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How Did ETP’s Debt Level Change Last Year?

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Energy Transfer Partners’ debt

In the previous part of this series, we analyzed Energy Transfer Partners’ (ETP) top line and bottom line. In this part, we’ll look at how ETP has been managing its debt over the past few years.

As MLPs (or master limited partnerships) generally distribute most of the available cash flows to their unit holders, they are generally dependent upon outside sources, such as raising debt or equity, for funding acquisitions and organic projects. Similarly, ETP has become more leveraged due to the fresh debt for the acquisition of Sunoco Logistics (SXL) and Southern Union Company in 2012. For more detail on how capital markets affect the performance of MLPs, refer to our MLP premier series.

Energy Transfer Partners’ outstanding debt has more than doubled if we compare the pre-merger and post-merger periods.

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As of December 31, 2014, ETP’s outstanding debt has increased to ~$19.3 billion compared to ~$17.1 billion in the prior year. The increase was mostly due to the net impact of ~$2 billion in senior notes offerings by Sunoco Logistics (SXL), a $683 million revolving credit facility by Sunoco LP, and debt repayments during 2014.

Energy Transfer Partners’ debt ratios

ETP’s debt ratios, which exploded during 2012 to 2013, have started normalizing in 2014. The trend is expected to continue. The net-debt-to-EBITDA ratio decreased from 6.4x in 2013 to 5.2x in 2014. The total-debt-to-total-assets ratio, another important ratio to gauge the leverage situation of a company, has stayed flat at the end of 2014 compared to the prior year. ETP’s total-debt-to-total-assets ratio was 0.40 as of December 31, 2014.

In comparison, industry peers Enterprise Product Partners (EPD), Williams Partners (WPZ), and Spectra Energy Partners (SEP) had total-debt-to-total-assets ratios of 0.45x, 0.47x, and 0.34x at the end of 2014, respectively. EPD alone constitutes ~10.4% of the Alerian MLP ETF (AMLP).

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