Energy Transfer Partners, Regency Energy team to acquire LDH Energy midstream assets for $1.9B

Source: Energy Transfer Partners

Energy Transfer Partners, L.P. (NYSE:ETP) and Regency Energy Partners LP (NASDAQ:RGNC) have formed a joint venture to purchase LDH Energy Asset Holdings LLC from Louis Dreyfus Highbridge Energy LLC for approximately $1.925 billion in cash. 

LDH owns and operates a natural gas liquids, or NGL, storage, fractionation and transportation business. LDH’s storage assets are primarily located in Mont Belvieu, Texas, one of the largest NGL storage, distribution and trading complexes in North America. Its West Texas Pipeline transports NGLs through a 1,066-mile intrastate pipeline system that originates in the Permian Basin in west Texas, passes through the Barnett Shale production area in north Texas and terminates at the Mont Belvieu storage and fractionation complex. LDH also owns and operates fractionation and processing assets located in Louisiana. 

The acquisition of LDH is expected to significantly expand ETP’s and Regency’s asset portfolios, adding an NGL platform with storage, transportation and fractionation capabilities. Additionally, this acquisition will provide both ETP and Regency with additional consistent fee-based revenues. 

At closing, ETP will contribute $1.35 billion in exchange for a 70-percent ownership interest in the joint venture, while Regency will contribute $578 million in exchange for a 30-percent ownership interest in the joint venture. The joint venture will be managed by a two-person board of directors, with ETP and Regency each having the right to appoint one director. ETP will operate the assets on behalf of the joint venture with the existing LDH employees. 

"With increased producer activity in the liquid-rich shale plays, we believe the LDH assets give ETP and Regency a tremendous advantage in the NGL business within our existing geographic footprints, a goal we have both been working toward for some time,” said Mike Smith, vice president of mergers and acquisitions for ETP. "This acquisition, combined with our existing natural gas infrastructure, will allow ETP and Regency to provide and profit from a full array of midstream services required by our customers." 

“We see a number of exciting growth opportunities for these assets, which will allow both partnerships to compete in a new business platform of the midstream value chain, add downstream capabilities and capitalize on favorable NGL market fundamentals,” said Mike Bradley, president and chief executive officer of Regency. “In addition, we anticipate that Louis Dreyfus will remain an important customer of LDH, and that this transaction will present possibilities to partner with Louis Dreyfus on existing and future growth opportunities.” 

ETP and Regency expect to initially fund their respective ownership interests in the joint venture under their revolving credit facilities, to be followed by permanent financing that is commensurate with ETP’s commitment to maintain, and Regency’s goal to achieve, investment grade credit ratings. 

Completion of the acquisition is subject to customary closing conditions, including customary regulatory approvals, and the transaction is expected to close in the second quarter of 2011.

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