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Capital Accounts

12 Months Ended

Dec. 31, 2020

Note 8. Capital Accounts

Common Limited Partner Interests

The following table summarizes changes in the number of our common units outstanding since December 31, 2017:

Common units outstanding at December 31, 2017	2,161,089,479
Common unit repurchases under Legacy Buyback Program	(1,236,800	)
Common units issued in connection with DRIP and EUPP	19,861,951
Common units issued in connection with the vesting of phantom unit awards, net	2,442,436
Common units issued in connection with employee compensation	1,443,586
Common units issued in connection with land acquisition	1,223,242
Other	45,135
Common units outstanding at December 31, 2018	2,184,869,029
Common unit repurchases under 2019 Buyback Program	(2,909,128	)
Common units issued in connection with DRIP and EUPP	2,897,990
Common units issued in connection with the vesting of phantom unit awards, net	2,720,603
Common units issued in connection with employee compensation	1,626,041
Other	21,595
Common units outstanding at December 31, 2019	2,189,226,130
Common units issued to Skyline North Americas, Inc. in connection with settlement of Liquidity Option in March 2020	54,807,352
Treasury units acquired in connection with settlement of the Liquidity Option in March 2020	(54,807,352	)
Common unit repurchases under 2019 Buyback Program	(8,978,317	)
Common units issued in connection with the vesting of phantom unit awards, net	3,162,095
Common units exchanged for preferred units in September 2020, with the common units received being immediately cancelled	(1,120,588	)
Other	19,638
Common units outstanding at December 31, 2020	2,182,308,958

The Partnership’s common units represent limited partner interests that give the holders thereof the right to participate in distributions and to exercise the other rights or privileges available to them under our Seventh Amended and Restated Agreement of Limited Partnership (as amended from time to time, the “Partnership Agreement”). In accordance with the Partnership Agreement, capital accounts are maintained for our limited partners. The capital account provisions of our Partnership Agreement incorporate principles established for U.S. federal income tax purposes and are not comparable to the equity balances presented in our consolidated financial statements prepared in accordance with GAAP. Partnership earnings and cash distributions are allocated to holders of our common units in accordance with their respective percentage interests.

Registration Statements

We have a universal shelf registration statement (the “2019 Shelf”) on file with the SEC which allows the Partnership and EPO (each on a standalone basis) to issue an unlimited amount of equity and debt securities, respectively. EPO issued $4.25 billion of senior notes during 2020 using the 2019 Shelf (see Note 7).

In addition, the Partnership has a registration statement on file with the SEC covering the issuance of up to $2.54 billion of its common units in amounts, at prices and on terms based on market conditions and other factors at the time of such offerings (referred to as the Partnership’s at-the-market (“ATM”) program). The Partnership did not issue any common units under its ATM program during the three years ended December 31, 2020. The Partnership’s capacity to issue additional common units under the ATM program remains at $2.54 billion as of December 31, 2020.

We may issue additional equity and debt securities to assist us in meeting our future liquidity requirements, including those related to capital investments.

Issuance of Common Units due to Settlement of Liquidity Option in March 2020

In October 2014, we acquired approximately 65.9% of the limited partner interests of Oiltanking Partners, L.P. (“Oiltanking”), all of the member interests of OTLP GP, LLC, the general partner of Oiltanking (“Oiltanking GP”), and the incentive distribution rights held by Oiltanking GP from Oiltanking Holding Americas, Inc. (currently known as OTA Holdings, Inc., “OTA”), a U.S. corporation, as the first step (“Step 1”) of a two-step acquisition of Oiltanking. In February 2015, we completed the second step of this transaction consisting of the acquisition of the noncontrolling interests in Oiltanking. In order to fund the equity consideration paid in Step 1 of the Oiltanking acquisition, we issued 54,807,352 common units to OTA on October 1, 2014 in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof. We also entered into a put option agreement (the “Liquidity Option Agreement” or “Liquidity Option”) with OTA and Marquard & Bahls AG (“M&B”), a German corporation and the ultimate parent company of OTA, in connection with Step 1. Under the Liquidity Option Agreement, we granted M&B the option to sell to the Partnership 100% of the issued and outstanding capital stock of OTA at any time within a 90-day period commencing on February 1, 2020.

On February 25, 2020, the Partnership received notice of M&B’s election to exercise its rights under the Liquidity Option Agreement. On March 5, 2020, the Partnership settled its obligations under the Liquidity Option Agreement by issuing 54,807,352 new common units to Skyline North Americas, Inc. (“Skyline,” an affiliate of M&B) in exchange for the capital stock of OTA. As a result of the settlement, OTA became a consolidated subsidiary of ours and we indirectly acquired the 54,807,352 Partnership common units owned by OTA and assumed all future income tax obligations of OTA, including its deferred tax liability.

As a result of the Liquidity Option settlement, the partners’ equity balance for common units (as presented on our Consolidated Balance Sheet) increased by $1.30 billion, representing the market value of the 54,807,352 Partnership common units issued to Skyline on March 5, 2020 at a closing price of $23.67 per unit. Since OTA did not meet the definition of a business as described in ASC 805, Business Combinations, the OTA transaction was accounted for by the Partnership as the reacquisition of common units and the assumption of OTA’s related deferred tax liability. In consolidation, we present the common units owned by OTA as treasury units, with their historical cost equal to the $1.30 billion market value of the Partnership common units issued to Skyline. On September 30, 2020, OTA exchanged the common units it holds for preferred units issued by the Partnership. For information regarding the preferred units and exchange transaction, see “Redeemable Preferred Limited Partner Interests” within this Note 8.

The common units issued to Skyline upon settlement of the Liquidity Option constitute “restricted securities” in the meaning of Rule 144 under the Securities Act and may not be resold except pursuant to an effective registration statement or an available exemption under the Securities Act. In connection with the settlement of the Liquidity Option, the Partnership entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with Skyline. Pursuant to the Registration Rights Agreement, Skyline has the right to request that the Partnership prepare and file a registration statement to permit and otherwise facilitate the public resale of all or a portion of the Partnership’s common units owned by Skyline and its affiliates. The Partnership’s obligation to Skyline to effect such transactions is limited to five registration statements and underwritten offerings. In May 2020, the Partnership filed a registration statement on behalf of Skyline for the resale of up to 54,807,352 common units. This registration statement is effective and, in June 2020, the Partnership filed a prospectus supplement to this registration statement that allows Skyline to sell up to $500 million of the Partnership’s common units it owns in connection with an “at-the-market” program that it administers. We do not receive any proceeds from such offerings.

Upon settlement of the Liquidity Option on March 5, 2020, the Liquidity Option liability was effectively replaced by the deferred tax liability of OTA as calculated in accordance with ASC 740, Income Taxes. See Note 16 for additional information regarding OTA’s deferred tax liability. For information regarding the Liquidity Option prior to its settlement, see Note 17.

Common Unit Repurchases Under Buyback Programs

In January 2019, we announced that the Board of Enterprise GP had approved a $2.0 billion multi-year unit buyback program (the “2019 Buyback Program”), which provides the Partnership with an additional method to return capital to investors. The 2019 Buyback Program authorizes the Partnership to repurchase its common units from time to time, including through open market purchases and negotiated transactions. No time limit has been set for completion of the program, and it may be suspended or discontinued at any time.

The Partnership repurchased 8,978,317 common units under the 2019 Buyback Program through open market and private purchases during the year ended December 31, 2020. The total purchase price of these repurchases was $186.3 million including commissions and fees. During the year ended December 31, 2019, the Partnership repurchased 2,909,128 common units under the 2019 Buyback Program for a total purchase price of $81.1 million including commissions and fees. Units repurchased under the 2019 Buyback Program are immediately cancelled upon acquisition. At December 31, 2020, the remaining available capacity under the 2019 Buyback Program was $1.73 billion.

In December 1998, we announced a common unit buyback program whereby we, together with certain affiliates, could repurchase up to 4,000,000 of the Partnership’s common units on the open market (the “Legacy Buyback Program”). The Partnership purchased the remaining authorized amount of 1,236,800 common units in December 2018 for $30.8 million. Units repurchased under the Legacy Buyback Program were immediately cancelled upon acquisition.

Common Units Delivered Under DRIP and EUPP

The Partnership has registration statements on file with the SEC in connection with its distribution reinvestment plan (“DRIP”) and employee unit purchase plan (“EUPP”). In July 2019, the Partnership announced that, beginning with the quarterly distribution payment paid in August 2019, it would use common units purchased on the open market, rather than issuing new common units, to satisfy its delivery obligations under the DRIP and EUPP. This election is subject to change in future quarters depending on the Partnership’s need for equity capital. Agents of the Partnership purchased 6,982,963 common units and 2,801,196 common units on the open market and delivered them to participants in the DRIP and EUPP during the year ended December 31, 2020 and five months ended December 31, 2019, respectively. Apart from $2.4 million and $0.9 million attributable to the plan discount available to all participants in the EUPP during 2020 and 2019, respectively, the funds used to effect these purchases were sourced from the DRIP and EUPP participants. No other Partnership funds were used to satisfy these obligations. We used open market purchases to satisfy DRIP and EUPP reinvestments in connection with the distribution paid on February 11, 2021.

Prior to July 2019, the Partnership satisfied its delivery obligations under the DRIP and EUPP by issuing new common units to participants. An aggregate 2,897,990 common units and 19,861,951 common units were issued to DRIP and EUPP participants during the seven months ended July 31, 2019 and year ended December 31, 2018, respectively. These transactions generated net cash proceeds of $82.2 million in 2019 and $538.4 million in 2018. Privately held affiliates of EPCO reinvested $29 million and $213 million through the DRIP in each of the years ended December 31, 2019 and 2018, respectively (this amount being a component of the net cash proceeds presented for each period).

After taking into account the number of common units delivered under the DRIP through December 31, 2020, we have the capacity to deliver an additional 50,615,246 common units under this plan. Likewise, we have the capacity to deliver an additional 3,318,607 common units under the EUPP.

Common Units Issued in Connection With the Vesting of Phantom Unit Awards

After taking into account tax withholding requirements, the Partnership issued 3,162,095, 2,720,603 and 2,442,436 new common units to employees in connection with the vesting of phantom unit awards during the years ended December 31, 2020, 2019 and 2018, respectively. See Note 13 for information regarding our phantom unit awards.

Common Units Issued in Connection With Employee Compensation

In February 2019 and 2018, certain employees of EPCO received discretionary bonus payments, less any retirement plan deductions and applicable withholding taxes, for work performed on our behalf during the prior fiscal year (e.g., the bonus paid in February 2019 was with respect to the year ended December 31, 2018). The net dollar value of the bonus amounts was remitted to employees through the issuance of an equivalent value of newly issued Partnership common units under EPCO’s 2008 Enterprise Products Long-Term Incentive Plan (Third Amendment and Restatement) (referred to as the “2008 Plan”).

In February 2019, we issued 1,626,041 common units, which had a value of $45.6 million, in connection with the employee bonus awards. In February 2018, we issued 1,443,586 common units, which had a value of $39.1 million. The compensation expense associated with each bonus award was recognized during the year in which the work was performed.

Common Units Issued in Connection With Land Acquisition

In April 2018, we acquired land in the Houston, Texas area for $85.2 million. The consideration paid consisted of $55.2 million in cash with the balance funded by the issuance of 1,223,242 Partnership common units.

Redeemable Preferred Limited Partner Interests

The following table summarizes changes in the number of our preferred units outstanding during the year ended December 31, 2020:

Original issuance of preferred units on September 30, 2020:
Units sold to third party purchasers			35,000
Units sold to a related party			15,000
Total preferred units outstanding at September 30, 2020			50,000
Paid-in kind distribution to related party			138
Preferred units outstanding at December 31, 2020			50,138

On September 30, 2020, the Partnership issued and sold an aggregate of 50,000 Series A Cumulative Convertible Preferred Units in a private placement transaction. The preferred units represent a new class of limited partner interests authorized under the Partnership Agreement. The stated value of each preferred unit is $1,000 per unit. The total offering price for the preferred units was $50.0 million, of which $32.5 million was received in cash with the remaining $17.5 million funded through the exchange of 1,120,588 of the Partnership’s common units owned by the purchasers. Cash proceeds from the preferred unit offering include $15.0 million received from a privately held affiliate of EPCO for the purchase of 15,000 preferred units. Offering expenses were approximately $1.0 million.

Concurrently, the Partnership exchanged all of the 54,807,352 Partnership common units owned directly by OTA for 855,915 of the Partnership’s new preferred units having an equivalent value. The preferred units held by OTA, like the common units OTA held prior to the exchange, are accounted for as treasury units by the Partnership in consolidation. The historical cost of the treasury units did not change as a result of the exchange and remains at the $1.30 billion recognized on March 5, 2020 in connection with settlement of the Liquidity Option.

As described in the Partnership Agreement, key terms of the preferred units include the following:

•

With respect to distribution and liquidation rights, the preferred units rank senior to the Partnership’s common units. Preferred units held by persons other than the Partnership, its subsidiaries and its affiliates generally will vote on an as-converted basis with the Partnership’s common units and have certain class voting rights with respect to certain protective matters.

•

Holders of the preferred units are entitled to receive cumulative quarterly distributions at a rate of 7.25% per annum. The Partnership is prohibited from paying distributions on its common units unless full cumulative distributions on the preferred units are paid or set aside for payment. The Partnership may satisfy its obligation to pay distributions to the preferred unitholders through the issuance, in whole or in part, of additional preferred units (referred to as paid-in kind or “PIK” distributions), with the remainder in cash, subject to certain rights of a holder to elect all cash and other conditions as described in the Partnership Agreement. The exchange by OTA of its common units for PIK-eligible preferred units enables the Partnership to more effectively manage its consolidated cash balances.

In November 2020, the Partnership made its first quarterly distribution to third party and related party preferred unitholders. The distribution was valued at $0.5 million, consisting of PIK distributions of 138 new preferred units and $0.3 million in cash.

•

Subject to certain limitations, each preferred unitholder may elect to convert its preferred units on or after September 30, 2025 into a number of the Partnership’s common units equal to (a) the number of preferred units to be converted multiplied by (b) the quotient of (i) $1,000 plus any accrued and unpaid distributions per preferred unit, divided by (ii) 92.5% of the volume-weighted average price of the Partnership’s common units at the time of conversion (as defined in the underlying agreements). In addition, each preferred unitholder may convert its preferred units into common units if EPO’s senior notes cease to have an investment grade rating or a Change of Control (as defined in the Partnership Agreement) occurs, in each case based on the conversion ratio specified in the Partnership Agreement.

•	The Partnership may elect to redeem the preferred units for cash, in whole or in part, based on a redemption price outlined in the following schedule, plus any accrued and unpaid distributions at the redemption date:

•	$1,100 per preferred unit from September 30, 2020 through September 29, 2022;

•	$1,070 per preferred unit from September 30, 2022 through September 29, 2024;

•	$1,030 per preferred unit from September 30, 2024 through September 29, 2025;

•	$1,010 per preferred unit from September 30, 2025 through September 29, 2026; and

•	$1,000 per preferred unit on or after September 30, 2026; however,

•	if a Change of Control event occurs prior to September 30, 2026, the redemption price is $1,010 per preferred unit.

In connection with a redemption at the Partnership’s election, the Partnership may convert up to 50% of the preferred units being redeemed into common units (and to pay cash with respect to the remainder), with each such preferred unit being converted on the applicable redemption date into a number of common units equal to (i) the then-applicable preferred unit redemption price divided by (ii) 92.5% of the volume-weighted average price of the Partnership’s common units at the time of conversion (as defined in the underlying agreements).

The Partnership has agreed to prepare and file a registration statement that would permit or otherwise facilitate the public resale of any common units resulting from the conversion of the preferred units to common units.

Our Consolidated Balance Sheet at December 31, 2020 presents the capital accounts of the third-party and related party purchasers of the preferred units as mezzanine equity since the terms of the preferred units allow for cash redemption by the holders in a Change of Control event, without regard to the likelihood of such an event. The preferred units held by OTA are presented as treasury units in consolidation since their ultimate disposition remains under the control of the Partnership.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) primarily reflects cumulative gain or loss on derivative instruments designated and qualified as cash flow hedges from inception less gains or losses previously reclassified from accumulated other comprehensive income (loss) into earnings. Gain or loss amounts related to cash flow hedges recorded in accumulated other comprehensive income (loss) are reclassified to earnings in the same period(s) in which the underlying hedged forecasted transactions affect earnings. If it becomes probable that a forecasted transaction will not occur, the related net gain or loss in accumulated other comprehensive income (loss) is immediately reclassified into earnings.

The following tables present the components of accumulated other comprehensive income (loss) as reported on our Consolidated Balance Sheets at the dates indicated:

	Cash Flow Hedges
	Commodity Derivative Instruments			Interest Rate Derivative Instruments			Other			Total
Accumulated Other Comprehensive Income (Loss), December 31, 2018	$	152.7		$	(104.8	)	$	3.0		$	50.9
Other comprehensive income (loss) for period, before reclassifications		44.1			81.4			(0.6	)		124.9
Reclassification of losses (gains) to net income during period		(141.7	)		37.3			–			(104.4	)
Total other comprehensive income (loss) for period		(97.6	)		118.7			(0.6	)		20.5
Accumulated Other Comprehensive Income (Loss), December 31, 2019		55.1			13.9			2.4			71.4
Other comprehensive income (loss) for period, before reclassifications		124.4			(127.5	)		(0.1	)		(3.2	)
Reclassification of losses (gains) to net income during period		(272.7	)		39.3			–			(233.4	)
Total other comprehensive income (loss) for period		(148.3	)		(88.2	)		(0.1	)		(236.6	)
Accumulated Other Comprehensive Income (Loss), December 31, 2020	$	(93.2	)	$	(74.3	)	$	2.3		$	(165.2	)

The following table presents reclassifications of (income) loss out of accumulated other comprehensive income (loss) into net income during the years indicated:

		For the Year Ended December 31,
Losses (gains) on cash flow hedges:	Location	2020			2019
Interest rate derivatives	Interest expense	$	39.3		$	37.3
Commodity derivatives	Revenue		(282.6	)		(152.4	)
Commodity derivatives	Operating costs and expenses		9.9			10.7
Total		$	(233.4	)	$	(104.4	)

For information regarding our interest rate and commodity derivative instruments, see Note 14.

Noncontrolling Interests

Noncontrolling interests represent third party ownership interests in our consolidated subsidiaries. The following table presents the components of noncontrolling interests as reported on our Consolidated Balance Sheets at the dates indicated:

	At December 31,
Consolidated Subsidiary	2020		2019
Breviloba LLC (“Breviloba”)(1)	$	480.4	$	492.9
Whitethorn Pipeline Company LLC (“Whitethorn”)(2)		193.0		198.9
Enterprise Navigator Ethylene Terminal LLC (“ENET”)(3)		142.2		124.3
Other (4)		257.7		247.4
Total noncontrolling interests in consolidated subsidiaries	$	1,073.3	$	1,063.5

(1)	Altus Midstream Processing LP acquired a noncontrolling 33% equity interest in Breviloba, which owns the Shin Oak NGL Pipeline, in July 2019 for $440.7 million in cash.
(2)	An affiliate of Western Gas Partners, LP acquired a noncontrolling 20% equity interest in Whitethorn, which owns the majority of our Midland-to-ECHO 1 pipeline, in June 2018 for $189.6 million in cash.
(3)	Navigator Ethylene Terminals LLC owns a noncontrolling 50% equity interest in ENET, which owns our ethylene export terminal located at Morgan’s Point on the Houston Ship Channel.
(4)	Primarily represents noncontrolling equity interests in NGL fractionation and pipeline businesses.

Net income attributable to noncontrolling interests was $110.1 million, $95.8 million and $66.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Cash Distributions

The following table presents Enterprise’s declared quarterly cash distribution rates per common unit with respect to the quarter indicated. Actual cash distributions are paid by Enterprise within 45 days after the end of each fiscal quarter.

	Quarterly Distribution Per Common Unit		Record Date	Payment Date
2018:
1st Quarter	$	0.4275	4/30/2018	5/8/2018
2nd Quarter	$	0.4300	7/31/2018	8/8/2018
3rd Quarter	$	0.4325	10/31/2018	11/8/2018
4th Quarter	$	0.4350	1/31/2019	2/8/2019
2019:
1st Quarter	$	0.4375	4/30/2019	5/13/2019
2nd Quarter	$	0.4400	7/31/2019	8/13/2019
3rd Quarter	$	0.4425	10/31/2019	11/12/2019
4th Quarter	$	0.4450	1/31/2020	2/12/2020
2020:
1st Quarter	$	0.4450	4/30/2020	5/12/2020
2nd Quarter	$	0.4450	7/31/2020	8/12/2020
3rd Quarter	$	0.4450	10/30/2020	11/12/2020
4th Quarter	$	0.4500	1/29/2021	2/11/2021

On January 7, 2021, we announced that the Board of Enterprise GP declared a quarterly cash distribution of $0.45 per common unit with respect to the fourth quarter of 2020. The quarterly distribution was paid on February 11, 2021 to unitholders of record as of the close of business on January 29, 2021. The total amount paid was $988.8 million, which includes $7.1 million for distribution equivalent rights on phantom unit awards.