Fitch Affirms Energy Transfer Partners & Energy Transfer Equity; Outlook Stable

Business Wire, April 9, 2008

CHICAGO -- Fitch Ratings has affirmed the ratings for Energy Transfer Partners, L.P. (ETP) and Energy Transfer Equity, L.P. (ETE) as listed below. ETE owns approximately 62.5 million ETP limited partner (LP) units and ETP's 2% general partner (GP) interest. Approximately $5.1 billion of outstanding debt securities are affected. The Rating Outlooks for ETP and ETE are Stable.

Energy Transfer Partners, L.P.

--Issuer Default Rating (IDR) at 'BBB-';

--Senior unsecured debt at 'BBB-'.

Energy Transfer Equity, L.P.

--IDR at 'BB-';

--Senior secured term loan at 'BB';

--Senior secured revolving credit facility at 'BB'.

ETP's ratings and Stable Outlook reflect the increasing scale, scope, and diversity of its operations, strong quantitative credit measures, a conservative distribution policy, a favorable near-term regional natural gas supply position from expanding Barnett Shale and Bossier Sands development, and the expected benefits of ongoing contractually supported pipeline expansions. ETP's credit measures are consistent with its peer group of investment grade MLPs. However, a substantial capital spending program directed mostly toward pipeline expansion projects, estimated to approximate $1.8 billion for calendar 2008, will result in increased debt leverage until the new projects generate operating returns.

In December 2007, ETP raised approximately $270 million in new equity proceeds. Management is committed to periodically issue new equity throughout the current construction phase. The company's debt to EBITDA for the twelve months ended December 2007 was approximately 3.4 times (x). Debt leverage will move higher in 2008 but should remain consistent with its rating category, albeit at the high end of the range for its MLP peer group. Maintaining appropriate future leverage measures will in good part depend on ETP completing timely equity financings.

ETE's ratings and Stable Outlook are primarily dependent the financial and operating characteristics of ETP, the standalone credit profile of ETE and the strong recovery prospects for its senior secured creditors under distressed conditions. Fitch considers fiscal 2007 debt-to-EBITDA of 3.6x as reasonable for a master limited partnership (MLP) holding company structure and does not present an inordinate amount of risk for ETE and ETP given the amount and predictability of its cash flow stream. ETP's upstream cash distributions should increase and as a result, ETE's cash flow ratios will strengthen as several ongoing expansion projects become operational. However, Fitch recognizes that ETE's outstanding $1.572 billion of debt is substantial and its ability to refinance the debt in the future could be impaired by deteriorating capital market conditions.

Fitch also considered recovery prospects for ETE's senior secured lenders in a distressed situation. Based on the value to loan ratio definition in the ETE credit agreement, at current market prices creditors would have recovery valuations in excess of 400%. Moreover, under reasonable stress case scenarios Fitch found that above average recoveries for creditors were likely.

On Sept. 12, 2007, Fitch changed ETP's Rating Outlook to Stable from Positive. The rating action was primarily the result of legal proceedings commenced against the company by the Federal Energy Regulatory Commission (FERC) and The U.S. Commodities Futures Trading Commission (CFTC) relating for the most part to charges of natural gas market manipulation or attempted gas market manipulation. On Mar. 17, 2008, it was announced that the legal action brought against ETP by CFTC was dismissed. In a consent order ETP agreed to pay CFTC $10 million while CFTC agreed to release ETP from claims it had brought against the company. The agreement between ETP and the CFTC contains no findings of fact or conclusions of law. However, resolution to the FERC case could extend well into calendar 2009 and beyond and continues to have a negative overhang on ETP's operations. Currently FERC's enforcement staff is recommending penalties against ETP and its affiliates totaling $198 million. The size of a future settlement, if any, or the results of a fully litigated case cannot be determined at this stage. However, eventual payments to FERC and any potential third party claims could be material.

The uncertainty caused by the regulatory proceedings has most certainly contributed to increasing ETP's borrowing costs and depressing the market value of its LP units. ETP's $2 billion revolving credit facility maturing in 2012 is expandable to $3 billion. Approximately $500 million is currently outstanding under the facility. In addition, Midcontinent Express Pipeline (MEP) has established a $1.4 billion three-year bank credit facility severally guaranteed by its 50% sponsors, ETP and Kinder Morgan Energy Partners, L.P. (KMP) to provide construction period financing for the project. While ETP's liquidity is adequate for the near term, given its aggressive capital budget, an impaired ability to issue long-term debt and equity would have negative credit implications.