S-1 1 h40294sv1.htm FORM S-1 - REGISTRATION STATEMENT sv1
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As filed with the Securities and Exchange Commission on November 2, 2006
Registration No. 333-          
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 
 
 
 
Duncan Energy Partners L.P.
(Exact Name of Registrant as Specified in Its Charter)
 
 
 
         
Delaware   4922   20-5639997
(State or Other Jurisdiction of
Incorporation or Organization) 		  (Primary Standard Industrial
Classification Code Number) 		  (I.R.S. Employer
Identification Number)
 
 
 
 
1100 Louisiana Street, 10th Floor
Houston, Texas 77002
(713) 381-6500
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant’s Principal Executive Offices)
 
 
 
 
Richard H. Bachmann
1100 Louisiana Street, 10th Floor
Houston, Texas 77002
(713) 381-6500
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
 
 
 
 
Copies to:
     
Robert V. Jewell
David C. Buck
Andrews Kurth LLP
600 Travis, Suite 4200
Houston, Texas 77002
(713) 220-4200 		  Joshua Davidson
Sean T. Wheeler
Baker Botts L.L.P.
One Shell Plaza, 910 Louisiana
Houston, Texas 77002
(713) 229-1234
 
 
 
 
Approximate date of commencement of proposed sale to the public:  As soon as practicable after this Registration Statement becomes effective.
 
 
 
 
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, 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, 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 post-effective amendment filed pursuant to Rule 462(d) 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
 
 
 
 
CALCULATION OF REGISTRATION FEE
 
             
Title of Each Class of
 		    Proposed Maximum
 		     
Securities to be Registered     Aggregate Offering Price(1)(2)     Amount of Registration Fee
Common units representing limited partner interests
    $313,950,000     $33,593
             
 
(1) Includes common units issuable upon exercise of the underwriters’ option to purchase additional common units.
(2) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o).
 
 
 
 
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 

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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
 
Subject to Completion, dated November 2, 2006
PROSPECTUS
DUNCAN ENERGY PARTNERS L.P. LOGO
 
13,000,000 Common Units
Representing Limited Partner Interests
 
 
Duncan Energy Partners L.P. is a limited partnership recently formed by Enterprise Products Partners L.P. This is the initial public offering of our common units. We currently estimate that the initial public offering price will be between $      and $      per common unit. Before this offering, there has been no public market for our common units. We intend to apply to list the common units on the New York Stock Exchange under the symbol “DEP.”
 
Investing in our common units involves risks.  Please read “Risk Factors” beginning on page 22.
 
These risks include the following:
 
•  We may not have sufficient cash from operations to enable us to pay distributions on our common units.
 
•  Changes in demand for and production of hydrocarbon products may materially adversely affect our results of operations, cash flows and financial condition.
 
•  We depend on Enterprise Products Partners L.P. and certain other key customers for a significant portion of our revenues. The loss of any of these key customers could result in a decline in our revenues and cash from operations available to pay distributions to our unitholders.
 
•  Our general partner and its affiliates, including Enterprise Products Partners L.P., will have conflicts of interest and limited fiduciary duties, which may permit them to favor their own interests to your detriment.
 
•  Affiliates of our general partner, including Enterprise Products Partners L.P., Enterprise GP Holdings L.P. and TEPPCO Partners L.P., may compete with us and be entitled to pursue certain business opportunities before us. This arrangement may limit our ability to grow.
 
•  Our general partner has a limited call right that may require you to sell your common units at an undesirable time or price.
 
•  Unitholders have limited voting rights and are not entitled to elect our general partner or its directors.
 
•  You will experience immediate and substantial dilution of $      per unit in the net tangible book value of your common units.
 
•  You may be required to pay taxes on income from us even if you do not receive any cash distributions from us.
 
                 
    Per Common Unit     Total  
 
Initial public offering price
  $     $  
Underwriting discount(1)
  $     $  
Proceeds to us before expenses
  $     $  
 
(1) Excludes structuring fee payable to Lehman Brothers of $          , in consideration of advice rendered by Lehman Brothers related to this offering and related transactions.
 
We have granted the underwriters a 30-day option to purchase up to an additional 1,950,000 common units on the same terms and conditions as set forth above, if the underwriters sell more than 13,000,000 common units in this offering.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
 
Lehman Brothers, on behalf of the underwriters, expects to deliver the common units on or about          , 2007.
 
Lehman Brothers
          , 2007

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  F-1
  A-1
  B-1
 Certificate of Limited Partnership of Duncan Energy Partners L.P.
 Certificate of Formation of DEP Holdings, LLC
 Certificate of Formation of DEP OLPGP, LLC
 Certificate of Limited Partnership of DEP Operating Partnership, L.P.
 Consent of Deloitte & Touche LLP

 
 
You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized any other person to provide you with different information. If anyone provides you with


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different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus. Our business, financial condition and results of operations may have changed since that date.
 
Until          , 2007 (25 days after the date of this prospectus), all dealers that buy, sell or trade our common units, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.


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SUMMARY
 
This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, including the historical and pro forma financial statements and the notes to those financial statements. You should read “Risk Factors” for important information about risks that you should consider before buying our common units. The information presented in this prospectus assumes an initial public offering price per unit of $      and that the underwriters’ option to purchase additional common units is not exercised, unless otherwise noted.
 
All references in this prospectus to “we,” “us,” “Duncan Energy Partners,” the “Partnership” and “our” refer to Duncan Energy Partners L.P. and its subsidiaries. All references in this prospectus to “we,” “us,” “our” or the “Company,” when used in a historical context, are intended to mean and include the combined business and operations of Duncan Energy Partners Predecessor. Duncan Energy Partners Predecessor reflects ownership of 100% of the assets being contributed, but we will own only a 66% interest in these assets after their contribution in connection with this offering. For all references in this prospectus to the terms “our general partner,” “DEP Holdings,” “Enterprise Products Partners,” “Enterprise Products OLP,” “Enterprise Products GP,” “Enterprise GP Holdings,” “EPE Holdings,” “EPCO,” “Mont Belvieu Caverns,” “Acadian Gas,” “Sabine Propylene,” “Lou-Tex Propylene,” “South Texas NGL,” “TEPPCO Partners,” “TEPPCO GP” and “Evangeline,” please read Appendix B — Glossary of Terms. Please also read Appendix B — Glossary of Terms for a glossary of industry and partnership terms used in this prospectus.
 
Duncan Energy Partners L.P.
 
We are a Delaware limited partnership formed by Enterprise Products Partners in September 2006 to own, operate and acquire a diversified portfolio of midstream energy assets. We are engaged in the business of gathering, transporting, marketing and storing natural gas and transporting and storing natural gas liquids, or NGLs, and petrochemicals. Our assets were previously owned by Enterprise Products Partners and are part of its integrated midstream energy asset network, or “value chain,” which includes natural gas gathering, processing, transportation and storage; NGL fractionation (or separation), transportation, storage and import and export terminaling; crude oil transportation; and offshore production platform services. After this offering, we will own 66% of the equity interests in the subsidiaries that hold our operating assets, and affiliates of Enterprise Products Partners will continue to own the remaining 34%. We believe our relationship with Enterprise Products Partners will enable us to maintain stable cash flows and optimize our scale, strategic location and pipeline connections.
 
Our operations are organized into the following four business segments:
 
  •  NGL & Petrochemical Storage Services.  Our NGL & Petrochemical Storage Services segment consists of 33 salt dome caverns located in Mont Belvieu, Texas, with an underground storage capacity of approximately 100 MMBbls, and certain related assets. These assets receive, store and deliver NGLs and petrochemical products for industrial customers located along the upper Texas Gulf Coast, which has the largest concentration of petrochemical plants and refineries in the United States.
 
  •  Natural Gas Pipelines & Services.  Our Natural Gas Pipelines & Services segment consists of the Acadian Gas system, which is an onshore natural gas pipeline system that gathers, transports, stores and markets natural gas in Louisiana. The Acadian Gas system links natural gas supplies from onshore and offshore Gulf of Mexico developments (including offshore pipelines, continental shelf and deepwater production) with local gas distribution companies, electric generation plants and industrial customers, including those in the Baton Rouge-New Orleans-Mississippi River corridor. In the aggregate, the Acadian Gas system includes over 1,000 miles of high-pressure transmission lines and lateral and gathering lines with an aggregate throughput capacity of approximately one Bcf/d and a leased storage facility with approximately three Bcf of storage capacity.
 
  •  Petrochemical Pipeline Services.  Our Petrochemical Pipeline Services segment consists of two petrochemical pipeline systems with an aggregate of 284 miles of pipeline. The Lou-Tex propylene pipeline system consists of a 263-mile pipeline used to transport chemical-grade propylene between


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  Sorrento, Louisiana and Mont Belvieu, Texas. The Sabine propylene pipeline system consists of a 21-mile pipeline used to transport polymer-grade propylene from Port Arthur, Texas to a pipeline interconnect in Cameron Parish, Louisiana on a transport-or-pay basis.
 
  •  NGL Pipeline Services.  Our NGL Pipeline Services segment will consist of a 290-mile pipeline system used to transport NGLs from two Enterprise Products Partners’ facilities located in South Texas to Mont Belvieu, Texas and related interconnections. We acquired a 223-mile segment of the system in August 2006, and we are in the process of acquiring and constructing other segments of the pipeline. The system is not in operation, but it is currently undergoing modifications, extensions and interconnections that should allow it to transport NGLs beginning in January 2007. Additional expansions are scheduled to be completed during 2007.
 
Our Relationship With Enterprise Products Partners
 
Enterprise Products Partners is a North American midstream energy company that provides a wide range of services to producers and consumers of natural gas, NGLs and crude oil, and is an industry leader in the development of pipeline and other midstream infrastructure in the continental United States and Gulf of Mexico. Enterprise Products Partners’ value chain is an integrated midstream energy asset network that links producers of natural gas, NGLs and crude oil from some of the largest supply basins in the United States, Canada and the Gulf of Mexico with domestic consumers and international markets. For the year ended December 31, 2005, Enterprise Products Partners had revenues of $12.3 billion, operating income of $663 million and net income of $420 million. For the six months ended June 30, 2006, Enterprise Products Partners had revenues of $6.8 billion, operating income of $379.5 million and net income of $260 million.
 
In the event we propose to sell any equity interests in our operating subsidiaries or material assets of those entities, other than sales of inventory and other assets in the ordinary course of business, Enterprise Products OLP will have a right of first refusal to purchase those interests or assets. We believe our relationship with EPCO and Enterprise Products Partners will provide us access to a significant pool of management talent and strong commercial relationships throughout the energy industry; however, this relationship is also a source of potential conflicts. For example, Enterprise Products Partners, EPCO and their affiliates are not restricted from competing with us and may generally acquire, construct or dispose of midstream or other assets in the future without any obligation to offer us the opportunity to purchase or construct those assets or participate in these activities. Please read “Conflicts of Interest, Business Opportunity Agreements and Fiduciary Duties” and “Certain Relationships and Related Party Transactions — Administrative Services Agreement” for more information.
 
Our Business Strategy
 
Our primary 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:
 
  •  optimize the benefits of our scale, strategic location and pipeline connections serving our natural gas, NGL, petrochemical and refining markets;
 
  •  manage our existing and future asset portfolio to minimize the volatility of our cash flows;
 
  •  invest in organic growth projects to capitalize on market opportunities which expand our asset base and generate additional cash flow; and
 
  •  pursue acquisitions of assets and businesses from related parties or, in accordance with our business opportunity agreements, from third parties.
 
For a description of our business opportunity agreements, please read “— Summary of Conflicts of Interest, Business Opportunity Agreements and Fiduciary Duties” and “Conflicts of Interest, Business Opportunity Agreements and Fiduciary Duties.”


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Our Competitive Strengths
 
We believe we are well-positioned to achieve our primary objectives and to execute our business strategies successfully because of the following competitive strengths:
 
  •  our operations currently consist of mature assets and a new NGL pipeline which are expected to generate stable, predictable cash flows;
 
  •  our assets are strategically located in areas with high demand for our services and play a critical role in Enterprise Products Partners’ midstream energy value chain;
 
  •  Enterprise Products Partners and EPCO have established a reputation in the midstream natural gas and NGL industries as reliable and cost-effective operators;
 
  •  the senior management team and board of directors of our general partner have extensive industry experience and include some of the most senior officers of EPCO;
 
  •  we have a lower cost of capital than other publicly traded partnerships that have incentive distribution rights; and
 
  •  our affiliation with Enterprise Products Partners and its affiliates may provide us access to attractive acquisition opportunities from them and third parties.
 
Formation Transactions
 
At the closing of this offering, the following transactions will occur:
 
  •  Enterprise Products OLP will contribute to us 66% of the equity interests in Mont Belvieu Caverns, Acadian Gas, Sabine Propylene, Lou-Tex Propylene and South Texas NGL;
 
  •  We will issue to Enterprise Products OLP 7,298,551 common units representing an approximate 35.2% limited partner interest in us (or an approximate 25.8% limited partner interest if the underwriters exercise in full their option to purchase additional common units), and we will issue a 2% general partner interest to our general partner, DEP Holdings, LLC;
 
  •  We will borrow approximately $200 million under a new credit agreement that we anticipate entering into prior to the closing of this offering, which will be used to fund a portion of our payment to Enterprise Products Partners in connection with the transactions described above;
 
  •  We will sell 13,000,000 common units to the public in this offering representing an approximate 62.8% limited partner interest in us (or an approximate 72.2% limited partner interest if the underwriters exercise in full their option to purchase additional common units), and will use the net proceeds from this offering as described under “Use of Proceeds;”
 
  •  We will become party to an existing administrative services agreement among EPCO and certain of their affiliates;
 
  •  We will enter into various new transportation, storage and operating agreements with Enterprise Products OLP and its affiliates; and
 
  •  We will enter into an omnibus agreement with Enterprise Products Partners, pursuant to which Enterprise Products Partners will agree to (i) indemnify us for certain environmental liabilities, tax liabilities and title and right-of-way defects occurring or existing before the closing and (ii) reimburse us for our 66% share of excess construction costs, if any, above our current estimated cost to complete planned expansions on the South Texas NGL pipeline.
 
Management and Ownership
 
As is common with publicly traded limited partnerships and in order to maximize operational flexibility, we will conduct our operations through subsidiaries.


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Our general partner will manage our operations and activities. Some of the executive officers and non-independent directors of our general partner also serve as executive officers or directors of Enterprise Products GP, EPE Holdings and TEPPCO GP. Please read “Management.” Our general partner will not receive any management fee or other compensation in connection with its management of our business but will be entitled to be reimbursed for all direct and indirect expenses incurred on our behalf. Neither our general partner nor the board of directors of our general partner will be elected by our unitholders. Unlike shareholders in a corporation, our unitholders will not elect or remove the board of directors of our general partner.
 
Our principal executive offices are located at 1100 Louisiana Street, 10th Floor, Houston, Texas 77002, and our telephone number is (713) 381-6500. Our website is located at http://www.deplp.com. Information on our website or any other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus.


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Our Structure
 
The following diagram depicts our organizational structure after giving effect to this offering and the related transactions assuming no exercise of the underwriters’ option to purchase additional common units.
 
Ownership of Duncan Energy Partners L.P.
 
                 
          % of
 		 
          Total
 		 
    Common Units     Ownership  
Public common units
    13,000,000       62.8 %
Enterprise Products Partners and its affiliates
    7,298,551       35.2 %
General partner interest
    —       2.0 %
                 
Total
    20,298,551       100.0 %
                 


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