MERGERS, DECONSOLIDATIONS, AND RELATED TRANSACTIONS:

Pending Transaction

Regency Merger

In January 2015, ETP and Regency entered into a definitive merger agreement pursuant to which ETP will acquire Regency. Under the terms of the definitive merger agreement, holders of Regency common units will receive 0.4066 ETP Common Units for each Regency common unit. Regency unitholders will also receive at closing an additional $0.32 per common unit in the form of ETP Common Units (based on the price for ETP Common Units prior to the merger closing). The transaction is subject to other customary closing conditions including approval by Regency’s unitholders and is expected to close in the second quarter of 2015.

2014 Transactions

Panhandle Merger

On January 10, 2014, the Company consummated a merger with Southern Union, the indirect parent of the Company, and PEPL Holdings, the sole limited partner of the Company, pursuant to which each of Southern Union and PEPL Holdings, a wholly-owned subsidiary of Southern Union, were merged with and into the Company (the “Panhandle Merger”), with the Company surviving the Panhandle Merger. In connection with the Panhandle Merger, the Company assumed Southern Union’s obligations under its 7.6% Senior Notes due 2024, 8.25% Senior Notes due 2029 and Floating Rate Junior Subordinated Notes due 2066. At the time of the Panhandle Merger, Southern Union did not have material operations of its own, other than its ownership of the Company and noncontrolling interest in PEI Power II, LLC, Regency (31.4 million common units and 6.3 million Class F Units) and ETP (2.2 million common units). In connection with the Panhandle Merger, the Company also assumed PEPL Holdings’ guarantee of $600 million of Regency senior notes.

Lake Charles LNG Transaction

On February 19, 2014, Panhandle transferred to ETP all of the interests in Lake Charles LNG, the entity that owns a LNG regasification facility in Lake Charles, Louisiana, in exchange for the cancellation of a $1.09 billion note payable to ETP that was assumed by the Company in the merger with Southern Union on January 10, 2014. Also on February 19, 2014, ETE and ETP completed the transfer to ETE of Lake Charles LNG from ETP in exchange for the redemption by ETP of 18.7 million ETP common units held by ETE. The transaction was effective as of January 1, 2014, at which time Panhandle deconsolidated Lake Charles LNG, including goodwill of $184 million and intangible assets of $50 million related to Lake Charles LNG. The results of Lake Charles LNG’s operations have not been presented as discontinued operations and Lake Charles LNG’s assets and liabilities have not been presented as held for sale in the Company’s consolidated financial statements due to the expected continuing involvement among the entities.

2013 Transactions

Sale of Southern Union’s Distribution Operations

In September 2013, Southern Union completed its sale of the assets of MGE for an aggregate purchase price of $975 million, subject to customary post-closing adjustments. In December 2013, Southern Union completed its sale of the assets of NEG for cash proceeds of $40 million, subject to customary post-closing adjustments, and the assumption of $20 million of debt.

MGE and NEG have been classified as discontinued operations in the consolidated statements of operations.

Summarized financial information for MGE and NEG is as follows:



	Successor		Predecessor
	Year Ended December 31, 2013	Period from Acquisition (March 26, 2012) to December 31, 2012	Period from January 1, 2012 to March 25, 2012
Revenue from discontinued operations	415	324	190
Net income of discontinued operations, excluding effect of taxes and overhead allocations	65	43	27

SUGS Contribution

On April 30, 2013, Southern Union completed its contribution to Regency of all of the issued and outstanding 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 Southern Union, (ii) the issuance of approximately 6.3 million Regency Class F units to Southern Union, (iii) the distribution of $463 million in cash to Southern Union, 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. In addition, PEPL Holdings provided a guarantee of collection with respect to the payment of the principal amounts of Regency’s debt related to the SUGS Contribution. The Regency Class F units have the same rights, terms and conditions as the Regency common units, except that the Company, as successor to 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.

ETP’s Acquisition of ETE’s ETP Holdco Interest

On April 30, 2013, ETP acquired ETE’s 60% interest in ETP Holdco, the entity formed by ETP and ETE in 2012 (as discussed under “ETP Holdco Transaction” below) to own the equity interests in Southern Union and Sunoco, Inc.. As a result of this transaction, ETP now owns 100% of ETP Holdco. ETP controlled ETP Holdco prior to this acquisition; therefore, the transaction did not constitute a change of control.

2012 Transactions

ETE Merger

On March 26, 2012, ETE completed its acquisition of Southern Union. Southern Union was the surviving entity in the merger and operated as a wholly-owned subsidiary of ETE until the Panhandle Merger in 2014. See below for discussion of ETP Holdco Transaction and ETE’s contribution of Southern Union to ETP Holdco.

Under the terms of the merger agreement, Southern Union stockholders received a total of 56,982,160 ETE Common Units and a total of approximately $3.01 billion in cash. Effective with the closing of the transaction, Southern Union’s common stock was no longer publicly traded.

In connection with the ETE Merger on March 26, 2012, ETP completed the acquisition of CrossCountry, a subsidiary of Southern Union which owned an indirect 50% interest in Citrus, the owner of FGT. The total merger consideration was approximately $2.0 billion, consisting of approximately $1.9 billion in cash and approximately 2.3 million ETP Common Units.

ETP Holdco Transaction

Immediately following the closing of ETP’s acquisition of Sunoco, Inc. in 2012, ETE contributed its interest in Southern Union into ETP Holdco, an ETP-controlled entity, in exchange for a 60% equity interest in ETP Holdco. In conjunction with ETE’s contribution, ETP contributed its interest in Sunoco, Inc. to ETP Holdco and retained a 40% equity interest in ETP Holdco. Pursuant to a stockholders agreement between ETE and ETP, ETP controlled ETP Holdco. This transaction did not result in a new basis of accounting for Southern Union or Panhandle.

Allocation of Consideration Transferred

The ETE Merger was accounted for using business combination accounting under applicable accounting principles. Business combination accounting requires, among other things, that assets acquired and liabilities assumed be recognized on the balance sheet at their fair values as of the acquisition date. The table below represents the amounts allocated to Southern Union’s tangible and intangible assets and liabilities as of March 26, 2012 based upon management’s estimate of their respective fair values. The goodwill resulting from the ETE Merger was primarily due to expected commercial and operational synergies and is not deductible for tax purposes.



Cash and cash equivalents	$	37
Other current assets	519
Property and equipment	6,242
Goodwill	2,497
Identified intangibles ⁽¹⁾	55
Other non-current assets	290
Long-term debt, including current portion	(3,334		)
Deferred income taxes	(1,419		)
Other liabilities	(974		)
Total fair value of partners’ capital	$	3,913


⁽¹⁾	Identified intangibles will be amortized over a life of approximately 17.5 years and are included in Other non-current assets in the consolidated balance sheets.

As a result of the ETE Merger, we recognized $77 million and $19 million of merger-related costs during the periods from March 26, 2012 to December 31, 2012 and January 1, 2012 to March 25, 2012, respectively. Such expenses include legal and other outside service costs, charges resulting from employment agreements with certain executives that provided for compensation when their employment was terminated and severance costs associated with administrative headcount reductions. These expenses were included in operating, maintenance, and general expenses in the consolidated statement of operations.

The Company also recognized a $15 million net gain due to the curtailment of certain other postretirement employee benefit plans in 2012. See Note 8 for more information on the curtailment.