8-KAcquisitions & DispositionsMaterial AgreementsRegulation FD+1

Energy Transfer LP 8-K Report, Material Agreement (Apr 3, 2018)

Filed April 3, 2018For Securities:ETET-PI

Summary

Energy Transfer LP (ET) announced on April 2, 2018, the completion of its acquisition of USA Compression Holdings, LLC's general partner interest in USA Compression Partners, LP (USAC) and a significant block of USAC common units for $250 million in cash. This transaction also involved a concurrent restructuring of USAC, where its incentive distribution rights were cancelled and its economic general partner interest was converted into a non-economic general partner interest. In exchange for this restructuring, ET received 8,000,000 USAC common units. This move signals a strategic simplification and potential optimization of ET's holdings in the compression services sector. Investors should note the cash outflow for the acquisition and the issuance of additional USAC units to ET, which increases its direct stake in USAC. The filing also outlines registration rights granted to ET concerning its newly acquired USAC units, providing pathways for future monetization or strategic deployment.

Key Highlights

  • 1Completion of acquisition of USAC GP and 12,466,912 USAC common units for $250 million cash.
  • 2Acquisition involved purchasing the general partner interest and limited partner units of USA Compression Partners, LP (USAC).
  • 3Concurrent restructuring of USAC: cancellation of Incentive Distribution Rights (IDRs) and conversion of economic general partner interest to non-economic.
  • 4ET received 8,000,000 USAC common units in connection with the USAC restructuring.
  • 5Entered into a Registration Rights Agreement with USAC, providing ET rights to require registration of its USAC common units for resale and potentially initiate underwritten offerings.
  • 6The transactions are referred to as the 'Transactions' and the cash payment as the 'GP Purchase'.

Frequently Asked Questions

The 8-K filing reports the completion of Energy Transfer LP's (ET) acquisition of the general partner interest and a significant portion of common units in USA Compression Partners, LP (USAC), along with a related restructuring of USAC. This marks a material definitive agreement and completion of an acquisition.

ET paid $250 million in cash for all outstanding limited liability company interests in USAC GP (the general partner of USAC) and 12,466,912 USAC common units. Additionally, as part of the restructuring, ET received 8,000,000 USAC common units.

The cancellation of Incentive Distribution Rights (IDRs) simplifies USAC's capital structure and potentially aligns incentives. By converting the economic general partner interest into a non-economic one and receiving USAC common units in return, ET has streamlined its economic exposure and increased its direct ownership stake in USAC's underlying common units.

The Registration Rights Agreement grants ET the ability to compel USAC to register its owned USAC common units for resale. This provides ET with flexibility to potentially sell these units in the public market or conduct underwritten offerings under certain conditions, offering liquidity or strategic exit options for its investment in USAC.