As filed with the Securities and Exchange Commission on July 19, 2011
Registration No. 333-163842
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Post-Effective
Amendment No. 1 to
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Duncan Energy Partners L.P.
(Name of registrant as specified in its charter)
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Delaware
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20-5639997
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Stephanie C. Hildebrandt
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1100 Louisiana, 10th Floor
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1100 Louisiana, 10th Floor
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Houston, Texas 77002
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Houston, Texas 77002
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(713) 381-6500
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(713) 381-6500
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(Address, including zip code, and telephone, number
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(Name, address, including zip code, and telephone number,
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including area code, of Registrant’s principal executive offices)
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including area code, of agent for service)
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Copies to:
David C. Buck
Andrews Kurth LLP
600 Travis, Suite 4200
Houston, Texas 77002
(713) 220-4200
Approximate date of commencement of proposed sale to the public:
From
time to time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following box:
þ
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933,
other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box:
o
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for
the same offering.
o
If this Form is a registration statement pursuant to General Instruction
I.D. or a post-effective amendment thereto that shall become effective upon filing
with the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box.
o
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to Rule 413(b) under the Securities Act,
check the following box.
o
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
þ
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Non-accelerated filer
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Smaller reporting company
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(Do not check if a smaller reporting company)
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EXPLANATORY NOTE
On December 18, 2009, Duncan Energy Partners L.P. (the “Partnership”) filed a Registration
Statement on Form S-3 (Registration No. 333-163842) with the Securities and Exchange Commission in
order to register 2,000,000 common units representing limited partner interests in the Partnership,
for offering and sale to participants in the Partnership’s Distribution Reinvestment Plan (the
“Plan”). The Registration Statement became effective immediately upon filing.
Effective July 19, 2011, the Partnership appointed a new administrator for the Plan.
Information concerning the operation of the Plan is provided in the definitive prospectus filed as
part of this Post-Effective Amendment No. 1 to the Registration Statement. This prospectus
discloses updated information in respect of the manner in which the Plan operates and identifies
the new administrator of the Plan: Wells Fargo Shareowner Services, a division of Wells Fargo Bank,
N.A.
— PROSPECTUS
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Distribution Reinvestment Plan
2,000,000 Common Units
With this prospectus, we are offering participation in our Distribution Reinvestment Plan to
owners of our common units. We have appointed Wells Fargo Shareowner Services, a division of Wells
Fargo Bank, N.A., as the administrator of the Plan. The Plan provides a simple, convenient and
no-cost means of investing in our common units.
Plan Highlights:
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You may participate in the Plan if you currently are a unitholder of record of
our common units or if you own our common units through your broker (by having your broker
participate on your behalf).
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You may purchase additional common units by reinvesting all or a portion of the
cash distributions paid on your common units.
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You may purchase our common units at a discount ranging from 0% to 5%
(currently set at 5%) without paying any service fees, brokerage trading fees or other
charges. (Note: If you participate in the Plan through your broker, you should consult with
your broker; your broker may charge you a service fee.)
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Your participation in the Plan is voluntary, and you may terminate your account at any time.
You should read carefully this prospectus before deciding to participate in the Plan. You
should read the documents we have referred you to in the “Where You Can Find More Information”
section of this prospectus for information on us and for our financial statements.
Our common units are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol
“DEP.”
Limited partnerships are inherently different from corporations. Investing in our common units
involves risk. You should review carefully “Risk Factors” beginning on page 3 for a discussion of
important risks you should consider before enrolling in the Plan. We suggest you retain this
prospectus for future reference.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is July 19, 2011.
TABLE OF CONTENTS
You should rely only on the information contained or incorporated by reference into this
prospectus. We have not authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not rely on it. You
should not assume that the information incorporated by reference into or provided in this
prospectus is accurate as of any date other than the date on the front of this prospectus.
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OUR COMPANY
As used in this prospectus, references to
“we,” “us,” “our,” “the Partnership”
or
“Duncan
Energy”
are intended to mean the business and operations of Duncan Energy Partners L.P. and its
consolidated subsidiaries since February 5, 2007, the date of our initial public offering, and,
unless the context requires otherwise, our operating partnership, DEP Operating Partnership, L.P.
References to
“DEP GP”
mean DEP Holdings, LLC, which is our general partner.
References to
“DEP Operating Partnership”
mean DEP Operating Partnership, L.P., which is a
wholly owned subsidiary of Duncan Energy that conducts substantially all of our business.
References to
“Enterprise Products Partners”
mean Enterprise Products Partners L.P., a
publicly traded partnership, the common units of which are listed on the NYSE under the ticker
symbol “EPD.”
References to
“EPO”
mean Enterprise Products Operating LLC, a wholly owned subsidiary of
Enterprise Products Partners that conducts substantially all of its business. EPO has a
controlling interest in the Partnership’s general partner and is a significant owner of the
Partnership’s common units.
References to
“EPCO”
mean Enterprise Products Company, a privately held affiliate of
Enterprise Products Partners.
Duncan Energy Partners L.P. is a publicly traded Delaware limited partnership, the common
units of which are listed on the NYSE under the ticker symbol “DEP.” We were formed in September
2006 and did not own any assets prior to February 5, 2007, which was the date we completed our
initial public offering and acquired controlling interests in the DEP I Midstream Businesses from
EPO. Our business purpose is to acquire, own and operate a diversified portfolio of midstream
energy assets and to support the growth objectives of EPO and other affiliates under common
control. We are engaged in the business of: (i) natural gas liquids, or NGLs, transportation,
fractionation and marketing; (ii) storage of NGL, petrochemical and refined products; (iii)
transportation of petrochemical products; and (iv) gathering, transportation, marketing and storage
of natural gas.
At March 31, 2011, we are owned 99.3% by our limited partners and 0.7% by our general partner,
DEP GP. EPO beneficially owned approximately 58.5% of our limited partner interests and 100% of
DEP GP. On April 28, 2011, we and our general partner entered into a definitive merger agreement
with Enterprise, its general partner and certain of their subsidiaries, in which a wholly owned
subsidiary of Enterprise Products Partners will merge with and into Duncan Energy, with Duncan
Energy surviving the merger (the “Merger”). At the effective time of the Merger, all of our common
units outstanding will be cancelled and converted into the right to receive common units
representing limited partner interests in Enterprise Products Partners based on an exchange rate of
1.01 Enterprise common units for each of our common units. If approved by requisite unitholder
approval, the Merger is expected to close during the third quarter of 2011.
Our principle executive offices are located at 1100 Louisiana, 10th Floor, Houston, Texas
77002. Our telephone number is (713) 381-6500 and our website is
www.deplp.com
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Business Strategy
Our primary business objectives are to maintain and, over time, to increase our cash available
for distributions to our unitholders. Our business strategies to achieve these objectives are to:
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optimize the benefits of our economies of scale, strategic location and
pipeline connections serving natural gas, NGL, petrochemical and refining customers;
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manage our portfolio of midstream energy assets to minimize the volatility of
our cash flows;
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invest in organic growth projects to capitalize on market opportunities that
expand our asset base and generate additional cash flow; and
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pursue acquisitions of assets and businesses from related parties, or in
accordance with our business opportunity agreements, from third parties.
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Our Business Segments
We have three reportable business segments: (i) Natural Gas Pipelines & Services; (ii) NGL
Pipelines & Services; and (iii) Petrochemical Services. Our business segments are generally
organized and managed according to the type of services rendered (or technologies employed) and
products produced and/or sold.
Natural Gas Pipelines & Services.
Our Natural Gas Pipelines & Services business segment
includes approximately 9,400 miles of natural gas pipeline systems that provide for the gathering
and transportation of natural gas in Louisiana and Texas. We lease natural gas storage facilities
located in Texas and Louisiana. This segment also includes our related natural gas marketing
activities.
NGL Pipelines & Services.
Our NGL Pipelines & Services business segment includes our NGL and
related product storage facility located in Mont Belvieu, Texas, our South Texas NGL System
(pipelines and fractionators) and the results from NGL marketing activities related to our Big
Thicket Gathering System. Our South Texas NGL System is a group of assets comprised of
approximately 1,480 miles of NGL pipelines and two NGL fractionators in South Texas and includes
the leased Markham and Almeda NGL storage facilities.
Petrochemical Services.
Our Petrochemical Services business segment reflects the operations of
our Lou-Tex Propylene Pipeline and Sabine Propylene Pipeline. These pipelines provide for the
transportation of polymer-grade and chemical-grade propylene in Texas and Louisiana. Polymer-grade
propylene is used in the manufacture of polypropylene. Chemical-grade propylene is a basic
petrochemical used in plastics, synthetic fibers and foams.
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RISK FACTORS
An investment in our common units involves risks. You should consider carefully the following
risk factors relating to our Distribution Reinvestment Plan, or the “Plan,” together with all of
the other information included in, or incorporated by reference into, this prospectus before
deciding to participate in the Plan. The risks relating to the Plan are not the only risks
associated with an investment in our common units. For (i) risks inherent in our business that may
have an impact on our results of operations and financial condition, (ii) risks inherent in an
investment in us related to our common units as a result of our partnership structure, and (iii)
tax risks to common unitholders, please read Item 1A “Risk Factors” in Part I of our most recent
Annual Report on Form 10-K and Item 1A “Risk Factors” in Part II of our Quarterly Reports on Form
10-Q filed for quarterly periods ending after our most recent Annual Report and our future annual
and quarterly reports that are incorporated by reference into this prospectus, as such information
may be amended or supplemented by any future filings with the Securities and Exchange Commission
(the “Commission”). This prospectus also contains or incorporates by reference forward-looking
statements that involve risks and uncertainties. Please read “Forward-Looking Statements.” Our
actual results could differ materially from those anticipated in the forward-looking statements as
a result of certain factors, including the risks described above and elsewhere in this prospectus.
If the events or possibilities described in any of these risks occur, our business, financial
condition or results of operation could be adversely affected. In that case, the trading price of
our common units could decline, and you could lose all or part of your investment.
Risks Relating to the Plan
You will not know the price of the common units you are purchasing under the Plan at the time
you authorize the investment or elect to have your distributions reinvested. The price of our
common units may fluctuate between the time you decide to purchase common units under the Plan and
the time of actual purchase. As a result, you may purchase common units at a price higher than the
price you anticipated.
If you instruct the administrator to sell common units under the Plan, you will not be able to
direct the time or price at which your common units are sold. The price of our common units may
decline between the time you decide to sell common units and the time of actual sale.
If you decide to withdraw from the Plan and you request a certificate for whole common units
credited to you under the Plan from the administrator, the market price of our common units may
decline between the time you decide to withdraw and the time you receive the certificate.
THE PLAN
Plan Overview
The Plan offers a simple, convenient and no-cost way for owners of our common units to invest
all or a portion of their cash distributions in our common units. The Plan is designed for
long-term investors who wish to invest and build their common unit ownership over time. Unlike an
individual brokerage account, the timing of purchases is subject to the provisions of the Plan. The
principal terms and conditions of the Plan are summarized in this prospectus under “Commonly Asked
Questions” below.
We have appointed Wells Fargo Shareowner Services, or the “Administrator,” to administer the
Plan, and certain administrative support will be provided to the Administrator by its designated
affiliates. Together, the Administrator and its affiliates will purchase and hold common units for
Plan participants, keep records, send statements and perform other duties required by the Plan.
Only registered holders of our common units can participate directly in the Plan. If you are a
beneficial owner of common units in a brokerage account and wish to reinvest your distributions,
you can make arrangements with your broker or nominee to participate in the Plan on your behalf, or
you can request that your common units become registered in your name.
Please read this entire prospectus for a more detailed description of the Plan. If you are a
registered holder of our common units and would like to participate in the Plan, you can enroll
online via Shareowner Online, or by completing the enclosed Enrollment Form and mailing it to the
Administrator in the envelope provided.
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COMMONLY ASKED QUESTIONS
1. How can I participate in the Plan?
If you are a current holder of record, or registered holder, of our common units, you may
participate directly in the Plan. If you own common units that are registered in someone else’s
name (for example, a bank, broker or trustee), the Plan allows you to participate through such
person, should they elect to participate, without having to withdraw your common units from such
bank, broker or trustee. If your broker or bank elects not to participate in the Plan on your
behalf, you can participate by withdrawing your common units from such bank or broker and
registering your common units in your name.
2. How do I get started?
If you are a registered holder of our common units, once you have read this prospectus, you
can get started by enrolling in the Plan online at
www.shareowneronline.com
, or by completing the
enclosed Enrollment Form and mailing it to the Administrator in the envelope provided. Your
participation will begin promptly after your authorization is received. Once you have enrolled,
your participation continues automatically, as long as you wish. If you own common units that are
registered in someone else’s name (for example a bank, broker or trustee), then you should contact
such person to arrange for them to participate in the Plan on your behalf.
3. How are distributions reinvested?
By enrolling in the Plan, you direct the Administrator to apply distributions to the purchase
of additional common units in accordance with the terms and conditions of the Plan. You may elect
to reinvest all or a portion of your distributions in additional common units. The Administrator
will invest distributions in whole and fractional common units on the quarterly distribution
payment date (the investment date). No interest will be paid on funds held by the Administrator
pending investment.
If the Administrator receives your Enrollment Form on or before the record date for the
payment of the next distribution, the amount of the distribution that you elect to be reinvested
will be invested in additional common units for your Plan account. If the Enrollment Form is
received in the period after any distribution record date, that distribution will be paid by check
or automatic deposit to a bank account that you designate and your initial distribution
reinvestment will commence with the following distribution.
You may change your distribution reinvestment election at any time on-line by accessing your
account online at
www.shareowneronline.com
, by telephone or by notifying the Administrator in
writing. To be effective with respect to a particular distribution, any such change must be
received by the Administrator on or before the record date for that distribution.
4. What reinvestment options are provided under the Plan?
When you enroll, you may choose one of the following options regarding cash distributions paid
on your common units:
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Full Distribution Reinvestment:
Distributions on all units of our common units
registered in your name will be reinvested in additional units of our common units.
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Partial Distribution Reinvestment:
A portion of your cash distribution will be
paid to you in cash, and the remainder will automatically be reinvested to purchase
additional units. To do this, you must specify the number of whole units on which you wish
to receive cash distributions. You may choose to have these cash distributions directly
deposited to your designated U.S. bank account instead of receiving a check by mail. For
direct deposit of cash distributions, contact the Administrator to request an authorization
for electronic direct deposit form, complete and return the form to Wells Fargo Shareowner
Services. Be sure to include a voided check for checking accounts or savings deposit slip
for savings accounts.
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If you do not specify a distribution reinvestment option when you enroll, your Plan account
will be automatically set up for the full distribution reinvestment option.
5. When are distributions reinvested?
The investment date will be the distribution payment date for each quarter (generally, before
the 15th calendar day of February, May, August and November). The record date for eligibility to
receive distributions generally will be the last business day of the month preceding a month in
which distributions are paid (generally, the last day of January, April, July and October). In the
unlikely event that, due to unusual market conditions, the Administrator is unable to invest the
funds within 30 days of the distribution payment date, the Administrator will return the funds to
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you by check or by automatic deposit to a bank account that you designate. No interest will be
paid on funds held by the Administrator pending investment.
During the period that distribution payments are held by the Administrator pending their
investment under the Plan, such funds may be invested in certain “Permitted Investments.” For
purposes of this Plan, “Permitted Investments” means any money market mutual funds registered under
the Investment Company Act (including those of an affiliate of the Administrator or for which the
Administrator or any of its affiliates provides management advisory or other services) consisting
entirely of (i) direct obligations of the United States of America or (ii) obligations fully
guaranteed by the United States of America. The risk of any loss from such Permitted Investments
shall be the responsibility of the Administrator. Investment income from such Permitted
Investments shall be retained by the Administrator.
6. What is the source and price of common units purchased under the Plan?
We have the sole discretion to determine whether common units purchased under the Plan will
come from our authorized but unissued common units or from common units purchased on the open
market by the Administrator. We currently intend to use our authorized but unissued common units
for all common units to be purchased under the Plan.
The price for authorized but unissued common units purchased with reinvested distributions
will be the average of the high and low trading prices of the common units on the New York Stock
Exchange—Composite Transactions for the five trading days immediately preceding the investment
date, less a discount ranging from 0% to 5%. The discount is initially set at 5%; therefore, the
initial purchase price for authorized but unissued common units purchased with reinvested
distributions will be 95% of such average trading price. (Note: If you participate in the Plan
through your broker, you should consult with your broker to determine if your broker will charge
you a service fee.)
The purchase price for common units purchased with reinvested distributions on the open market
will be the weighted average price of all common units purchased for the Plan for the respective
investment date, less a discount ranging from 0% to 5%. (Note: If you participate in the Plan
through your broker, you should consult with your broker to determine if your broker will charge
you a service fee.)
We will provide notice to you of any changes in the discount rate at least 30 days prior to
the following record date.
7. Who is the Administrator of the Plan?
Wells Fargo Shareowner Services is the Administrator of the Plan. Certain administrative
support will be provided to the Administrator by its designated affiliates. If you have questions
regarding the Plan, please write to the Administrator at the following address: Wells Fargo
Shareowner Services, P.O. Box 64856, St. Paul, MN 55154-0856, or call the Administrator at
1-800-468-9716 (toll free from inside the United States or Canada) or 651-450-4064 (from outside
the United States). An automated voice response system is available 24 hours a day, 7 days a week.
Customer service representatives are available from 8:00 a.m. to 8:00 p.m., Eastern Standard Time,
Monday through Friday (except holidays). Please include a reference to Duncan Energy Partners L.P.
in all correspondence.
In addition, you may visit the Administrator’s website at
www.shareowneronline.com
. At this
website, if you are a registered holder of our common units, you can enroll in the Plan, obtain
information, and perform certain transactions on your Plan account.
8. What is the cost of participating in the Plan?
There is no fee for reinvesting distributions through the Plan. You may be responsible for
certain charges if you withdraw from the Plan. Additionally, if you are a beneficial owner of our
common units and are participating in the Plan through your broker, you should consult with your
broker; you may be charged a fee by your broker for participating in the Plan on your behalf.
9. How many common units will be purchased for my account?
If you are a registered holder of our common units and are directly participating in the Plan,
the number of common units, including fractional common units, purchased under the Plan will depend
on the amount of your cash distribution you elect to reinvest and the price of the common units
determined as provided above. Common units purchased under the Plan, including fractional common
units, will be credited to your account. Both whole and fractional common units will be purchased.
Fractional common units will be computed to three decimal places.
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If you are a beneficial owner and are participating in the Plan through your broker, you
should contact your broker for the details of how the number of common units you purchase will be
determined.
This prospectus relates to 2,000,000 of our common units registered for sale under the Plan.
We cannot assure you there will be enough common units to meet the requirements under the Plan. If
we do not have a sufficient number of authorized but unissued common units to meet the Plan
requirements during any quarter, and if the Administrator is unable to purchase a sufficient number
of common units in the open market, any reinvested distributions received by the Administrator but
not invested in our common units under the Plan will be returned to participants without interest.
10. What are the tax consequences of purchasing common units under the Plan?
Your cost basis for tax purposes in the common units you purchase under the Plan will be equal
to the amount of the distributions used to purchase those common units. Purchasing common units
pursuant to the Plan will not affect the tax obligations associated with the common units you
currently own. Participation in the Plan will reduce the amount of cash distributions available to
you to satisfy any tax obligations associated with owning common units. Please read “Material Tax
Consequences” for information relevant to holders of common units generally.
11. How can I withdraw from the Plan?
If you are a registered holder of our common units, you may discontinue the reinvestment of
your distributions at any time by providing notice to the Administrator. In addition, you may
change your distribution election by accessing your account online at
www.shareowneronline.com
. To
be effective for a particular distribution payment, the Administrator must receive notice on or
before the record date for that distribution. In addition, you may request that all or part of your
common units be sold. When your common units are sold through the Administrator, you will receive
the proceeds less applicable service and processing fees. See Addendum A.
If you are a beneficial owner of our common units and you are participating in the Plan
through your broker, you should direct your broker to discontinue participation in the Plan on your
behalf.
If you dispose of all the common units registered in your name, but do not give notice of
withdrawal to the Administrator, the Administrator will continue to reinvest the cash distributions
on any common units held in your account under the Plan until the Administrator is notified
otherwise.
Generally, an owner of common units may again become a participant in the Plan. However, we
reserve the right to reject the enrollment of a previous participant in the Plan on grounds of
excessive joining and termination. This reservation is intended to minimize administrative expense
and to encourage use of the Plan as a long-term investment service.
12. How will my common units be held under the Plan?
If you are a registered holder of our common units and you are directly participating in the
Plan, the common units that you acquire under the Plan will be maintained in your Plan account in
non-certificated form for safekeeping. Safekeeping protects your common units against physical
loss, theft or accidental destruction and also provides a convenient way for you to keep track of
your common units. Only common units held in safekeeping may be sold through the Plan.
If you own common units in certificated form, you may deposit your certificates for those
common units with the Administrator. Certificates should be delivered to the Administrator at 161
North Concord Exchange, South St. Paul, MN 55075-1139 by United States Post Office registered mail,
a national courier service or other receipted delivery service. Please be advised that choosing
registered, express or certified mail alone will not protect you should your certificates become
lost or stolen.
As the Administrator, Wells Fargo Shareowner Services can provide low-cost loss insurance for
certificates being returned for conversion to book-entry form. Mail loss insurance covers the cost
of the replacement surety bond only. Replacement transaction fees may also apply. To take
advantage of the optional mail loss insurance, simply include your $10.00 check, made payable to
WFSS Surety Program, along with your certificates and instructions.
To qualify for this service you must choose to use an accountable mail delivery service such
as Federal Express, United Parcel Service, DHL, Express Mail, Purolator, TNT or United States
Postal Service Registered Mail. Any one shipping package may not contain certificates exceeding a
total value of $100,000.
The value of certificate units is based on the closing market price of our common units on the
trading day prior to the documented mail date. Claims related to lost certificates under this
service must be made within 60 days of the
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documented delivery service mail date. This is specific coverage for the purpose of converting
certificated units to book-entry form and the surety is not intended to cover certificates being
tendered for certificate breakdown or exchange for other certificates.
If you choose another method of delivery or acquire your own mail loss insurance, we recommend
you insure your delivery for at least 2% of the market value of your securities.
You may request a certificate for all or a portion of the whole common units in your Plan
account from the Administrator. Upon request, the Administrator will mail a certificate to you
within two business days. Please allow an additional five to seven business days for delivery of
your certificate.
If you are a beneficial owner of our common units and you are participating in the Plan
through your broker, the common units that are purchased on your behalf under the Plan will be
maintained in your account with your broker.
13. How do I sell common units held under the Plan?
If you are a registered holder of our common units and you are directly participating in the
Plan, you can sell your Plan common units at any time by contacting the Administrator. Your sale
request will be processed, and your common units will, subject to market conditions and other
facts, generally be sold within 24 hours of receipt and processing of your request. Please note
that the Administrator cannot and does not guarantee the actual sale date or price, nor can it stop
or cancel any outstanding sale or issuance requests. All requests are final. The Administrator will
mail a check to you (less applicable sales fees) on the settlement date, which is three business
days after your common units have been sold. Please allow an additional five to seven business days
from the settlement date to receive your check.
Alternatively, you may choose to withdraw your common units from your Plan account and to sell
them through a broker of your choice. In this case you would have to request a certificate for your
common units from the Administrator prior to such sale.
If you are a beneficial owner of our common units and you are participating in the Plan
through your broker, you should contact your broker to sell your common units.
If you are an EPCO employee working in our Houston headquarters offices or if you are one of
our officers having a title of Vice President or higher, any sale by you of Plan common units is
subject to the trading window provisions of our insider trading policy. Those persons are allowed
to sell Plan common units only while the trading window is open (typically during the period
beginning on the second business day following the public announcement of the Partnership’s
financial results for the most recently completed fiscal quarter and ending on the last day of the
subsequent fiscal quarter). Sales of Plan common units by our executive officers are also subject
to Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
14. How will I keep track of my investments?
If you are a registered holder of our common units and you are directly participating in the
Plan, the Administrator will send you a transaction notice confirming the details of each
transaction that you make and a quarterly statement of your account.
If you are a beneficial owner of our common units and you are participating in the Plan
through your broker, the details of the reinvestment transactions will be maintained by your
broker. You should contact your broker to determine how this information will be provided to you.
You can also keep track of your account activity by accessing your account online at
www.shareowneronline.com
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15. Can the Plan be suspended, modified or terminated?
We reserve the right to suspend, modify or terminate the Plan at any time. Participants will
be notified of any suspension, modification or termination of the Plan. If you are a registered
holder of our common units and you are directly participating in the Plan, upon our termination of
the Plan, a certificate will be issued to you for the number of whole common units in your account.
Any fractional common unit in your Plan account will be converted to cash and remitted to you by
check.
16. What would be the effect of any unit splits, unit distributions or other distributions?
Any common units we distribute as a distribution on common units (including fractional common
units) that are credited to your account under the Plan, or upon any split of such common units,
will be credited to your account. Distributions or splits distributed on all other common units
held by you and registered in your own name will be mailed directly to you. In a rights offering,
your entitlement will be based upon your total holdings, including those
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credited to your account under the Plan. Rights applicable to common units credited to your
account under the Plan will be sold by the Administrator and the proceeds will be credited to your
account under the Plan and applied to the purchase of common units on the next investment date.
If you want to exercise, transfer or sell any portion of the rights applicable to the common
units credited to your account under the Plan, you must request, at least two days prior to the
record date for the issuance of any such rights, that a portion of the common units credited to
your account be transferred from your account and registered in your name.
Responsibilities Under the Plan
We, the Administrator and any agent will not be liable in administering the Plan for any act
done in good faith, or for any omission to act in good faith, including, without limitation, any
claim of liability arising out of failure to terminate a participant’s account upon that
participant’s death prior to the receipt of notice in writing of such death. Since we have
delegated all responsibility for administering the Plan to the Administrator, we specifically
disclaim any responsibility for any of its actions or inactions in connection with the
administration of the Plan.
Neither we nor the Administrator, which is acting solely as an agent in connection with the
Plan, will have any duties or responsibilities in connection with the Plan other than those
expressly set forth in the Plan or as imposed by applicable laws, and no implied duties, fiduciary
or otherwise, shall be read into this Plan.
The Administrator is authorized to choose a broker/dealer, including an affiliated
broker/dealer, at its sole discretion to facilitate purchases and sales of common units for you.
The Administrator will furnish the name of the registered broker/dealer, including any affiliated
broker/dealer, utilized in unit transactions within a reasonable time upon written request from
you.
In the absence of negligence or willful misconduct on its part, the Administrator, whether
acting directly or through agents or attorneys shall not be liable for any action taken, suffered,
or omitted or for any error of judgment made by it in the performance of its duties hereunder. In
no event shall the Administrator be liable for special, indirect or consequential loss or damage of
any kind whatsoever (including but not limited to lost profit), even if the Administrator has been
advised of the likelihood of such loss or damage and regardless of the form of action.
The Administrator shall: (i) not be required to and shall make no representations and have no
responsibilities as to the validity, accuracy, value or genuineness of any signatures or
endorsements, other than its own; and (ii) not be obligated to take any legal action hereunder that
might, in its judgment, involve any expense or liability, unless it has been furnished with
reasonable indemnity.
The Administrator shall not be responsible or liable for any failure or delay in the
performance of its obligations under this Plan arising out of or caused, directly or indirectly, by
circumstances beyond its reasonable control, including, without limitation, acts of God;
earthquakes; fires; floods; wars; civil or military disturbances; sabotage; epidemics; riots;
interruptions, loss or malfunctions of utilities; computer (hardware or software) or communications
services; accidents; labor disputes; acts of civil or military authority or governmental actions;
it being understood that the Administrator shall use reasonable efforts which are consistent with
accepted practices in the banking industry to resume performance as soon as practicable under the
circumstances.
You should recognize that neither we, the Administrator, nor any agent can assure you of a
profit or protect you against an economic loss on common units purchased under the Plan.
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USE OF PROCEEDS
We do not know either the number of common units that will be purchased under the Plan or the
prices at which common units will be sold to participants. In connection with purchases of
authorized but unissued common units under the Plan, our general partner is entitled to make, but
is not obligated to make, a capital contribution in order to maintain its general partner interest
in us, which is currently 0.7%. The net proceeds we realize from sales of our authorized but
unissued common units pursuant to the Plan, including our general partner’s proportionate capital
contribution, if any, will be used for general partnership purposes.
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DESCRIPTION OF OUR COMMON UNITS
Our common units represent limited partner interests in us that entitle the holders thereof to
participate in our cash distributions and to exercise the rights or privileges available to limited
partners under our partnership agreement. For a description of the relative rights and preferences
of holders of units and our general partner in and to partnership distributions, please read “How
We Make Cash Distributions.” For a general discussion of the expected federal income tax
consequences of owning and disposing of common units, please read “Material Tax Consequences.” For
a description of the rights and privileges of limited partners under our partnership agreement,
including voting rights, please read “Description of Our Partnership Agreement.”
Under our partnership agreement, we may issue, without further unitholder action, an unlimited
number of additional limited partner interests and other equity securities with such rights,
preferences and privileges as may be established by our general partner in its sole discretion.
Our common units are listed for trading on the NYSE under the symbol “DEP.”
Transfer of Units
By transfer of our common units in accordance with our partnership agreement, each transferee
of our common units will be admitted as a common unitholder with respect to the units transferred
when such transfer and admission is reflected in our books and records. Additionally, each
transferee of our units:
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becomes the record holder of the units;
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represents that the transferee has the capacity, power and authority to enter
into and become bound by our partnership agreement;
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automatically agrees to be bound by the terms and conditions of, and is deemed
to have executed, our partnership agreement;
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grants powers of attorney to the officers of our general partner and any
liquidator of our partnership as signified in our partnership agreement;
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gives the consents and approvals contained in our partnership agreement, such
as the approval of all transactions and agreements that we are entering into in connection
with our formation and our initial public offering.
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An assignee will become a limited partner of our partnership for the transferred common units
automatically upon the recording of the transfer on our books and records.
We may, at our discretion, treat the nominee holder of a common unit as the absolute owner. In
that case, the beneficial holder’s rights are limited solely to those that it has against the
nominee holder as a result of any agreement between the beneficial owner and the nominee holder.
Common units are securities and are transferable according to the laws governing transfers of
securities. In addition to other rights acquired upon transfer, the transferor gives the transferee
the right to become a limited partner in our partnership for the transferred common units.
Until a common unit has been transferred on our books, we and the transfer agent,
notwithstanding any notice to the contrary, may treat the record holder of the common unit as the
absolute owner for all purposes, except as otherwise required by law or stock exchange regulations.
Transfer Agent and Registrar
Our transfer agent and registrar for the common units is Wells Fargo Shareowner Services.
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HOW WE MAKE CASH DISTRIBUTIONS
Following is a description of the relative rights and preferences of holders of our common
units in and to cash distributions. The information presented in this section assumes that our
general partner continues to make capital contributions to Duncan Energy in order to maintain its
general partner interest in Duncan Energy, which is currently 0.7%.
Distributions of Available Cash
General
Within approximately 45 days after the end of each quarter, commencing with the quarter ending
on March 31, 2007, we have been and will continue to distribute all of our available cash to
unitholders of record on the applicable record date. We will distribute 99.3% of our available cash
to our common unitholders, pro rata, and 0.7% to our general partner. Unlike many publicly traded
limited partnerships, our general partner is not entitled to any incentive distributions, and we do
not have any subordinated units.
Definition of Available Cash
Available cash is defined in our partnership agreement and generally means, with respect to
any fiscal quarter, all cash and cash equivalents on the date of determination of available cash
for such quarter:
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less the amount of cash reserves established by the general partner to:
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provide for the proper conduct of our business (including reserves for
future capital expenditures and for our future credit needs);
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comply with applicable law or any debt instrument or other agreement; or
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provide funds for distributions to unitholders and our general partner in
respect of any one or more of the next four quarters.
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Distributions of Cash upon Liquidation
If we dissolve in accordance with our partnership agreement, we will sell or otherwise dispose
of our assets in a process called a liquidation. We will first apply the proceeds of liquidation to
the payment of our creditors and the liquidator in the order of priority provided in our
partnership agreement and by law and, thereafter, we will distribute any remaining proceeds to our
unitholders and our general partner in accordance with their respective capital account balances as
so adjusted.
Manner of Adjustments for Gain
The manner of the adjustment is set forth in our partnership agreement. Upon our liquidation,
we will allocate any net gain (or unrealized gain attributable to assets distributed in kind to our
partners) as follows:
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, to our general partner and the holders of our common units having
negative balances in their capital accounts to the extent of and in proportion to such
negative balances; and
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thereafter
, 99.3% to all of our unitholders, pro rata, and 0.7% to our general
partner.
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Manner of Adjustments for Losses
Upon our liquidation, any loss will generally be allocated to our general partner and our
unitholders as follows:
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, 99.3% to the holders of our common units in proportion to the positive
balances in their respective capital accounts and 0.7% to our general partner, until the
capital accounts of our unitholders have been reduced to zero; and
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thereafter
, 100% to our general partner.
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Adjustments to Capital Accounts
In addition, interim adjustments to capital accounts will be made at the time we issue
additional partnership interests or make distributions of property. Such adjustments will be based
on the fair market value of the partnership interests or the property distributed and any gain or
loss resulting therefrom will be allocated to our unitholders and our general partner in the same
manner as gain or loss is allocated upon liquidation.
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DESCRIPTION OF OUR PARTNERSHIP AGREEMENT
The following is a summary of the material provisions of our partnership agreement.
We summarize the following provisions of our partnership agreement elsewhere in this
prospectus:
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with regard to distributions of available cash, please read “How We Make Cash
Distributions;”
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with regard to fiduciary duties of our general partner, please read “Conflicts
of Interest, Business Opportunity Agreements and Fiduciary Duties;”
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with regard to rights of holders of common units, please read “Description of
Our Common Units;” and
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with regard to allocations of taxable income and other matters, please read
“Material Tax Consequences.”
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Organization and Duration
We were organized on September 29, 2006 and have a perpetual existence.
Purpose
Under our partnership agreement, we are permitted to engage in any business activity that is
approved by our general partner and that lawfully may be conducted by a limited partnership
organized under Delaware law and, in connection therewith, to exercise all of the rights and powers
conferred upon us pursuant to the agreements relating to such business activity; provided, however,
that our general partner shall not cause us to engage, directly or indirectly in any business
activity that our general partner determines would cause us to be treated as an association taxable
as a corporation or otherwise taxable as an entity for federal income tax purposes. Affiliates of
our general partner generally will not be obligated to present to us or our general partner any
business opportunities unless and until the business opportunities have been rejected by other
publicly traded affiliates of our general partner, including Enterprise Products Partners.
Power of Attorney
Each limited partner, and each person who acquires a common unit from a unitholder, by
accepting the common unit, automatically grants to our general partner and, if appointed, a
liquidator, a power of attorney to, among other things, execute and file documents required for our
qualification, continuance or dissolution. The power of attorney also grants the authority to
amend, and to make consents and waivers under, our partnership agreement. Please read “—
Amendments to Our Partnership Agreement.”
Cash Distributions
Our partnership agreement specifies the manner in which we will make cash distributions to
holders of our common units and other partnership securities as well as to our general partner in
respect of its general partner interest. For a description of these cash distribution provisions,
please read “How We Make Cash Distributions.”
Capital Contributions
Common unitholders are not obligated to make additional capital contributions, except as
described below under “— Limited Liability.”
Our general partner has the right, but not the obligation, to contribute a proportionate
amount of capital to us to maintain its 0.7% general partner interest if we issue additional units.
Our general partner’s 0.7% interest, and the percentage of our cash distributions to which it is
entitled, will be proportionately reduced if we issue additional units in the future and our
general partner does not contribute a proportionate amount of capital to us to maintain its 0.7%
general partner interest. Our general partner will be entitled to make a capital contribution in
order to maintain its 0.7% general partner interest in the form of the contribution to us of common
units based on the current market value of the contributed common units.
Limited Liability
Assuming that a limited partner does not participate in the control of our business within the
meaning of the Delaware Act and that he otherwise acts in conformity with the provisions of our
partnership agreement, his liability under the Delaware Act will be limited, subject to possible
exceptions, to the amount of capital he is obligated to contribute to us for his common units plus
his share of any undistributed profits and assets. If it were determined, however, that the right,
or exercise of the right, by the limited partners as a group:
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to remove or replace the general partner;
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to approve some amendments to the partnership agreement; or
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to take other action under the partnership agreement;
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constituted “participation in the control” of our business for the purposes of the Delaware Act,
then the limited partners could be held personally liable for our obligations under the laws of
Delaware, to the same extent as the general partner. This liability would extend to persons who
transact business with us and reasonably believe that the limited partner is a general partner.
Neither our partnership agreement nor the Delaware Act specifically provides for legal recourse
against the general partner if a limited partner were to lose limited liability through any fault
of the general partner. While this does not mean that a limited partner could not seek legal
recourse, we know of no precedent for this type of a claim in Delaware case law.
Under the Delaware Act, a limited partnership may not make a distribution to a partner if,
after the distribution, all liabilities of the limited partnership, other than liabilities to
partners on account of their partnership interests and liabilities for which the recourse of
creditors is limited to specific property of the partnership, would exceed the fair value of the
assets of the limited partnership. For the purpose of determining the fair value of the assets of a
limited partnership, the Delaware Act provides that the fair value of property subject to liability
for which recourse of creditors is limited shall be included in the assets of the limited
partnership only to the extent that the fair value of that property exceeds the nonrecourse
liability. The Delaware Act provides that a limited partner who receives a distribution and knew at
the time of the distribution that the distribution was in violation of the Delaware Act shall be
liable to the limited partnership for the amount of the distribution for three years. Under the
Delaware Act, a substituted limited partner of a limited partnership is liable for the obligations
of his assignor to make contributions to the partnership, except that such person is not obligated
for liabilities unknown to him at the time he became a limited partner and that could not be
ascertained from the partnership agreement.
Limitations on the liability of limited partners for the obligations of a limited partner have
not been clearly established in many jurisdictions. If in the future, by our ownership in an
operating company or otherwise, it is determined that we conduct business in any state without
compliance with the applicable limited partnership or limited liability company statute, or that
the right or exercise of the right by the limited partners as a group to remove or replace the
general partner, to approve some amendments to our partnership agreement, or to take other action
under our partnership agreement constituted “participation in the control” of our business for
purposes of the statutes of any relevant jurisdiction, then the limited partners could be held
personally liable for our obligations under the law of that jurisdiction to the same extent as the
general partner under the circumstances. We will operate in a manner that the general partner
considers reasonable and necessary or appropriate to preserve the limited liability of the limited
partners.
Voting Rights
The following is a summary of the unitholder vote required for the matters specified below. In
voting their common units, affiliates of our general partner will have no fiduciary duty or
obligation whatsoever to us or the limited partners, including any duty to act in good faith or in
the best interests of us or the limited partners.
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Issuance of additional common units or other
equity interests
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No approval right.
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Amendment of our partnership agreement
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Certain amendments may be
made by our general
partner without the
approval of our
unitholders. Other
amendments generally
require the approval of
holders of a majority of
our outstanding common
units. Please read “—
Amendments to Our
Partnership Agreement.”
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Merger of our partnership or the sale of all or
substantially all of our assets
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Holders of a majority of
our outstanding common
units in certain
circumstances. Please read
“— Merger, Consolidation,
Conversion, Sale or Other
Disposition of Assets.”
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Dissolution or our partnership
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Holders of a majority of
our outstanding common
units. Please read “—
Termination or
Dissolution.”
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Reconstitution or our partnership upon
dissolution
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Holders of a majority of
our outstanding common
units. Please read “—
Termination or
Dissolution.”
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Withdrawal of our general partner
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Under most circumstances,
the approval of holders of
a majority of the common
units, excluding common
units held by our general
partner and its
affiliates, is required
for the withdrawal of the
general partner prior to
December 31, 2016 in a
manner that would cause a
dissolution of our
partnership. Please read
“— Withdrawal or Removal
of Our General Partner.”
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Removal of our general partner
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Holders of not less than
66-2/3% of the outstanding
common units, including
common units held by our
general partner and its
affiliates. Please read
“— Withdrawal or Removal
of Our General Partner.”
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Transfer of the general partner interest
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Our general partner may
transfer all, but not less
than all, of its general
partner interest in us
without a vote of our
unitholders to (i) an
affiliate (other than an
individual) or (ii)
another entity in
connection with its merger
or consolidation with or
into, or sale of all or
substantially all of its
assets to, such person.
The approval of holders of
a majority of the common
units, excluding common
units held by the general
partner and its
affiliates, is required in
other circumstances for a
transfer of the general
partner interest to a
third party prior to
December 31, 2016. Please
read “— Transfer of
General Partner Interest.”
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Transfer of ownership interests in our general
partner
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No approval required at
any time. Please read “—
Transfer of Ownership
Interests in Our General
Partner.”
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Issuance of Additional Securities
Our partnership agreement authorizes us to issue an unlimited number of additional limited
partner interests and other equity securities that may be senior to our common units on terms and
conditions established by our general partner in its sole discretion without the approval of our
unitholders.
It is possible that we will fund acquisitions through the issuance of additional common units
or other equity securities. Holders of any additional common units we issue will be entitled to
share equally with the then-existing holders of common units in our cash distributions. In
addition, the issuance of additional partnership interests may dilute the value of the interests of
the then-existing holders of common units in our net assets.
In accordance with Delaware law and the provisions of our partnership agreement, we may also
issue additional partnership interests that, as determined by our general partner, may have special
voting rights to which common units are not entitled. In addition, our partnership agreement does
not prohibit the issuance by our subsidiaries of equity securities, which may effectively rank
senior to the common units.
Upon issuance of additional common units or other partnership securities, our general partner
will be entitled, but will not be required, to make additional capital contributions to the extent
necessary to maintain its 0.7% general partner interest in us. If the general partner does not make
additional capital contributions to maintain its 0.7% general partner interest in us, its interest
will be decreased to its pro rata portion of its relative capital account. Please read “—
Liquidation and Distribution of Proceeds.” Our general partner and its affiliates have the right,
which they may from time to time assign in whole or in part to any of their affiliates, to purchase
common units or other equity securities whenever, and on the same terms that, we issue those
securities to persons other than our general partner and its affiliates, to the extent necessary to
maintain their limited partner percentage interests in us that existed immediately prior to the
issuance. Our general partner and its affiliates owned approximately 58.5% of our outstanding
common units as of March 31, 2011. The holders of common units will not have preemptive rights to
acquire additional common units or other partnership interests in us.
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Amendments to Our Partnership Agreement
General
Amendments to our partnership agreement may be proposed only by or with the consent of our
general partner. However, our general partner will have no duty or obligation to propose any
amendment and may decline to do so free of any fiduciary duty or obligation whatsoever to us or the
limited partners. In order to adopt a proposed amendment, other than the amendments discussed
below, our general partner is required to seek written approval of the holders of the number of
common units required to approve the amendment or call a meeting of the limited partners to
consider and vote upon the proposed amendment. Except as described below, an amendment must be
approved by holders of a majority of our outstanding common units.
Prohibited Amendments
No amendment may be made that would:
(1) enlarge the obligations of any limited partner without its consent, unless approved by
holders of at least a majority of the type or class of limited partner interests so affected; or
(2) enlarge the obligations of, restrict in any way any action by or rights of, or reduce in
any way the amounts distributable, reimbursable or otherwise payable by us to our general partner
or any of its affiliates without the consent of our general partner, which may be given or withheld
at its option.
The provision of our partnership agreement preventing the amendments having the effects
described in clauses (1) or (2) above can be amended upon the approval of the holders of at least
90% of the outstanding common units.
No Unitholder Approval
Our general partner may generally make amendments to our partnership agreement without the
approval of any limited partner to reflect:
(1) a change in the name of the partnership, the location of the partnership’s principal place
of business, the partnership’s registered agent or its registered office;
(2) the admission, substitution, withdrawal or removal of partners in accordance with our
partnership agreement;
(3) a change that our general partner determines to be necessary or appropriate for the
partnership to qualify or to continue our qualification as a limited partnership or a partnership
in which the limited partners have limited liability under the laws of any state or to ensure that
none of us or our subsidiaries will be treated as an association taxable as a corporation or
otherwise taxed as an entity for federal income tax purposes;
(4) an amendment that is necessary, in the opinion of our counsel, to prevent the partnership
or our general partner or its directors, officers, agents or trustees, from in any manner being
subjected to the provisions of the Investment Company Act of 1940, the Investment Advisors Act of
1940, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of
1974, whether or not substantially similar to plan asset regulations currently applied or proposed;
(5) an amendment that the general partner determines to be necessary or appropriate in
connection with the authorization of issuance of any class or series of partnership securities;
(6) any amendment expressly permitted in our partnership agreement to be made by our general
partner acting alone;
(7) an amendment effected, necessitated or contemplated by a merger agreement that has been
approved under the terms of our partnership agreement;
(8) any amendment that our general partner determines to be necessary or appropriate for the
formation by the partnership of, or its investment in, any corporation, partnership or other
entity, as otherwise permitted by our partnership agreement;
(9) a change in our fiscal year or taxable year and related changes;
(10) certain mergers or conveyances set forth in our partnership agreement; and
(11) any other amendments substantially similar to any of the matters described in (1) through
(10) above.
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In addition, our general partner may make amendments to our partnership agreement without the
approval of any limited partner or if our general partner determines that those amendments:
(1) do not adversely affect our limited partners (or any particular class of limited partners)
in any material respect;
(2) are necessary or appropriate to satisfy any requirements, conditions or guidelines
contained in any opinion, directive, order, ruling or regulation of any federal or state agency or
judicial authority or contained in any federal or state statute;
(3) are necessary or appropriate to facilitate the trading of limited partner interests or to
comply with any rule, regulation, guideline or requirement of any securities exchange on which the
limited partner interests are or will be listed for trading, compliance with any of which our
general partner deems to be in the partnership’s best interest and the best interest of our limited
partners;
(4) are necessary or advisable for any action taken by our general partner relating to splits
or combinations of units under the provisions of our partnership agreement; or
(5) are required to effect the intent of the provisions of our partnership agreement or are
otherwise contemplated by our partnership agreement.
Opinion of Counsel and Unitholder Approval
Our general partner will not be required to obtain an opinion of counsel that an amendment
will not result in a loss of limited liability to the limited partners or result in us or our
subsidiaries being treated as an entity for federal income tax purposes in connection with any of
the amendments described under “— Amendments to Our Partnership Agreement — No Unitholder
Approval.” No other amendments to our partnership agreement will become effective without the
approval of holders of at least 90% of the outstanding common units unless we first obtain an
opinion of counsel to the effect that the amendment will not affect the limited liability under
applicable law of any of our limited partners. Any amendment that reduces the voting percentage
required to take any action must be approved by the affirmative vote of limited partners
constituting not less than the voting requirement sought to be reduced.
Merger, Consolidation, Conversion, Sale or Other Disposition of Assets
Our partnership agreement generally prohibits our general partner, without the prior approval
of holders of a majority of our outstanding common units, from causing us to, among other things,
sell, exchange or otherwise dispose of all or substantially all of our assets in a single
transaction or a series of related transactions, including by way of merger, consolidation or other
combination, or approving on our behalf the sale, exchange or other disposition of all or
substantially all of the assets of our subsidiaries. Our general partner may, however, mortgage,
pledge, hypothecate or grant a security interest in all or substantially all of our assets without
that approval. Our general partner may also sell all or substantially all of our assets under a
foreclosure or other realization upon those encumbrances without that approval. Finally, our
general partner may consummate any merger without the prior approval of our unitholders if we are
the surviving entity in the transaction, our general partner has received an opinion of counsel
regarding limited liability and tax matters, the transaction would not result in a material
amendment to the partnership agreement, each of our units will be an identical unit of our
partnership following the transaction, and the partnership securities to be issued do not exceed
20% of our outstanding partnership securities immediately prior to the transaction.
If the conditions specified in our partnership agreement are satisfied, our general partner,
without the approval of our unitholders, may convert us into a new limited liability entity or
merge us or any of our subsidiaries into, or convey some or all of our assets to, a newly formed
entity if the sole purpose of that conversion, merger or conveyance is to effect a mere change in
our legal form into another limited liability entity. The unitholders are not entitled to
dissenters’ rights of appraisal under our partnership agreement or applicable Delaware law in the
event of a conversion, merger or consolidation, a sale of substantially all of our assets or any
other transaction or event.
Termination or Dissolution
We will continue as a limited partnership until terminated under our partnership agreement. We
will dissolve upon:
(1) the election of our general partner to dissolve us, if approved by a majority of the
members of our general partner’s audit and conflicts committee and the holders of a majority of our
outstanding common units;
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(2) there being no limited partners, unless we are continued without dissolution in accordance
with applicable Delaware law;
(3) the entry of a decree of judicial dissolution of our partnership; or
(4) the withdrawal or removal of our general partner or any other event that results in its
ceasing to be our general partner other than by reason of a transfer of its general partner
interest in accordance with our partnership agreement or withdrawal or removal following approval
and admission of a successor.
Upon a dissolution under clause (4) above, the holders of a majority of our outstanding common
units may also elect, within specific time limitations, to continue our business on the same terms
and conditions described in our partnership agreement by appointing a successor general partner an
entity approved by the holders of a majority of our outstanding common units, excluding those
common units held by our general partner and its affiliates, subject to receipt by us of an opinion
of counsel to the effect that:
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the action would not result in the loss of limited liability of any limited
partner; and
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we would not be treated as an association taxable as a corporation or otherwise
be taxable as an entity for federal income tax purposes upon the exercise of that right to
continue.
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Liquidation and Distribution of Proceeds
Upon our dissolution, unless we are continued as a new limited partnership, the person
authorized to wind up our affairs (the liquidator) will, acting with all the powers of our general
partner that the liquidator deems necessary or desirable, liquidate our assets. The proceeds of the
liquidation will be applied as follows:
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first
, towards the payment of all of our creditors and the creation of a
reserve for contingent liabilities; and
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then
, to all partners in accordance with the positive balance in their
respective capital accounts.
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Under some circumstances and subject to some limitations, the liquidator may defer liquidation
or distribution of our assets for a reasonable period of time. If the liquidator determines that a
sale would be impractical or would cause undue loss to our partners, our general partner may
distribute assets in kind to our partners.
Withdrawal or Removal of Our General Partner
Except as described below, our general partner has agreed not to withdraw voluntarily as our
general partner prior to December 31, 2016 without obtaining the approval of a majority of the
members of our audit and conflicts committee and holders of a majority of our outstanding common
units, excluding those held by our general partner and its affiliates, and furnishing an opinion of
counsel regarding limited liability and tax matters. On or after December 31, 2016, our general
partner may withdraw as general partner without first obtaining approval of any unitholder by
giving 90 days’ written notice, and that withdrawal will not constitute a violation of our
partnership agreement. In addition, our general partner may withdraw without unitholder approval
upon 90 days’ notice to our limited partners if at least 50% of our outstanding common units are
held or controlled by one person and its affiliates other than our general partner and its
affiliates.
Upon the voluntary withdrawal of our general partner, the holders of a majority of our
outstanding common units, excluding the common units held by the withdrawing general partner and
its affiliates, may elect a successor to the withdrawing general partner. If a successor is not
elected, or is elected but an opinion of counsel regarding limited liability and tax matters cannot
be obtained, we will be dissolved, wound up and liquidated, unless within 90 days after that
withdrawal, the holders of a majority of our outstanding common units, excluding the common units
held by the withdrawing general partner and its affiliates, agree to continue our business and to
appoint a successor general partner.
Our general partner may not be removed unless that removal is approved by (i) a majority of
the audit and conflicts committee of our general partner and (ii) holders of not less than 66-2/3%
of our outstanding common units, including common units held by our general partner and its
affiliates, and we receive an opinion of counsel regarding limited liability and tax matters. In
addition, if our general partner is removed as our general partner under circumstances where cause
does not exist and common units held by our general partner and its affiliates are not voted in
favor of such removal, our general partner will have the right to convert its general partner
interest into common units or to receive cash in exchange for such interests. Any removal of this
kind is also subject to the approval of a successor general partner by a majority of our
outstanding common units, including those held by our general partner and its affiliates. The
ownership of more than 33-1/3% of the outstanding common units by our
general partner and its affiliates would give it the practical ability to prevent its removal.
Affiliates of our general partner owned approximately 58.5% of the outstanding common units as of
March 31, 2011.
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In the event of removal of a general partner under circumstances where cause exists or
withdrawal of a general partner where that withdrawal violates our partnership agreement, a
successor general partner will have the option to purchase the general partner interest of the
departing general partner for a cash payment equal to its fair market value. Under all other
circumstances where a general partner withdraws or is removed by the limited partners, the
departing general partner will have the option to require the successor general partner to purchase
the general partner interest of the departing general partner for a cash payment equal to its fair
market value. In each case, this fair market value will be determined by agreement between the
departing general partner and the successor general partner. If no agreement is reached within 30
days of the departing general partner’s departure, an independent investment banking firm or other
independent expert selected by the departing general partner and the successor general partner will
determine the fair market value. Or, if the departing general partner and the successor general
partner cannot agree upon an expert, then an expert chosen by agreement of the experts selected by
each of them will determine the fair market value.
If the option described above is not exercised by either the departing general partner or the
successor general partner, the departing general partner’s general partner interest will
automatically convert into common units equal to the fair market value of those interests as
determined by an investment banking firm or other independent expert selected in the manner
described in the preceding paragraph.
In addition, we will be required to reimburse the departing general partner for all amounts
due the departing general partner, including, without limitation, all employee-related liabilities,
including severance liabilities, incurred for the termination of any employees employed by the
departing general partner or its affiliates for our benefit.
Transfer of General Partner Interest
Except for transfer by our general partner of all, but not less than all, of its general
partner interest in us to:
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an affiliate of the general partner (other than an individual); or
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another entity as part of the merger or consolidation of the general partner
with or into another entity or the transfer by the general partner of all or substantially
all of its assets to another entity,
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our general partner may not transfer all or any part of its general partner interest in us to
another entity prior to December 31, 2016 without the approval of holders of a majority of the
common units outstanding, excluding common units held by our general partner and its affiliates. As
a condition of this transfer, the transferee must assume the rights and duties of our general
partner, agree to be bound by the provisions of the partnership agreement, and furnish an opinion
of counsel regarding limited liability and tax matters.
Our general partner and its affiliates may at any time transfer common units to one or more
persons without unitholder approval.
Transfer of Ownership Interests in Our General Partner
At any time, EPO may sell or transfer all or part of its ownership interest in our general
partner without the approval of our unitholders.
Change of Management Provisions
Our partnership agreement contains specific provisions that are intended to discourage a
person or group from attempting to remove our general partner as general partner or otherwise
change management. If any person or group other than our general partner and its affiliates
acquires beneficial ownership of 20% or more of any class of common units, that person or group
loses voting rights on all of its common units. This loss of voting rights does not apply to any
person or group that acquires the common units from our general partner or its affiliates and any
transferees of that person or group approved by our general partner or to any person or group who
acquires the common units with the prior approval of the board of directors of our general partner.
Limited Call Right
If at any time our general partner and its affiliates hold 80% or more of the outstanding
limited partner interests of any class, our general partner will have the right, but not the
obligation, which it may assign in whole or in part to any of its affiliates or us, to acquire all,
but not less than all, of the remaining limited partner interests of the class
held by unaffiliated persons as of a record date to be selected by our general partner, on at
least 10 but not more than 60 days’ notice. The purchase price in the event of this purchase is the
greater of:
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the highest price paid by either our general partner or any of its affiliates
for any limited partners interests of the class purchased within the 90 days preceding the
date our general partner first mails notice of its election to purchase the limited partner
interests; and
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the current market price of the limited partner interests of the class as of
the date three days prior to the date that notice is mailed.
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As a result of our general partner’s right to purchase outstanding limited partner interests,
a holder of limited partner interests may have his limited partner interests purchased at an
undesirable time or price. The tax consequences to a unitholder of the exercise of this call right
are the same as a sale by that unitholder of his common units in the market. Please read “Material
Tax Consequences — Disposition of Common Units.”
Affiliates of our general partner owned approximately 33,783,587 common units representing
approximately 58.5% of our outstanding common units as of March 31, 2011.
Meetings; Voting
Except as described below regarding a person or group owning 20% or more of common units then
outstanding, unitholders on the record date will be entitled to notice of, and to vote at, meetings
of our limited partners and to act upon matters for which approvals may be solicited. Common units
that are owned by non-citizen assignees will be voted by our general partner and our general
partner will distribute the votes on those common units in the same ratios as the votes of limited
partners on other common units are cast.
Our general partner does not anticipate that any meeting of unitholders will be called in the
foreseeable future. Any action that is required or permitted to be taken by our unitholders may be
taken either at a meeting of the unitholders or without a meeting if consents in writing describing
the action so taken are signed by holders of the number of common units as would be necessary to
authorize or take that action at a meeting. Meetings of the unitholders may be called by our
general partner or by unitholders owning at least 20% of the outstanding common units. Unitholders
may vote either in person or by proxy at meetings. The holders of a majority of the outstanding
common units, represented in person or by proxy, will constitute a quorum unless any action by the
unitholders requires approval by holders of a greater percentage of the common units, in which case
the quorum will be the greater percentage.
Each record holder of a common unit has a vote according to his percentage interest in us,
although additional limited partner interests having special voting rights could be issued. Please
read “— Issuance of Additional Securities” above. However, if at any time any person or group,
other than our general partner and its affiliates, or a direct or subsequently approved transferee
of our general partner or its affiliates, acquires, in the aggregate, beneficial ownership of 20%
or more of any class of units then outstanding, that person or group will lose voting rights on all
of its units and the units may not be voted on any matter and will not be considered to be
outstanding when sending notices of a meeting of unitholders, calculating required votes,
determining the presence of a quorum or for other similar purposes. Common units held in nominee or
street name account will be voted by the broker or other nominee in accordance with the instruction
of the beneficial owner unless the arrangement between the beneficial owner and his nominee
provides otherwise.
Any notice, demand, request, report or proxy material required or permitted to be given or
made to record holders of common units under our partnership agreement will be delivered to the
record holder by us or by the transfer agent.
Status as Limited Partner
By transfer of common units in accordance with our partnership agreement, each transferee of
common units shall be admitted as a limited partner with respect to the transferred units when such
transfer and admission is reflected in our books and records. Except as described under “— Limited
Liability,” the common units will be fully paid, and unitholders will not be required to make
additional contributions.
Non-Citizen Assignees; Redemption
If we are or become subject to federal, state or local laws or regulations that, in the
reasonable determination of our general partner, create a substantial risk of cancellation or
forfeiture of any property that we have an interest in because of the nationality, citizenship or
other related status of any limited partner, we may redeem the common units held by the limited
partner at their current market price. In order to avoid any cancellation or forfeiture, our
general partner may require each limited partner to furnish information about his nationality,
citizenship or related status. If a limited partner fails to furnish information about his
nationality, citizenship or other related status within 30 days after a request for the information
or our general partner determines after receipt of the information that the
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limited partner is not
an eligible citizen, the limited partner may be treated as a non-citizen assignee. A non-citizen
assignee is entitled to an interest equivalent to that of a limited partner for the right to share
in allocations and distributions from us, including liquidating distributions. A non-citizen
assignee does not have the right to direct the voting of his common units and may not receive
distributions in kind upon our liquidation.
Indemnification
Under our partnership agreement, in most circumstances, we will indemnify the following
persons, to the fullest extent permitted by law, subject to certain limitations expressly provided
in our partnership agreement, from and against all losses, claims, damages or similar events:
(1) our general partner;
(2) any departing general partner;
(3) any person who is or was an affiliate of our general partner or any departing general
partner;
(4) any person who is or was an officer, director, member, partner, fiduciary or trustee of
any entity described in (1), (2) or (3) above;
(5) any person who is or was serving as an officer, director, member, partner, fiduciary or
trustee of another person at the request of the general partner or any departing general partner;
and
(6) any person designated by our general partner.
This indemnification is required unless there has been a final and non-appealable judgment by
a court of competent jurisdiction determining that these indemnitees acted in bad faith or engaged
in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the
indemnitee’s conduct was unlawful.
Any indemnification under these provisions will only be out of our assets. Unless it otherwise
agrees, our general partner will not be personally liable for, or have any obligation to contribute
or loan funds or assets to us to enable us to effectuate, indemnification. We may purchase
insurance against liabilities asserted against and expenses incurred by persons for our activities,
regardless of whether we would have the power to indemnify the person against liabilities under the
partnership agreement.
Resolution of Conflicts of Interest
As discussed elsewhere in this prospectus, our partnership agreement provides contractual
procedures for the resolution of certain conflicts of interest that are binding on all partners and
modifies certain fiduciary duties otherwise applicable under Delaware law.
Unless otherwise expressly provided in our partnership agreement, whenever a potential
conflict of interest exists or arises between our general partner or any of its affiliates, on the
one hand, and us, any of our subsidiaries or any partner, on the other hand, any resolution or
course of action by the general partner or its affiliates in respect of such conflict of interest
shall be permitted and deemed approved by all partners, and shall not constitute a breach of our
partnership agreement or of any agreement contemplated thereby, or of any duty stated or implied by
law or equity, if the resolution or course of action in respect of such conflict of interest is or,
by operation of the partnership agreement is deemed to be, fair and reasonable to us; provided
that, any conflict of interest and any resolution of such conflict of interest shall be, or be
deemed to be, fair and reasonable to us if such conflict of interest or resolution is (i) approved
by “Special Approval” (i.e., by a majority of the members of the audit and conflicts committee), or
(ii) on terms no less favorable to us than those generally being provided to or available from
unrelated third parties. The audit and conflicts committee (in connection with Special Approval)
shall be authorized in connection with its resolution of any conflict of interest to consider (i)
the relative interests of any party to such conflict, agreement, transaction or situation and the
benefits and burdens relating to such interest; (ii) the totality of the relationships between the
parties involved (including other transactions that may be particularly favorable or advantageous
to us); (iii) any customary or accepted industry practices and any customary or historical dealings
with a particular Person; (iv) any applicable generally accepted accounting or engineering
practices or principles; (v) the relative cost of capital of the parties and the consequent rates
of return to the equity holders of the party; and (vi) such additional factors as the audit and
conflicts committee determines in its sole discretion to be relevant, reasonable or appropriate
under the circumstances. Nothing contained in the partnership agreement, however, is intended to
nor shall it be construed to require the audit and conflicts committee to consider the interests of
any
person other than the Partnership. In the absence of bad faith by the audit and conflicts
committee or our general partner, the resolution, action or terms so made, taken or provided
(including granting Special Approval) by the audit and conflicts committee or our general partner
with respect to such matter shall be conclusive and binding on
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all persons (including all partners)
and shall not constitute a breach of the partnership agreement, or any other agreement contemplated
thereby, or a breach of any standard of care or duty imposed in the partnership agreement or under
the Delaware Revised Uniform Limited Partnership Act or any other law, rule or regulation. It shall
be presumed that the resolution, action or terms made, taken or provided by the audit and conflicts
committee or our general partner was not made, taken or provided in bad faith, and in any
proceeding brought by any limited partner or by or on behalf of such limited partner or any other
limited partner or us challenging such resolution, action or terms, the person bringing or
prosecuting such proceeding shall have the burden of overcoming such presumption.
Whenever our general partner makes a determination or takes or declines to take any other
action, or any of its affiliates causes it to do so, in its capacity as our general partner as
opposed to in its individual capacity, whether under our partnership agreement, or any other
agreement contemplated thereby or otherwise, then unless another express standard is provided for
in our partnership agreement, our general partner, or such affiliates causing it to do so, shall
make such determination or take or decline to take such other action in a manner that is not in bad
faith and shall not be subject to any other or different standards imposed by our partnership
agreement, any other agreement contemplated thereby or under the Delaware Revised Uniform Limited
Partnership Act or any other law, rule or regulation or at equity.
Reimbursement of Expenses
Our partnership agreement requires us to reimburse our general partner for all direct and
indirect expenses it incurs or payments it makes on our behalf and all other expenses allocable to
us or otherwise incurred by our general partner in connection with operating our business. These
expenses include salary, bonus, incentive compensation and other amounts paid to persons who
perform services for us or our general partner and expenses allocated to us or otherwise incurred
by our general partner in connection with operating our business. The general partner is entitled
to determine in good faith the expenses that are allocable to us.
Books and Reports
Our general partner is required to keep appropriate books of our business at our principal
offices. The books will be maintained for both tax and financial reporting purposes on an accrual
basis. For tax and financial reporting purposes, our fiscal year is the calendar year.
We will furnish or make available to record holders of common units, within 120 days after the
close of each fiscal year, an annual report containing audited financial statements and a report on
those financial statements by our independent public accountants. Except for our fourth quarter, we
will also furnish or make available summary financial information within 90 days after the close of
each quarter.
We will furnish each record holder of a common unit with information reasonably required for
tax reporting purposes within 90 days after the close of each calendar year. This information is
expected to be furnished in summary form so that some complex calculations normally required of
partners can be avoided. Our ability to furnish this summary information to unitholders will depend
on the cooperation of unitholders in supplying us with specific information. Every unitholder will
receive information to assist him in determining his federal and state tax liability and filing his
federal and state income tax returns, regardless of whether he supplies us with information.
Right to Inspect Our Books and Records
A limited partner can, for a purpose reasonably related to the limited partner’s interest as a
limited partner, upon reasonable demand stating the purpose of such demand and at his own expense,
obtain:
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a current list of the name and last known address of each partner;
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a copy of our tax returns;
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information as to the amount of cash and a description and statement of the
agreed value of any other property or services, contributed or to be contributed by each
partner and the date on which each became a partner;
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copies of our partnership agreement, our certificate of limited partnership,
amendments to either of them and powers of attorney which have been executed under our
partnership agreement;
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information regarding the status of our business and financial condition; and
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any other information regarding our affairs as is just and reasonable.
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Our general partner may, and intends to, keep confidential from the limited partners trade
secrets and other information the disclosure of which our general partner believes in good faith is
not in our best interest, could damage our business or which we are required by law or by
agreements with third parties to keep confidential.
Registration Rights
Under our partnership agreement, we have agreed to register for resale under the Securities
Act and applicable state securities laws any common units or other partnership securities proposed
to be sold by our general partner or any of its affiliates or their assignees if an exemption from
the registration requirements is not otherwise available. We are obligated to pay all costs and
expenses incidental to any such registration and offering on behalf of our general partner or its
affiliates, excluding underwriting discounts and commissions.
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CONFLICTS OF INTEREST, BUSINESS OPPORTUNITY
AGREEMENTS AND FIDUCIARY DUTIES
Conflicts of Interest and Business Opportunity Agreements
General
Conflicts of interest exist and may arise in the future as a result of the relationships among
us, Enterprise Products Partners and our and their respective general partners and affiliates. Our
general partner, DEP GP, is controlled indirectly by Enterprise Products Partners. The members of
the board of directors of DEP GP are elected by EPO. However, the current voting trustees under
the Dan Duncan LLC Voting Trust Agreement dated April 26, 2006, who control Dan Duncan LLC, through
their indirect control of EPO and our general partner, have the ability to elect, remove and
replace at any time, all of the officers and directors of DEP GP. Dan Duncan LLC is a privately
held affiliate of EPCO that owns 100% of the membership interests in the general partner of
Enterprise Products Partners.
Our general partner’s directors and officers have fiduciary duties to manage our business in a
manner beneficial to us and our partners. Some of the executive officers of our general partner
also serve as executive officers of the general partner of Enterprise Products Partners. As a
result, they have fiduciary duties to manage the business of Enterprise Products Partners in a
manner beneficial to such entity and its respective partners. Consequently, these officers may
encounter situations in which their fiduciary obligations to Enterprise Products Partners, on the
one hand, and us, on the other hand, are in conflict.
It is not possible to predict the nature or extent of these potential future conflicts of
interest at this time, nor is it possible to determine how we will address and resolve any such
future conflicts of interest. However, the resolution of these conflicts may not always be in our
best interest or that of our unitholders. We do not currently intend to take any action which would
limit the ability of Enterprise Products Partners to pursue its business strategies.
Administrative Services Agreement
We and our general partner are parties to an existing administrative services agreement with
EPCO, Enterprise Products Partners, and its general partner and certain affiliated entities. The
administrative services agreement addresses potential conflicts that may arise among us and our
general partner, Enterprise Products Partners and its general partner, and the EPCO Group, which
includes EPCO and its affiliates (excluding us, our general partner, Enterprise Products Partners,
its general partner and their subsidiaries and controlled affiliates).
Conflicts Between Our General Partner and its Affiliates and Our Partners
Whenever a conflict arises between our general partner or its affiliates, on the one hand, and
us or any other partner, on the other hand, our general partner will resolve that conflict. Our
partnership agreement contains provisions that modify and limit our general partner’s fiduciary
duties to our unitholders. Our partnership agreement also restricts the remedies available to
unitholders for actions taken that, without those limitations, might constitute breaches of
fiduciary duty.
Our general partner will not be in breach of its obligations under the partnership agreement
or its duties to us or our unitholders if the resolution of the conflict is or is deemed to be,
fair and reasonable to the partnership. Any resolution shall be deemed fair and reasonable if it
is:
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approved by a majority of the members of the audit and conflicts committee; or
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on terms no less favorable to us than those generally being provided to or
available from unrelated third parties.
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Our general partner may, but is not required to, seek the approval of such resolution from the
audit and conflicts committee of its board of directors. It will be presumed that the resolution of
any conflicts of interest by our audit and conflicts committee and our general partner is not made
in bad faith, and in any proceeding brought by or on behalf of any limited partner or the
partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming
such presumption. The audit and conflicts committee may consider any factors it determines in good
faith to consider when resolving a conflict, including taking into account the totality of the
relationships among the parties involved, including other transactions that may be particularly
favorable or advantageous to us.
Conflicts of interest could arise in the situations described below, among others.
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Actions taken by our general partner may affect the amount of cash available for distribution to unitholders.
The amount of cash that is available for distribution to our unitholders is affected by
decisions of our general partner regarding such matters as:
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amount and timing of cash expenditures (including expansion projects at Mont
Belvieu or other subsidiaries that may be funded through the construction phase by
Enterprise Products Partners and acquired or contributed to us at a later date);
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assets sales or acquisitions;
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borrowings;
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the issuance of additional common units; and
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the creation, reduction or increase of reserves in any quarter.
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We will reimburse EPCO and its affiliates for expenses.
We will reimburse EPCO and its affiliates for costs incurred in managing and operating us,
including costs incurred in rendering staff and support services to us. The partnership agreement
provides that our general partner will determine the expenses that are allocable to us. Our general
partner may do so in any manner it determines. Please read “Description of Our Partnership
Agreement — Reimbursement of Expenses.”
Our general partner intends to limit its liability regarding our obligations.
Our general partner intends to limit its liability under contractual arrangements so that the
other party has recourse only to our assets, and not against our general partner or its assets or
any affiliate of our general partner or its assets. Our partnership agreement provides that any
action taken by our general partner to limit its liability or our liability is not a breach of our
general partner’s fiduciary duties, even if we could have obtained more favorable terms without the
limitation on liability.
Unitholders will have no right to enforce obligations of our general partner and its affiliates under agreements with us.
Any agreements between us on the one hand, and our general partner and its affiliates, on the
other, will not grant to the unitholders, separate and apart from us, the right to enforce the
obligations of our general partner and its affiliates in our favor.
Contracts between us, on the one hand, and our general partner and its affiliates, on the other,
will not be the result of arm’s-length negotiations for the benefit of our unitholders.
Our partnership agreement allows our general partner to determine any amounts to reimburse
itself or its affiliates for any services rendered to us. Our general partner may also enter into
additional contractual arrangements with any of its affiliates on our behalf. Neither our
partnership agreement nor any of the other agreements, contracts and arrangements between us, on
the one hand, and our general partner and its affiliates, on the other, are or will be the result
of arm’s-length negotiations for the benefit of our unitholders.
As described in this prospectus, we are a party to a number of agreements with our general
partner and its affiliates at the time of the closing of our initial public offering. These
contracts include the administrative services agreement, storage agreements and transportation
agreements.
Our general partner will determine the terms of any of these transactions or amendments to
existing agreements entered into after the sale of the common units offered in our initial public
offering.
Our common units are subject to our general partner’s limited call right.
If at any time our general partner and its affiliates own 80% or more of the common units, our
general partner will have the right, but not the obligation, which it may assign to any of its
affiliates or to us, to acquire all, but not less than all, of the common units held by
unaffiliated persons at a price not less than their then-current market price. As a result,
unitholders may be required to sell their common units at an undesirable time or price and may not
receive any return on their investment. Our general partner and its affiliates owned approximately
58.5% of our outstanding common units as of March 31, 2011. Please read “Description of Our
Partnership Agreement — Limited Call Right.”
We may not choose to retain separate counsel for ourselves or for the holders of our common units.
The attorneys, independent auditors and others who have performed services for us regarding
our initial public offering have been retained by our general partner, its affiliates and us and
may continue to be retained by our
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general partner, its affiliates and us after our initial public offering. Attorneys,
independent auditors and others who will perform services for us in the future will be selected by
our general partner or our audit and conflicts committee and may also perform services for our
general partner and its affiliates. We may, but are not required to, retain separate counsel for
ourselves or the holders of common units in the event of a conflict of interest arising between our
general partner and its affiliates, on the one hand, and us or the holders of common units, on the
other, after the sale of the common units offered in this prospectus, depending on the nature of
the conflict. We do not intend to do so in most cases.
Our general partner’s affiliates may compete with us.
Our partnership agreement provides that our general partner will be restricted from engaging
in any business activities other than acting as our general partner and those activities incidental
to its ownership of interests in us. Except as provided in our partnership agreement and subject to
certain business opportunity agreements, affiliates of our general partner are not prohibited from
engaging in other businesses or activities, including those that might be in direct competition
with us.
Shared Personnel
Our general partner will manage our operations and activities. Under the amended and restated
administrative services agreement, EPCO will provide all employees and administrative, operational
and other services to us. All of our general partner’s executive officers will, and certain other
EPCO employees assigned to our operations may, also perform services for EPCO, Enterprise Products
Partners and their affiliates. The services performed by these shared personnel will generally be
limited to non-commercial functions, including but not limited to human resources, information
technology, financial and accounting services and legal services. We will adopt policies and
procedures to protect and prevent inappropriate disclosure by shared personnel of commercial and
other non-public information relating to us and Enterprise Products Partners.
Because our general partner’s executive officers allocate time among EPCO, us and Enterprise
Products Partners, these officers may face conflicts regarding the allocation of their time, which
could adversely affect our business, results of operations and financial condition.
Compensation Arrangements
Michael A. Creel (the CEO of Enterprise Products Partners’ general partner and a Vice Chairman
of EPCO) currently has ultimate decision-making authority with respect to compensation to be paid
to our named executive officers, including our CEO.
Fiduciary Duties
Our general partner is accountable to us and our unitholders as a fiduciary. Fiduciary duties
owed to unitholders by our general partner are prescribed by law and the partnership agreement. The
Delaware Revised Uniform Limited Partnership Act, which we refer to in this prospectus as the
Delaware Act, provides that Delaware limited partnerships may, in their partnership agreements,
restrict, eliminate or otherwise modify the fiduciary duties otherwise owed by a general partner to
limited partners and the partnership.
Our partnership agreement contains various provisions modifying and restricting the fiduciary
duties that might otherwise be owed by our general partner. We have adopted these provisions to
allow our general partner to take into account the interests of other parties in addition to our
interests when resolving conflicts of interest. These modifications are detrimental to the
unitholders because they restrict the remedies available to unitholders for actions that, without
those limitations, might constitute breaches of fiduciary duty, as described below. The following
is a summary of the material restrictions of the fiduciary duties owed by our general partner to
the limited partners:
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State law fiduciary duty standards
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Fiduciary duties are generally
considered to include an obligation to
act in good faith and with due care and
loyalty. The duty of care, in the
absence of a provision in a partnership
agreement providing otherwise, would
generally require a general partner to
act for the partnership in the same
manner as a prudent person would act on
his own behalf. The duty of loyalty, in
the absence of a provision in a
partnership agreement providing
otherwise, would generally prohibit a
general partner of a Delaware limited
partnership from taking any action or
engaging in any transaction where a
conflict of interest is present.
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Partnership agreement modified
standards
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Our partnership agreement contains
provisions that waive or consent to
conduct by our general partner and its
affiliates that might otherwise raise
issues about compliance with fiduciary
duties or applicable law. For example,
our partnership agreement provides that
when our general partner is acting in
its capacity as our general partner, as
opposed to in its individual capacity,
it must act in a manner not in bad
faith and will not be subject to any
other standard under applicable law. In
addition, when our general partner is
acting in its individual capacity, as
opposed to in its capacity as our
general partner, it may act without any
fiduciary obligation to us or the
unitholders whatsoever. These standards
reduce the obligations to which our
general partner would otherwise be
held, including the duties of due care
and loyalty.
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Our partnership agreement generally
provides that affiliated transactions
and resolutions of conflicts of
interest that are not approved by the
audit and conflicts committee of the
board of directors of our general
partner must be:
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on terms no less favorable to
us than those generally being provided
to or available from unrelated third
parties; or
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fair and reasonable” to us,
which may take into account the
totality of the relationships between
the parties involved (including other
transactions that may be particularly
favorable or advantageous, or
unfavorable or disadvantageous, to us).
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If our general partner does not seek
approval from the audit and conflicts
committee and its board of directors
determines that the resolution or
course of action taken with respect to
the conflict of interest satisfies
either of the standards set forth in
the bullet points above, then it will
be presumed that, in making its
decision, the resolution of any
conflicts of interest by our general
partner and the audit and conflicts
committee was not made in bad faith,
and in any proceeding brought by or on
behalf of any limited partner or the
partnership, the person bringing or
prosecuting such proceeding will have
the burden of overcoming such
presumption. These standards reduce the
obligations to which our general
partner would otherwise be held.
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In addition to the other more specific
provisions limiting the obligations of
our general partner, our partnership
agreement further provides that our
general partner and its officers and
directors will not be liable for
monetary damages to us, our limited
partners or assignees for losses
sustained or liabilities incurred as a
result of any act or omissions unless
there has been a final and
non-appealable judgment by a court of
competent jurisdiction determining that
such indemnitee acted in bad faith or
engaged in fraud, willful misconduct
or, in the case of a criminal matter,
acted with knowledge that the
indemnitee’s conduct was unlawful.
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Rights and remedies of unitholders
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The Delaware Act generally provides
that a limited partner may institute
legal action on behalf of the
partnership to recover damages from a
third party where a general partner has
refused to institute the action or
where an effort to cause a general
partner to do so is not likely to
succeed. These actions include actions
against a general partner for breach of
its fiduciary duties or of the
partnership agreement. In addition, the
statutory or case law of some
jurisdictions may permit a limited
partner to institute legal action on
behalf of himself and all other
similarly situated limited partners to
recover damages from a general partner
for violations of its fiduciary duties
to the limited partners.
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In order to become one of our limited partners, a unitholder is required to agree to be bound
by the provisions in the partnership agreement, including the provisions discussed above. This is
in accordance with the policy of the Delaware Act favoring the principle of freedom of contract and
the enforceability of partnership agreements. The failure of a limited partner or assignee to sign
a partnership agreement does not render the partnership agreement unenforceable against that
person.
We are required to indemnify our general partner and its officers, directors and managers, to
the fullest extent permitted by law, against liabilities, costs and expenses incurred by our
general partner or these other persons. This indemnification is required unless there has been a
final and non-appealable judgment by a court of competent jurisdiction determining that these
persons acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal
matter, that these persons acted with knowledge that their conduct was unlawful. Thus, our general
partner could be indemnified for its negligent acts if it met the requirements set forth above. In
the opinion of the Commission, indemnification provisions that purport to include indemnification
for liabilities arising under the Securities Act are contrary to public policy and are, therefore,
unenforceable. If you have questions regarding the fiduciary duties of our general partner, you
should consult with your own counsel. Please read “Description of Our Partnership Agreement —
Indemnification.”
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MATERIAL TAX CONSEQUENCES
This section is a discussion of the material tax considerations that may be relevant to
prospective unitholders who are individual citizens or residents of the United States and, unless
otherwise noted in the following discussion, represents the opinion of Andrews Kurth LLP, counsel
to our general partner and us, insofar as it relates to matters of United States federal income tax
law and legal conclusions with respect to those matters. This section is based upon current
provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, existing
and proposed regulations and current administrative rulings and court decisions, all of which are
subject to change. Later changes in these authorities may cause the tax consequences to vary
substantially from the consequences described below. Unless the context otherwise requires,
references in this section to “us” or “we” are references to Duncan Energy Partners L.P. and DEP
Operating Partnership, L.P., a Delaware limited partnership, which is our operating partnership.
The following discussion does not address all U.S. federal, state and local income tax matters
affecting us or the unitholders. Moreover, the discussion focuses on unitholders who are individual
citizens or residents of the United States and has only limited application to corporations,
estates, trusts, nonresident aliens or other unitholders subject to specialized tax treatment, such
as tax-exempt institutions, foreign persons, individual retirement accounts (IRAs), real estate
investment trusts (REITs), employee benefit plans or mutual funds. Accordingly, we urge each
prospective unitholder to consult, and depend on, his own tax advisor in analyzing the federal,
state, local and foreign tax consequences particular to him of the ownership or disposition of the
common units.
All statements as to matters of law and legal conclusions, but not as to factual matters,
contained in this section, unless otherwise noted, are the opinion of Andrews Kurth LLP and are
based on the accuracy of the representations made by us and our general partner.
No ruling has been or will be requested from the Internal Revenue Service (the “IRS”)
regarding any matter affecting us or prospective unitholders. Instead, we will rely on opinions and
advice of Andrews Kurth LLP. Unlike a ruling, an opinion of counsel represents only that counsel’s
best legal judgment and does not bind the IRS or the courts. Accordingly, the opinions and
statements made in this discussion may not be sustained by a court if contested by the IRS. Any
contest of this sort with the IRS may materially and adversely impact the market for the common
units and the prices at which the common units trade. In addition, the costs of any contest with
the IRS, principally legal, accounting and related fees, will result in a reduction in cash
available for distribution to our unitholders and our general partner and thus will be borne
indirectly by our unitholders and our general partner. Furthermore, our tax treatment or the tax
treatment of an investment in us may be significantly modified by future legislative or
administrative changes or court decisions. Any modifications may or may not be retroactively
applied.
For the reasons described below, Andrews Kurth LLP has not rendered an opinion with respect to
the following specific federal income tax issues: the treatment of a unitholder whose common units
are loaned to a short seller to cover a short sale of common units (please read “— Tax
Consequences of Unit Ownership — Treatment of Short Sales”); whether our monthly convention for
allocating taxable income and losses is permitted by existing Treasury Regulations (please read “—
Disposition of Common Units — Allocations Between Transferors and Transferees”); and whether our
method for depreciating Section 743 adjustments is sustainable in certain cases (please read “—
Tax Consequences of Unit Ownership — Section 754 Election” and “— Uniformity of Units”).
Partnership Status
A partnership is not a taxable entity and incurs no federal income tax liability. Instead,
each partner of a partnership is required to take into account his share of items of income, gain,
loss and deduction of the partnership in computing his federal income tax liability, regardless of
whether cash distributions are made to him by the partnership. Distributions by a partnership to a
partner are generally not taxable to the partner unless the amount of cash distributed is in excess
of the partner’s adjusted basis in his partnership interest.
Section 7704 of the Internal Revenue Code provides that publicly traded partnerships will, as
a general rule, be taxed as corporations. However, an exception, referred to as the “Qualifying
Income Exception,” exists with respect to publicly traded partnerships of which 90% or more of the
gross income for every taxable year consists of “qualifying income.” Qualifying income includes
income and gains derived from the exploration, development, mining or production, processing,
refining, transportation, storage and marketing of any mineral or natural resource. Other types of
qualifying income include interest (other than from a financial business), dividends, gains from
the sale of real property and gains from the sale or other disposition of capital assets held for
the production of income that otherwise constitutes qualifying income. We estimate that less than
5% of our current gross income is not qualifying income; however, this estimate could change from
time to time. Based on and subject to this estimate, the
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factual representations made by us and our general partner and a review of the applicable
legal authorities, Andrews Kurth LLP is of the opinion that at least 90% of our current gross
income constitutes qualifying income. The portion of our income that is qualifying income may
change from time to time.
No ruling has been or will be sought from the IRS and the IRS has made no determination as to
our status or the status of DEP Operating Partnership for federal income tax purposes or whether
our operations generate “qualifying income” under Section 7704 of the Internal Revenue Code.
Instead, we will rely on the opinion of Andrews Kurth LLP on such matters. It is the opinion of
Andrews Kurth LLP that, based upon the Internal Revenue Code, its regulations, published revenue
rulings and court decisions and the representations described below, we will be classified as a
partnership and the operating partnership will be disregarded as an entity separate from us for
federal income tax purposes.
In rendering its opinion, Andrews Kurth LLP has relied on factual representations made by us
and our general partner. The representations made by us and our general partner upon which Andrews
Kurth LLP has relied include:
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neither we nor our operating partnership has elected nor will elect to be
treated as a corporation; and
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for each taxable year, more than 90% of our gross income has been and will be
income that Andrews Kurth LLP has opined or will opine is “qualifying income” within the
meaning of Section 7704(d) of the Internal Revenue Code.
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If we fail to meet the Qualifying Income Exception, other than a failure that is determined by
the IRS to be inadvertent and that is cured within a reasonable time after discovery (in which case
the IRS may also require us to make adjustments with respect to our unitholders or pay other
amounts), we will be treated as if we had transferred all of our assets, subject to liabilities, to
a newly formed corporation, on the first day of the year in which we fail to meet the Qualifying
Income Exception, in return for stock in that corporation, and then distributed that stock to the
unitholders in liquidation of their interests in us. This deemed contribution and liquidation
should be tax-free to unitholders and us except to the extent that our liabilities exceed the tax
bases of our assets at that time. Thereafter, we would be treated as a corporation for federal
income tax purposes.
If we were taxable as a corporation for U.S. federal income tax purposes in any taxable year,
either as a result of a failure to meet the Qualifying Income Exception or otherwise, our items of
income, gain, loss and deduction would be reflected only on our tax return rather than being passed
through to the unitholders, and our net income would be taxed to us at corporate rates. In
addition, any distribution made to a unitholder would be treated as either taxable dividend income,
to the extent of our current or accumulated earnings and profits, or, in the absence of earnings
and profits, a nontaxable return of capital, to the extent of the unitholder’s tax basis in his
common units, or taxable capital gain, after the unitholder’s tax basis in his common units is
reduced to zero. Accordingly, taxation as a corporation would result in a material reduction in a
unitholder’s cash flow and after-tax return and thus would likely result in a substantial reduction
of the value of the units.
The discussion below is based on Andrews Kurth LLP’s opinion that we will be classified as a
partnership for federal income tax purposes.
Limited Partner Status
Unitholders who are admitted as limited partners of Duncan Energy Partners L.P., as well as
unitholders whose common units are held in street name or by a nominee and who have the right to
direct the nominee in the exercise of all substantive rights attendant to the ownership of their
common units, will be treated as partners of Duncan Energy Partners L.P. for federal income tax
purposes.
A beneficial owner of common units whose units have been transferred to a short seller to
complete a short sale would appear to lose his status as a partner with respect to those units for
federal income tax purposes. Please read “— Tax Consequences of Unit Ownership — Treatment of
Short Sales.”
Items of our income, gain, loss and deduction would not appear to be reportable by a
unitholder who is not a partner for federal income tax purposes, and any cash distributions
received by a unitholder who is not a partner for federal income tax purposes would therefore
appear to be fully taxable as ordinary income. These holders are urged to consult their own tax
advisors with respect to their status as partners in Duncan Energy Partners L.P. for federal income
tax purposes. The references to “unitholders” in the discussion that follows are to persons who are
treated as partners in Duncan Energy Partners L.P. for federal income tax purposes.
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Tax Consequences of Unit Ownership
Flow-through of Taxable Income
We do not pay any federal income tax. Instead, each unitholder is required to report on his
income tax return his share of our income, gains, losses and deductions without regard to whether
corresponding cash distributions are received by him. Consequently, we may allocate income to a
unitholder even if he has not received a cash distribution. Each unitholder will be required to
include in income his allocable share of our income, gains, losses and deductions for our taxable
year or years ending with or within his taxable year. Our taxable year ends on December 31.
Treatment of Distributions
Distributions by us to a unitholder generally will not be taxable to the unitholder for
federal income tax purposes to the extent of his tax basis in his common units immediately before
the distribution. Our cash distributions in excess of a unitholder’s tax basis in his common units
generally will be considered to be gain from the sale or exchange of the common units, taxable in
accordance with the rules described under “— Disposition of Common Units” below. Any reduction in
a unitholder’s share of our liabilities for which no partner, including our general partner, bears
the economic risk of loss, known as “nonrecourse liabilities,” will be treated as a distribution of
cash to that unitholder. To the extent our distributions cause a unitholder’s “at risk” amount to
be less than zero at the end of any taxable year, the unitholder must recapture any losses deducted
in previous years. Please read “— Limitations on Deductibility of Losses.”
A decrease in a unitholder’s percentage interest in us because of our issuance of additional
common units will decrease his share of our nonrecourse liabilities, and thus will result in a
corresponding deemed distribution of cash, which may constitute a non-pro rata distribution. A
non-pro rata distribution of money or property may result in ordinary income to a unitholder,
regardless of his tax basis in his common units, if the distribution reduces the unitholder’s share
of our “unrealized receivables,” including depreciation recapture, and/or substantially appreciated
“inventory items,” both as defined in Section 751 of the Internal Revenue Code, and collectively,
“Section 751 Assets.” To that extent, he will be treated as then having been distributed his
proportionate share of the Section 751 Assets and having exchanged those assets with us in return
for the non-pro rata portion of the actual distribution made to him. This latter deemed exchange
will generally result in the unitholder’s realization of ordinary income, which will equal the
excess of the non-pro rata portion of that distribution over the unitholder’s tax basis for the
share of Section 751 Assets deemed relinquished in the exchange.
Basis of Common Units
A unitholder’s initial tax basis for his common units will be the amount he paid for the
common units plus his share of our nonrecourse liabilities. That basis generally will be increased
by his share of our income and by any increases in his share of our nonrecourse liabilities. That
basis generally will be decreased, but not below zero, by distributions from us, by the
unitholder’s share of our losses, by any decreases in his share of our nonrecourse liabilities and
by his share of our expenditures that are not deductible in computing taxable income and are not
required to be capitalized. A unitholder will have no share of our debt that is recourse to our
general partner, but will have a share, generally based on his share of profits, of our nonrecourse
liabilities. Please read “— Disposition of Common Units — Recognition of Gain or Loss.”
Limitations on Deductibility of Losses
The deduction by a unitholder of his share of our losses will be limited to the tax basis in
his units and, in the case of an individual unitholder or a corporate unitholder, if more than 50%
of the value of the corporate unitholder’s stock is owned directly or indirectly by or for five or
fewer individuals or some tax-exempt organizations, to the amount for which the unitholder is
considered to be “at risk” with respect to our activities, if that amount is less than his tax
basis. A unitholder must recapture losses deducted in previous years to the extent that
distributions cause his at risk amount to be less than zero at the end of any taxable year. Losses
disallowed to a unitholder or recaptured as a result of these limitations will carry forward and
will be allowable as a deduction in a later year to the extent that his tax basis or at risk
amount, whichever is the limiting factor, is subsequently increased provided that such losses are
otherwise allowable. Upon the taxable disposition of a unit, any gain recognized by a unitholder
can be offset by losses that were previously suspended by the at risk limitation but may not be
offset by losses suspended by the basis limitation. Any excess loss above that gain previously
suspended by the at risk or basis limitations is no longer utilizable.
In general, a unitholder will be at risk to the extent of the tax basis of his units,
excluding any portion of that basis attributable to his share of our nonrecourse liabilities,
reduced by (i) any portion of that basis representing amounts other than were protected against
loss because of a guarantee, stop loss agreement or other similar arrangement, and (ii) any amount
of money he borrows to acquire or hold his units, if the lender of those borrowed funds owns an
interest in us, is related to another unitholder who has an interest in us or can look only to the
units
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for repayment. A unitholder’s at risk amount will increase or decrease as the tax basis of the
unitholder’s units increases or decreases, other than tax basis increases or decreases attributable
to increases or decreases in his share of our nonrecourse liabilities.
In addition to the basis and at-risk limitations on the deductibility of losses, the passive
loss limitations generally provide that individuals, estates, trusts and some closely-held
corporations and personal service corporations are permitted to deduct losses from passive
activities, which are generally trade or business activities in which the taxpayer does not
materially participate, only to the extent of the taxpayer’s income from those passive activities.
The passive loss limitations are applied separately with respect to each publicly traded
partnership. Consequently, any passive losses we generate will only be available to offset our
passive income generated in the future and will not be available to offset income from other
passive activities or investments, including our investments or investments in other publicly
traded partnerships, or a unitholder’s salary or active business income. Further, your share of our
net income may be offset by any suspended passive losses from your investment in us, but may not be
offset by your current or carryover losses from other passive activities, including those
attributable to other publicly traded partnerships. Passive losses that are not deductible because
they exceed a unitholder’s share of income we generate may be deducted in full when the unitholder
disposes of his entire investment in us in a fully taxable transaction with an unrelated party. The
passive activity loss limitations are applied after other applicable limitations on deductions,
including the at risk rules and the basis limitation.
A unitholder’s share of our net income may be offset by any of our suspended passive losses,
but it may not be offset by any other current or carryover losses from other passive activities,
including those attributable to other publicly traded partnerships.
Limitations on Interest Deductions
The deductibility of a non-corporate taxpayer’s “investment interest expense” is generally
limited to the amount of that taxpayer’s “net investment income.” Investment interest expense
includes:
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interest on indebtedness properly allocable to property held for investment;
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our interest expense attributed to portfolio income; and
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the portion of interest expense incurred to purchase or carry an interest in a
passive activity to the extent attributable to portfolio income.
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The computation of a unitholder’s investment interest expense will take into account interest
on any margin account borrowing or other loan incurred to purchase or carry a unit. Net investment
income includes gross income from property held for investment and amounts treated as portfolio
income under the passive loss rules, less deductible expenses, other than interest, directly
connected with the production of investment income, but generally does not include gains
attributable to the disposition of property held for investment. The IRS has indicated that net
passive income earned by a publicly traded partnership will be treated as investment income to its
unitholders. In addition, the unitholder’s share of our portfolio income will be treated as
investment income for purposes of the investment interest limitation.
Entity-Level Collections
If we are required or elect under applicable law to pay any federal, state, local or foreign
income tax on behalf of any unitholder or our general partner or any former unitholder, we are
authorized to pay those taxes from our funds. That payment, if made, will be treated as a
distribution of cash to the partner on whose behalf the payment was made. If the payment is made on
behalf of a person whose identity cannot be determined, we are authorized to treat the payment as a
distribution to all current unitholders. We are authorized to amend our partnership agreement in
the manner necessary to maintain uniformity of intrinsic tax characteristics of units and to adjust
later distributions, so that after giving effect to these distributions, the priority and
characterization of distributions otherwise applicable under our partnership agreement is
maintained as nearly as is practicable. Payments by us as described above could give rise to an
overpayment of tax on behalf of an individual unitholder in which event the unitholder would be
required to file a claim in order to obtain a credit or refund.
Allocation of Income, Gain, Loss and Deduction
In general, if we have a net profit, our items of income, gain, loss and deduction will be
allocated among our general partner and the unitholders in accordance with their percentage
interests in us. If we have a net loss for the entire year, that loss will be allocated first to
our general partner and the unitholders in accordance with their percentage interests in us to the
extent of their positive capital accounts and, second, to our general partner.
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Specified items of our income, gain, loss and deduction will be allocated under Section 704(c)
of the Internal Revenue Code to account for the difference between the tax basis and fair market
value of our assets at the time we issue units in an offering, referred to in this discussion as
“Contributed Property.” These allocations are required to eliminate the difference between a
partner’s “book” capital account, credited with the fair market value of Contributed Property, and
the “tax” capital account, credited with the tax basis of Contributed Property, referred to in the
discussion as the “Book-Tax Disparity.” The effect of these allocations to a unitholder purchasing
common units from us in an offering will be essentially the same as if the tax basis of our assets
were equal to their fair market value at the time of such an offering. In the event we issue
additional common units or engage in certain other transactions in the future, “reverse Section
704(c) allocations,” similar to the Section 704(c) allocations described above, will be made to all
partners to account for the difference, at the time of such future transaction, between the “book”
basis for purposes of maintaining capital accounts and the fair market value of all property held
by us at the time of the future transaction. In addition, items of recapture income will be
allocated to the extent possible to the unitholder who was allocated the deduction giving rise to
the treatment of that gain as recapture income in order to minimize the recognition of ordinary
income by other unitholders. Finally, although we do not expect that our operations will result in
the creation of negative capital accounts, if negative capital accounts nevertheless result, items
of our income and gain will be allocated in an amount and manner to eliminate the negative balance
as quickly as possible.
An allocation of items of our income, gain, loss or deduction, other than an allocation
required by Section 704(c), will generally be given effect for federal income tax purposes in
determining a partner’s share of an item of income, gain, loss or deduction only if the allocation
has substantial economic effect. In any other case, a partner’s share of an item will be determined
on the basis of his interest in us, which will be determined by taking into account all the facts
and circumstances, including:
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his relative contributions to us;
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the interests of all the partners in profits and losses;
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the interest of all the partners in cash flow and other nonliquidating
distributions; and
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the rights of all the partners to distributions of capital upon liquidation.
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Andrews Kurth LLP is of the opinion that, with the exception of the issues described in “—
Tax Consequences of Unit Ownership — Section 754 Election,” “— Uniformity of Units” and “—
Disposition of Common Units — Allocations Between Transferors and Transferees,” allocations under
our partnership agreement will be given effect for federal income tax purposes in determining a
partner’s share of an item of income, gain, loss or deduction.
Treatment of Short Sales
A unitholder whose units are loaned to a “short seller” to cover a short sale of units may be
considered as having disposed of those units. If so, he would no longer be a partner for tax
purposes with respect to those units during the period of the loan and may recognize gain or loss
from the disposition. As a result, during this period:
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any of our income, gain, loss or deduction with respect to those units would
not be reportable by the unitholder;
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any cash distributions received by the unitholder as to those units would be
fully taxable; and
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all of these distributions would appear to be ordinary income.
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Andrews Kurth LLP has not rendered an opinion regarding the treatment of a unitholder where
common units are loaned to a short seller to cover a short sale of common units; therefore,
unitholders desiring to assure their status as partners and avoid the risk of gain recognition from
a loan to a short seller are urged to modify any applicable brokerage account agreements to
prohibit their brokers from loaning their units. The IRS has previously announced that it is
studying issues relating to the tax treatment of short sales of partnership interests. Please also
read “— Disposition of Common Units — Recognition of Gain or Loss.”
Alternative Minimum Tax
Each unitholder will be required to take into account his distributive share of any items of
our income, gain, loss or deduction for purposes of the alternative minimum tax. The current
minimum tax rate for noncorporate taxpayers is 26% on the first $175,000 of alternative minimum
taxable income in excess of the exemption amount and 28% on any additional alternative minimum
taxable income. Prospective unitholders are urged to consult with their tax advisors as to the
impact of an investment in units on their liability for the alternative minimum tax.
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Tax Rates
In general the highest effective United States federal income tax rate for individuals is
currently 35% and the maximum United States federal income tax rate for net capital gains of an
individual is currently 15% if the asset disposed of was a capital asset held for more than 12
months at the time of disposition. However, absent new legislation extending the current rates,
beginning January 1, 2013, the highest marginal United States federal income tax rate applicable to
ordinary income and long-term capital gains of individuals will increase to 39.6% and 20%,
respectively. These rates are subject to change at any time.
Recently enacted legislation will impose a 3.8% Medicare tax on certain net investment income
earned by individuals, estates and trusts for taxable years beginning after December 31, 2012. For
these purposes, net investment income generally includes a unitholder’s allocable share of our
income and gain realized by a unitholder from a sale of units. In the case of an individual, the
tax will be imposed on the lesser of (1) the unitholder’s net investment income or (2) the amount
by which the unitholder’s modified adjusted gross income exceeds $250,000 (if the unitholder is
married and filing jointly or a surviving spouse), $125,000 (if the unitholder is married and
filing separately) or $200,000 (in any other case).
Section 754 Election
We have made the election permitted by Section 754 of the Internal Revenue Code. That election
is irrevocable without the consent of the IRS. The election generally permits us to adjust a common
unit purchaser’s tax basis in our assets (“inside basis”) under Section 743(b) of the Internal
Revenue Code to reflect his purchase price. This election applies to a person who purchases units
from a selling unitholder but does not apply to a person who purchases common units directly from
us. The Section 743(b) adjustment belongs to the purchaser and not to other unitholders. For
purposes of this discussion, a unitholder’s inside basis in our assets will be considered to have
two components: (1) his share of our tax basis in our assets (“common basis”) and (2) his Section
743(b) adjustment to that basis.
Treasury Regulations under Section 743 of the Internal Revenue Code require, if the remedial
allocation method is adopted (which we have adopted), a portion of the Section 743(b) adjustment
that is attributable to recovery property under Section 168 of the Internal Revenue Code to be
depreciated over the remaining cost recovery period for the property’s unamortized Book-Tax
Disparity. Under Treasury Regulation Section 1.167(c)-1(a)(6), a Section 743(b) adjustment
attributable to property subject to depreciation under Section 167 of the Internal Revenue Code,
rather than cost recovery deductions under Section 168, is generally required to be depreciated
using either the straight-line method or the 150% declining balance method. Under our partnership
agreement, our general partner is authorized to take a position to preserve the uniformity of units
even if that position is not consistent with these Treasury Regulations. Please read “— Uniformity
of Units.”
Although Andrews Kurth LLP is unable to opine as to the validity of this approach because
there is no clear authority on this issue, we intend to depreciate the portion of a Section 743(b)
adjustment attributable to unrealized appreciation in the value of Contributed Property, to the
extent of any unamortized Book-Tax Disparity, using a rate of depreciation or amortization derived
from the depreciation or amortization method and useful life applied to the unamortized Book-Tax
Disparity of the property, or treat that portion as non-amortizable to the extent attributable to
property which is not amortizable. This method is consistent with the Treasury Regulations under
Section 743 of the Internal Revenue Code but is arguably inconsistent with Treasury Regulation
Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our
assets. To the extent this Section 743(b) adjustment is attributable to appreciation in value in
excess of the unamortized Book-Tax Disparity, we will apply the rules described in the Treasury
Regulations and legislative history. If we determine that this position cannot reasonably be taken,
we may take a depreciation or amortization position under which all purchasers acquiring units in
the same month would receive depreciation or amortization, whether attributable to common basis or
a Section 743(b) adjustment, based upon the same applicable rate as if they had purchased a direct
interest in our assets. This kind of aggregate approach may result in lower annual depreciation or
amortization deductions than would otherwise be allowable to some unitholders. Please read “—
Uniformity of Units.”
A Section 754 election is advantageous if the transferee’s tax basis in his units is higher
than the units’ share of the aggregate tax basis of our assets immediately prior to the transfer.
In that case, as a result of the election, the transferee would have, among other items, a greater
amount of depreciation deductions and his share of any gain or loss on a sale of our assets would
be less. Conversely, a Section 754 election is disadvantageous if the transferee’s tax basis in his
units is lower than those units’ share of the aggregate tax basis of our assets immediately prior
to the transfer. Thus, the fair market value of the units may be affected either favorably or
unfavorably by the election. A basis adjustment is required regardless of whether a Section 754
election is made in the case of a transfer of an
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interest in us if we have a substantial built-in loss immediately after the transfer, or if we
distribute property and have a substantial basis reduction. Generally a basis reduction or a
built-in loss is substantial if it exceeds $250,000.
The calculations involved in the Section 754 election are complex and will be made on the
basis of assumptions as to the value of our assets and other matters. For example, the allocation
of the Section 743(b) adjustment among our assets must be made in accordance with the Internal
Revenue Code. The IRS could seek to reallocate some or all of any Section 743(b) adjustment we
allocated to our tangible assets to goodwill instead. Goodwill, as an intangible asset, is
generally either nonamortizable or amortizable over a longer period of time or under a less
accelerated method than our tangible assets. We cannot assure you that the determinations we make
will not be successfully challenged by the IRS and that the deductions resulting from them will not
be reduced or disallowed altogether. Should the IRS require a different basis adjustment to be
made, and should our general partner determine the expense of compliance exceeds the benefit of the
election, we may seek permission from the IRS to revoke our Section 754 election. If permission is
granted, a subsequent purchaser of units may be allocated more income than such purchaser would
have been allocated had the election not been revoked.
Tax Treatment of Operations
Accounting Method and Taxable Year
We use the year ending December 31 as our taxable year and the accrual method of accounting
for federal income tax purposes. Each unitholder will be required to include in income his share of
our income, gain, loss and deduction for our taxable year or years ending within or with his
taxable year. In addition, a unitholder who has a taxable year different than our taxable year and
who disposes of all of his units following the close of our taxable year but before the close of
his taxable year must include his share of our income, gain, loss and deduction in income for his
taxable year, with the result that he will be required to include in income for his taxable year
his share of more than one year of our income, gain, loss and deduction. Please read “—
Disposition of Common Units — Allocations Between Transferors and Transferees.”
Tax Basis, Depreciation and Amortization
We use the tax basis of our assets for purposes of computing depreciation and cost recovery
deductions and, ultimately, gain or loss on the disposition of these assets. The federal income tax
burden associated with the difference between the fair market value of our assets and their tax
basis immediately prior to an offering will be borne by partners holding interests in us
immediately prior to an offering. Please read “— Tax Consequences of Unit Ownership — Allocation
of Income, Gain, Loss and Deduction.”
To the extent allowable, we may elect to use the depreciation and cost recovery methods that
will result in the largest deductions being taken in the early years after assets are placed in
service. Property we subsequently acquire or construct may be depreciated using accelerated methods
permitted by the Internal Revenue Code.
If we dispose of depreciable property by sale, foreclosure, or otherwise, all or a portion of
any gain, determined by reference to the amount of depreciation previously deducted and the nature
of the property, may be subject to the recapture rules and taxed as ordinary income rather than
capital gain. Similarly, a common unitholder who has taken cost recovery or depreciation deductions
with respect to property we own will likely be required to recapture some, or all, of those
deductions as ordinary income upon a sale of his interest in us. Please read “— Tax Consequences
of Unit Ownership — Allocation of Income, Gain, Loss and Deduction” and “— Disposition of Common
Units — Recognition of Gain or Loss.”
The costs incurred in selling our units (called “syndication expenses”) must be capitalized
and cannot be deducted currently, ratably or upon our termination. There are uncertainties
regarding the classification of costs as organization expenses, which we may be able to amortize,
and as syndication expenses, which we may not amortize. The underwriting discounts and commissions
we incur will be treated as syndication expenses.
Valuation and Tax Basis of Our Properties
The federal income tax consequences of the ownership and disposition of units will depend in
part on our estimates of the relative fair market values, and the tax bases, of our assets.
Although we may from time to time consult with professional appraisers regarding valuation matters,
we will make many of the relative fair market value estimates ourselves. These estimates and
determinations of basis are subject to challenge and will not be binding on the IRS or the courts.
If the estimates of fair market value or basis are later found to be incorrect, the character and
amount of items of income, gain, loss or deductions previously reported by unitholders might
change, and unitholders might be required to adjust their tax liability for prior years and incur
interest and penalties with respect to those adjustments.
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Disposition of Common Units
Recognition of Gain or Loss
Gain or loss will be recognized on a sale of units equal to the difference between the
unitholder’s amount realized and the unitholder’s tax basis for the units sold. A unitholder’s
amount realized will be measured by the sum of the cash or the fair market value of other property
received by him plus his share of our nonrecourse liabilities attributable to the common units
sold. Because the amount realized includes a unitholder’s share of our nonrecourse liabilities, the
gain recognized on the sale of units could result in a tax liability in excess of any cash received
from the sale.
Prior distributions from us that in the aggregate were in excess of the cumulative net taxable
income allocated for a common unit that decreased a unitholder’s tax basis in that common unit
will, in effect, become taxable income if the common unit is sold at a price greater than the
unitholder’s tax basis in that common unit, even if the price received is less than his original
cost.
Except as noted below, gain or loss recognized by a unitholder, other than a “dealer” in
units, on the sale or exchange of a unit held for more than one year will generally be taxable as
capital gain or loss. However, a portion of this gain or loss, which will likely be substantial,
will be separately computed and taxed as ordinary income or loss under Section 751 of the Internal
Revenue Code to the extent attributable to assets giving rise to depreciation recapture or other
“unrealized receivables” or to “inventory items” we own. The term “unrealized receivables” includes
potential recapture items, including depreciation recapture. Ordinary income attributable to
unrealized receivables, inventory items and depreciation recapture may exceed net taxable gain
realized upon the sale of a unit and may be recognized even if there is a net taxable loss realized
on the sale of a unit. Thus, a unitholder may recognize both ordinary income and a capital loss
upon a sale of units. Net capital losses may offset capital gains and no more than $3,000 of
ordinary income each year, in the case of individuals, and may only be used to offset capital gains
in the case of corporations.
The IRS has ruled that a partner who acquires interests in a partnership in separate
transactions must combine those interests and maintain a single adjusted tax basis for all those
interests. Upon a sale or other disposition of less than all of those interests, a portion of that
tax basis must be allocated to the interests sold using an “equitable apportionment” method, which
generally means that the tax basis allocated to the interest sold equals an amount that bears the
same relation to the partner’s tax basis in his entire interest in the partnership as the value of
the interest sold bears to the value of the partner’s entire interest in the partnership. Treasury
Regulations under Section 1223 of the Internal Revenue Code allow a selling unitholder who can
identify common units transferred with an ascertainable holding period to elect to use the actual
holding period of the common units transferred. Thus, according to the ruling, a common unitholder
will be unable to select high or low basis common units to sell as would be the case with corporate
stock, but, according to the Treasury Regulations, may designate specific common units sold for
purposes of determining the holding period of units transferred. A unitholder electing to use the
actual holding period of common units transferred must consistently use that identification method
for all subsequent sales or exchanges of common units. A unitholder considering the purchase of
additional units or a sale of common units purchased in separate transactions is urged to consult
his tax advisor as to the possible consequences of this ruling and application of the Treasury
Regulations.
Specific provisions of the Internal Revenue Code affect the taxation of some financial
products and securities, including partnership interests, by treating a taxpayer as having sold an
“appreciated” partnership interest, one in which gain would be recognized if it were sold, assigned
or terminated at its fair market value, if the taxpayer or related persons enter(s) into:
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a short sale;
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an offsetting notional principal contract; or
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a futures or forward contract with respect to the partnership interest or
substantially identical property.
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Moreover, if a taxpayer has previously entered into a short sale, an offsetting notional
principal contract or a futures or forward contract with respect to the partnership interest, the
taxpayer will be treated as having sold that position if the taxpayer or a related person then
acquires the partnership interest or substantially identical property.
The Secretary of the Treasury is also authorized to issue regulations that treat a taxpayer
that enters into transactions or positions that have substantially the same effect as the preceding
transactions as having constructively sold the financial position.
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Allocations Between Transferors and Transferees
In general, our taxable income or loss will be determined annually, will be prorated on a
monthly basis and will be subsequently apportioned among the unitholders in proportion to the
number of units owned by each of them as of the opening of the applicable exchange on the first
business day of the month, which we refer to in this prospectus as the “Allocation Date.”
However, gain or loss realized on a sale or other disposition of our assets other than in the
ordinary course of business will be allocated among the unitholders on the Allocation Date in the
month in which that gain or loss is recognized. As a result, a unitholder transferring units may be
allocated income, gain, loss and deduction realized after the date of transfer.
The use of this method may not be permitted under existing Treasury Regulations; however, new
Treasury Regulations have been proposed regarding the allocation of items of income, gain, loss and
deduction using a monthly proration method and the allocation of “extraordinary items” (such as
gain or loss realized on the sale or other disposition of capital assets other than in the ordinary
course of business) to unitholders based on the month such items are recognized under the
partnership’s method of accounting. Although existing publicly traded partnerships, including us,
may rely on the proposed Treasury Regulations, such proposed Regulations are not currently in
effect, and may be modified before being adopted as final Treasury Regulations. Accordingly,
Andrews Kurth LLP is unable to opine on the validity of this method of allocating income and
deductions between unitholders. We use this method because it is not administratively feasible to
make these allocations on a more frequent basis. If this method is not allowed under the Treasury
Regulations, or only applies to transfers of less than all of the unitholder’s interest, our
taxable income or losses might be reallocated among the unitholders. We are authorized to revise
our method of allocation between unitholders, as well as among unitholders whose interests vary
during a taxable year, to conform to a method permitted under future Treasury Regulations.
A unitholder who owns units at any time during a quarter and who disposes of them prior to the
record date set for a cash distribution for that quarter will be allocated items of our income,
gain, loss and deductions attributable to that quarter but will not be entitled to receive that
cash distribution.
Notification Requirements
A unitholder who sells any of his units, other than through a broker, is generally required to
notify us in writing of that sale within 30 days after the sale (or, if earlier, January 15 of the
year following the sale). A purchaser of units who purchases units from another unitholder
generally is required to notify us in writing of that purchase within 30 days after the purchase.
We are required to notify the IRS of any such transfers of units and to furnish specified
information to the transferor and transferee. Failure to notify us of a transfer of units may, in
some cases, lead to the imposition of penalties. However, these reporting requirements do not apply
to a sale by an individual who is a citizen of the United States and who effects the sale or
exchange through a broker who will satisfy such requirement.
Constructive Termination
We will be considered to have been terminated for tax purposes if there are sales or exchanges
which, in the aggregate, constitute 50% or more of the total interests in our capital and profits
within a 12-month period. A constructive termination results in the closing of our taxable year for
all unitholders. In the case of a unitholder reporting on a taxable year different from our taxable
year, the closing of our taxable year may result in more than 12 months of our taxable income or
loss being includable in his taxable income for the year of termination. We would be required to
make new tax elections after a termination, including a new election under Section 754 of the
Internal Revenue Code, and a termination would result in a deferral of our deductions for
depreciation. A termination could also result in penalties if we were unable to determine that the
termination had occurred. Moreover, a termination might either accelerate the application of, or
subject us to, any tax legislation enacted before the termination. The IRS has recently announced
a relief procedure whereby if a publicly traded partnership that has technically terminated
requests and is granted relief from the IRS, among other things, the partnership will only have to
provide one Schedule K-1 to unitholders for the fiscal year notwithstanding that two partnership
tax years result from the termination.
Uniformity of Units
Because we cannot match transferors and transferees of units, we must maintain uniformity of
the economic and tax characteristics of the units to a purchaser of these units. In the absence of
uniformity, we may be unable to completely comply with a number of federal income tax requirements,
both statutory and regulatory. A lack of uniformity can result from a literal application of
Treasury Regulation Section 1.167(c)-1(a)(6). Any non-uniformity
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could have a negative impact on the value of the units. Please read “— Tax Consequences of
Unit Ownership — Section 754 Election.”
We intend to depreciate the portion of a Section 743(b) adjustment attributable to unrealized
appreciation in the value of Contributed Property, to the extent of any unamortized Book-Tax
Disparity, using a rate of depreciation or amortization derived from the depreciation or
amortization method and useful life applied to the unamortized Book-Tax Disparity of that property,
or treat that portion as nonamortizable, to the extent attributable to property which is not
amortizable, consistent with the Treasury Regulations under Section 743 of the Internal Revenue
Code, even though that position may be inconsistent with Treasury Regulation Section
1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our assets.
Please read “— Tax Consequences of Unit Ownership — Section 754 Election.” To the extent that the
Section 743(b) adjustment is attributable to appreciation in value in excess of the unamortized
Book-Tax Disparity, we will apply the rules described in the Treasury Regulations and legislative
history. If we determine that this position cannot reasonably be taken, we may adopt a depreciation
and amortization position under which all purchasers acquiring units in the same month would
receive depreciation and amortization deductions, whether attributable to a common basis or Section
743(b) adjustment, based upon the same applicable rate as if they had purchased a direct interest
in our property. If this position is adopted, it may result in lower annual depreciation and
amortization deductions than would otherwise be allowable to some unitholders and risk the loss of
depreciation and amortization deductions not taken in the year that these deductions are otherwise
allowable. This position will not be adopted if we determine that the loss of depreciation and
amortization deductions will have a material adverse effect on the unitholders. If we choose not to
utilize this aggregate method, we may use any other reasonable depreciation and amortization method
to preserve the uniformity of the intrinsic tax characteristics of any units that would not have a
material adverse effect on the unitholders. Our counsel, Andrews Kurth LLP, is unable to opine on
the validity of any of these positions. The IRS may challenge any method of depreciating the
Section 743(b) adjustment described in this paragraph. If this challenge were sustained, the
uniformity of units might be affected, and the gain from the sale of units might be increased
without the benefit of additional deductions. We do not believe these allocations will affect any
material items of income, gain, loss or deduction. Please read “— Disposition of Common Units —
Recognition of Gain or Loss.”
Tax-Exempt Organizations and Other Investors
Ownership of units by employee benefit plans, other tax-exempt organizations, regulated
investment companies, non-resident aliens, foreign corporations, and other foreign persons raises
issues unique to those investors and, as described below, may have substantially adverse tax
consequences to them.
Employee benefit plans and most other organizations exempt from federal income tax, including
individual retirement accounts and other retirement plans, are subject to federal income tax on
unrelated business taxable income. Virtually all of our income allocated to a unitholder that is a
tax-exempt organization will be unrelated business taxable income and will be taxable to them. A
regulated investment company or “mutual fund” is required to derive 90% or more of its gross income
from certain permitted sources. The American Jobs Creation Act of 2004 generally treats net income
from the ownership of publicly traded partnerships as derived from such a permitted source. We
anticipate that all of our net income will be treated as derived from such a permitted source.
Non-resident aliens and foreign corporations, trusts or estates that own units will be
considered to be engaged in business in the United States because of the ownership of units. As a
consequence they will be required to file federal tax returns to report their share of our income,
gain, loss or deduction and pay federal income tax at regular rates on their share of our net
income or gain. Moreover, under rules applicable to publicly traded partnerships, we will withhold
tax at the highest applicable effective tax rate from cash distributions made quarterly to foreign
unitholders. Each foreign unitholder must obtain a taxpayer identification number from the IRS and
submit that number to our transfer agent on a Form W-8 BEN or applicable substitute form in order
to obtain credit for these withholding taxes. A change in applicable law may require us to change
these procedures.
In addition, because a foreign corporation that owns units will be treated as engaged in a
United States trade or business, that corporation may be subject to the United States branch
profits tax at a rate of 30%, in addition to regular federal income tax, on its share of our income
and gain, as adjusted for changes in the foreign corporation’s “U.S. net equity,” that is
effectively connected with the conduct of a United States trade or business. That tax may be
reduced or eliminated by an income tax treaty between the United States and the country in which
the foreign corporate unitholder is a “qualified resident.” In addition, this type of unitholder is
subject to special information reporting requirements under Section 6038C of the Internal Revenue
Code.
Under a ruling of the IRS, a foreign unitholder who sells or otherwise disposes of a unit will
be subject to federal income tax on gain realized on the sale or disposition of that unit to the
extent that this gain is effectively
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connected with a United States trade or business of the foreign unitholder. Because a foreign
unitholder is considered to be engaged in a trade or business in the United States by virtue of the
ownership of units, under this ruling a foreign unitholder who sells or otherwise disposes of a
unit generally will be subject to federal income tax on gain realized on the sale or other
disposition of units. Apart from the ruling, a foreign unitholder will not be taxed or subject to
withholding upon the sale or disposition of a unit if he has owned less than 5% in value of the
units during the five-year period ending on the date of the disposition and if the units are
regularly traded on an established securities market at the time of the sale or disposition.
Administrative Matters
Information Returns and Audit Procedures
We intend to furnish to each unitholder, within 90 days after the close of each taxable year,
specific tax information, including a Schedule K-1, which describes each unitholder’s share of our
income, gain, loss and deduction for our preceding taxable year. In preparing this information,
which will not be reviewed by counsel, we will take various accounting and reporting positions,
some of which have been mentioned earlier, to determine each unitholder’s share of income, gain,
loss and deduction. We cannot assure you that those positions will yield a result that conforms to
the requirements of the Internal Revenue Code, Treasury Regulations or administrative
interpretations of the IRS. Neither we nor Andrews Kurth LLP can assure prospective unitholders
that the IRS will not successfully contend in court that those positions are impermissible. Any
challenge by the IRS could negatively affect the value of the units.
The IRS may audit our federal income tax information returns. Adjustments resulting from an
IRS audit may require each unitholder to adjust a prior year’s tax liability, and possibly may
result in an audit of his own return. Any audit of a unitholder’s return could result in
adjustments not related to our returns as well as those related to our returns.
Partnerships generally are treated as separate entities for purposes of federal tax audits,
judicial review of administrative adjustments by the IRS and tax settlement proceedings. The tax
treatment of partnership items of income, gain, loss and deduction are determined in a partnership
proceeding rather than in separate proceedings with the partners. The Internal Revenue Code
requires that one partner be designated as the “Tax Matters Partner” for these purposes. Our
partnership agreement names our general partner as our Tax Matters Partner.
The Tax Matters Partner will make some elections on our behalf and on behalf of unitholders.
In addition, the Tax Matters Partner can extend the statute of limitations for assessment of tax
deficiencies against unitholders for items in our returns. The Tax Matters Partner may bind a
unitholder with less than a 1% profits interest in us to a settlement with the IRS unless that
unitholder elects, by filing a statement with the IRS, not to give that authority to the Tax
Matters Partner. The Tax Matters Partner may seek judicial review, by which all the unitholders are
bound, of a final partnership administrative adjustment and, if the Tax Matters Partner fails to
seek judicial review, judicial review may be sought by any unitholder having at least a 1% interest
in profits or by any group of unitholders having in the aggregate at least a 5% interest in
profits. However, only one action for judicial review will go forward, and each unitholder with an
interest in the outcome may participate in that action.
A unitholder must file a statement with the IRS identifying the treatment of any item on his
federal income tax return that is not consistent with the treatment of the item on our return.
Intentional or negligent disregard of this consistency requirement may subject a unitholder to
substantial penalties.
Nominee Reporting
Persons who hold an interest in us as a nominee for another person are required to furnish to
us:
(1) the name, address and taxpayer identification number of the beneficial owner and the
nominee;
(2) a statement regarding whether the beneficial owner is
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a person that is not a United States person,
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(b)
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a foreign government, an international organization or any wholly owned agency
or instrumentality of either of the foregoing, or
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(c)
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a tax-exempt entity;
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(3) the amount and description of units held, acquired or transferred for the beneficial
owner; and
(4) specific information including the dates of acquisitions and transfers, means of
acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net
proceeds from sales.
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Brokers and financial institutions are required to furnish additional information, including
whether they are United States persons and specific information on units they acquire, hold or
transfer for their own account. A penalty of $100 per failure, up to a maximum of $1,500,000 per
calendar year, is imposed by the Internal Revenue Code for failure to report that information to
us. The nominee is required to supply the beneficial owner of the units with the information
furnished to us.
Accuracy-related Penalties
An additional tax equal to 20% of the amount of any portion of an underpayment of tax that is
attributable to one or more specified causes, including negligence or disregard of rules or
regulations, substantial understatements of income tax and substantial valuation misstatements, is
imposed by the Internal Revenue Code. No penalty will be imposed, however, for any portion of an
underpayment if it is shown that there was a reasonable cause for that portion and that the
taxpayer acted in good faith regarding that portion.
For individuals, a substantial understatement of income tax in any taxable year exists if the
amount of the understatement exceeds the greater of 10% of the tax required to be shown on the
return for the taxable year or $5,000 ($10,000 for most corporations). The amount of any
understatement subject to penalty generally is reduced if any portion is attributable to a position
adopted on the return:
(1) for which there is, or was, “substantial authority,” or
(2) as to which there is a reasonable basis if the pertinent facts of that position are
adequately disclosed on the return.
If any item of income, gain, loss or deduction included in the distributive shares of
unitholders might result in that kind of an “understatement” of income for which no “substantial
authority” exists, we must disclose the pertinent facts on our return. In addition, we will make a
reasonable effort to furnish sufficient information for unitholders to make adequate disclosure on
their returns and to take other actions as may be appropriate to permit unitholders to avoid
liability for this penalty. More stringent rules apply to “tax shelters,” but we believe we are not
a tax shelter.
A substantial valuation misstatement exists if (a) the value of any property, or the adjusted
basis of any property, claimed on a tax return is 150% or more of the amount determined to be the
correct amount of the valuation or adjusted basis, (b) the price for any property or services (or
for the use of property) claimed on any such return with respect to any transaction between persons
described in Internal Revenue Code Section 482 is 200% or more (or 50% or less) of the amount
determined under Section 482 to be the correct amount of such price, or (c) the net Internal
Revenue Code Section 482 transfer price adjustment for the taxable year exceeds the lesser of $5
million or 10% of the taxpayer’s gross receipts.
No penalty is imposed unless the portion of the underpayment attributable to a substantial
valuation misstatement exceeds $5,000 ($10,000 for most corporations). If the valuation claimed on
a return is 200% or more than the correct valuation, the penalty imposed increases to 40%. We do
not anticipate making any valuation misstatements.
Reportable Transactions
If we were to engage in a “reportable transaction,” we (and possibly you and others) would be
required to make a detailed disclosure of the transaction to the IRS. A transaction may be a
reportable transaction based upon any of several factors, including the fact that it is a type of
tax avoidance transaction publicly identified by the IRS as a “listed transaction” or a
“transaction of interest” or that it produces certain kinds of losses in excess of $2 million in
any single year, or $4 million in any combination of six successive taxable years. Our
participation in a reportable transaction could increase the likelihood that our federal income tax
information return (and possibly your tax return) would be audited by the IRS. Please read “—
Information Returns and Audit Procedures” above.
Moreover, if we were to participate in a reportable transaction with a significant purpose to
avoid or evade tax, or in any listed transaction, you may be subject to the following provisions of
the American Jobs Creation Act of 2004:
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accuracy-related penalties with a broader scope, significantly narrower
exceptions, and potentially greater amounts than described above at “— Accuracy-related
Penalties,”
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for those persons otherwise entitled to deduct interest on federal tax
deficiencies, nondeductibility of interest on any resulting tax liability, and
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in the case of a listed transaction, an extended statute of limitations.
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39
We do not expect to engage in any “reportable transactions.”
Recent Legislative Developments
In the last Congressional session, the U.S. House of Representatives passed legislation that
would have provided for substantive changes to the definition of qualifying income and the
treatment of certain types of income earned from profits interests in partnerships. It is possible
that these legislative efforts could result in changes to the existing federal income tax laws that
affect publicly traded partnerships. As previously proposed, we do not believe any such
legislation would affect our tax treatment as a partnership. However, the proposed legislation
could be modified in a way that could affect us. We are unable to predict whether any of these
changes, or other proposals, will ultimately be enacted. Any such changes could negatively impact
the value of an investment in our units.
State, Local, and Other Tax Considerations
In addition to federal income taxes, you likely will be subject to other taxes, such as state
and local income taxes, unincorporated business taxes, and estate, inheritance or intangible taxes
that may be imposed by the various jurisdictions in which we do business or own property or in
which you are a resident. Although an analysis of those various taxes is not presented here, each
prospective unitholder should consider their potential impact on his investment in us. We own
property or do business in Louisiana and Texas. Louisiana currently imposes a personal income tax
on individuals. We may also own property or do business in other jurisdictions in the future.
Although you may not be required to file a return and pay taxes in some jurisdictions if your
income from that jurisdiction falls below the filing and payment requirement, you will be required
to file income tax returns and to pay income taxes in some or all of the jurisdictions in which we
do business or own property and may be subject to penalties for failure to comply with those
requirements. In some jurisdictions, tax losses may not produce a tax benefit in the year incurred
and also may not be available to offset income in subsequent taxable years. Some of the
jurisdictions may require us, or we may elect, to withhold a percentage of income from amounts to
be distributed to a unitholder who is not a resident of the jurisdiction. Withholding, the amount
of which may be greater or less than a particular unitholder’s income tax liability to the
jurisdiction, generally does not relieve a nonresident unitholder from the obligation to file an
income tax return. Amounts withheld will be treated as if distributed to unitholders for purposes
of determining the amounts distributed by us. Please read “— Tax Consequences of Unit Ownership —
Entity-Level Collections.” Based on current law and our estimate of our future operations, we
anticipate that any amounts required to be withheld will not be material.
It is the responsibility of each unitholder to investigate the legal and tax consequences,
under the laws of pertinent jurisdictions, of his investment in us. Accordingly, each prospective
unitholder is urged to consult, and depend on, his own tax counsel or other advisor with regard to
those matters. Further, it is the responsibility of each unitholder to file all state, local and
foreign, as well as United States federal tax returns, that may be required of him. Andrews Kurth
LLP has not rendered an opinion on the state, local or foreign tax consequences of an investment in
us.
40
PLAN OF DISTRIBUTION
Subject to the discussion below, we will distribute newly issued common units sold under the
Plan. A registered broker/dealer that is an affiliate of the Administrator will assist in the
identification of investors and other related services, but will not be acting as an underwriter
with respect to common units sold under the Plan. You will pay no service fees or brokerage trading
fees whether common units are newly issued or purchased in the open market. We will pay all
brokerage trading fees or other charges on common units purchased through the Plan. However, if you
are participating in the Plan through your broker, you may be charged a fee by your broker for
participating in the Plan on your behalf. Additionally, if you request that your common units held
by the Administrator be sold, you will receive the proceeds less a handling charge of $15.00 and
any brokerage trading fees. The common units are currently listed on the NYSE under the ticker
symbol “DEP.”
Persons who acquire common units through the Plan and resell them shortly after acquiring
them, including coverage of short positions, under certain circumstances, may be participating in a
distribution of securities that would require compliance with Regulation M under the Exchange Act,
and may be considered to be underwriters within the meaning of the Securities Act of 1933. We will
not extend to any such person any rights or privileges other than those to which he, she or it
would be entitled as a participant, nor will we enter into any agreement with any such person
regarding the resale or distribution by any such person of the common units.
We have no arrangements or understandings, formal or informal, with any person relating to the
sale of our common units to be received under the Plan. We reserve the right to modify, suspend or
terminate participation in the Plan by otherwise eligible persons to eliminate practices that are
inconsistent with the purposes of the Plan.
41
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the SEC under the Securities Act that
registers the securities offered by this prospectus. The registration statement, including the
attached exhibits, contains additional relevant information about us. The rules and regulations of
the SEC allow us to omit from this prospectus some information included in the registration
statement.
We file annual, quarterly, and other reports and other information with the SEC under the
Exchange Act. You may read and copy any materials we file with the SEC at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the Public Reference Room. The SEC maintains an
Internet website at
http://www.sec.gov
that contains reports, proxy and information statements, and
other information regarding issuers, including us, that file electronically with the SEC. General
information about us, including our annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and amendments to those reports, is available free of charge through
our website at
http://www.deplp.com
as soon as reasonably practicable after we electronically file
them with, or furnish them to, the SEC. Information on our website is not incorporated into this
prospectus or our other securities filings and is not a part of these filings.
42
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to “incorporate by reference” information into this document. This means
that we can disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is considered to be part of this
prospectus, and information that we file later with the SEC will automatically update and supersede
the previously filed information. We incorporate by reference the documents listed below and any
future filings made by us with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act, excluding information deemed to be furnished and not filed with the SEC, until all
the securities are sold:
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the description of our common units contained in our Registration Statement on
Form 8-A (File No. 001-33266) filed on January 24, 2007, and any amendment or report filed
for the purpose of updating that description;
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Annual Report on Form 10-K (File No. 001-33266) for the year ended December 31,
2010, filed on March 1, 2011;
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Quarterly Report on Form 10-Q (File No. 001-33266) for the period ended March
31, 2011, filed on May 10, 2011; and
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Current Reports on Form 8-K (File No. 001-33266) filed on February 11, 2011,
February 23, 2011, March 15, 2011, April 29, 2011 and July 6, 2011 (only to the extent
information contained in each of these Forms 8-K has been filed and not furnished).
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Each of these documents is available from the SEC’s website and public reference rooms
described above. Through our website,
http://www.deplp.com
, you can access electronic copies of
documents we file with the SEC, including our annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports on Form 8-K and any amendments to those reports. Information on our
website is not incorporated by reference in this prospectus. Access to those electronic filings is
available as soon as practical after filing with the SEC. You may also request a copy of those
filings, excluding exhibits, at no cost by writing or telephoning Investor Relations, Duncan Energy
Partners L.P., at our principal executive office, which is: 1100 Louisiana Street, 10th Floor,
Houston, Texas 77002; Telephone: (713) 381-6500.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
Some of the information contained in or incorporated by reference in this prospectus may
contain forward-looking statements. These statements can be identified by the use of
forward-looking terminology including “may,” “believe,” “will,” “expect,” “anticipate,” “estimate,”
“continue,” or other similar words. These statements discuss future expectations, contain
projections of results of operations or of financial condition, or state other “forward-looking”
information. These forward-looking statements involve risks and uncertainties. When considering
these forward-looking statements, you should keep in mind the risk factors and other cautionary
statements in this prospectus or incorporated by reference herein, including those described in the
“Risk Factors” section of our most recent annual report on Form 10-K and, to the extent applicable,
our quarterly reports on Form 10-Q and any prospectus supplement. The risk factors and other
factors noted in this prospectus or incorporated by reference herein could cause our actual results
to differ materially from those contained in any forward-looking statement. Investors are cautioned
that certain statements contained in or incorporated by reference in this prospectus as well as
some statements in periodic press releases and some oral statements made by our officials and our
subsidiaries during presentations about us, are “forward-looking” statements. Forward-looking
statements are based on current expectations and projections about future events and are inherently
subject to a variety of risks and uncertainties, many of which are beyond our control, which could
cause actual results to differ materially from those anticipated or projected.
Forward-looking statements speak only as of the date of this prospectus or, in the case of
forward-looking statements contained in any document incorporated by reference, the date of such
document, and we expressly disclaim any obligation or undertaking to update these statements to
reflect any change in our expectations or beliefs or any change in events, conditions or
circumstances on which any forward-looking statement is based.
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fluctuations in oil, natural gas and NGL prices and production due to weather
and other natural and economic forces;
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a reduction in demand for our products by the petrochemical, refining or
heating industries;
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the effects of our debt level on our future financial and operating
flexibility;
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43
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a decline in the volumes of NGLs delivered by our facilities;
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the failure of our credit risk management efforts to adequately protect us
against customer non-payment;
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terrorist attacks aimed at our facilities; and
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our failure to successfully integrate our operations with assets or companies
we acquire.
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You should not put undue reliance on any forward-looking statements. When considering
forward-looking statements, please review the risk factors described under “Risk Factors” in this
prospectus, in our most recent Annual Report on Form 10-K and in our Quarterly Reports on Form 10-Q
filed after our most recent Annual Report on Form 10-K.
LEGAL MATTERS
Andrews Kurth LLP, our counsel, will issue an opinion for us about the legality of the common
units and the material federal income tax consequences regarding the common units.
EXPERTS
The consolidated financial statements of Duncan Energy Partners L.P. and subsidiaries
incorporated in this prospectus by reference from Duncan Energy Partners L.P.’s Annual Report on
Form 10-K for the year ended December 31, 2010, and the effectiveness of Duncan Energy Partners
L.P. and subsidiaries’ internal control over financial reporting have been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their reports, which are
incorporated herein by reference (which reports (i) express an unqualified opinion on the financial
statements and include an explanatory paragraph concerning the fact that the financial statements
have been prepared from the separate records maintained by Enterprise Products Partners L.P. or
affiliates and may not necessarily be indicative of the conditions that would have existed or the
results of operations if the Company had been operated as an unaffiliated entity, and (ii) express
an unqualified opinion on the effectiveness of internal control over financial reporting). Such
consolidated financial statements have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
44
Addendum A
Duncan Energy Partners L.P.
Distribution Reinvestment and Unit Purchase Plan Fees
As of July 19, 2011
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Administrative
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Brokerage Fee
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Fee
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(Per Share)
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Quarterly Reinvestment
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Company Paid
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Company Paid
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Returned Check or Rejected Automatic Bank Withdrawal
(per item)
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$
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35.00
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N/A
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Sale of Plan Units (each sell order)
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$
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15.00
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$
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0.12
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Direct Deposit of Net Sale Proceeds (per transaction)
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$
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5.00
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N/A
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Duplicate Statement & Research Fees
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Current Year Duplicate Statement
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No Fee
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Prior Year Duplicate Statement (per year)
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$
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20.00
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Research Fee
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Call for fee information
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Duncan Energy Partners L.P. reserves the right to change add or modify fees.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14.
Other Expenses of Issuance and Distribution
.
The following table sets forth the estimated expenses payable by Duncan Energy Partners L.P.
(“Duncan Energy Partners”) and in connection with the issuance and distribution of the securities
covered by this post-effective amendment.
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Registration fee
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$
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2,507
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Fees and expenses of accountants
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20,000
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Fees and expenses of legal counsel
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25,000
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Fees and expenses of Administrator
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20,000
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Printing and engraving expenses
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10,000
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Miscellaneous
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5,000
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Total
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$
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82,507
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Item 15.
Indemnification of Directors and Officers.
The section of the prospectus entitled “Description of Our Partnership Agreement —
Indemnification” is incorporated herein by this reference. Subject to any terms, conditions or
restrictions set forth in the partnership agreement, Section 17-108 of the Delaware Revised Uniform
Limited Partnership Act empowers a Delaware limited partnership to indemnify and hold harmless any
partner or other person from and against all claims and demands whatsoever.
Section 18-108 of the Delaware Limited Liability Company Act provides that, subject to such
standards and restrictions, if any, as are set forth in its limited liability company agreement, a
Delaware limited liability company may, and shall have the power to, indemnify and hold harmless
any member or manager or other person from and against any and all claims and demands whatsoever.
The limited liability company agreement of DEP Holdings, LLC provides for the indemnification of
(i) present or former members of the Board of Directors of DEP Holdings, LLC or any committee
thereof, (ii) present or former officers, employees, partners, agents or trustees of DEP Holdings,
LLC or (iii) persons serving at the request of DEP Holdings, LLC in another entity in a similar
capacity as that referred to in the immediately preceding clauses (i) or (ii) (each, a “General
Partner Indemnitee”) to the fullest extent permitted by law, from and against any and all losses,
claims, damages, liabilities, joint or several, expenses (including reasonable legal fees and
expenses), judgments, fines, penalties, interest, settlements and other amounts arising from any
and all claims, demands, actions, suits or proceedings, whether civil, criminal, administrative or
investigative, in which any such person may be involved, or is threatened to be involved, as a
party or otherwise, by reason of such person’s status as a General Partner Indemnitee; provided,
that in each case the General Partner Indemnitee acted in good faith and in a manner which such
General Partner Indemnitee believed to be in, or not opposed to, the best interests of DEP
Holdings, LLC and, with respect to any criminal proceeding, had no reasonable cause to believe such
General Partner Indemnitee’s conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that the General Partner Indemnitee acted in a manner
contrary to that specified above. Any indemnification pursuant to these provisions shall be made
only out of the assets of DEP Holdings, LLC. DEP Holdings, LLC is authorized to purchase and
maintain insurance, on behalf of the members of its Board of Directors, its officers and such other
persons as the Board of Directors may determine, against any liability that may be asserted against
or expense that may be incurred by such person in connection with the activities of DEP Holdings,
LLC, regardless of whether DEP Holdings, LLC would have the power to indemnify such person against
such liability under the provisions of its limited liability company agreement.
Item 16.
Exhibits.
Reference is made to the Index to Exhibits following the signature pages hereto, which Index
to Exhibits is hereby incorporated into this item.
II-1
Item 17.
Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering range may be reflected in
the form of a prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to such information in
the registration statement;
provided, however,
that paragraphs (a)(1)(i), (a)(1)(ii) and (a)(1)(iii) do not apply if the
information required to be included in a post-effective amendment by those paragraphs is contained
in reports filed with or furnished to the Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in this
Registration Statement, or that is contained in a form of prospectus filed pursuant to Rule 424(b)
that is part of this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof;
(3) To remove from the registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the offering;
(4) That, for the purpose of determining liability under the Securities Act to any purchaser,
each prospectus filed pursuant to Rule 424(b) as part of a Registration Statement relating to an
offering, other than Registration Statements relying on Rule 430B or other than prospectuses filed
in reliance on Rule 430A, shall be deemed to be part of and included in this Registration Statement
as of the date it is first used after effectiveness;
provided, however
, that no statement made in a
registration statement or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify any statement that was made in this
Registration Statement or prospectus that was part of the Registration Statement or made in any
such document immediately prior to such date of first use.
(5) That, for the purpose of determining liability of a Registrant under the Securities Act of
1933 to any purchaser in the initial distribution of the securities, the undersigned Registrant
undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this
Registration Statement, regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned Registrant will be a seller to the purchaser and will be considered
to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned Registrant relating to the
offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the
undersigned Registrant or used or referred to by the undersigned Registrant;
II-2
(iii) The portion of any other free writing prospectus relating to the offering containing
material information about an undersigned Registrant or its securities provided by or on behalf of
the undersigned Registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned
Registrant to the purchaser.
(b) The undersigned Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant’s annual report pursuant
to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide
offering
thereof.
(h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in
the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter had been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it
has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this Post-Effective Amendment No. 1 to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on
July 19, 2011.
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DUNCAN ENERGY PARTNERS L.P.
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By:
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DEP HOLDINGS, LLC
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its General Partner
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By:
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/s/ W. Randall Fowler
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Name:
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W. Randall Fowler
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Title:
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President and Chief Executive Officer
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Pursuant to the requirements of the Securities Act, this Post-Effective Amendment No. 1 to
Registration Statement on Form S-3 has been signed by the following persons in the capacities
indicated below on July 19, 2011.
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Signature
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Title
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/s/ W. Randall Fowler
W. Randall Fowler
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Director, President and Chief Executive Officer
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Director, Senior Vice President, Treasurer and Chief Financial Officer
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Director
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*
William A. Bruckmann, III
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Director
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Director
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Senior Vice President, Controller and Principal Accounting Officer
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*By:
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/s/ W. Randall Fowler
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W. Randall Fowler,
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as attorney-in-fact
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II-4
INDEX TO EXHIBITS
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Exhibit
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No.
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Description
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4.1
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Certificate of Limited Partnership of Duncan Energy Partners L.P. (incorporated by
reference to Exhibit 3.1 to Form S-1 Registration Statement (Reg. No. 333-138371)
filed November 2, 2006).
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4.2
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Amended and Restated Agreement of Limited Partnership of Duncan Energy Partners
L.P., dated February 5, 2007 (incorporated by reference to Exhibit 3.1 to Form 8-K
filed February 5, 2007).
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4.3
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Amendment No. 1 to the Amended and Restated Agreement of Limited Partnership of
Duncan Energy Partners L.P. dated as of December 27, 2007 (incorporated by
reference to Exhibit 3.1 to Form 8-K/A filed January 3, 2008).
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4.4
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Amendment No. 2 to the Amended and Restated Agreement of Limited Partnership of
Duncan Energy Partners L.P. dated as of November 6, 2008 (incorporated by
reference to Exhibit 3.4 to Form 10-Q filed November 10, 2008).
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4.5
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Third Amendment to the Amended and Restated Agreement of Limited Partnership of
Duncan Energy Partners L.P., dated December 8, 2008 (incorporated by reference to
Exhibit 3.1 to Form 8-K filed December 8, 2008).
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4.6
|
|
Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of
Duncan Energy Partners L.P., dated as of June 15, 2009 (incorporated by reference
to Exhibit 3.1 to Form 8-K filed June 15, 2009).
|
|
|
|
|
|
4.7
|
|
Certificate of Formation of DEP Holdings, LLC (incorporated by reference to
Exhibit 3.3 to Form S-1 Registration Statement (Reg. No. 333-138371) filed
November 2, 2006).
|
|
|
|
|
|
4.8
|
|
Second Amended and Restated Limited Liability Company Agreement of DEP Holdings,
LLC, dated May 3, 2007 (incorporated by reference to Exhibit 3.4 to Form 10-Q
filed May 4, 2007).
|
|
|
|
|
|
4.9
|
|
First Amendment to the Second Amended and Restated Limited Liability Company
Agreement of DEP Holdings, LLC, dated November 6, 2008 (incorporated by reference
to Exhibit 3.8 to Form 10-Q filed November 10, 2008).
|
|
|
|
|
|
5.1+
|
|
Opinion of Andrews Kurth LLP as to the legality of the securities being registered.
|
|
|
|
|
|
8.1#
|
|
Opinion of Andrews Kurth LLP relating to tax matters.
|
|
|
|
|
|
23.1#
|
|
Consent of Deloitte & Touche LLP.
|
|
|
|
|
|
23.2#
|
|
Consent of Andrews Kurth LLP (included in Exhibit 8.1).
|
|
|
|
|
|
24.1+
|
|
Powers of Attorney for DEP Holdings, LLC (included on signature page).
|
|
|
|
|
|
99.1#
|
|
Cover letter to accompany the prospectus to be sent to participants in the Duncan
Energy Partners L.P. Distribution Reinvestment Plan who are registered owners of
common units.
|
|
|
|
|
|
99.2#
|
|
Cover letter to accompany the prospectus to be sent to participants in the Duncan
Energy Partners L.P. Distribution Reinvestment Plan who are beneficial owners of
common units.
|
|
|
|
|
|
99.3#
|
|
Enrollment Form for Duncan Energy Partners L.P. Distribution Reinvestment Plan.
|
|
|
|
|
|
#
|
|
Filed herewith.
|
|
|
|
+
|
|
Previously filed.
|
II-5
Duncan Energy Partners L.P. (NYSE:DEP)
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Duncan Energy Partners L.P. (NYSE:DEP)
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From Jan 2024 to Jan 2025
