ETE and ETP execute another step in strategic plan

Energy Transfer Partners LP (NYSE: ETP) and Energy Transfer Equity LP (NYSE: ETE) plan the exchange of 21 million ETP common units, currently owned by ETE, for 100% of the general partner (GP) interest and the incentive distribution rights (IDRs) of Sunoco LP (NYSE: SUN). In addition, as part of this transaction, ETE has agreed to provide ETP a $35 million annual IDR subsidy for two years.

The cash flow accretion expected to be realized by ETP from this transaction is more than $0.30 per common unit per annum, which will continue to support ETP’s distribution growth going forward.

For ETE, this transaction continues its transition to a pure-play general partner for the overall Energy Transfer group. Pro forma for this transaction, ETE expects to maintain its distribution growth rate while migrating to its traditional 1.0x distribution coverage ratio.

In connection with the original acquisition of Susser Holdings Corp. by ETP in August 2014, ETE agreed to provide ETP an annual $35 million IDR subsidy for 10 years, subject to automatic termination in the event that ETE acquired the GP interest and IDRs of SUN in exchange for ETP common units owned by ETE. As part of the current transaction, ETE has agreed to provide ETP a $35 million IDR subsidy for an additional two years (through June 30, 2017).

ETP and ETE expect there will be no credit ratings impact from this transaction. Following this transaction, SUN will no longer be consolidated for accounting purposes by ETP, but instead will appear in the consolidated financial statements for ETE.

This deal is expected to close in August after the record date for second-quarter distributions for both the SUN GP interest and IDRs and ETP common units, but will be effective as of July 1.

Tudor, Pickering, Holt & Co. acted as financial advisor to the ETP conflicts committee. Akin Gump Strauss Hauer & Feld LLP acted as legal advisor to ETP and Richard Layton & Finger PA acted as legal advisor to the ETP conflicts committee.

Credit Suisse acted as financial advisor to the ETE conflicts committee. Latham & Watkins LLP acted as legal advisor to ETE, and Potter Anderson & Corroon LLP acted as legal advisor to the ETE conflicts committee.

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