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Enterprise Products Partners increases liquidity

December 10, 2008 – Comments (2) | RELATED TICKERS: DEP , ETP , EPE.DL

Dan Duncan is an influential executive in the midstream pipelines sector. He controls Enterprise GP Holdings (EPE), Enterprise Products Partners (EPD) and Duncan Energy Partners (DEP). He also owns a 10+% stake in Teppco (TPP).

EPE is the general partner for EPD. EPE also owns a large stake in the general partner of Energy Transfer Partners'  (ETP), and owns Teppco's general partner outright.

Duncan Energy Partners is basically a financing vehicle for EPD. It could be an acceptable holding in its own right for investors interested in current income. However, DEP was set up to buy stakes in ETP's mature properties; ETP can then redeploy that cash to higher return projects and doesn't have to go to the capital markets on uncertain terms.

 Indeed, ETP and DEP just made one such transaction. DEP will pay ETP $200+ million in cash and $500+ million in units. Now, ETP has enough cash on hand to cover its maturing debt and to finance its growth plans into 2009 at least, even if the capital markets remain locked up in 2009. 

DEP has little growth potential and I wouldn't buy it for my own needs. Additionally, there's a potential conflict of interest built in, since DEP could very well buy some of Enterprise's less attractive properties. Shareholders have little recourse in this structure, although I wouldn't expect Dan Duncan to run this company into the ground. However, this makes his other holdings more attractive. Investors interested in current income should definitely look at EPD. Additionally, EPE remains one of my favorite holdings since it depends on ETP for the majority of its income.