Natural gas pipeline operator Energy Transfer Partners LP (ETP) and parent company, Energy Transfer Equity, L.P. (ETE), have received approval from their boards on the previously announced deal involving the sale of stake in the Bakken pipeline. The transaction will be effective from Jan 1, 2015 and is expected to close in Feb.
Per the deal, Energy Transfer Partners will acquire 45% stake in the Bakken pipeline project and will receive $879 million in cash and 30.8 million of its common units from Energy Transfer Equity.
In exchange, Energy Transfer Equity would receive 40% stake in general partner interest (GP) and incentive distribution rights (IDR) of Sunoco Logistics Partners L.P. (SXL). Also, per the agreement, both the parties will lower IDR subsidies to ETP from ETE. Energy Transfer Equity would pay $55 million less in 2015 and $30 million less in 2016.
The deal is will be mutually beneficial to the parties. Energy Transfer Partners plans to redeem the 30.8 million common units that it will receive, reducing its outstanding shares to about 322 million. Energy Transfer Partners will benefit from lower obligations to ETE and less quarterly distributions to be paid.
The partnership would also gain from its increased shares in the Bakken pipeline – up 75% from 30%. Moreover, the cash received from the deal could be used to fund other growth projects.
On the other hand, Energy Transfer Equity’s increased stake in Sunoco Logistics GP/IDR would mean higher earnings for the company. A reduction in the subsidiaries to be paid to ETP should further benefit the company.
Both Energy Transfer Partners and Energy Transfer Equity currently carry a Zacks Rank #3 (Hold).
A better-ranked player from the industry, Spectra Energy Partners, LP (SEP), sports a Zacks Rank #1 (Strong Buy).
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