Energy Transfer 2010 Annual Report Download - page 50

We also engage in other trading activities, and may enter into other types of over-the-counter energy commodity
forward contracts and options. These trading activities are based on our management’s estimates of future events
and prices and are intended to generate a profit. However, if those estimates are incorrect or other market events
outside of our control occur, such activities could generate a loss in future periods and potentially impair our
profitability.
We are dependent on our principal propane suppliers, which increases the risk of an interruption in supply.
During 2010, we purchased approximately 53.5%, 12.9% and 13.3% of our propane from Enterprise, Targa and
M.P. Oils, Ltd., respectively. Enterprise owns approximately 17.6% of ETE’s outstanding Common Units. We
purchase a portion of our propane requirements from Enterprise pursuant to an agreement that was extended until
March 2015 and contains an option to renew for an additional year. If supplies from these sources were
interrupted, the cost of procuring replacement supplies and transporting those supplies from alternative locations
might be materially higher and, at least on a short-term basis, margins could be adversely affected. Supply from
Canada is subject to the additional risk of disruption associated with foreign trade such as trade restrictions,
shipping delays and political, regulatory and economic instability.
Historically, a substantial portion of the propane that we purchase has originated from one of the industry’s major
markets located in Mt. Belvieu, Texas and has been shipped to us through major common carrier pipelines. Any
significant interruption in the service at Mt. Belvieu or other major market points, or on the common carrier
pipelines we use, would adversely affect our ability to obtain propane.
Competition from alternative energy sources may cause us to lose propane customers, thereby reducing our
revenues.
Competition in our propane business from alternative energy sources has been increasing as a result of reduced
regulation of many utilities. Propane is generally not competitive with natural gas in areas where natural gas
pipelines already exist because natural gas is a less expensive source of energy than propane. The gradual
expansion of natural gas distribution systems and the availability of natural gas in many areas that previously
depended upon propane could cause us to lose customers, thereby reducing our revenues. Fuel oil also competes
with propane and is generally less expensive than propane. In addition, the successful development and
increasing usage of alternative energy sources could adversely affect our operations.
Energy efficiency and technological advances may affect the demand for propane and adversely affect our
operating results.
The national trend toward increased conservation and technological advances, including installation of improved
insulation and the development of more efficient furnaces and other heating devices, has decreased the demand
for propane by retail customers. Stricter conservation measures in the future or technological advances in
heating, conservation, energy generation or other devices could adversely affect our operations.
Tax Risks to Common Unitholders
Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not
being subject to a material amount of entity-level taxation by individual states. If the IRS were to treat us as a
corporation for federal income tax purposes or if we become subject to a material amount of entity-level
taxation for state tax purposes, it would substantially reduce the amount of cash available for distribution to
Unitholders.
The anticipated after-tax economic benefit of an investment in our Common Units depends largely on our being
treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a
ruling from the IRS, with respect to our classification as a partnership for federal income tax purposes.
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