EQUITY RESEARCH July 27, 2007 United States of America Energy & Power Energy Transfer Partners LP (ETP - US$ 61.24) 1-Overweight
Company Update Main PT Pending Outcome of FERC/CFTC Inv
� ETP has been under investigation by FERC and CFTC regarding certain physical and financial natural gas trades that occurred during 2003-2005. FERC has issued a show cause order giving ETP 30 days to respond to allegations. CFTC has filed a complaint with U.S. District Court. We believe worst case would be both commissions fine ETP for total of $377 million. Assuming fines were financed w/debt, this would impact our current PT of $68 by $3. PT based on dist run rate of $3.74 and 5.5% yield. Incr int exp of $0.19 would decr dist run rate to $3.55. We are maintaining our current PT and estimates pending outcome of investigations. We would note ETP released stmt today defending their position.
� Timing of final outcomes difficult to predict. Although FERC may be resolved faster than CFTC given procedures involved.
� We believe headline risk will continue to weigh on stock near-term, but LT fundamentals remain intact.