A Look at ETP’s 2018 Distribution Growth Plans



4Q17 distribution

Energy Transfer Partners (ETP) announced a flat distribution of $0.565 per unit for 4Q17 and missed its low double-digit distribution growth guidance for 2017. ETP’s GP (general partner), Energy Transfer Equity (ETE), grew its distribution by 3.4% in 4Q17.

On the partnership’s flat distribution, Thomas Long, ETP’s CFO, said, “Even with ETP’s great fourth quarter and the contribution from major projects coming online, we felt with ETP’s current cost of equity, it was prudent to temporarily suspend the distribution growth in order to retain excess cash flow to fund the equity component of our growth projects and continue to reduce our leverage.”

However, the partnership didn’t make any comments about its 2018 distribution growth during the 4Q17 earnings call.

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2018 distribution drivers

ETP’s major projects discussed in the previous article are expected to contribute significantly to the partnership’s distributable cash flow growth and coverage ratio in the 2018–2019 timeframe.

However, project delays and the removal of IDRs subsidies from Energy Transfer Equity could weigh on the partnership’s growth plans and coverage targets in 2018. ETP’s Mariner East 2 and Bayou Bridge pipeline projects are facing some regulatory hurdles, which might delay these projects. US courts recently revoked the permit for the construction of the Bayou Bridge pipeline project.

However, there seems to be little chance of a distribution cut considering the partnership’s strong earnings growth. ETP’s current distribution is more than 12.0%.

Analyst recommendations

Of the analysts surveyed by Reuters, 75.0% rate Energy Transfer Partners as a “buy,” and the remaining 25% rate it as a “hold.” ETP is currently trading below the low range ($20.00) of analysts’ target price. ETP’s average target price of $24.20 implies an ~32.0% upside potential from the current price levels.

In the next article, we’ll look into Kinder Morgan’s (KMI) expansion plans for 2018.


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