Energy Transfer 2013 Annual Report Download - page 138

Table of Contents
the quarterly cash distribution generated by the Partnership 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 level. In April 2013, all of the outstanding Class F Units were exchanged for Class G Units on a one-for-one basis.
The Class G Units have terms that are substantially the same as the Class F Units, with the principal difference between the Class G Units and the Class F
Units being that allocations of depreciation and amortization to the Class G Units for tax purposes are based on a predetermined percentage and are not
contingent on whether ETP has net income or loss.
On April 30, 2013, Southern Union completed its contribution to Regency of all of the issued and outstanding membership interest in Southern Union
Gathering Company, LLC, and its subsidiaries, including SUGS (the “SUGS Contribution”). The general partner and IDRs of Regency are owned by ETE.
The consideration paid by Regency in connection with this transaction consisted of (i) the issuance of approximately 31.4 million Regency common units to
Southern Union, (ii) the issuance of approximately 6.3 million Regency Class F units to Southern Union, (iii) the distribution of $463 million in cash to
Southern Union, net of closing adjustments, and (iv) the payment of $30 million in cash to a subsidiary of ETP. The Regency Class F units have the same
rights, terms and conditions as the Regency common units, except that Southern Union will not receive distributions on the Regency Class F units for the first
eight consecutive quarters following the closing, and the Regency Class F units will thereafter automatically convert into Regency common units on a one-for-
one basis.
On April 30, 2013, ETP acquired ETE’s 60% interest in Holdco for approximately 49.5 million of newly issued ETP Common Units and $1.40 billion in
cash, less $68 million of closing adjustments (the “Holdco Acquisition”). As a result, ETP now owns 100% of Holdco. ETE, which owns the general partner
and IDRs of ETP, agreed to forego incentive distributions on the newly issued ETP units for each of the first eight consecutive quarters beginning with the
quarter in which the closing of the transaction occurred and 50% of incentive distributions on the newly issued ETP units for the following eight consecutive
quarters. ETP controlled Holdco prior to this acquisition; therefore, the transaction did not constitute a change of control.
Pursuant to an Exchange and Redemption Agreement previously entered into between ETP, ETE and ETE Holdings, ETP redeemed and cancelled 50.2 million
of its Common Units representing limited partner interests (the “Redeemed Units”) owned by ETE Holdings on October 31, 2013 in exchange for the issuance
by ETP to ETE Holdings of a new class of limited partner interest in ETP (the “Class H Units”), which are generally entitled to (i) allocations of profits,
losses and other items from ETP corresponding to 50.05% of the profits, losses, and other items allocated to ETP by Sunoco Partners with respect to the IDRs
and general partner interest in Sunoco Logistics held by Sunoco Partners, (ii) distributions from available cash at ETP for each quarter equal to 50.05% of the
cash distributed to ETP by Sunoco Partners with respect to the IDRs and general partner interest in Sunoco Logistics held by Sunoco Partners for such quarter
and, to the extent not previously distributed to holders of the Class H Units, for any previous quarters and (iii) incremental additional cash distributions in the
aggregate amount of $329 million, to be payable by ETP to ETE Holdings over 15 quarters, commencing with the quarter ended September 30, 2013 and
ending with the quarter ending March 31, 2017. The incremental cash distributions referred to in clause (iii) of the previous sentence are intended to offset a
portion of the incentive distribution relinquishments previously granted by ETE to ETP in connection with the Citrus Merger, the Holdco Transaction and the
Holdco Acquisition. In connection with the issuance of the Class H Units, ETE and ETP also agreed to certain adjustments to the prior incentive distribution
relinquishments in order to ensure that the incentive distribution relinquishments are fixed amounts for each quarter to which the incentive distribution
relinquishments are in effect.
On February 19, 2014, ETE and ETP completed the transfer to ETE of Trunkline LNG, the entity that owns a LNG regasification facility in Lake Charles,
Louisiana, from ETP in exchange for the redemption by ETP of 18.7 million ETP Common Units held by ETE. This transaction was effective as of January
1, 2014.
In connection with ETE’s acquisition of Trunkline LNG, ETP agreed to continue to provide management services for ETE through 2015 in relation to both
Trunkline LNG’s regasification facility and the development of a liquefaction project at Trunkline LNG’s facility, for which ETE has agreed to pay
incremental management fees to ETP of $75 million per year for the years ending December 31, 2014 and 2015. ETE also agreed to provide additional
subsidies to ETP through the relinquishment of future incentive distributions totaling $180 million during the years ending December 31, 2016 through 2019.
133