It is my understanding that a substantial potion of ETP's pipeline fee income is protected by "Capacity Reservation Charges". These fees are offset or "paid for" if volumes are utilized, but apply in the event of no volumes. This is the significance of the CHK announcement re the Tiger pipeline project and is the purpose of "Open Seasons". The "Capacity Reservation Charges are typically 10 to 15 years for new pipelines and vary based on market conditions upon renewal.
The risk comes in the event of a long term decline in volumes on a particular pipeline; in that case, the shippers will be able to negotiate improved terms on renewal.
The practical downside we are facing (in the next few years) is a decrease in Unit distributioin increases (or continued flat distributions). Decreases in Unit distributions are extremely unlikely for ETP. Some MLP's (notable, the "gatherers and processors") face far diffenent circumstances.
The concern is with gas production going down 3 to 5% in 2009 (per an article in Bloomberg today), if ETP customers pay based on volume transported, there is a certain risk on revenue to the downside. Can we say this is a fair statement?
With ETE offering 1) a history of growing the distribution at 2.5x the rate of ETPs dist. growth (including 4x in the past year) 2) a solid projected future growth for ETP (the 1.4x gives a lot of cushion) and 3) CAGR forecasts for ETP are for 4%/year, which would give ETE a CAGR of 10% - 16% on the historical ratios
I am amazed at how low ETE's price is (same as 'how high ETE's yield is'). In this crazy market environment we are in, ETE is a steal right now. The 11% yield for ETE is just way to high, and I don't see the numerator in the yield equation going down. That just leaves the denominator to go up. A 9.97% yield (equal to ETPs...which still makes little sense) would be an ETE price of $20.47 (10% above where we are now). At a perfectly reasonable 8% yield (IMHO closer to where ETE should be given ETP at ~10%) would be a price of $25.50, or 38% above where today's price.