Energy Transfer 2015 Annual Report Download - page 221

Table of Contents
The following table summarizes our interest rate swaps outstanding, none of which were designated as hedges for accounting purposes:
Term
Type(1)
Notional Amount Outstanding
December 31, 2015
December 31, 2014
July 2015(2)
Forward-starting to pay a fixed rate of 3.38% and receive a floating rate
$ —
$ 200
July 2016(3)
Forward-starting to pay a fixed rate of 3.80% and receive a floating rate
200
200
July 2017(4)
Forward-starting to pay a fixed rate of 3.84% and receive a floating rate
300
300
July 2018(4)
Forward-starting to pay a fixed rate of 4.00% and receive a floating rate
200
200
July 2019(4)
Forward-starting to pay a fixed rate of 3.25% and receive a floating rate
200
300
December 2018
Pay a floating rate based on a 3-month LIBOR and receive a fixed rate of
1.53%
1,200
—
March 2019
Pay a floating rate based on a 3-month LIBOR and receive a fixed rate of
1.42%
300
—
February 2023
Pay a floating rate plus a spread of 1.73% and receive a fixed rate of 3.60%
—
200
(1) Floating rates are based on 3-month LIBOR.
(2) Represents the effective date. These forward-starting swaps have terms of 10 years with a mandatory termination date the same as the effective date.
(3) Represents the effective date. These forward-starting swaps have terms of 10 and 30 years with a mandatory termination date the same as the
effective date.
(4) Represents the effective date. These forward-starting swaps have terms of 30 years with a mandatory termination date the same as the effective date.
Credit Risk
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. The Partnership also uses industry standard commercial agreements which allow for the netting of 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, gas and electric utilities, midstream companies and independent power generators. Our overall
exposure may be affected positively or negatively by macroeconomic or regulatory changes that 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.
The Partnership has maintenance margin deposits with certain counterparties in the OTC market, primarily independent system operators, and with
clearing brokers. Payments on margin deposits are required when the value of a derivative exceeds our pre-established credit limit with the counterparty.
Margin deposits are returned to us on or about the settlement date for non-exchange traded derivatives, and we exchange margin calls on a daily basis for
exchange traded transactions. Since the margin calls are made daily with the exchange brokers, the fair value of the financial derivative instruments are
deemed current and netted in deposits paid to vendors within other current assets in the consolidated balance sheets.
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