Energy Transfer 2013 Annual Report Download - page 72

Table of Contents
Trends and Outlook
We remain focused on the full integration and optimization of our diversified asset portfolio to enhance unitholder value. Recently, we have taken advantage of
numerous asset optimization opportunities through strategic transactions among us and our subsidiaries and/or affiliates, and we expect to continue to evaluate
and execute on such opportunities. We will also continue to look for opportunities to simplify our organization, which may include additional sales or transfers
of non-core assets or businesses. As we have in the past, we will evaluate growth projects and acquisitions as such opportunities may be identified in the
future, and we intend to continue to maintain sufficient liquidity to allow us to fund such potential growth projects and acquisitions. We intend to continue our
distribution rate increases maintaining a distribution coverage ratio of 1.05x, thereby promoting a prudent balance between distribution rate increases and
enhanced financial flexibility and strength while maintaining our investment grade ratings.
We expect to see processing and throughput volumes increase over 2014 as numerous projects that have been placed in service recently continue to ramp up.
We have announced growth projects aggregating to $830 million that are expected to be placed in service through 2014 primarily in our midstream and NGL
transportation and services segments, in which we plan to invest $575 million to $630 million in 2014 which we expect to drive growth over the next several
years.
Regarding industry trends, we expect natural gas and NGL prices to remain within a range similar to recent history, as numerous forces impact both the
supply and demand of natural gas and NGLs, including the ongoing economic recovery, coal to gas switching for power generation, exports to Mexico,
conversion of natural gas pipelines to more profitable commodities, and increasing supply of natural gas from shale developments and associated gas from
crude oil wells.
We expect to see continued opportunities related to wet or rich natural gas from shale formations, as well as continued demand for NGL related services,
including storage, fractionation and exportation. In addition, we anticipate significant demand for crude transportation to the Gulf Coast markets.
Consequently, these expectations will shape our strategic transactions and growth projects in the near term.
Results of Operations
We report Segment Adjusted EBITDA as a measure of segment performance. We define Segment Adjusted EBITDA as earnings before interest, taxes,
depreciation, amortization and other non-cash items, such as non-cash compensation expense, gains and losses on disposals of assets, the allowance for
equity funds used during construction, unrealized gains and losses on commodity risk management activities, non-cash impairment charges, loss on
extinguishment of debt, gain on deconsolidation and other non-operating income or expense items. Unrealized gains and losses on commodity risk management
activities include unrealized gains and losses on commodity derivatives and inventory fair value adjustments (excluding lower of cost or market adjustments).
Segment Adjusted EBITDA reflects amounts for unconsolidated affiliates based on the Partnership’s proportionate ownership.
When presented on a consolidated basis, Adjusted EBITDA is a non-GAAP measure. Although we include Segment Adjusted EBITDA in this report, we have
not included an analysis of the consolidated measure, Adjusted EBITDA. We have included a total of Segment Adjusted EBITDA for all segments, which is
reconciled to the GAAP measure of net income in the consolidated results sections that follow.
During the fourth quarter 2013, management realigned the composition of our reportable segments, and as a result, our natural gas marketing operations are
now aggregated into the “all other” segment. These operations were previously reported in the midstream segment. Based on this change in our segment
presentation, we have recast the presentation of our segment results for the prior years to be consistent with the current year presentation. See Note 14 to our
consolidated financial statements for additional financial information about our segments.
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).
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