8-KAcquisitions & Dispositions

Energy Transfer LP 8-K Report, Acquisition Completed (Mar 10, 2015)

Filed March 10, 2015For Securities:ETET-PI

Summary

This 8-K filing reports the completion of a significant transaction between Energy Transfer Equity, L.P. (ETE) and Energy Transfer Partners, L.P. (ETP), effective March 9, 2015. ETP repurchased a substantial number of its common units from ETE and its subsidiary, ETE Holdings. This transaction also involved ETE transferring its membership interests in Dakota Access Holdings LLC and ETCO Holdings LLC to ETP, along with a cash payment, in exchange for newly issued Class H and Class I units in ETP. This strategic move fundamentally alters the ownership structure and the flow of incentive distribution rights (IDRs) between the two entities, aiming to streamline operations and adjust financial arrangements.

Key Highlights

  • 1ETP completed a repurchase of common units from ETE and ETE Holdings, altering direct ownership stakes.
  • 2ETE transferred its interests in Dakota Access Holdings LLC and ETCO Holdings LLC to ETP.
  • 3ETP issued Class H and Class I units to ETE and ETE Holdings in exchange for the transferred assets and a cash payment.
  • 4Holders of Class H Units will now receive 90.05% of profits, losses, and distributions related to ETP's incentive distribution rights (IDRs) and general partner interest in Sunoco Logistics Partners (SXL), an increase from the previous 50.05%. This change is effective for the quarter ending March 31, 2015.
  • 5ETP and ETE agreed to reduce IDR subsidies from ETE to ETP by $55 million in 2015 and $30 million in 2016, revising the overall IDR subsidy schedule.
  • 6Following the transaction, ETE no longer holds ETP common units but retains indirect control over ETP's general partner interest and IDRs.

Frequently Asked Questions

The primary purpose was to reorganize the ownership structure between ETE and ETP, involving a repurchase of ETP common units by ETP from ETE and its subsidiary, the transfer of key pipeline project interests to ETP, and an adjustment to the flow of incentive distribution rights (IDRs) and their associated subsidies. This aims to simplify the relationship and financial arrangements between the two entities.

The increase in the Class H unit holders' share of profits, losses, and distributions from ETP's stake in Sunoco Logistics Partners (SXL) IDRs and general partner interest, from 50.05% to 90.05%, means a larger portion of these specific earnings will flow to ETE (as the holder of Class H units). This change becomes effective for the quarter ending March 31, 2015. This also reflects a reduction in IDR subsidies previously provided by ETE to ETP.

The reduction in IDR subsidies by $55 million in 2015 and $30 million in 2016 indicates a shift in the financial support structure between ETE and ETP. It suggests that ETP will rely less on direct financial subsidies from ETE related to these specific distribution rights, aligning the financial flows more directly with the operational results of the underlying assets.

Yes, although ETE no longer directly owns ETP common units, it continues to indirectly control ETP through its ownership of ETP's general partner interest and Incentive Distribution Rights (IDRs). ETE also holds a significant number of Class H units, which entitle it to a majority of the economic benefits from ETP's SXL IDRs and general partner interest.