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Executives

Martin Salinas - CFO, Energy Transfer Equity

Kelcy Warren - Chairman & CEO, Energy Transfer Equity

Analysts

James Jampel - HITE

Ross Payne - Wells Fargo

Harry Mateer - Barclays Capital

Southern Union Company (SUG) Energy Transfer Equity, L.P. and Southern Union Announce Successful Completion of Merger Call March 26, 2012 3:00 PM ET

Operator

Good day ladies and gentlemen and welcome to the Energy Transfer Partners investor conference call SUG merger completed. My name is Tasha and I will be your operator for today. At this time all participants are in a listen only mode. (Operator Instructions). As a reminder this conference is being recorded for replay purposes. I will now turn the conference over to your host for today, Mr. Martin Salinas, Energy Transfer CFO. Please proceed.

Martin Salinas

Thanks Tasha and good afternoon everyone. Well after many months about talking about this, we are proud to say that Energy Transfer Equity today has successfully completed its merger with Southern Union Company. The merger creates a $40 billion plus group of integrated midstream companies in the United States natural gas industry with accretion to ETE unit holders, not only in the near term, but also over the long term. After my prepared remarks we will go into Q&A and I have Kelcy, Mackie, and John McReynolds here with me to answer your questions.

During the call I will make forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934 based on our beliefs as well as certain assumptions and information available to us. Now let's talk a little bit about the transaction details. The transaction is valued at roughly $9.4 billion, consisted of $5.8 billion in cash and equity consideration and roughly $3.6 billion of assumed debt.

The SUG shareholder elections resulted in approximately 54% taking cash and 46% electing ETE units. The transaction was structured as a merger between ETE and Southern Union’s holding companies which resulted in Southern Union becoming a wholly owned subsidiary of ETE. And in connection with the acquisition, ETP also acquired today Southern Union’s 50% interest in Citrus from ETE for $2 billion as we previously announced.

The consideration included $1.895 billion of cash and a 105 million of newly issued ETP common units. I recall that EPT raised roughly $2 billion in senior notes earlier this year for this transaction. Of the cash consideration, $1.45 billion was used by ETE to fund the cash portion of the Southern Union acquisition and roughly $445 million was utilized to repay existing debt at the Southern Union level.

From a transaction rationale perspective and we have talked about this before, but let me reiterate. ETE’s cash flow as a result of this transaction become much more diversified resulting in a significant portion of the pro forma cash source from large scale, regulated and investment-grade operations. The combined network will consist of roughly 45,000 miles of pipeline, one of the largest in the United States. It also complements our existing, supply focused interstate and intrastate operations with a largely regulated demand side, market centric set of operations.

Including Southern Union, the ETE family will be able to transport roughly 31 Bcf of natural gas per day across not only in intrastate but also interstate pipelines. We'll also have roughly 184 Bcf of natural gas source capacity and processing capacity of 2 Bcf and growing significantly over the next several years.

In addition significant increases in fee-based revenues will be realized from long-term contracts with strong credit quality customers. We also have an attractive and complementary asset aligned with ETE’s growth strategy. In addition, this provides a larger, more competitive interstate and midstream platform with significantly enhanced and expanded geographic diversity, not to mention the significant organic growth opportunities that we see in the strategic geographic locations across the United States.

In addition, strong commercial and operational synergies will be realized as the combined the existing natural gas or gas liquids operations and not to mention the expanded platform that we will see in the Permian basin where we see a significant amount of growth opportunities and enhancement to our Lone Star JV. From a financing perspective and as a result of the Southern Union shareholder election and also taking into consideration fees and expenses and the repayment of borrowings under ETE’s revolving credit facility, we have closed a $2 billion secured term loan as well.

The proceeds from the loan coupled with the proceeds from the Citrus merger will satisfy the cash consideration of the Southern Union merger. And as it relates to the term loan, it will be a five-year maturity with a LIBOR plus 300 basis point spread, a 75 basis point LIBOR floor, no amortization, an original issue discount at 98% customary terms and covenants. And I'll just say how pleased we are seeing over $3.5 billion of commitment on this term loan, something that we certainly believed as we launched the transaction several weeks ago.

In addition this also eliminates the need to draw on the $3.7 billion bridge facility that we had previously entered into and as such have terminated that facility to date. From an integration perspective, we have put together teams from both Energy Transfer and Southern Union to create and manage our commercial, regulatory, operational, financial, accounting and HR integrations across the organizations. And as we have talked about before, our integration team has confirmed a cost savings estimate of at least $100 million per annum which we believe will be realized over the next 12 to 24 months.

So what's next. We will continue to evaluate our drop-down opportunities whereby increased unit holder value will be achieved, while maintaining appropriate credit breakers and we will look to do these as soon as we are comfortable. And remember that ETP has a right of first offer on Southern Union gas services. Those are the old fit ventures and assets that Southern Union currently own today.

In addition we will explore alternative uses of pipelines across our network of assets as we continue to adapt to the ever-changing and evolving landscape that we operate in. This could be in wet gas, natural gas liquids, crude, other potential services of our pipelines.

In addition, we are very excited about the opportunity on the L&G export capabilities, so much that we are proceeding full steam ahead on exporting L&G.

In addition, to acquiring required licenses and permits we are also analyzing contractors for construction and speaking with potential customers. In addition we will continue to add on to existing infrastructure and prolific basins to meet customer needs while generating project returns and increase distributable cash flow to our unit holders.

Needless to say we are and will be utilizing Southern Union’s assets to maximize value, wherever we can within the Energy Transfer family.

So in conclusion we at Energy Transfer couldn’t be more excited and proud of this accomplishment. We've worked extremely hard for the last nine to 10 months to get us to the finish line and here we are. During this period we've gotten to not only learn more about Southern Union’s assets but equally important have inherited a strong and loyal group of employees and we have no doubt we will continue to deliver unit holder value.

To the ET unit holders we welcome you to our family. We are excited that you have elected to make an investment in Energy Transfer and we will certainly not let you down.

With that Tasha, let's open up the call for questions. Thank you.

Question-and-Answer Session

Operator

Sure, thank you. (Operator Instructions) First question comes from the line of James Jampel from HITE. Please proceed.

James Jampel - HITE

Hi, thanks for taking the question. A couple of questions. First, how much do you figure you are going to save by not having to use the bridge loan?

Martin Salinas

By not having to use the bridge loan.

James Jampel - HITE

Yeah.

Martin Salinas

It will substantial dollars. When we look at the bridge facility and all the fees associated with that. It adds up to millions of dollars and that could have [inaudible] to it, but certainly with the pricing that we received on the term loan, it certainly has resulted at least in that potentially one-year period that we would have the bridge facility, a significant amount of dollars.

James Jampel - HITE

I see. Okay and what kind we expect as a next step at financing at the ETP level?

Martin Salinas

You are talking about Energy Transport Partners.

James Jampel - HITE

Yes.

Martin Salinas

When we look at Energy Transfer Partners, certainly as we have discussed previously we are committed to investment grade credit metrics. We will look to manage not only on liquidity but also those metrics based on our needs for market access, with the debt that we did, the senior notes offering we did at the Citrus level back in January. We will look to balance that with the appropriate amount of equity over the course of 2012.

Operator

Your next question comes from the line of Ross Payne from Wells Fargo. Please proceed.

Ross Payne - Wells Fargo

Martin, a question for you. First of all, any kind of comments from the rating agencies on how things are going with ETE and Southern Union? And second of all, if you guys can speak to just any new expectations out of Trunkline or Trunkline LNG that you may have today that you didn’t have a while ago? Thanks.

Martin Salinas

Sure on the first one, Ross, we had very constant communication with the rating agencies. I think you saw Fitch come out with their information, you know, a couple of weeks ago. We expect S&P and Moody’s to follow too. I think all are focused on S&P’s commentary. I do believe based on where the shareholder elections came in with less than 50% of cash elections that certainly bodes well for not only ETE’s stand-alone credit metrics, but overall debt levels.

And so I am confident that we’ll be able to see a nice credit enhancement at the ETE level and certainly maintain Southern Union’s investment grades as we continue to evaluate or manage those ratings along with ETP and of course Regency. So I do expect that’s a next day or two as the merchant has closed. With respect to your second question, I’ll turn it over to Kelcy, who will answer that one.

Kelcy Warren

Yeah, Ross, on Trunkline LNG we are extremely optimistic that we will have something in more detail to talk about hopefully about early to mid-summer. We believe that still can be converted into liquefaction. As you know, it’s already a regasification facility; operating as LNG regasification. So we are confident we will convert that to liquefaction, but we are not there are yet.

Operator

Your next question comes from the line of Harry Mateer from Barclays Capital. Please proceed.

Harry Mateer - Barclays Capital

Martin and Kelcy, based on recent comments regarding the assets and so my perception at least is that asset sales to third parties might be bit a less likely now than it may have been a few months ago and it’s more likely the Energy Transfer complex will retain all the assets; is that fair to say and any comment on how you’re thinking about that right now?

Kelcy Warren

This is Kelcy. I don’t know if that’s 100% accurate. I think that there is -- my comment I just made about the LNG facility I think that’s pretty fair to say as it relates to that facility. However, we are looking at all of the assets and while some of the things we have read lately about what people are willing to pay, I am not so sure we would sell everything.

Harry Mateer - Barclays Capital

So everything is still on the table is that with the exception of the LNG facility, basically?

Kelcy Warren

Yes.

Operator

Ladies and gentlemen, we have no more questions in queue. I would now like to turn the conference back over to Mr. Martin Salinas for any closing remarks.

Martin Salinas

Thanks Tasha again, we look forward to opportunities that this merger brings in Energy Transfer family. And as I mentioned before, we’re certainly not going to let you down. Thanks everyone. Have a good day.

Operator

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.

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