8-KMaterial AgreementsRegulation FDExhibits & Filings

Energy Transfer LP 8-K Report, Material Agreement (Mar 26, 2013)

Filed March 26, 2013For Securities:ETET-PI

Summary

This 8-K filing from Energy Transfer Equity, L.P. (ETE) on March 26, 2013, announces a significant transaction involving its relationship with Energy Transfer Partners, L.P. (ETP). ETE, through its subsidiary ETE Sigma, is contributing its 60% ownership interest in ETP Holdco to ETP's subsidiary, Heritage ETC. ETP Holdco holds Southern Union Company (SUG) and Sunoco, Inc. In exchange, ETE will receive $1.4 billion in cash and approximately 49.5 million common units of ETP, valued in aggregate at $3.75 billion. This move effectively consolidates ETP's ownership of ETP Holdco to 100% under ETP. For investors, this transaction implies a strategic simplification and potential integration of assets. ETE's agreement to forego incentive distributions on the contributed ETP units for the initial eight quarters, and then on 50% for the subsequent eight quarters, suggests a focus on supporting ETP's growth and unit holder returns in the near to medium term. The filing also mentions ancillary agreements, including registration rights for ETE's newly acquired ETP units, which is crucial for future liquidity, and an amendment to a shared services agreement. The transaction's closing is anticipated in the second quarter of 2013, subject to customary closing conditions.

Key Highlights

  • 1Energy Transfer Equity (ETE) is contributing its 60% stake in ETP Holdco to Energy Transfer Partners (ETP) for $3.75 billion.
  • 2The consideration comprises $1.4 billion in cash and approximately 49.5 million common units of ETP.
  • 3This transaction will result in ETP owning 100% of ETP Holdco, which owns Southern Union Company (SUG) and Sunoco, Inc.
  • 4ETE has agreed to waive incentive distributions on the contributed ETP units for the first two years post-closing, and on 50% of those units for the subsequent two years.
  • 5Ancillary agreements include a registration rights agreement, allowing ETE to register its acquired ETP units for resale.
  • 6An amendment to the Shared Services Agreement will see ETP providing business development services for specific ETE projects for an annual fee of $20 million over three years.
  • 7The transaction has board and conflicts committee approval and is expected to close in the second quarter of 2013.

Frequently Asked Questions

The primary purpose for ETE appears to be a strategic simplification and monetization of its stake in ETP Holdco. By contributing its interest to ETP, ETE receives significant cash and ETP units, while ETP gains full control of ETP Holdco's assets (SUG and Sunoco).

The waiver of incentive distributions, especially in the initial two years, directly benefits ETP unitholders by reducing the amount of cash that would otherwise flow to ETE. This can allow ETP to retain more cash for reinvestment, debt reduction, or to increase distributions to other ETP unitholders.

The Registration Rights Agreement is crucial for ETE as it grants ETE the ability to require ETP to register the approximately 49.5 million ETP common units it will receive. This will enable ETE to sell these units in the public market, providing liquidity and the ability to realize value from its investment in ETP.

Yes, a key closing condition is the completion of Regency Energy Partners LP's previously announced acquisition of Southern Union Gas Company, LLC from SUG. This indicates an interdependency between these transactions.