Business Context and Reporting Period
This Form 8-K filing by Energy Transfer Equity, L.P. (the "Partnership") reports material definitive agreements entered into on January 15, 2018. The filing details a series of transactions involving the acquisition of interests in USA Compression Partners, LP ("USAC"), the contribution of assets to USAC, and an equity restructuring of USAC's general partner interest.
Key Financial Metrics and Transaction Values
- GP Purchase Consideration: $250 million in cash to acquire all outstanding LLC interests in USA Compression GP, LLC and 12,466,912 USAC Common Units.
- Contribution Consideration: Approximately $1.7 billion for the contribution of CDM Resource Management LLC and CDM Environmental & Technical Services LLC to USAC.
- Restructuring Issuance: USAC agreed to issue 8,000,000 USAC Common Units to USAC GP in exchange for the conversion of economic general partner interests to non-economic interests.
- Future GP Contribution Option: The Partnership retains the right to contribute the General Partner Interest to USAC for $10,000,000 after one year, subject to specific ownership thresholds.
Note: This filing does not provide standard financial performance metrics such as revenue, profit, cash flow, margins, or debt levels for the reporting period.
Material Changes and Transaction Structure
The filing outlines three concurrent agreements intended to close in the first half of 2018, subject to customary conditions:
- Purchase Agreement: GP Purchasers (including the Partnership) will acquire the general partner and significant common unit interests in USAC from USA Compression Holdings, LLC.
- Contribution Agreement: Energy Transfer Partners, L.P. ("ETP") will contribute specific compression assets to USAC for $1.7 billion.
- Equity Restructuring Agreement: Incentive distribution rights in USAC will be cancelled, and the economic general partner interest will be converted to a non-economic interest, with 8,000,000 new common units issued to the general partner.
Guidance, Outlook, and Restrictions
- Closing Timeline: The transactions are expected to close in the first half of 2018.
- Lock-Up Provisions: The Partnership agreed to a holding period expiring 18 months after Closing (or earlier if USAC Holdings ownership drops below 1,000,000 units). Post-holding period, sales are limited to 10,000,000 units per six-month period.
- Registration Rights: The Partnership will have rights to require USAC to file registration statements for the resale of its USAC Common Units and, under certain circumstances, to initiate underwritten offerings.
- Risks and Contingencies: Closing is contingent upon the concurrent closing of the Contribution and the ability to consummate the Restructuring immediately following the Closing. The agreements contain customary representations, warranties, and indemnification provisions.
Investor Verification Checklist
- Verify the final closing date of the GP Purchase, Contribution, and Restructuring, as the filing only estimates the first half of 2018.
- Confirm the exact valuation of the $1.7 billion asset contribution and its impact on USAC's capital structure.
- Review the full text of the Purchase Agreement (Exhibit 2.1) and Contribution Agreement (Exhibit 2.2) for specific closing conditions and representations.
- Monitor the Partnership's ownership percentage in USAC post-closing to assess the automatic trigger for the $10 million GP Contribution.
- Check for any subsequent filings regarding the status of the 18-month holding period restrictions on the Partnership's USAC Common Units.