Energy Transfer 2012 Annual Report Download - page 170

F - 25
Sunoco generates cash flow from a portfolio of retail outlets for the sale of gasoline and middle distillates in the east coast,
midwest and southeast areas of the United States. Prior to October 5, 2012, Sunoco also owned a 2% general partner interest,
100% of the IDRs, and 32% of the outstanding common units of Sunoco Logistics. As discussed below, on October 5, 2012,
Sunoco's interests in Sunoco Logistics were transferred to the Partnership.
Sunoco Logistics is a publicly traded limited partnership that owns and operates a logistics business consisting of a
geographically diverse portfolio of complementary pipeline, terminalling and crude oil acquisition and marketing assets. The
refined products pipelines business consists of refined products pipelines located in the northeast, midwest and southwest
United States, and equity interests in refined products pipelines. The crude oil pipeline business consists of crude oil pipelines
located principally in Oklahoma and Texas. The terminal facilities business consists of refined products and crude oil terminal
capacity at the Nederland Terminal on the Gulf Coast of Texas and capacity at the Eagle Point terminal on the banks of the
Delaware River in New Jersey. The crude oil acquisition and marketing business, principally conducted in Oklahoma and
Texas, involves the acquisition and marketing of crude oil and consists of crude oil transport trucks and crude oil truck
unloading facilities.
Prior to the Sunoco Merger, on September 8, 2012, Sunoco completed the exit from its Northeast refining operations by
contributing the refining assets at its Philadelphia refinery and various commercial contracts to PES, a joint venture with The
Carlyle Group. Sunoco also permanently idled the main refining processing units at its Marcus Hook refinery in June 2012.
The Marcus Hook facility continued to support operations at the Philadelphia refinery prior to commencement of the PES
joint venture. Under the terms of the joint venture agreement, The Carlyle Group contributed cash in exchange for a 67%
controlling interest in PES. In exchange for contributing its Philadelphia refinery assets and various commercial contracts to
the joint venture, Sunoco retained an approximate 30% non-operating noncontrolling interest. The fair value of Sunoco's
retained interest in PES, which was $75 million on the date on which the joint venture was formed, was determined based on
the equity contributions of The Carlyle Group. Sunoco has indemnified PES for environmental liabilities related to the
Philadelphia refinery that arose from the operation of such assets prior the formation of the joint venture. The Carlyle Group
will oversee day-to-day operations of PES and the refinery. JPMorgan Chase will provide working capital financing to PES
in the form of an asset-backed loan, supply crude oil and other feedstocks to the refinery at the time of processing and purchase
certain blendstocks and all finished refined products as they are processed. Sunoco entered into a ten-year supply contract for
gasoline and diesel produced at the refinery for its retail marketing business.
ETP incurred merger related costs related to the Sunoco Merger of $28 million during the year ended December 31, 2012.
Sunoco's revenue included in our consolidated statement of operations was approximately $5.93 billion during October through
December 2012. Sunoco's net loss included in our consolidated statement of operations was approximately $14 million during
October through December 2012. Sunoco Logistics' revenue included in our consolidated statement of operations was
approximately $3.11 billion during October through December 2012. Sunoco Logistics' net income included in our
consolidated statement of operations was approximately $145 million during October through December 2012.
Holdco Transaction
Immediately following the closing of the Sunoco Merger, ETE contributed its interest in Southern Union into Holdco, an
ETP-controlled entity, in exchange for a 60% equity interest in Holdco. In conjunction with ETE's contribution, ETP
contributed its interest in Sunoco to Holdco and retained a 40% equity interest in Holdco. Prior to the contribution of Sunoco
to Holdco, Sunoco contributed $2.0 billion of cash and its interests in Sunoco Logistics to ETP in exchange for 90,706,000
Class F Units representing limited partner interests in ETP ("Class F Units"). The Class F Units are entitled to 35% of the
quarterly cash distribution generated by ETP and its subsidiaries other than Holdco, subject to a maximum cash distribution
of $3.75 per Class F Unit per year, which is the current distribution level. Pursuant to a stockholders agreement between ETE
and ETP, ETP controls Holdco. Consequently, ETP consolidated Holdco (including Sunoco and Southern Union) in its
financial statements subsequent to consummation of the Holdco Transaction.
Under the terms of the Holdco transaction agreement, ETE agreed to relinquish its right to $210 million of incentive distributions
from ETP that ETE would otherwise be entitled to receive over 12 consecutive quarters beginning with the distribution paid
on November 14, 2012.
In accordance with GAAP, we have accounted for the Holdco Transaction, whereby ETP obtained control of Southern Union,
as a reorganization of entities under common control. Accordingly, ETP's consolidated financial statements have been
retrospectively adjusted to reflect consolidation of Southern Union into ETP beginning March 26, 2012 (the date ETE acquired
Southern Union). This change only impacted interim periods in 2012, and no prior annual amounts have been adjusted.
Table of Contents