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Analysis of Energy Transfer Equity’s Cash Flow Measures

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Dec. 30 2015, Published 1:26 p.m. ET

Energy Transfer Equity’s distributions

Energy Transfer Equity’s (ETE) distributions continued to grow for the past several quarters. It declared a distribution of $0.29 per unit for fiscal 3Q15. This represents an ~37.4% YoY (year-over-year) rise compared to fiscal 3Q14. It’s an ~7.5% sequential rise compared fiscal 2Q15. This was Energy Transfer Equity’s 12th consecutive quarterly cash distribution increase. Its peers, EQT GP Holdings (EQGP) and Western Gas Equity Partners (WGP) saw their fiscal 3Q15 distributions grow by 13.4% and 4.8% quarter-over-quarter, respectively. Energy Transfer Equity forms 0.58% of the First Trust North American Energy Infrastructure Fund (EMLP).

Energy Transfer Equity’s earnings and distributions mainly depend on distribution income from its MLP subsidiaries. Energy Transfer Equity holds the following LP (limited partner), GP (general partner), and IDRs (incentive distribution rights) interests in its subsidiaries:

  • Energy Transfer Partners (ETP) – ~1% LP interest, 100% of GP interest and IDRs
  • Sunoco Logistics Partners (SXL) – 90% of GP and IDR through ownership of class H units in Energy Transfer Partners
  • Sunoco LP (SUN) – 100% of GP and IDRs
  • 100% interest in Energy Transfer LNG

Energy Transfer Equity’s distributable cash flow and distributions would be negatively impacted if there’s a need for a distribution cut at its subsidiaries in the near future.

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Energy Transfer Equity’ distributable cash flows

The distributable cash flow drives Energy Transfer Equity’s distributions. The distributable cash flow is calculated by adjusting the net income for certain non-cash charges and maintenance expenditure. Energy Transfer Equity’s fiscal 3Q15 distributable cash flow rose by 38.9% YoY (year-over-year) compared to fiscal 3Q14.

Energy Transfer Equity’s capital expenditure and its subsidiaries

Energy Transfer Equity and its subsidiaries spent $6.7 billion in the first nine months of 2015. This is 80% higher than what it spent during the first nine months of 2014. Energy Transfer Equity and its subsidiaries’ total capital expenditure for 2015 is expected to be ~$8.2 billion.

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