8-KOther Events

Energy Transfer LP 8-K Report, Corporate Update (Dec 18, 2008)

Filed December 18, 2008For Securities:ETET-PI

Summary

This 8-K filing from Energy Transfer Equity, L.P. (ET) on December 18, 2008, primarily serves to supplement risk factor disclosures concerning a proposed joint venture with OGE and ongoing legal and regulatory matters. The company highlights significant uncertainties regarding the completion of the joint venture due to deteriorating credit markets, which are impacting the ability to secure necessary financing on favorable terms. If completed, the joint venture structure means ET will not have full control over the newly formed entity. Furthermore, the filing details substantial legal and regulatory challenges, including an ongoing action by the Federal Energy Regulatory Commission (FERC) related to alleged market manipulation and pipeline operations. While there's an agreement in principle to settle certain FERC-related claims concerning the Oasis pipeline, the broader investigation and related third-party lawsuits remain active. These legal issues pose potential financial liabilities, including significant penalties and disgorgement, which could materially impact the company's financial condition and liquidity.

Key Highlights

  • 1The completion of a significant joint venture with OGE is uncertain due to the inability to secure required financing on agreed-upon terms, attributed to deteriorating credit markets.
  • 2If the joint venture proceeds, Energy Transfer LP (ET) will own only 50% of the new entity (ETP Enogex Partners) and will not have full control over its management and operational decisions.
  • 3ET is facing a substantial ongoing investigation by the Federal Energy Regulatory Commission (FERC) regarding alleged market manipulation and pipeline operational violations.
  • 4There is an agreement in principle to settle claims related to the Oasis pipeline with FERC enforcement staff, but finalization and FERC approval are pending.
  • 5The FERC is seeking significant penalties and disgorgement of profits from ET related to alleged market manipulation activities.
  • 6Multiple third-party lawsuits, including class actions, have been filed against ET seeking unspecified damages related to alleged natural gas price manipulation.
  • 7The company acknowledges that the ultimate resolution of these legal and regulatory matters could result in payments exceeding current accruals and may materially impact financial condition and liquidity.

Frequently Asked Questions

The completion of the joint venture with OGE is uncertain. It is conditioned on securing specific financing terms (ETP Enogex Financing Plan) which the company believes are currently unobtainable due to deteriorated credit markets. While the parties could agree to waive this condition, ET currently does not intend to do so. The agreement may be terminated if the joint venture is not consummated by March 31, 2009.

If completed, ET will own 50% of the joint venture entity (ETP Enogex Partners) and will not have full control, with management and key decisions shared with OGE. There's also a risk that the joint operations of Enogex and ETP may not integrate successfully. Additionally, if the joint venture cannot obtain adequate financing for its capital expenditure requirements, ET may be required to contribute additional funds.

The FERC is investigating Energy Transfer Partners (ETP) for alleged violations of market manipulation rules related to natural gas trading in the Houston Ship Channel and at the Waha and Permian Hubs. The FERC is also investigating alleged violations related to ETP's Oasis pipeline, including granting undue preference to affiliates and charging rates exceeding approved maximums. The FERC is seeking significant civil penalties and disgorgement of profits.

The FERC is seeking substantial amounts in penalties and disgorgement. In addition to the FERC action, numerous third-party lawsuits and class actions have been filed seeking unspecified damages. The company is unable to predict the final outcome but acknowledges that any payments could exceed current accruals and materially adversely affect its results of operations and liquidity. Legal and consulting fees are also being expensed as incurred.