Contribution and Disposals

9 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Contribution and Disposals

CONTRIBUTION AND DISPOSALS:

SUGS Contribution

On April 30, 2013, the Company completed its contribution to Regency of all of the membership interest in Southern Union Gathering Company, LLC, and its subsidiaries, including SUGS (the “SUGS Contribution”).  The general partner and IDRs of Regency are owned by ETE. The consideration paid by Regency in connection with this transaction consisted of (i) the issuance of approximately 31.4 million Regency common units to the Company, (ii) the issuance of approximately 6.3 million Regency Class F units to the Company, (iii) the distribution of $463 million in cash to the Company, net of closing adjustments, and (iv) the payment of $30 million in cash to a subsidiary of ETP. This transaction was between commonly controlled entities; therefore, the amounts recorded in the consolidated balance sheet for the investment in Regency and the related deferred tax liabilities were based on the historical book value of SUGS. The Company used a portion of the cash consideration to pay down $240 million in outstanding borrowings on the Eighth Amended and Restated Revolving Credit Agreement (the “Southern Union Credit Facility”).  In addition, PEPL Holdings, a wholly-owned subsidiary of the Company, provided a guarantee of collection with respect to the payment of the principal amounts of Regency’s debt related to the SUGS Contribution, as further discussed in Note 10. The Regency Class F units have the same rights, terms and conditions as the Regency common units, except that Southern Union will not receive distributions on the Regency Class F units for the first eight consecutive quarters following the closing, and the Regency Class F units will thereafter automatically convert into Regency common units on a one-for-one basis.  The Company has not presented SUGS as discontinued operations due to the expected continuing involvement with SUGS through affiliate relationships, as well as the direct investment in Regency common and Class F units received, which has been accounted for using the equity method.

Discontinued Operations

In December 2012, the Company entered into a purchase and sale agreement with The Laclede Group, Inc. pursuant to which Laclede Missouri agreed to acquire the assets of the MGE division and Laclede Massachusetts agreed to acquire the assets of the NEG division (together, the “LDC Disposal Group”).  Laclede Gas Company, a subsidiary of The Laclede Group, Inc., subsequently assumed all of Laclede Missouri’s rights and obligations under the purchase and sale agreement. In February 2013, The Laclede Group, Inc. entered into an agreement with APUC that allows a subsidiary of APUC to assume the rights of The Laclede Group, Inc. to purchase the assets of NEG, subject to certain approvals.

Effective September 1, 2013, the Company completed its sale of the assets of MGE to Laclede Gas Company for an aggregate purchase price of $975 million, subject to customary post-closing adjustments. Proceeds from the sale were used to repay borrowings under ETP’s revolving credit facility. The sale of NEG is expected to close in the fourth quarter of 2013 for cash proceeds of $40 million, subject to customary post-closing adjustments and the assumption of $20 million of debt.  All periods reflected herein have been restated to present the LDC Disposal Group’s operations as discontinued operations in the condensed consolidated statements of operations.  The assets and liabilities of NEG have been reported as assets and liabilities held for sale as of September 30, 2013 and December 31, 2012. The assets and liabilities of MGE have been reported as assets and liabilities held for sale as of December 31, 2012.

Summarized financial information for Southern Union’s LDC Disposal Group is as follows:

	Successor								Predecessor
	Three Months Ended September 30,				Nine Months Ended September 30, 2013		Period from Acquisition (March 26, 2012) to September 30, 2012		Period from January 1, 2012 to March 25, 2012
	2013		2012
Revenue from discontinued operations	$	51	$	73	$	408	$	168	$	190
Net income of discontinued operations, excluding effect of taxes and overhead allocations	27		8		125		22		27

The goodwill allocated to NEG was $1 million at September 30, 2013.