Energy Transfer Equity, L.P. (NYSE:ETE)

CAPS Rating: 3 out of 5

A publicly traded Limited Partnership, whose activities are conducted through three subsidiary operating partnerships, Energy Transfer Company, Heritage Operating, L.P. and Titan Energy Partners, L.P.

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Player Avatar BIGDOGJII (36.50) Submitted: 2/13/2007 3:29:41 PM : Outperform Start Price: $10.73 ETE Score: +389.41

Morningstar.com
Buy These Stocks While They're New
Monday January 29, 6:00 am ET
By Michael Hodel, CFA

Energy Transfer Equity LP
Energy Transfer Equity (NYSE:ETE - News), the general partner for Energy Transfer Partners (NYSE:ETP - News), went public 11 months ago. The partnership units have had a nice run since, but we think they're still worth a look. We love the natural gas pipeline business, and ETE, via ETP, operates one of the best natural-gas distribution networks in the industry, in our view. The Barnett Shale continues to be the hottest natural-gas play in the country, and we believe ETP is in the best position among pipeline operators to benefit from production growth there. The firm's 2006 acquisition of the Transwestern pipeline offers access to markets in the western United States, and building a pipeline with Kinder Morgan (NYSE:KMP - News) to reach the East will give it a system that enables producers to sell into whichever market offers the best price for gas at any given time.

ETE's current yield is low, compared with those of similar partnerships, which typically fall in the 6%-10% range. But ETE holds incentive distribution rights that give unitholders an increasing share of ETP's cash flow as the firm grows. For example, a 10% increase in distributions to ETP's unitholders would result in nearly 20% more cash flow to ETE. So, while ETE investors may not receive a big yield today, we think the shares will appreciate nicely over time

***** YIED- %4.50

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