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Energy Transfer, Regency JV for $2B NGL Asset Acquisition

Energy Transfer Partners LP (ETP) and Regency Energy Partners LP have formed a joint venture (JV) to buy LDH Energy Asset Holdings LLC from Louis Dreyfus Highbridge Energy LLC for $1.925 billion in cash.

LDH owns and operates a natural gas liquids (NGL) storage, fractionation and transportation business with storage assets primarily in Mont Belvieu, TX, one of the largest NGL storage, distribution and trading complexes in North America.

LDH's West Texas Pipeline transports NGLs through a 1,066-mile intrastate system that originates in the Permian Basin in West Texas, passes through the Barnett Shale production area in North Texas and terminates at the Mont Belvieu storage and fractionation complex. LDH also owns and operates fractionation and processing assets in Louisiana.

"The acquisition of LDH is expected to significantly expand ETP's and Regency's asset portfolios, adding an NGL platform with storage, transportation and fractionation capabilities. Additionally, this acquisition will provide both ETP and Regency with additional consistent fee-based revenues," the partners said Tuesday.

At closing, ETP will contribute $1.35 billion in exchange for a 70% ownership interest in the JV, while Regency will contribute $578 million in exchange for a 30% interest. The JV will be managed by a two-person board, with ETP and Regency each appointing one director. ETP will operate the assets with the existing LDH employees.

"With increased producer activity in the liquid-rich shale plays, we believe the LDH assets give ETP and Regency a tremendous advantage in the NGL business within our existing geographic footprints, a goal we have both been working toward for some time," said Mike Smith, ETP vice president of mergers and acquisitions. "This acquisition, combined with our existing natural gas infrastructure, will allow ETP and Regency to provide and profit from a full array of midstream services required by our customers."

"We see a number of exciting growth opportunities for these assets, which will allow both partnerships to compete in a new business platform of the midstream value chain, add downstream capabilities and capitalize on favorable NGL market fundamentals," said Regency CEO Mike Bradley. "In addition, we anticipate that Louis Dreyfus will remain an important customer of LDH, and that this transaction will present possibilities to partner with Louis Dreyfus on existing and future growth opportunities."

ETP and Regency expect to initially fund their investments under their revolving credit facilities, to be followed by permanent financing that is commensurate with ETP's commitment to maintain, and Regency's goal to achieve, investment-grade credit ratings, they said. Closing is expected in the second quarter and is subject to conditions, including regulatory approvals.

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