8-KMaterial AgreementsRegulation FDOther Events+1

Energy Transfer LP 8-K Report, Material Agreement (Sep 24, 2008)

Filed September 24, 2008For Securities:ETET-PI

Summary

This 8-K filing from Energy Transfer LP (ET) on September 24, 2008, announces the formation of a significant joint venture, ETP Enogex Partners LLC, with OGE Energy Corp. This strategic move involves contributing substantial pipeline and midstream assets to the new entity, which will be equally controlled initially. The joint venture aims to consolidate and grow natural gas gathering, processing, transportation, and storage operations, primarily in Oklahoma and surrounding regions. Investors should note the significant financing plan required for the transaction, including substantial debt issuances by ETP Enogex and Transwestern Pipeline Company, LLC. While ETP and OGE will share equally in distributions initially, OGE is slated to receive disproportionately larger distributions in the short term, capped at approximately $50 million over a three-year period. The formation of ETP Enogex also includes territorial restrictions on future acquisitions for both partners, ensuring that such assets within a defined "designated area" must be channeled through the joint venture.

Key Highlights

  • 1Energy Transfer Partners, L.P. (ETP) and OGE Energy Corp. (OGE) are forming a 50/50 joint venture named ETP Enogex Partners LLC.
  • 2ETP is contributing its ownership interests in Transwestern pipeline, Canyon Gas Resources, and its stake in Midcontinent Express pipeline to the JV.
  • 3OGE is contributing its wholly-owned subsidiary, Enogex LLC, which operates a significant natural gas gathering, processing, transportation, and storage system primarily in Oklahoma.
  • 4The transaction is contingent on obtaining substantial financing, including a $700 million revolving credit facility for ETP Enogex and approximately $1.6 billion in senior unsecured notes issuance by ETP Enogex and Transwestern.
  • 5OGE will receive preferential cash distributions from ETP Enogex initially (55% before June 30, 2010) and higher distributions for a period thereafter, capped at $50 million.
  • 6The joint venture establishes 'designated area' restrictions, requiring both ETP and OGE to conduct future acquisitions of natural gas and NGL assets within this zone through ETP Enogex.
  • 7The filing includes a press release and presentation slides discussing the transaction, furnished as exhibits but not deemed "filed" for Section 18 purposes.

Frequently Asked Questions

The primary purpose of this 8-K filing is to announce the entry into a material definitive agreement for the formation of a joint venture between Energy Transfer Partners, L.P. (ETP) and OGE Energy Corp. (OGE), named ETP Enogex Partners LLC. It details the assets being contributed by each party and the key terms of the venture.

ETP is contributing its 100% ownership in the Transwestern pipeline, 100% of Canyon Gas Resources, and its 50% interest in the Midcontinent Express pipeline. OGE is contributing its entire ownership interest in Enogex LLC, which operates a substantial natural gas gathering, processing, transportation, and storage system.

The transaction requires significant financing, including a $700 million senior secured revolving credit facility for ETP Enogex and the issuance of approximately $800 million in senior unsecured notes by ETP Enogex and $800 million by Transwestern. Proceeds will be used for payments to the partners and to repay existing debt and intercompany loans.

Initially, ETP and OGE are set to receive 50% of cash distributions each. However, OGE receives preferential treatment: 55% of distributions prior to June 30, 2010, and a higher percentage for three years thereafter, with total additional distributions to OGE capped at approximately $50 million.