8-KMaterial AgreementsRegulation FDOther Events+1

Energy Transfer LP 8-K Report, Material Agreement (Jul 15, 2015)

Filed July 15, 2015For Securities:ETET-PI

Summary

Energy Transfer Equity, L.P. (ETE) and Energy Transfer Partners, L.P. (ETP) have entered into an Exchange and Repurchase Agreement that involves a significant restructuring of their relationship concerning Sunoco LP (SUN). ETP will transfer its Sunoco LP incentive distribution rights (IDRs) and general partner interests to ETE. In exchange, ETE will transfer 21.0 million ETP common units to ETP. This transaction also includes an amendment to ETP's partnership agreement, which will reduce ETP's quarterly distributions to its IDR holders by $8.75 million per quarter for a period of two years (starting Q3 2015 through Q2 2017). This deal is strategically important as it effectively terminates the remaining IDR subsidy ETE owes to ETP related to the 2014 Susser acquisition. The transaction has been approved by the boards and conflicts committees of both ETE and ETP. The parties anticipate closing the transaction in August 2015, subject to customary closing conditions. Investors should note that while this agreement aims to streamline operations and financial obligations, there's no guarantee that the anticipated benefits will be realized.

Key Highlights

  • 1ETP will transfer its Sunoco LP (SUN) incentive distribution rights (IDRs) and general partner interests to ETE.
  • 2ETE will transfer 21.0 million ETP common units to ETP as part of the exchange.
  • 3ETP's quarterly distributions to its IDR holders will be reduced by $8.75 million per quarter for two years (Q3 2015 - Q2 2017).
  • 4The agreement terminates ETE's remaining obligation to provide an IDR subsidy to ETP related to the 2014 Susser acquisition.
  • 5The transaction was approved by the boards and conflicts committees of both ETE and ETP.
  • 6Closing is anticipated in August 2015, subject to customary closing conditions.
  • 7The filing includes a joint press release from ETE and ETP regarding the agreement.

Frequently Asked Questions

The primary purpose is to restructure the relationship between Energy Transfer Equity (ETE) and Energy Transfer Partners (ETP) concerning Sunoco LP (SUN). ETP is transferring its SUN IDRs and general partner interests to ETE, and in return, ETE is transferring ETP common units to ETP. This also includes a reduction in ETP's IDR distributions and terminates a prior subsidy agreement.

ETP's quarterly distributions to its own incentive distribution rights (IDRs) holders will be reduced by $8.75 million per quarter. This reduction is set to begin with the quarter ending September 30, 2015, and will continue through the quarter ending June 30, 2017.

By acquiring the SUN IDRs and SUN General Partner interests, ETE is essentially consolidating control and financial benefit related to Sunoco LP. This also leads to the termination of ETE's obligation to provide a $35 million annual IDR subsidy to ETP, which was part of the original Susser acquisition terms.

ETE and ETP anticipate closing the transaction in August 2015. The closing is contingent upon satisfying certain customary closing conditions. There is no guarantee that all conditions will be met or that the expected benefits will be achieved.