we then the ETP. let comfortable until We that transaction occurring that that, we said we buying as market But also saw and Tom earlier, in to going we’re comfortable see will go get grade, by forward. that we investment rating fact sometime. to today our believe Once all the we agency we going assessments we’re maintain

we than point leverage. that do previous feel do we like And see or to a goal to questions our times we’d grow get now, however, so some in do going but the distribution to which to to sooner trying And we’re this distribution later. increases less X.X our right really don’t after to support was duty on what back occur

Dennis Coleman

Okay.

the of there. thinking to trying sort understand Just

congrats, again, me. from it So that’s

Kelcy Warren

Thank you.

Operator

the comes SunTrust. question next Adam line with Breit Our of from

Adam Breit

facility to Yes. X lot that. proportionate debt are One is more of with talking for good morning. credit Hi, more is X.X just JV you. than leverage a Tom times agency quick lower that which The a about or number, adjusted question, you target rating number a

Tom Long

that. that’s of you differences one at we’re rating them that’s each rating what referring And to to. No, definitely look But agency. slight as definitely agencies how a there’s know as

Adam Breit

Got Thank it. you.

Operator

Tom concludes for comments. Long you. today’s This back turn question-and-answer closing Thank floor session. I’d like the to to

Tom Long

stability this this this a And we’ve financial we transaction to create I under about which all excited also all to think companies obviously, approximately that talked it’s enterprise today, to structure should all enhanced these are stage here cost see this come bring obviously Well back $XX capital. able very about billion be to getting lower simplified with much of of able you how being can to and together.

to forward joining follow-up once we So conversations you. any thank Thank all. or for again with you we all have us will of look today. And you questions

Operator

This today’s teleconference. concludes

Thank at You your may for lines your time. you disconnect participation. this

Energy Transfer (ET) 2 Aug 182007 Q1 Earnings call transcript