Energy Transfer 2013 Annual Report Download - page 24

Table of Contents
Our refined product terminals compete with other independent terminals with respect to price, versatility and services provided. The competition primarily
comes from integrated petroleum companies, refining and marketing companies, independent terminal companies and distribution companies with marketing
and trading operations.
Retail Marketing
We face strong competition in the market for the sale of retail gasoline and merchandise. Our competitors include service stations of large integrated oil
companies, independent gasoline service stations, convenience stores, fast food stores, and other similar retail outlets, some of which are well-recognized
national or regional retail systems. The number of competitors varies depending on the geographical area. It also varies with gasoline and convenience store
offerings. The principal competitive factors affecting our retail marketing operations include gasoline and diesel acquisition costs, site location, product price,
selection and quality, site appearance and cleanliness, hours of operation, store safety, customer loyalty and brand recognition. We compete by pricing gasoline
competitively, combining retail gasoline business with convenience stores that provide a wide variety of products, and using advertising and promotional
campaigns. We believe that we are in a position to compete effectively as a marketer of refined products because of the location of our retail network, which is
well integrated with the distribution system operated by Sunoco Logistics.
Credit Risk and Customers
Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a loss to the Partnership. Credit policies have been
approved and implemented to govern the Partnership’s portfolio of counterparties with the objective of mitigating credit losses. These policies establish
guidelines, controls and limits to manage credit risk within approved tolerances by mandating an appropriate evaluation of the financial condition of existing
and potential counterparties, monitoring agency credit ratings, and by implementing credit practices that limit exposure according to the risk profiles of the
counterparties. Furthermore, the Partnership may at times require collateral under certain circumstances to mitigate credit risk as necessary. We also implement
the use of industry standard commercial agreements which allow for the netting of positive and negative exposures associated with transactions executed under
a single commercial agreement. Additionally, we utilize master netting agreements to offset credit exposure across multiple commercial agreements with a single
counterparty or affiliated group of counterparties.
The Partnership’s counterparties consist of a diverse portfolio of customers across the energy industry, including petrochemical companies, commercial and
industrials, oil and gas producers, municipalities, utilities and midstream companies. Our overall exposure may be affected positively or negatively by
macroeconomic or regulatory changes that could impact our counterparties to one extent or another. Currently, management does not anticipate a material
adverse effect in our financial position or results of operations as a consequence of counterparty non-performance.
Our natural gas transportation and midstream revenues are derived significantly from companies that engage in natural gas exploration and production
activities. The discovery and development of new shale formations across the United States has created an abundance of natural gas resulting in a negative
impact on prices in recent years. As a result, some of our exploration and production customers have been negatively impacted; however, we are monitoring
these customers and mitigating credit risk as necessary.
During the year ended December 31, 2013, none of our customers individually accounted for more than 10% of our consolidated revenues.
Regulation of Interstate Natural Gas Pipelines. The FERC has broad regulatory authority over the business and operations of interstate natural gas
pipelines. Under the Natural Gas Act (“NGA”), the FERC generally regulates the transportation of natural gas in interstate commerce. For FERC regulatory
purposes, “transportation” includes natural gas pipeline transmission (forwardhauls and backhauls), storage and other services. The Florida Gas
Transmission, Transwestern, Panhandle Eastern, Trunkline Gas, Tiger, Fayetteville Express and Sea Robin pipelines transport natural gas in interstate
commerce and thus each qualifies as a “natural-gas company” under the NGA subject to the FERC’s regulatory jurisdiction. We also hold certain storage
facilities that are subject to the FERC’s regulatory oversight.
The FERC’s NGA authority includes the power to regulate:
•the certification and construction of new facilities;
•the review and approval of transportation rates;
•the types of services that our regulated assets are permitted to perform;
•the terms and conditions associated with these services;
•the extension or abandonment of services and facilities;
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