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Betting on US Energy Exports

By Peter Staas on Apr. 24, 2014

Energy Transfer Equity serves as the general partner to Energy Transfer Partners LP (NYSE: ETP), Regency Energy Partners LP (NYSE: RGP) and Sunoco Logistics Partners LP (NYSE: SXL) and offers leveraged exposure to these MLP’s growth stories.

The company’s acquisition of Trunkline LNG, which owns an import and regasification terminal in Lake Charles, from Energy Transfer Partners for the retirement of 19.7 million of the MLP’s common units a master stroke.

Not only did this move help to facilitate distribution growth at Energy Transfer Partners, but the transaction gives also Energy Transfer Equity a new vehicle to spin-off as an MLP.

In a conference call to discuss Energy Transfer Equity’s fourth-quarter earnings, management indicated that this IPO could take place in late summer or early fall of 2014.

Whereas Cheniere Energy Partners assumed the risk of cost overruns, Energy Transfer Equity’s partner, BG Group, will oversee construction and take responsibility for any cost inflation. BG Group has a long history of executing LNG projects of this nature, a distinct advantage over other competitors in the US market.

Energy Transfer Equity’s newly listed MLP would own and finance the proposed three-train liquefaction facility, with BG Group inking a 25-year offtake agreement. The UK-based energy giant, a leader in the global LNG market, would have the option to assign some of its capacity to third parties.

Pending final investment decisions from Energy Transfer Equity and BG Group, construction on this project would start in 2015.

In addition to the proposed liquefaction facility in Lake Charles, Energy Transfer Equity stands to benefit from its limited partners’ organic growth opportunities and could pull a number of other levers to unlock value for its unitholders.

For example, Energy Transfer Partners could sell Sunoco’s retail gasoline business to Energy Transfer Equity, enabling the MLP to acquire assets that better complement its existing asset portfolio. Energy Transfer Equity, in turn, could then spin off this business as a separate MLP.

Energy Transfer Equity offers exposure to US LNG exports, but the Lake Charles project won’t make or break the company’s growth prospects.

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