8-KMaterial AgreementsExhibits & Filings

Energy Transfer LP 8-K Report, Material Agreement (Dec 29, 2014)

Filed December 29, 2014For Securities:ETET-PI

Summary

This 8-K filing from Energy Transfer Equity, L.P. (ETE) on December 29, 2014, details a significant transaction agreement entered into on December 23, 2014, with Energy Transfer Partners, L.P. (ETP). The core of this agreement involves ETE transferring ETP common units and its ownership stakes in Dakota Access Holdings LLC and ETCO Holdings LLC to ETP in exchange for ETP issuing new Class H and Class I units to ETE and its subsidiary. This transaction is a key component of a previously announced $3.75 billion deal and aims to adjust the financial relationship between ETE and ETP, particularly concerning incentive distribution rights (IDRs) and development cost reimbursements related to the Bakken Pipeline project. Investors should note the material changes to the profit and distribution allocations for ETE related to ETP's general partner interest and IDRs in Sunoco Logistics Partners (SXL). Specifically, the Class H units will now entitle ETE to 90.05% of these allocations and distributions, up from 50.05%, effective for the quarter ending March 31, 2015. Additionally, the agreement modifies the IDR subsidies ETE provides to ETP, reducing them by $55 million in 2015 and $30 million in 2016, with a revised schedule provided. The transaction, approved by both ETE and ETP's boards and conflicts committees, is expected to close in Q1 2015.

Key Highlights

  • 1Energy Transfer Equity (ETE) and Energy Transfer Partners (ETP) finalized an Exchange and Repurchase Agreement on December 23, 2014, related to a $3.75 billion transaction.
  • 2ETE is transferring ETP common units and interests in Dakota Access Holdings LLC and ETCO Holdings LLC to ETP.
  • 3ETP will issue new Class H units to ETE, increasing ETE's share of ETP's profits/distributions related to Sunoco Logistics Partners (SXL) IDRs from 50.05% to 90.05%, effective Q1 2015.
  • 4The agreement includes a cash component, with ETE paying ETP approximately $879 million plus adjustments for Bakken Pipeline project costs.
  • 5IDR subsidies from ETE to ETP are reduced by $55 million in 2015 and $30 million in 2016, with a revised subsidy schedule provided.
  • 6The transaction has been approved by the boards of directors and conflicts committees of both ETE and ETP.
  • 7Closing of the transaction is anticipated in the first quarter of 2015.

Frequently Asked Questions

The agreement is a critical step in a larger $3.75 billion transaction announced in November 2014. Its main purpose is to restructure the relationship between ETE and ETP, specifically by adjusting ETE's economic exposure to ETP's assets, particularly its general partner interest and incentive distribution rights (IDRs) in Sunoco Logistics Partners (SXL). It also formalizes the terms for ETE's contribution to the Bakken Pipeline project development costs.

ETE is receiving new Class H units in ETP, which significantly increases its share of profits and distributions derived from ETP's ownership of Sunoco Logistics Partners' (SXL) IDRs and general partner interest. ETE's entitlement will increase from 50.05% to 90.05%, effective for the quarter ending March 31, 2015. This enhances ETE's direct participation in the performance of SXL.

ETE and ETP have agreed to reduce the IDR subsidies that ETE provides to ETP. Specifically, the subsidies will be reduced by $55 million in 2015 and $30 million in 2016. A detailed schedule outlining the net IDR subsidies from ETE to ETP for 2015 through Q1 2019 is provided in the filing, indicating lower subsidy payments by ETE to ETP over these periods.

The transaction is expected to close in the first quarter of 2015, following the record dates for the fourth quarter of 2014 cash distributions. Closing is subject to certain customary closing conditions, as is typical for such agreements.