Energy Transfer 2015 Annual Report Download - page 69

Table of Contents
Class H Units and Class I Units
Currently Outstanding
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 and (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.
Bakken Pipeline Transaction
In March 2015, ETE transferred 30.8 million ETP Common Units, ETE’s 45% interest in the Bakken Pipeline project, and $879 million in cash to ETP in
exchange for 30.8 million newly issued Class H Units of ETP that, when combined with the 50.2 million previously issued Class H Units, generally entitle
ETE to receive 90.05% of the cash distributions and other economic attributes of the general partner interest and IDRs of Sunoco Logistics. In connection
with this transaction, ETP also issued 100 Class I Units, as described below, that provide distributions to ETE to offset IDR subsidies previously provided to
ETP. These IDR subsidies, including the impact from distributions on Class I Units, were reduced by $55 million in 2015 and $30 million in 2016.
In connection with the transaction, ETP issued 100 Class I Units. The Class I Units are generally entitled to: (i) pro rata allocations of gross income or gain
until the aggregate amount of such items allocated to the holders of the Class I Units for the current taxable period and all previous taxable periods is equal to
the cumulative amount of all distributions made to the holders of the Class I Units and (ii) after making cash distributions to Class H Units, any additional
available cash deemed to be either operating surplus or capital surplus with respect to any quarter will be distributed to the Class I Units in an amount equal
to the excess of the distribution amount set forth in our Partnership Agreement, as amended, (the “Partnership Agreement”) for such quarter over the
cumulative amount of available cash previously distributed commencing with the quarter ending March 31, 2015 until the quarter ending December 31,
2016. The impact of (i) the IDR subsidy adjustments and (ii) the Class I Unit distributions, along with the currently effective IDR subsidies, is included in the
table below under “Quarterly Distributions of Available Cash.”
General Partner Interest
As of December 31, 2015, our General Partner owned an approximate 0.5% general partner interest in us and the holders of Common Units, Class E, Class G,
Class H and Class I Units collectively owned a 99.5% limited partner interest in us.
Incentive Distribution Rights
IDRs represent the contractual right, pursuant to the terms of our partnership agreement, of our general partner to receive a specified percentage of quarterly
distributions of Available Cash from operating surplus after the minimum quarterly distribution has been paid. Please read “Distributions of Available Cash
from Operating Surplus” below.
Cash Distribution Policy
GeneralWe will distribute all of our “Available Cash” to our Unitholders and our General Partner within 45 days following the end of each fiscal quarter.
Definition of Available Cash. Available Cash is defined in our Partnership Agreement and generally means, with respect to any calendar quarter, all cash on
hand at the end of such quarter:
• Less the amount of cash reserves that are necessary or appropriate in the reasonable discretion of the General Partner to
• provide for the proper conduct of our business;
• comply with applicable law and/or debt instrument or other agreement (including reserves for future capital expenditures and for our future capital
needs); or
• provide funds for distributions to Unitholders and our General Partner in respect of any one or more of the next four quarters.
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