Filed Pursuant to Rule 424(b)(5)
Registration No. 333-202282
The information in this preliminary prospectus supplement and
accompanying base prospectus is not complete and may be changed. This preliminary prospectus supplement and the accompanying base prospectus are not an offer to sell these securities and are not soliciting an offer to buy these securities in any
jurisdiction where the offer or sale is not permitted.
Subject to Completion, dated February 26, 2015
PRELIMINARY PROSPECTUS SUPPLEMENT
(To Prospectus dated February 25, 2015)
$ % Senior Notes
due
$ % Senior Notes
due
$ % Senior Notes
due
We are offering $ aggregate
principal amount of our % senior notes due (the notes), $
aggregate principal amount of our % senior notes due (the notes) and
$ aggregate principal amount of our % senior notes due (the notes
and, together with the notes and the notes, the notes). The notes will pay interest
semi-annually in cash in arrears on and of each year, beginning on , 2015. The
notes will pay interest semi-annually in cash in arrears on and of each year, beginning on
, 2015. The notes will pay interest semi-annually in cash in arrears on and
of each year, beginning on , 2015. We may redeem some or all of the notes of each series at any time or from time to time prior
to , in the case of the notes,
, in the case of the notes or
, in the case of the notes, at a specified make-whole premium
for each series of notes as described under the caption Description of the Notes Optional Redemption. We also have the option, with respect to the notes, at any time on or after
, (which is the date that is months prior to the maturity date of the
notes), with respect to the notes, at any time on or after
, (which is the date that is months prior to the maturity date of the
notes) and with respect to the notes, at any time on or after
, (which is the date that is months prior to the maturity date of the
notes), to redeem the notes of such series, in whole or in part, at a redemption price equal to 100% of the principal amount of the notes of such series to be redeemed, plus accrued and unpaid
interest thereon to the redemption date. See Description of the Notes Optional Redemption.
The notes will be our senior
unsecured obligations and will rank equally in right of payment with all of our existing and future senior unsecured indebtedness. The notes will be effectively subordinated to all of our future secured indebtedness and will be structurally
subordinated to all existing and future indebtedness and other obligations of our subsidiaries, including trade payables. The notes will rank senior to all of our future subordinated indebtedness.
Investing in our notes involves risks. Please read Risk Factors beginning on page S-10 of this
prospectus supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement or the accompanying base prospectus. Any representation to the contrary is a criminal offense.
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notes |
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notes |
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notes |
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Per note |
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Total |
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Per note |
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Total |
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Per note |
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Total |
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Public offering price(1) |
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$ |
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Underwriting discount and commissions |
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$ |
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$ |
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$ |
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Proceeds to Williams Partners L.P. (before expenses)(1) |
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$ |
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(1) |
Plus accrued interest from March , 2015, if settlement occurs after that date. |
The underwriters expect to deliver the notes on or about March , 2015,
through the book-entry facilities of The Depository Trust Company, including its participants the Euroclear System and Clearstream Banking, S.A.
Joint Book-Running Managers
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Barclays |
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BofA Merrill Lynch |
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Wells Fargo Securities |
Prospectus Supplement dated February , 2015
This document is in two parts. The first part is this prospectus supplement, which describes the
specific terms of this offering of the notes. The second part is the accompanying base prospectus, which gives more general information, some of which may not apply to this offering of the notes. Generally, when we refer only to the
prospectus, we are referring to both parts combined. If the information about the offering of the notes varies between this prospectus supplement and the accompanying base prospectus, you should rely on the information in this prospectus
supplement.
Any statement made in this prospectus or in a document incorporated or deemed to be incorporated by reference into this
prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any other subsequently filed document that is also incorporated by reference into this
prospectus modifies or supersedes that statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this prospectus. Please read Where You Can Find More Information
on page S-55 of this prospectus supplement.
You should rely only on the information contained in or incorporated by reference into this
prospectus supplement, the accompanying base prospectus and any free writing prospectus relating to this offering of the notes. Neither we nor the underwriters have authorized anyone to provide you with additional or different information. If anyone
provides you with additional, different or inconsistent information, you should not rely on it. We are offering to sell the notes, and seeking offers to buy the notes, only in jurisdictions where offers and sales are permitted. You should not assume
that the information contained in this prospectus supplement, the accompanying base prospectus or any free writing prospectus is accurate as of any date other than the dates shown in these documents or that any information we have incorporated by
reference herein is accurate as of any date other than the date of the document incorporated by reference. Our business, financial condition, results of operations and prospects may have changed since such dates.
S-i
TABLE OF CONTENTS
Prospectus Supplement
Prospectus dated February 25, 2015
S-ii
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this prospectus supplement and the documents incorporated herein by reference, excluding historical information,
include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the
Exchange Act). These forward-looking statements relate to anticipated financial performance, managements plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other
matters.
All statements, other than statements of historical facts, included in this prospectus supplement that address activities,
events or developments that we expect, believe or anticipate will exist or may occur in the future, are forward-looking statements. Forward-looking statements can be identified by various forms of words such as anticipates,
believes, seeks, could, may, should, continues, estimates, expects, forecasts, intends, might, goals,
objectives, targets, planned, potential, projects, scheduled, will, assumes, guidance, outlook, in service date, or
other similar expressions. These forward-looking statements, as of the date they were made, were based on managements beliefs and assumptions and on information currently available to management and include, among others, statements regarding:
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the levels of cash distributions to unitholders; |
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our and Williams (as defined below) future credit ratings; |
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amounts and nature of future capital expenditures; |
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expansion and growth of our business and operations; |
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financial condition and liquidity; |
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cash flow from operations or results of operations; |
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seasonality of certain business components; |
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natural gas, natural gas liquids and olefins prices, supply and demand; and |
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demand for our services. |
Forward-looking statements are based on numerous assumptions,
uncertainties, and risks that could cause future events or results to be materially different from those stated or implied in this prospectus supplement or in the documents incorporated herein by reference. You should carefully consider the risk
factors discussed below in addition to the other information in this prospectus supplement and in the documents incorporated herein by reference. If any of the following risks were actually to occur, our business, results of operations, and
financial condition could be materially adversely affected. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by
the forward-looking statements include, among others, the following:
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whether we have sufficient cash from operations to enable us to pay current and expected levels of cash distributions, if any, following establishment of cash reserves and payment of fees and expenses, including
payments to our general partner; |
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availability of supplies, market demand, and volatility of prices; |
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inflation, interest rates and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers); |
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the strength and financial resources of our competitors and the effects of competition; |
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whether we are able to successfully identify, evaluate and execute investment opportunities; |
S-iii
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our ability to acquire new businesses and assets and successfully integrate those operations and assets into our existing businesses, as well as successfully expand our facilities; |
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development of alternative energy sources; |
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the impact of operational and development hazards and unforeseen interruptions; |
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our ability to recover expected insurance proceeds related to the Geismar plant; |
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costs of, changes in, or the results of laws, government regulations (including safety and environmental regulations), environmental liabilities, litigation and rate proceedings; |
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our allocated costs for defined benefit pension plans and other postretirement benefit plans sponsored by our affiliates; |
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changes in maintenance and construction costs; |
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changes in the current geopolitical situation; |
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our exposure to the credit risks of our customers and counterparties; |
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risks related to financing, including restrictions stemming from our debt agreements, future changes in our credit ratings and the availability and cost of capital; |
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the amount of cash distributions from and capital requirements of our investments and joint ventures in which we participate; |
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risks associated with weather and natural phenomena, including climate conditions; |
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acts of terrorism, including cybersecurity threats and related disruptions; and |
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additional risks described in our filings with the Securities and Exchange Commission (the SEC). |
Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking
statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update the above list or to announce publicly the result of any revisions to any of the forward-looking
statements to reflect future events or developments.
In addition to causing our actual results to differ, the factors listed above and
referred to below may cause our intentions to change from those statements of intention set forth in or incorporated into this prospectus supplement. Such changes in our intentions may also cause our results to differ. We may change our intentions,
at any time and without notice, based upon changes in such factors, our assumptions, or otherwise.
Because forward-looking statements
involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. These factors include the
risks set forth under the caption Risk Factors in this prospectus supplement.
S-iv
CERTAIN DEFINITIONS
As used in this prospectus supplement, unless the context otherwise requires or indicates:
Credit Facility refers to our five year, $3,500,000,000 senior unsecured credit facility governed by the Second
Amended & Restated Credit Agreement, dated as of February 2, 2015, by and among us, Northwest Pipeline and Transco, as co-borrowers, the lenders from time to time party thereto and Citibank, N.A., as Administrative Agent for the
lenders.
Northwest Pipeline refers to Northwest Pipeline LLC.
Partially Owned Entities refers to the entities in which we do not own a 100 percent ownership interest and which are
accounted for as equity method investments, including principally Aux Sable Liquid Products L.P., Caiman Energy II, LLC, Discovery Producer Services LLC, Gulfstream Natural Gas System, L.L.C., Laurel Mountain Midstream, LLC, Overland Pass Pipeline
Company LLC, and Utica East Ohio Midstream LLC.
Short-Term Credit Facility refers to our six month, $1,500,000,000
senior unsecured credit facility governed by the Credit Agreement, dated as of February 3, 2015, by and among us, the lenders from time to time party thereto and Barclays Bank PLC, as Administrative Agent for the lenders.
Transco refers to Transcontinental Gas Pipe Line Company, LLC.
Williams Partners, we, our, us and like terms refer to Williams Partners L.P. and its
subsidiaries.
Williams refers to The Williams Companies, Inc. and its subsidiaries, including Williams Partners.
In addition, our industry uses many terms and acronyms that may not be familiar to you. To assist you in reading this prospectus supplement,
we have provided below definitions of some of these terms.
British Thermal Units (Btu): When used in terms of volumes, Btu is used
to refer to the amount of natural gas required to raise the temperature of one pound of water by one degree Fahrenheit at one atmospheric pressure.
FERC: Federal Energy Regulatory Commission.
Fractionation: The process by which a mixed stream of natural gas liquids is separated into its constituent products, such as ethane,
propane and butane.
LNG: Liquefied natural gas. Natural gas which has been liquefied at cryogenic temperatures.
NGLs: Natural gas liquids. Natural gas liquids result from natural gas processing and crude oil refining and are used as petrochemical
feedstocks, heating fuels and gasoline additives, among other applications.
NGL margins: NGL revenues less Btu replacement cost,
plant fuel, transportation and fractionation.
Throughput: The volume of product transported or passing through a pipeline, plant,
terminal or other facility.
S-v
SUMMARY
This summary highlights information contained elsewhere or incorporated by reference in this prospectus supplement and the accompanying
base prospectus. It does not contain all of the information that you should consider before making an investment decision. You should read the entire prospectus supplement, the accompanying base prospectus and the documents incorporated by reference
for a more complete understanding of this offering of the notes. Please read Risk Factors beginning on page S-10 of this prospectus supplement for information regarding risks you should consider before investing in the notes.
Williams Partners L.P.
We are an energy infrastructure master limited partnership focused on connecting North Americas significant hydrocarbon resource plays
to growing markets for natural gas, NGLs and olefins through our gas pipeline and midstream businesses. WPZ GP LLC, a Delaware limited liability company wholly owned by Williams, is our general partner. Our reportable segments are Access Midstream,
Northeast G&P, Atlantic-Gulf, West, and NGL & Petchem Services which are comprised of the following businesses as of December 31, 2014:
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Access Midstream provides domestic gathering, treating, and compression services to producers under long-term, fixed fee contracts. Its primary operating areas are in the Barnett Shale region of north-central
Texas, the Eagle Ford Shale region of south Texas, the Haynesville Shale region of northwest Louisiana; the Marcellus Shale region primarily in Pennsylvania and West Virginia, the Niobrara Shale region of eastern Wyoming, the Utica Shale region of
eastern Ohio, and the Mid-Continent region which includes the Anadarko, Arkoma, Delaware and Permian Basins. Access Midstream also includes a 49 percent equity-method investment in Utica East Ohio Midstream, LLC, a 50 percent equity-method
investment interest in the Delaware Basin Gas Gathering System in the Mid-Continent region, and Appalachia Midstream Services, LLC, which owns an approximate average 45 percent interest in 11 gas gathering systems in the Marcellus Shale (Appalachia
Midstream Investments). |
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Northeast G&P is comprised of our midstream gathering and processing businesses in the Marcellus and Utica shale regions, as well as a 69 percent equity investment in Laurel Mountain Midstream, LLC and a 58
percent equity investment in Caiman Energy II, LLC. |
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Atlantic-Gulf is comprised of our interstate natural gas pipeline, Transco, and significant natural gas gathering and processing and crude oil production handling and transportation in the Gulf Coast region, as
well as a 50 percent equity investment in Gulfstream Natural Gas System, L.L.C., a 60 percent equity investment in Discovery Producer Services LLC, and a 41 percent interest in Constitution Pipeline Company, LLC (a consolidated entity).
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West is comprised of our gathering, processing and treating operations in New Mexico, Colorado, and Wyoming and our interstate natural gas pipeline, Northwest Pipeline. |
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NGL & Petchem Services is comprised of our 88.5 percent interest in an olefins production facility in Geismar, Louisiana, along with a refinery grade propylene splitter and various petrochemical and
feedstock pipelines in the Gulf Coast region, an oil sands offgas processing plant near Fort McMurray, Alberta, and an NGL/olefin fractionation facility and Butylene/Butane splitter facility at Redwater, Alberta. This segment also includes an NGL
and natural gas marketing business, storage facilities and an undivided 50 percent interest in an NGL fractionator near Conway, Kansas, and a 50 percent equity investment in Overland Pass Pipeline Company, LLC. |
S-1
Business Strategies
Our primary business objectives are to generate stable cash flows sufficient to make quarterly cash distributions to our unitholders and to
increase quarterly cash distributions over time. Our strategy to achieve those objectives is to provide large-scale energy infrastructure designed to maximize the opportunities created by the vast supply of natural gas, natural gas products and
crude oil that exists in North America. Accordingly, we seek to:
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pursue economically attractive organic expansion opportunities around our existing assets; |
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focus on consistently attracting new business by providing highly reliable service to our customers; |
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create value by maximizing the utilization of our pipeline capacity by providing high quality, low cost transportation of natural gas to large and growing markets; |
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safely and reliably operate our large scale midstream infrastructure where our assets can be fully utilized and drive low per-unit costs; |
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grow through accretive acquisitions of complementary energy assets; and |
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target investment-grade credit metrics. |
Competitive Strengths
We believe we are well positioned to execute our business strategies successfully because of the following competitive strengths:
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our assets are strategically located in areas with high demand for our services; |
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our assets are diversified geographically within the United States and represent important aspects of the regulated interstate natural gas pipeline business and midstream natural gas and natural gas liquids businesses;
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our conservative capital structure and investment grade rating, which facilitate pursuit of additional growth opportunities; |
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the senior management team and board of directors of our general partner have extensive industry experience and include the most senior officers of Williams; and |
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Williams has established a reputation in the regulated interstate natural gas pipeline and midstream natural gas and natural gas liquids industries as a reliable and cost-effective operator, and we believe that we and
our customers will continue to benefit from Williams scale and operational expertise. |
Recent Developments
Merger with Access Midstream Partners, L.P.
Pursuant to an Agreement and Plan of Merger dated as of October 24, 2014, the general partners of Williams Partners L.P. and Access
Midstream Partners, L.P. agreed to combine those businesses and their general partners, with Williams Partners L.P. merging with and into Access Midstream Partners, L.P. and the Access Midstream Partners, L.P. general partner being the surviving
general partner (the Merger). Following the completion of the Merger on February 2, 2015, as further described below, the surviving Access Midstream Partners, L.P. changed its name to Williams Partners L.P., and the surviving
general partner changed its name to WPZ GP LLC. For the purpose of this discussion, Williams Partners L.P. (WPZ) refers to the renamed merged partnership, while Pre-merger Access Midstream Partners, L.P. (Pre-merger ACMP) and
Pre-merger Williams Partners L.P. (Pre-merger WPZ) refer to the separate partnerships prior to the consummation of the Merger.
S-2
In accordance with the terms of the Merger, each Pre-merger ACMP unitholder received 1.06152
Pre-merger ACMP units for each Pre-merger ACMP unit owned immediately prior to the Merger. In conjunction with the Merger, each Pre-merger WPZ common unit held by the public was exchanged for 0.86672 common units of Pre-merger ACMP. Each Pre-merger
WPZ common unit held by Williams was exchanged for 0.80036 common units of Pre-merger ACMP. Prior to the closing of the Merger, the Class D limited partner units of Pre-merger WPZ, all of which were held by Williams, were converted into Pre-merger
WPZ common units on a one-for-one basis pursuant to the terms of the partnership agreement of Pre-merger WPZ. All of the general partner interests of Pre-merger WPZ were converted into general partner interests of Pre-merger ACMP such that the
general partner interest of Pre-merger ACMP represents 2 percent of the outstanding partnership interest. Following the Merger, Williams owns approximately 60 percent of the merged partnership, including the general partner interest and IDRs.
Credit Facility
On
February 2, 2015, we, Northwest Pipeline, and Transco (together, the Borrowers) entered into the Credit Facility, which is governed by a Second Amended & Restated Credit Agreement (the Restated Credit
Agreement) with the lenders named therein and an administrative agent. The Restated Credit Agreement amends and restates that certain First Amended & Restated Credit Agreement, dated as of July 31, 2013 (as amended prior to
February 2, 2015, the Existing Credit Agreement) among Pre-merger WPZ, Northwest, Transco, the lenders named therein and the administrative agent. The Restated Credit Agreement increases the aggregate commitments available to the
Borrowers by $1 billion (the Incremental Commitments) and extends the maturity date to February 2, 2020 (the Maturity Date). Furthermore, the Borrowers may request an extension of the Maturity Date for an additional
one-year period up to two times, to allow a Maturity Date as late as February 2, 2022, subject to certain conditions. Additionally, the Restated Credit Agreement lowers, in certain cases, the applicable margin and commitment fees payable by
each Borrower based on such Borrowers senior unsecured debt ratings. The Incremental Commitments are increased commitments from lenders named in the Existing Credit Agreement as well as new commitments from institutions party to the Restated
Credit Agreement. After giving effect to the Restated Credit Agreement, the Borrowers may borrow, in the aggregate, up to $3.5 billion under the Restated Credit Agreement. Northwest and Transco are each subject to a $500 million borrowing sublimit.
In addition, we may request an increase of up to an additional $500 million in commitments from either new lenders or increased commitments from existing lenders named in the Restated Credit Agreement. The Restated Credit Agreement allows for same
day swingline borrowings up to an aggregate amount of $150 million, subject to other utilization of the aggregate commitments under the Restated Credit Agreement. However, at no time may the aggregate commitments under the Restated Credit Agreement
exceed $4.0 billion.
The Restated Credit Agreement contains various covenants that limit, among other things, each Borrower and each
Borrowers respective material subsidiaries ability to grant certain liens supporting indebtedness, each Borrowers to ability to merge or consolidate, sell all or substantially all of its assets in certain circumstances, enter into
certain affiliate transactions, make certain distributions during an event of default, enter into certain restrictive agreements and allow any material change in the nature of its business.
For further information concerning the Credit Facility, please refer to our Current Report on Form 8-K filed on February 3, 2015, which
includes a copy of the Restated Credit Agreement attached as an exhibit thereto and is incorporated by reference into this prospectus supplement.
Short-Term Credit Facility
On February 3, 2015, we entered into the Short-Term Credit Facility, which is governed by a Credit Agreement (the Short-Term Credit
Agreement), with the lenders named therein and an administrative agent.
S-3
Under the Short-Term Credit Agreement, the lenders provide aggregate commitments of $1.5 billion with an initial maturity date of August 3, 2015, which term may be extended at our option to
February 2, 2016. The Short-Term Credit Agreement has substantially the same covenants as the Restated Credit Agreement. We may not borrow loans under the Short-Term Credit Agreement until all commitments under the Restated Credit Agreement
have been utilized. In the event of certain debt incurrences, issuances of equity, and certain asset sales, we will be required to repay any outstanding borrowings and the commitments under the Short-Term Credit Facility will be reduced on a
dollar-for-dollar basis with the net cash proceeds of such events.
For further information concerning the Short-Term Credit Facility,
please refer to our Current Report on Form 8-K filed on February 3, 2015, which includes a copy of the Short-Term Credit Agreement attached as an exhibit thereto and is incorporated by reference into this prospectus supplement.
Commercial Paper Program
On February 2, 2015, we amended and restated Pre-merger WPZs existing commercial paper program (the CP Program). In
accordance with the terms of the CP Program, we may issue short-term, unsecured commercial paper notes (the CP Notes) pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Capacity under the
CP Program was increased from $2.0 billion to $3.0 billion and amounts available under the CP Program may be borrowed, repaid and re-borrowed from time to time. However, the aggregate principal amount of CP Notes outstanding under the CP Program at
any time may not exceed $3.0 billion. The net proceeds of issuances of the CP Notes are expected to be used to fund planned capital expenditures and for other general partnership purposes. Each of our Credit Facility and Short-Term Credit Facility
is available, subject to the terms and conditions thereof, to repay the CP Notes, if necessary.
The maturities of the CP Notes will vary
but may not exceed 397 days from the date of issue. The CP Notes will be sold under customary terms in the commercial paper market and will be issued at a discount from par, or, alternatively, will be sold at par and bear varying interest rates on a
fixed or floating basis.
Four commercial paper dealers will each act as a dealer under the CP Program (each a Dealer and,
collectively, the Dealers) pursuant to the terms and conditions of an amended and restated commercial paper dealer agreement entered into between us and each Dealer (each, a Dealer Agreement). A national bank will act as
issuing and paying agent under the CP Program.
For further information concerning the Commercial Paper Program, please refer to our
Current Report on Form 8-K for filed on February 3, 2015, which includes a copy of the form of Dealer Agreement attached as an exhibit thereto and is incorporated by reference into this prospectus supplement.
Geismar Plant
Our
Geismar plant, which restarted in February 2015, is expected to continue to ramp up to expanded capacity through March. Production during February and March is expected to be intermittent, resulting in limited financial contribution for the first
quarter.
Our Relationship with Williams
One of our principal attributes is our relationship with Williams, an energy infrastructure company that trades on the New York Stock Exchange
(NYSE) under the symbol WMB. Williams operates in a number of areas within the energy industry, including principally interstate natural gas transportation and midstream services. Through our relationship with Williams, we
have access to a significant pool of management talent and strong commercial relationships throughout the energy industry.
S-4
Organizational Structure and Ownership
We are a publicly traded Delaware limited partnership formed in 2010. The diagram below provides a simplified depiction of our organization and
ownership structure as of December 31, 2014. This diagram is provided for illustrative purposes only and does not represent all legal entities of Williams or Williams Partners or their respective subsidiaries.
Partnership Structure and Management
Management of Williams Partners L.P.
Our operations are conducted through, and our operating assets are owned by, our operating subsidiaries, Williams Partners Operating LLC and
Access MLP Operating L.L.C., and their subsidiaries. Our general partner manages our operations and activities. The executive officers of our general partner manage our business. All of the executive officers and some of the directors of our general
partner also serve as executive officers and directors of Williams. For more information on these individuals, please read Item 10 of Part III, Directors, Executive Officers and Corporate Governance, of our Annual Report on Form
10-K for the year ended December 31, 2014. Please read Risk Factors in this prospectus supplement for a description of certain conflicts of interest between us and Williams. Unlike shareholders in a publicly traded corporation, our
unitholders are not entitled to elect our general partner or its directors.
While our relationship with Williams and its subsidiaries is
a significant attribute, it is also a source of potential conflicts. For example, Williams is not restricted from competing with us. Williams may acquire, construct or dispose of other assets in the future without any obligation to offer us the
opportunity to purchase or construct those assets. Please read Risk Factors in this prospectus supplement.
Principal
Executive Offices and Internet Address
Our principal executive offices are located at One Williams Center, Tulsa, Oklahoma
74172-0172, and our telephone number is (918) 573-2000. Our website is located at http://investor.williams.com/williams-partners-lp. We make our periodic reports and other information filed with or furnished to the SEC available, free of
charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into
this prospectus supplement or the accompanying base prospectus and does not constitute a part of this prospectus supplement or the accompanying base prospectus.
S-5
Underwriting and Conflicts
Some of the underwriters and their affiliates have engaged, and may in the future engage, in commercial banking, investment banking or
financial advisory transactions with us, our affiliates and Williams, in the ordinary course of their business. Such underwriters and their affiliates have received customary compensation and expense reimbursement for these commercial banking,
investment banking or financial advisory transactions. In addition, as described under Use of Proceeds in this prospectus supplement, the underwriters participating in this offering or their affiliates may hold our commercial paper notes
and receive a portion of the net proceeds of this offering through the repayment by us of such commercial paper notes with such net proceeds. In addition, certain of the underwriters or their respective affiliates are agents, arrangers, bookrunners
or lenders under our Credit Facility. To the extent the net proceeds of this offering are used to pay down the outstanding balance under our Credit Facility, the underwriters or their affiliates will receive a portion of the net proceeds of this
offering. Please read Underwriting Relationships in this prospectus supplement.
S-6
The Offering
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Issuer |
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Williams Partners L.P. |
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Notes Offered |
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$ aggregate principal amount of our senior notes consisting
of:
$ aggregate
principal amount of % senior notes due ;
$ aggregate
principal amount of % senior notes due ; and
$ aggregate
principal amount of % senior notes due ; |
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Maturity |
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The notes will mature on
, .
The notes will mature on
, .
The notes will mature on
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Interest |
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The interest rate on the notes shall
be %. The interest rate on the
notes shall be %.
The interest rate on the notes shall
be %. |
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Interest Payment Dates |
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Interest on the notes will be payable semi-annually in
arrears on and beginning on
, 2015, and will be payable to holders of record at the close of business on the or
immediately preceding the interest payment date (whether or not a business day).
Interest on the notes will be payable semi-annually in arrears
on and beginning on ,
2015, and will be payable to holders of record at the close of business on the or immediately
preceding the interest payment date (whether or not a business day). Interest on
the notes will be payable semi-annually in arrears on
and beginning on , 2015, and will be payable to holders of record at the close of business on
the or immediately preceding the interest payment date (whether or not a business
day). |
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Optional Redemption |
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We may redeem the notes of each series, in whole or in part, at our option at any time or from time to time prior to , in the
case of the notes, , in the case of
the notes or , in the case of the
notes, at the applicable make-whole redemption price for such series of notes described in this prospectus supplement. We also have the option, with respect to the
notes, at any time on or after , (which is the date that is
months prior to the maturity date of the notes), with respect to the
notes, at any time on or after , (which is the date that is
months prior to the maturity date of the notes) and with respect to the
notes, at any time on or after , (which is the date that is
months prior to the maturity date of the |
S-7
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notes), to redeem the notes of such series, in whole or in part, at a redemption price equal to 100% of the principal amount of the notes of such series to be redeemed, plus accrued and unpaid interest thereon to the redemption
date. See Description of the Notes Optional Redemption. |
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Ranking |
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The notes will be our senior unsecured obligations and will rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The notes will be effectively subordinated to all of our future secured
indebtedness and will be structurally subordinated to all existing and future indebtedness and other obligations of our subsidiaries, including trade payables. The notes will rank senior to all of our future subordinated indebtedness. |
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Certain Covenants |
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We will issue the notes under a supplemental indenture to the base indenture dated as of November 9, 2010, between us and The Bank of New
York Mellon Trust Company, N.A., as trustee. We refer to the supplemental indenture and the base indenture collectively as the indenture. The indenture will contain limitations on, among other things:
the incurrence of
liens on assets to secure debt; and
certain mergers or consolidations and transfers of assets.
These covenants are subject to exceptions. See Description of the Notes
Certain Covenants. |
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Use of Proceeds |
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The net proceeds from this offering of notes will be approximately $ billion after deducting the estimated underwriting discount and commissions and offering
expenses payable by us. We intend to use the net proceeds of this offering to repay indebtedness, which may include amounts outstanding under our commercial paper program and our Credit Facility, to fund capital expenditures, and for general
partnership purposes. See Use of Proceeds. |
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Form and Denomination |
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Each series of notes will be represented by one or more global notes. The global notes will be deposited with the trustee, as custodian
for The Depository Trust Company (DTC). Ownership of beneficial interests
in the global notes will be shown on, and transfers of such interests will be effected only through, records maintained in book-entry form by DTC and its direct and indirect participants, including the depositaries for Clearstream Banking
Luxembourg, or Euroclear Bank S.A./N.V., as operator of the Euroclear System. The
notes will be issued in minimum denominations of $2,000 and in integral multiples of $1,000 in excess thereof. |
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Absence of Public Trading Market |
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The notes are new issues of securities for which there is currently no established trading market. We do not intend to apply for the notes
to be listed on any securities exchange or to arrange for any quotation system to quote them. Accordingly, there can be no assurance that a liquid market for the notes will develop or be maintained. See Risk Factors in this prospectus
supplement. |
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Governing Law |
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The notes and the indenture will be governed by the laws of the State of New York. |
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Trustee |
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The Bank of New York Mellon Trust Company, N.A. |
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Risk Factors |
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See Risk Factors beginning on page S-10 and the other information included in, or incorporated by reference into, this prospectus supplement and the accompanying base prospectus for a discussion of certain factors you
should carefully consider before deciding to invest in the notes. |
S-9
RISK FACTORS
An investment in our notes involves risks. Before you invest in the notes, you should carefully consider the following risk factors,
together with all of the other information included in this prospectus supplement, the accompanying base prospectus and the documents incorporated herein by reference in evaluating an investment in the notes. If any of the risks discussed below or
in the foregoing documents were actually to occur, our business, prospects, financial condition, results of operations, cash flows and, in some cases, our reputation, could be materially adversely affected. In that case, we might not be able to pay
interest on, or the principal of, the notes. In any such case, you may lose all or part of your original investment and not realize any return that you may have expected thereon. See Certain Definitions for definitions of certain terms
used in this section.
Risks Related to the Notes
Our partnership agreement limits our ability to accumulate cash, which may limit cash available to service the notes or to repay them at
maturity.
Our partnership agreement requires us to distribute on a quarterly basis, 100% of our available cash to our unitholders
of record and our general partner. Available cash is generally all of our cash on hand at the end of each quarter, after payment of fees and expenses and the establishment of cash reserves by our general partner. Our general partner determines the
amount and timing of cash distributions and has broad discretion to establish and make additions to our reserves or the reserves of our operating subsidiaries in amounts our general partner determines to be necessary or appropriate:
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to provide for the proper conduct of our business and the businesses of our operating subsidiaries (including reserves for future capital expenditures and for our anticipated future credit needs); |
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to provide funds for distributions to our unitholders and our general partner for any one or more of the next four calendar quarters; and |
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to comply with applicable law or any of our loan or other agreements. |
Depending on the timing
and amount of our cash distributions to unitholders and because we are not required to accumulate cash for the purpose of meeting obligations to holders of any notes, such distributions could significantly reduce the cash available to us in
subsequent periods to pay the interest on, and the principal of, the notes.
Restrictions in our debt agreements and the amount of
our indebtedness may affect our future financial and operating flexibility.
Following the closing of the Merger, our outstanding
long-term debt (which does not include commercial paper notes), was $16.3 billion, representing approximately 36% of our total book capitalization.
The agreements governing our indebtedness contain covenants that restrict our and our material subsidiaries ability to incur certain
liens to support indebtedness and our ability to merge or consolidate or sell all or substantially all of our assets in certain circumstances. In addition, certain of our debt agreements contain various covenants that restrict or limit, among other
things, our ability to make certain distributions during the continuation of an event of default, and our and our material subsidiaries ability to enter into certain affiliate transactions and certain restrictive agreements and to change the
nature of our business. Certain of our debt agreements also contain, and those we enter into in the future may contain, financial covenants and other limitations with which we will need to comply. Williams debt agreements contain similar
covenants with respect to Williams and its subsidiaries, including in some cases us.
S-10
Our debt service obligations and the covenants described above could have important consequences.
For example, they could:
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make it more difficult for us to satisfy our obligations with respect to the notes and our other indebtedness, which could in turn result in an event of default on such other indebtedness or the notes;
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impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general partnership purposes or other purposes; |
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diminish our ability to withstand a continued or future downturn in our business or the economy generally; |
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require us to dedicate a substantial portion of our cash flow from operations to debt service payments, thereby reducing the availability of cash for working capital, capital expenditures, acquisitions, general
partnership purposes or other purposes; and |
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limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, including limiting our ability to expand or pursue our business activities and preventing us from
engaging in certain transactions that might otherwise be considered beneficial to us. |
Our ability to comply with our debt
covenants, to repay, extend, or refinance our existing debt obligations, to make payments of interest on, and the principal of, the notes, and to obtain future credit will depend primarily on our operating performance. Our ability to refinance
existing debt obligations or obtain future credit will also depend upon the current conditions in the credit markets and the availability of credit generally. If we are unable to comply with these covenants, meet our debt service obligations or
obtain future credit on favorable terms, or at all, we could be forced to restructure or refinance our indebtedness, seek additional equity capital or sell assets. We may be unable to obtain financing or sell assets on satisfactory terms, or at all.
Our failure to comply with the covenants in the documents governing our indebtedness could result in events of default, which could
render such indebtedness due and payable. We may not have sufficient liquidity to repay our indebtedness in such circumstances. In addition, cross-default or cross-acceleration provisions in our debt agreements could cause a default or acceleration
to have a wider impact on our liquidity than might otherwise arise from a default or acceleration of a single debt instrument. For more information regarding our debt agreements, please read Description Of Other Indebtedness in this
prospectus supplement and Managements Discussion and Analysis of Financial Condition and Results of Operations Managements Discussion and Analysis of Financial Condition and Liquidity in Exhibit 99.1 to our Current
Report on Form 8-K, filed with the SEC on February 25, 2015, both of which are incorporated by reference in this prospectus supplement.
We are not prohibited under the indenture that will govern the notes or the indentures that govern our existing senior unsecured notes from
incurring additional indebtedness in addition to the notes. Our incurrence of significant additional indebtedness would exacerbate the negative consequences mentioned above, and could adversely affect our ability to repay our existing indebtedness,
including payments of interest on, and the principal of, the notes.
Our ability to obtain credit in the future could be affected by
Williams credit ratings.
Substantially all of Williams operations are conducted through its subsidiaries.
Williams cash flows are substantially derived from loans, dividends and distributions paid to it by its subsidiaries. Williams cash flows are typically utilized to service debt and pay dividends on the common stock of Williams, with the
balance, if any, reinvested in its subsidiaries as loans or contributions to capital. Due to our relationship with Williams, our ability to obtain credit will be affected by Williams credit ratings. Williams has been assigned investment-grade
credit ratings at two of the three ratings agencies and sub-investment-grade at the third rating agency. If Williams were to experience a deterioration in its credit standing or financial condition, our access to credit and our ratings could be
adversely affected. Any future downgrading of a Williams credit rating could also result in a downgrading of our credit rating. A downgrading of a Williams credit rating could limit our ability to obtain financing in the future upon favorable terms,
if at all.
S-11
We have a holding company structure in which our subsidiaries conduct our operations and
own our operating assets, which may affect our ability to make payments on the notes.
We have a holding company structure, and our
subsidiaries conduct all of our operations and own all of our operating assets. We have no significant assets other than the ownership interests in these subsidiaries. As a result, our ability to make required payments on the notes depends on the
performance of our subsidiaries and their ability to distribute funds to us. The ability of our subsidiaries to make distributions to us may be restricted by, among other things, applicable state partnership and limited liability company laws and
other laws and regulations. If we are unable to obtain the funds necessary to pay the principal amount at maturity of the notes, we may be required to adopt one or more alternatives, such as a refinancing of the notes. We cannot assure you that we
would be able to refinance the notes.
Our subsidiaries are not prohibited from incurring indebtedness by their organizational
documents, which may affect our ability to pay interest on, and the principal of, the notes.
Our subsidiaries are not prohibited
by the terms of their respective organizational documents from incurring indebtedness. If they were to incur significant amounts of indebtedness, such occurrence may inhibit their ability to make distributions to us. An inability by our subsidiaries
to make distributions to us would materially and adversely affect our ability to pay interest on, and the principal of, the notes because we expect distributions we receive from our subsidiaries to represent a significant portion of the cash we use
to pay interest on, and the principal of, the notes.
The notes will be structurally subordinated to liabilities and indebtedness of
our subsidiaries and effectively subordinated to any of our secured indebtedness to the extent of the assets securing such indebtedness.
We currently have no secured indebtedness outstanding, but holders of any secured indebtedness that we may incur in the future would have
claims with respect to our assets constituting collateral for such indebtedness that are effectively prior to any claims you may have under the notes. In the event of a default on such secured indebtedness or our bankruptcy, liquidation or
reorganization, those assets would be available to satisfy obligations with respect to the indebtedness secured thereby before any payment could be made on the notes. Accordingly, any such secured indebtedness would effectively be senior to the
notes to the extent of the value of the collateral securing the indebtedness. While the indenture governing the notes places some limitations on our ability to create liens, there are significant exceptions to these limitations that will allow us to
secure some kinds of indebtedness without equally and ratably securing the notes. To the extent the value of the collateral is not sufficient to satisfy the secured indebtedness, the holders of that indebtedness would be entitled to share with the
holders of the notes and the holders of other claims against us with respect to our other assets. Holders of the notes will participate ratably with all holders of our unsecured indebtedness that is deemed to be of the same class as the notes, and
potentially with all of our other general creditors, based upon the respective amounts owed to each holder or creditor, in our remaining assets. In any of the foregoing events, we cannot assure you that there will be sufficient assets to pay amounts
due on the notes. As a result, holders of notes may receive less, ratably, than holders of secured indebtedness.
In addition, the notes
are not guaranteed by our subsidiaries and our subsidiaries are generally not prohibited under the indenture from incurring additional indebtedness (in particular, Transco and Northwest Pipeline collectively had approximately $2.12 billion of
indebtedness outstanding as of December 31, 2014 and are likely to incur additional indebtedness in the future). As a result, holders of the notes will be structurally subordinated to claims of third party creditors, including holders of
indebtedness, of these subsidiaries. Claims of those other creditors, including trade creditors, secured creditors, governmental authorities, and holders of indebtedness or guarantees issued by the subsidiaries, will generally have priority as to
the assets of the subsidiaries over claims by the holders of the notes. As a result, rights of payment of holders of our indebtedness, including the holders of the notes, will be structurally subordinated to all those claims of creditors of our
subsidiaries.
S-12
Cost reimbursements due to our general partner and its affiliates will reduce cash
available to pay interest on, and the principal of, the notes.
We will reimburse our general partner and its affiliates, including
Williams, for various general and administrative services they provide for our benefit, including costs for rendering administrative staff and support services to us, and overhead allocated to us. Our general partner determines the amount of these
reimbursements in its sole discretion. Payments for these services will be substantial and will reduce the amount of cash available for payments of interest on, and the principal of, the notes. In addition, under Delaware partnership law, our
general partner has unlimited liability for our obligations, such as our debts and environmental liabilities, except for our contractual obligations that are expressly made without recourse to our general partner. To the extent our general partner
incurs obligations on our behalf, we are obligated to reimburse or indemnify it. If we are unable or unwilling to reimburse or indemnify our general partner, our general partner may take actions to cause us to make payments of these obligations and
liabilities. Any such payments could adversely affect our ability to pay interest on, and the principal of, the notes.
We may not
be able to fund a change of control offer with respect to our outstanding notes originally issued by Pre-merger ACMP (the Pre-merger ACMP Notes), and a change of control may have adverse effects on us pursuant to the agreements governing
our indebtedness.
In the event of a change of control followed by a decrease in the rating of the Pre-merger ACMP Notes (as
described in the indentures governing the Pre-merger ACMP Notes), we would be required, subject to certain conditions, to offer to purchase the outstanding Pre-merger ACMP Notes (of which $3.65 billion aggregate principal amount was outstanding as
of December 31, 2014) at a price equal to 101% of the principal amount thereof, plus accrued and unpaid interest thereon to the date of purchase. If a repurchase offer were required, we may not have sufficient funds available to purchase all of
the outstanding Pre-merger ACMP Notes. We may not be permitted by our other debt instruments to fulfill these purchase obligations upon a change of control in the future. Our failure to repurchase the Pre-merger ACMP Notes as required under the
indentures governing the Pre-merger ACMP Notes would result in an event of default under such indentures and may trigger a cross-default under our Credit Facility and Short-Term Credit Facility, each of which could have material adverse consequences
for us and the holders of the notes. A change of control (as defined in the indentures governing the Pre-merger ACMP Notes) may also be an independent event of default under our Credit Facility and Short-Term Credit Facility that would
permit the lenders to accelerate the debt outstanding under such facilities.
An active trading market may not develop for our
notes.
Prior to this offering, there was no established trading market for the notes. We do not intend to apply for the notes to
be listed on any securities exchange or to arrange for any quotation system to quote them. We have been informed by the underwriters that they intend to make a market in the notes after this offering is completed. However, the underwriters are not
obligated to make a market in the notes and, even if the underwriters commence market making, they may cease their market-making at any time. In addition, the liquidity of the trading market in the notes and the market price quoted for the notes may
be adversely affected by changes in the overall market for debt securities and by changes in our financial performance or prospects or in the financial performance or prospects of companies in our industry. As a result, an active trading market may
not develop or be maintained for our notes. If an active trading market does not develop or is not maintained, the market price and liquidity of our notes may be adversely affected.
S-13
Risks Related to Our Business
Prices for NGLs, olefins, natural gas, oil and other commodities are volatile and this volatility could adversely affect our financial
results, cash flows, access to capital and ability to maintain our existing businesses.
Our revenues, operating results, future
rate of growth and the value of certain components of our businesses depend primarily upon the prices of NGLs, olefins, natural gas, oil or other commodities, and the differences between prices of these commodities and could be materially adversely
affected by an extended period of current low commodity prices, or a further decline in commodity prices. Price volatility can impact both the amount we receive for our products and services and the volume of products and services we sell. Prices
affect the amount of cash flow available for capital expenditures and our ability to borrow money or raise additional capital. Price volatility can also have an adverse effect on our business, results of operations, financial condition and cash
flows and our ability to pay interest on, and the principal of, the notes.
The markets for NGLs, olefins, natural gas, oil and other
commodities are likely to continue to be volatile. Wide fluctuations in prices might result from one or more factors beyond our control, including:
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worldwide and domestic supplies of and demand for natural gas, NGLs, olefins, oil, and related commodities; |
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turmoil in the Middle East and other producing regions; |
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the activities of the Organization of Petroleum Exporting Countries; |
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the level of consumer demand; |
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the price and availability of other types of fuels or feedstocks; |
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the availability of pipeline capacity; |
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supply disruptions, including plant outages and transportation disruptions; |
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the price and quantity of foreign imports of natural gas and oil; |
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domestic and foreign governmental regulations and taxes; and |
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the credit of participants in the markets where products are bought and sold. |
The
long-term financial condition of our natural gas transportation and midstream businesses is dependent on the continued availability of natural gas supplies in the supply basins that we access and demand for those supplies in our traditional markets.
Our ability to maintain and expand our natural gas transportation and midstream businesses depends on the level of drilling and
production by third parties in our supply basins. Production from existing wells and natural gas supply basins with access to our pipeline and gathering systems will naturally decline over time. The amount of natural gas reserves underlying these
existing wells may also be less than anticipated, and the rate at which production from these reserves declines may be greater than anticipated. We do not obtain independent evaluations of natural gas and NGL reserves connected to our systems and
processing facilities. Accordingly, we do not have independent estimates of total reserves dedicated to our systems or the anticipated life of such reserves. In addition, low prices for natural gas, regulatory limitations, or the lack of available
capital could adversely affect the development and production of additional natural gas reserves, the installation of gathering, storage, and pipeline transportation facilities and the import and export of natural gas supplies. The competition for
natural gas supplies to serve other markets could also reduce the amount of natural gas supply for our customers. A failure to obtain access to sufficient natural gas supplies will adversely impact our ability to maximize the capacities of our
gathering, transportation and processing facilities.
Demand for our services is dependent on the demand for gas in the markets we serve.
Alternative fuel sources such as electricity, coal, fuel oils or nuclear energy could reduce demand for natural gas in our markets and have an adverse effect on our business.
S-14
A failure to obtain access to sufficient natural gas supplies or a reduction in demand for our
services in the markets we serve could result in impairments of our assets and have a material adverse effect on our business, financial condition and results of operations and our ability to pay interest on, and the principal of, the notes.
We may not be able to grow or effectively manage our growth.
As part of our growth strategy, we consider acquisition opportunities and engage in significant capital projects. We have both a project
lifecycle process and an investment evaluation process. These are processes we use to identify, evaluate and execute on acquisition opportunities and capital projects. We may not always have sufficient and accurate information to identify and value
potential opportunities and risks or our investment evaluation process may be incomplete or flawed. Regarding potential acquisitions, suitable acquisition candidates may not be available on terms and conditions we find acceptable or, where multiple
parties are trying to acquire an acquisition candidate, we may not be chosen as the acquirer. If we are able to acquire a targeted business, we may not be able to successfully integrate the acquired businesses and realize anticipated benefits in a
timely manner. Our growth may also be dependent upon the construction of new natural gas gathering, transportation, compression, processing or treating pipelines and facilities, NGL transportation, fractionation or storage facilities or olefins
processing facilities, as well as the expansion of existing facilities. We also face all the risks associated with construction. These risks include the inability to obtain skilled labor, equipment, materials, permits, rights-of-way and other
required inputs in a timely manner such that projects are completed on time and the risk that construction cost overruns could cause total project costs to exceed budgeted costs. Additional risks associated with growing our business include, among
others, that:
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changing circumstances and deviations in variables could negatively impact our investment analysis, including our projections of revenues, earnings and cash flow relating to potential investment targets, resulting in
outcomes which are materially different than anticipated; |
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we could be required to contribute additional capital to support acquired businesses or assets; |
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we may assume liabilities that were not disclosed to us, that exceed our estimates and for which contractual protections are either unavailable or prove inadequate; |
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acquisitions could disrupt our ongoing business, distract management, divert financial and operational resources from existing operations and make it difficult to maintain our current business standards, controls and
procedures; and |
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acquisitions and capital projects may require substantial new capital, either by the issuance of debt or equity, and we may not be able to access capital markets or obtain acceptable terms. |
If realized, any of these risks could have an adverse impact on our results of operations, including the possible impairment of our assets,
and could also have an adverse impact on our financial position, cash flows and our ability to pay interest on, and the principal of, the notes.
We do not own all of the interests in the Partially Owned Entities, which could adversely affect our ability to operate and control
these assets in a manner beneficial to us.
Because we do not control the Partially Owned Entities, we may have limited flexibility
to control the operation of or cash distributions received from these entities. The Partially Owned Entities organizational documents generally require distribution of their available cash to their members on a quarterly basis; however, in
each case, available cash is reduced, in part, by reserves appropriate for operating the businesses. Following the closing of the Merger, our investments in the Partially Owned Entities accounted for approximately 8% of our total consolidated
assets. Conflicts of interest may arise in the future between us, on the one hand, and our Partially Owned Entities, on the other hand, with regard to our Partially Owned Entities governance, business, and operations. If a conflict of interest
arises between us and a Partially Owned Entity, other owners may control the Partially Owned Entitys actions with respect to such matter (subject to certain limitations), which could be detrimental to our business. Any future disagreements
with the other co-owners of these assets could adversely
S-15
affect our ability to respond to changing economic or industry conditions, which could have a material adverse effect on our business, financial condition, results of operations and cash flows
and our ability to pay interest on, and principal of, the notes.
Our industry is highly competitive and increased competitive
pressure could adversely affect our business and operating results.
We have numerous competitors in all aspects of our businesses,
and additional competitors may enter our markets. Some of our competitors are large oil, natural gas and petrochemical companies that have greater access to supplies of natural gas and NGLs than we do. In addition, current or potential competitors
may make strategic acquisitions or have greater financial resources than we do, which could affect our ability to make strategic investments or acquisitions. Our competitors may be able to respond more quickly to new laws or regulations or emerging
technologies or to devote greater resources to the construction, expansion or refurbishment of their facilities than we can. Similarly, a highly-liquid competitive commodity market in natural gas and increasingly competitive markets for natural gas
services, including competitive secondary markets in pipeline capacity, have developed. As a result, pipeline capacity is being used more efficiently, and peaking and storage services are increasingly effective substitutes for annual pipeline
capacity. Failure to successfully compete against current and future competitors could have a material adverse effect on our business, results of operations, financial condition and cash flows and our ability to pay interest on, and the principal
of, the notes.
We may not be able to replace, extend, or add additional customer contracts or contracted volumes on favorable
terms, or at all, which could affect our financial condition, the amount of cash available to pay distributions, and our ability to grow.
We rely on a limited number of customers and producers for a significant portion of our revenues and supply of natural gas and NGLs. Although
many of our customers and suppliers are subject to long-term contracts, if we are unable to replace or extend such contracts, add additional customers, or otherwise increase the contracted volumes of natural gas provided to us by current producers,
in each case on favorable terms, if at all, our financial condition, growth plans, and the amount of cash available to pay interest on, and the principal of, the notes could be adversely affected. Our ability to replace, extend, or add additional
customer or supplier contracts, or increase contracted volumes of natural gas from current producers, on favorable terms, or at all, is subject to a number of factors, some of which are beyond our control, including:
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the level of existing and new competition in our businesses or from alternative fuel sources, such as electricity, coal, fuel oils, or nuclear energy; |
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natural gas, NGL, and olefins prices, demand, availability and margins in our markets. Higher prices for energy commodities related to our businesses could result in a decline in the demand for those commodities and,
therefore, in customer contracts or throughput on our pipeline systems. Also, lower energy commodity prices could result in a decline in the production of energy commodities resulting in reduced customer contracts, supply contracts, and throughput
on our pipeline systems; |
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general economic, financial markets and industry conditions; |
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the effects of regulation on us, our customers and our contracting practices; and |
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our ability to understand our customers expectations, efficiently and reliably deliver high quality services and effectively manage customer relationships. The results of these efforts will impact our reputation
and positioning in the market. |
Some of our businesses, including our Access Midstream business, are exposed to
supplier concentration risks arising from dependence on a single or a limited number of suppliers.
Some of our businesses may be
dependent on a small number of suppliers for delivery of critical goods or services. For instance, pursuant to a compression services agreement, our Access Midstream business receives a substantial portion of its compression capacity on certain
gathering systems from EXLP Operating LLC
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(Exterran Operating). Exterran Operating has, until December 31, 2020, the exclusive right to provide our Access Midstream business with compression services on certain gas
gathering systems located in Wyoming, Texas, Oklahoma, Louisiana, Kansas and Arkansas, in return for the payment of specified monthly rates for the services provided, subject to an annual escalation provision. If a supplier on which we depend were
to fail to timely supply required goods and services we may not be able to replace such goods and services in a timely manner or otherwise on favorable terms or at all. If we are unable to adequately diversify or otherwise mitigate such supplier
concentration risks and such risks were realized, we could be subject to reduced revenues, increased expenses, which could have a material adverse effect on our financial condition, results of operation and cash flows and our ability to pay interest
on, and the principal of, the notes.
We will conduct certain operations through joint ventures that may limit our operational
flexibility or require us to make additional capital contributions.
Some of our operations are conducted through joint venture
arrangements, and we may enter additional joint ventures in the future. In a joint venture arrangement, we have less operational flexibility, as actions must be taken in accordance with the applicable governing provisions of the joint venture. In
certain cases:
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we have limited ability to influence or control certain day to day activities affecting the operations; |
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we cannot control the amount of capital expenditures that we are required to fund with respect to these operations; |
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we are dependent on third parties to fund their required share of capital expenditures; |
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we may be subject to restrictions or limitations on our ability to sell or transfer our interests in the jointly owned assets; and |
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we may be forced to offer rights of participation to other joint venture participants in the area of mutual interest. |
In addition, our joint venture participants may have obligations that are important to the success of the joint venture, such as the
obligation to pay substantial carried costs pertaining to the joint venture and to pay their share of capital and other costs of the joint venture. The performance and ability of third parties to satisfy their obligations under joint venture
arrangements is outside our control. If these third parties do not satisfy their obligations under these arrangements, our business may be adversely affected. Our joint venture partners may be in a position to take actions contrary to our
instructions or requests or contrary to our policies or objectives, and disputes between us and our joint venture partners may result in delays, litigation or operational impasses.
If we fail to make a required capital contribution under the applicable governing provisions of our joint venture arrangements, we could be
deemed to be in default under the joint venture agreement. Our joint venture partners may be permitted to fund any deficiency resulting from our failure to make such capital contribution, which would result in a dilution of our ownership interest,
or our joint venture partners may have the option to purchase all of our existing interest in the subject joint venture. The risks described above or the failure to continue our joint ventures, or to resolve disagreements with our joint venture
partners could adversely affect our ability to conduct our operation that is the subject of a joint venture, which could in turn negatively affect our financial condition and results of operations and our ability to pay interest on, and the
principal of, the notes.
Our operations are subject to operational hazards and unforeseen interruptions.
There are operational risks associated with the gathering, transporting, storage, processing and treating of natural gas, the fractionation,
transportation and storage of NGLs, the processing of olefins, and crude oil transportation and production handling, including:
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aging infrastructure and mechanical problems; |
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damages to pipelines and pipeline blockages or other pipeline interruptions; |
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uncontrolled releases of natural gas (including sour gas), NGLs, olefins products, brine or industrial chemicals; |
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collapse or failure of storage caverns; |
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damage caused by third-party activity, such as operation of construction equipment; |
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pollution and other environmental risks; |
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fires, explosions, craterings and blowouts; |
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truck and rail loading and unloading; and |
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operating in a marine environment. |
Any of these risks could result in loss of human life,
personal injuries, significant damage to property, environmental pollution, impairment of our operations, loss of services to our customers, reputational damage and substantial losses to us. The location of certain segments of our facilities in or
near populated areas, including residential areas, commercial business centers and industrial sites, could increase the level of damages resulting from these risks. An event such as those described above could have a material adverse effect on our
financial condition and results of operations, and our ability to pay interest on, and the principal of, the notes, particularly if the event is not fully covered by insurance.
We do not insure against all potential risks and losses and could be seriously harmed by unexpected liabilities or by the inability of
our insurers to satisfy our claims.
In accordance with customary industry practice, we maintain insurance against some, but not
all, risks and losses, and only at levels we believe to be appropriate. Williams currently maintains excess liability insurance with limits of $695 million per occurrence and in the annual aggregate with a $2 million per occurrence deductible. This
insurance covers Williams, its subsidiaries, and certain of its affiliates, including us, for legal and contractual liabilities arising out of bodily injury or property damage, including resulting loss of use to third parties. This excess liability
insurance includes coverage for sudden and accidental pollution liability for full limits, with the first $135 million of insurance also providing gradual pollution liability coverage for natural gas and NGL operations.
Although we maintain property insurance on certain physical assets that we own, lease or are responsible to insure, the policy may not cover
the full replacement cost of all damaged assets or the entire amount of business interruption loss we may experience. In addition, certain perils may be excluded from coverage or be sub-limited. We may not be able to maintain or obtain insurance of
the type and amount we desire at reasonable rates. We may elect to self-insure a portion of our risks. We do not insure our onshore underground pipelines for physical damage, except at certain locations such as river crossings and compressor
stations. Offshore assets are covered for property damage when loss is due to a named windstorm event, but coverage for loss caused by a named windstorm is significantly sub-limited and subject to a large deductible. All of our insurance is subject
to deductibles.
In addition to the insurance coverage described above, Williams is a member of Oil Insurance Limited (OIL),
and we are an insured of OIL, an energy industry mutual insurance company, which provides coverage for damage to our property. As an insured of OIL, we are allocated a portion of shared losses and premiums in proportion to our assets. As an insured
member of OIL, Williams shares in the losses among other OIL members even if its property is not damaged, and as a result, we may share in any such losses incurred by Williams.
The occurrence of any risks not fully covered by insurance could have a material adverse effect on our business, results of operations,
financial condition, cash flows and our ability to pay interest on, and the principal of, the notes.
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The time required to return our Geismar plant to full expanded production following the
explosion and fire at the facility on June 13, 2013, and the amount and timing of insurance recoveries related to such incident could be materially different than we anticipate and could cause our financial results and levels of distributions
to be materially different than we project, which may affect our ability to pay interest on, and the principal of, the notes.
Our
projections of financial results and expected levels of distributions are based on numerous assumptions and estimates, including, but not limited to, the time required to return our Geismar plant to full expanded production and the amount and timing
of insurance recoveries related to the June 13, 2013 explosion and fire at our Geismar plant. Our insurers continue to evaluate our claims and have raised questions around key assumptions involving our business interruption claim; as a result,
the insurers have elected to make a partial payment pending further assessment of these issues. Although we currently expect to recover the majority of the limits under a $500 million insurance program related to the Geismar incident, there can be
no assurance that we will recover the full policy limits. Our total receipts from our insurers to date are $296.25 million. Our financial results and levels of distributions could be materially different than we project if our assumptions and
estimates related to the incident are materially different than actual outcomes, and such differences could have a material adverse effect on our ability to pay interest on, and the principal of, the notes.
Our assets and operations, as well as our customers assets and operations, can be adversely affected by weather and other natural
phenomena.
Our assets and operations, especially those located offshore, and our customers assets and operations, can be
adversely affected by hurricanes, floods, earthquakes, landslides, tornadoes, fires and other natural phenomena and weather conditions, including extreme or unseasonable temperatures, making it more difficult for us to realize the historic rates of
return associated with our assets and operations. A significant disruption in our or our customers operations or a significant liability for which we are not fully insured could have a material adverse effect on our business, financial
condition, results of operations, and cash flows and our ability to pay interest on, and the principal of, the notes.
Acts of
terrorism could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Given
the volatile nature of the commodities we transport, process, store and sell, our assets and the assets of our customers and others in our industry may be targets of terrorist activities. A terrorist attack could create significant price volatility,
disrupt our business, limit our access to capital markets or cause significant harm to our operations, such as full or partial disruption to our ability to produce, process, transport or distribute natural gas, NGLs or other commodities. Acts of
terrorism as well as events occurring in response to or in connection with acts of terrorism could cause environmental repercussions that could result in a significant decrease in revenues or significant reconstruction or remediation costs, which
could have a material adverse effect on our business, financial condition, results of operations and cash flows and our ability to pay interest on, and the principal of, the notes.
Our business could be negatively impacted by security threats, including cybersecurity threats, and related disruptions.
We rely on our information technology infrastructure to process, transmit and store electronic information, including information we use to
safely operate our assets. While we believe that we maintain appropriate information security policies, practices and protocols, we face cybersecurity and other security threats to our information technology infrastructure, which could include
threats to our operational industrial control systems and safety systems that operate our pipelines, plants and assets. We could face unlawful attempts to gain access to our information technology infrastructure, including coordinated attacks from
hackers, whether state-sponsored groups, hacktivists, or private individuals. The age, operating systems or condition of our current information technology infrastructure and software assets and our ability to maintain and upgrade such
assets could affect our ability to resist cybersecurity threats. We could also face attempts to gain access to information related to our assets through attempts to obtain unauthorized access by targeting acts of deception against individuals with
legitimate access to physical locations or information.
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Breaches in our information technology infrastructure or physical facilities, or other
disruptions including those arising from theft, vandalism, fraud or unethical conduct, could result in damage to our assets, unnecessary waste, safety incidents, damage to the environment, reputational damage, potential liability or the loss of
contracts, and have a material adverse effect on our operations, financial position and results of operations and our ability to pay interest on, and the principal of, the notes.
The natural gas sales, transportation and storage operations of our gas pipelines are subject to regulation by the FERC, which could
have an adverse impact on their ability to establish transportation and storage rates that would allow them to recover the full cost of operating their respective pipelines, including a reasonable rate of return.
In addition to regulation by other federal, state and local regulatory authorities, under the Natural Gas Act of 1938, interstate pipeline
transportation and storage service is subject to regulation by the FERC. Federal regulation extends to such matters as:
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transportation and sale for resale of natural gas in interstate commerce; |
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rates, operating terms, types of services and conditions of service; |
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certification and construction of new interstate pipelines and storage facilities; |
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acquisition, extension, disposition or abandonment of existing interstate pipelines and storage facilities; |
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depreciation and amortization policies; |
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relationships with affiliated companies who are involved in marketing functions of the natural gas business; and |
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market manipulation in connection with interstate sales, purchases or transportation of natural gas. |
Regulatory or administrative actions in these areas, including successful complaints or protests against the rates of the gas pipelines, can
affect our business in many ways, including decreasing tariff rates and revenues, decreasing volumes in our pipelines, increasing our costs and otherwise altering the profitability of our pipeline business.
Our operations are subject to environmental laws and regulations, including laws and regulations relating to climate change and
greenhouse gas emissions, which may expose us to significant costs, liabilities and expenditures that could exceed expectations.
Our operations are subject to extensive federal, state, tribal and local laws and regulations governing environmental protection, endangered
and threatened species, the discharge of materials into the environment and the security of chemical and industrial facilities. Substantial costs, liabilities, delays and other significant issues related to environmental laws and regulations are
inherent in the gathering, transportation, storage, processing and treating of natural gas, fractionation, transportation and storage of NGLs, processing of olefins, and crude oil transportation and production handling as well as waste disposal
practices and construction activities. Failure to comply with these laws, regulations and permits may result in the assessment of administrative, civil and/or criminal penalties, the imposition of remedial obligations, the imposition of stricter
conditions on or revocation of permits, the issuance of injunctions limiting or preventing some or all of our operations and delays in granting permits.
Joint and several, strict liability may be incurred without regard to fault under certain environmental laws and regulations, for the
remediation of contaminated areas and in connection with spills or releases of materials associated with natural gas, oil and wastes on, under or from our properties and facilities. Private parties, including the owners of properties through which
our pipeline and gathering systems pass and facilities where our wastes are taken for reclamation or disposal, may have the right to pursue legal actions to enforce compliance
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as well as to seek damages for noncompliance with environmental laws and regulations or for personal injury or property damage arising from our operations. Some sites at which we operate are
located near current or former third-party hydrocarbon storage and processing or oil and natural gas operations or facilities, and there is a risk that contamination has migrated from those sites to ours.
We are generally responsible for all liabilities associated with the environmental condition of our facilities and assets, whether acquired or
developed, regardless of when the liabilities arose and whether they are known or unknown. In connection with certain acquisitions and divestitures, we could acquire, or be required to provide indemnification against, environmental liabilities that
could expose us to material losses, which may not be covered by insurance. In addition, the steps we could be required to take to bring certain facilities into compliance could be prohibitively expensive, and we might be required to shut down,
divest or alter the operation of those facilities, which might cause us to incur losses.
In addition, climate change regulations and the
costs associated with the regulation of emissions of greenhouse gases (GHGs) have the potential to affect our business. Regulatory actions by the Environmental Protection Agency or the passage of new climate change laws or regulations
could result in increased costs to (i) operate and maintain our facilities, (ii) install new emission controls on our facilities and (iii) administer and manage our GHG compliance program. If we are unable to recover or pass through a
significant level of our costs related to complying with climate change regulatory requirements imposed on us, it could have a material adverse effect on our results of operations and financial condition and our ability to pay interest on, and the
principal of, the notes. To the extent financial markets view climate change and GHG emissions as a financial risk, this could negatively impact our cost of and access to capital. Climate change and GHG regulation could also reduce demand for our
services.
If third-party pipelines and other facilities interconnected to our pipelines and facilities become unavailable to
transport natural gas and NGLs or to treat natural gas, our revenues and cash available to pay interest on, and the principal of, the notes could be adversely affected.
We depend upon third-party pipelines and other facilities that provide delivery options to and from our pipelines and facilities for the
benefit of our customers. Because we do not own these third-party pipelines or other facilities, their continuing operation is not within our control. If these pipelines or facilities were to become temporarily or permanently unavailable for any
reason, or if throughput were reduced because of testing, line repair, damage to pipelines or facilities, reduced operating pressures, lack of capacity, increased credit requirements or rates charged by such pipelines or facilities or other causes,
we and our customers would have reduced capacity to transport, store or deliver natural gas or NGL products to end use markets or to receive deliveries of mixed NGLs, thereby reducing our revenues. Any temporary or permanent interruption at any key
pipeline interconnect or in operations on third-party pipelines or facilities that would cause a material reduction in volumes transported on our pipelines or our gathering systems or processed, fractionated, treated or stored at our facilities
could have a material adverse effect on our business, results of operations, financial condition and cash flows and our ability to pay interest on, and the principal of, the notes.
The operation of our businesses might be adversely affected by changes in government regulations or in their interpretation or
implementation, or the introduction of new laws or regulations applicable to our businesses or our customers.
Public and
regulatory scrutiny of the energy industry has resulted in the proposal and/or implementation of increased regulations. Such scrutiny has also resulted in various inquiries, investigations and court proceedings, including litigation of energy
industry matters. Both the shippers on our pipelines and regulators have rights to challenge the rates we charge under certain circumstances. Any successful challenge could materially affect our results of operations and our ability to pay interest
on, and the principal of, the notes.
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Certain inquiries, investigations and court proceedings are ongoing. Adverse effects may continue
as a result of the uncertainty of ongoing inquiries, investigations and court proceedings, or additional inquiries and proceedings by federal or state regulatory agencies or private plaintiffs. In addition, we cannot predict the outcome of any of
these inquiries or whether these inquiries will lead to additional legal proceedings against us, civil or criminal fines and/or penalties, or other regulatory action, including legislation, which might be materially adverse to the operation of our
business and our results of operations or increase our operating costs in other ways. Current legal proceedings or other matters, including environmental matters, suits, regulatory appeals and similar matters might result in adverse decisions
against us which, among other outcomes, could result in the imposition of substantial penalties and fines and could damage our reputation. The result of such adverse decisions, either individually or in the aggregate, could be material and may not
be covered fully or at all by insurance.
In addition, existing regulations might be revised or reinterpreted, and new laws and
regulations, including those pertaining to oil and gas hedging and cash collateral requirements, might be adopted or become applicable to us, our customers, or our business activities. If new laws or regulations are imposed relating to oil and gas
extraction, or if additional levels of reporting, regulation or permitting moratoria are required or imposed, including those related to hydraulic fracturing, the volumes of natural gas and other products that we transport, gather, process and treat
could decline and our results of operations and our ability to pay interest on, and the principal of, the notes could be adversely affected.
Certain of our gas pipeline services are subject to long-term, fixed-price contracts that are not subject to adjustment, even if our
cost to perform such services exceeds the revenues received from such contracts.
Our gas pipelines provide some services pursuant
to long-term, fixed-price contracts. It is possible that costs to perform services under such contracts will exceed the revenues our pipelines collect for their services. Although most of the services are priced at cost-based rates that are subject
to adjustment in rate cases, under FERC policy, a regulated service provider and a customer may mutually agree to sign a contract for service at a negotiated rate that may be above or below the FERC regulated cost-based rate for that
service. These negotiated rate contracts are not generally subject to adjustment for increased costs that could be produced by inflation or other factors relating to the specific facilities being used to perform the services.
Our operating results for certain components of our business might fluctuate on a seasonal basis.
Revenues from certain components of our business can have seasonal characteristics. In many parts of the country, demand for natural gas and
other fuels peaks during the winter. As a result, our overall operating results in the future might fluctuate substantially on a seasonal basis. Demand for natural gas and other fuels could vary significantly from our expectations depending on the
nature and location of our facilities and pipeline systems and the terms of our natural gas transportation arrangements relative to demand created by unusual weather patterns.
We do not own all of the land on which our pipelines and facilities are located, which could disrupt our operations.
We do not own all of the land on which our pipelines and facilities have been constructed. As such, we are subject to the possibility of
increased costs to retain necessary land use. In those instances in which we do not own the land on which our facilities are located, we obtain the rights to construct and operate our pipelines and gathering systems on land owned by third parties
and governmental agencies for a specific period of time. In addition, some of our facilities cross Native American lands pursuant to rights-of-way of limited term. We may not have the right of eminent domain over land owned by Native American
tribes. Our loss of these rights, through our inability to renew right-of-way contracts or otherwise, could have a material adverse effect on our business, results of operations, financial condition and cash flows and our ability to pay interest on,
and the principal of, the notes.
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Difficult conditions in the global financial markets and the economy in general could
negatively affect our business and results of operations.
Our businesses may be negatively impacted by adverse economic conditions
or future disruptions in global financial markets. Included among these potential negative impacts are industrial or economic contraction leading to reduced energy demand and lower prices for our products and services and increased difficulty in
collecting amounts owed to us by our customers. If financing is not available when needed, or is available only on unfavorable terms, we may be unable to implement our business plans or otherwise take advantage of business opportunities or respond
to competitive pressures. In addition, financial markets have periodically been affected by concerns over U.S. fiscal and monetary policies. These concerns, as well as actions taken by the U.S. federal government in response to these concerns, could
significantly and adversely impact the global and U.S. economies and financial markets, which could negatively impact us in the manners described above.
As a publicly traded partnership, these developments could significantly impair our ability to make acquisitions or finance growth projects.
We distribute all of our available cash to our unitholders on a quarterly basis. We typically rely upon external financing sources, including the issuance of debt and equity securities and bank borrowings, to fund acquisitions or expansion capital
expenditures. Any limitations on our access to external capital, including limitations caused by illiquidity or volatility in the capital markets, may impair our ability to complete future acquisitions and construction projects on favorable terms,
if at all. As a result, we may be at a competitive disadvantage as compared to businesses that reinvest all of their available cash to expand ongoing operations, particularly under adverse economic conditions.
A downgrade of our credit ratings, which are determined outside of our control by independent third parties, could impact our liquidity,
access to capital, and our costs of doing business.
A downgrade of our credit ratings might increase our cost of borrowing and
could require us to provide collateral to our counterparties, negatively impacting our available liquidity. In addition, our ability to access capital markets could be limited by a downgrade of our credit ratings.
Credit rating agencies perform independent analysis when assigning credit ratings. This analysis includes a number of criteria such as
business composition, market and operational risks, as well as various financial tests. Credit rating agencies continue to review the criteria for industry sectors and various debt ratings and may make changes to those criteria from time to time.
Credit ratings are subject to revision or withdrawal at any time by the ratings agencies.
We are exposed to the credit risk of our
customers and counterparties, and our credit risk management may not be adequate to protect against such risk.
We are subject to
the risk of loss resulting from nonpayment and/or nonperformance by our customers and counterparties in the ordinary course of our business. Generally, our customers are rated investment grade, are otherwise considered creditworthy or are required
to make prepayments or provide security to satisfy credit concerns. However, our credit procedures and policies may not be adequate to fully eliminate customer and counterparty credit risk. Our customers and counterparties include industrial
customers, local distribution companies, natural gas producers and marketers whose creditworthiness may be suddenly and disparately impacted by, among other factors, commodity price volatility, deteriorating energy market conditions, and public and
regulatory opposition to energy producing activities. If we fail to adequately assess the creditworthiness of existing or future customers and counterparties, unanticipated deterioration in their creditworthiness and any resulting increase in
nonpayment and/or nonperformance by them could cause us to write down or write off doubtful accounts. Such write-downs or write-offs could negatively affect our operating results in the periods in which they occur, and, if significant, could have a
material adverse effect on our business, results of operations, cash flows and financial condition and our ability to pay interest on, and the principal of, the notes.
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Institutional knowledge residing with current employees nearing retirement eligibility or
with our former employees might not be adequately preserved.
We expect that a significant percentage of employees will become
eligible for retirement over the next several years. In certain areas of our business, institutional knowledge resides with employees who have many years of service. As these employees reach retirement age or their services are no longer available
to Williams, Williams may not be able to replace them with employees of comparable knowledge and experience. In addition, Williams may not be able to retain or recruit other qualified individuals, and our efforts at knowledge transfer could be
inadequate. If knowledge transfer, recruiting and retention efforts are inadequate, access to significant amounts of internal historical knowledge and expertise could become unavailable to us.
Our hedging activities might not be effective and could increase the volatility of our results.
In an effort to manage our financial exposure related to commodity price and market fluctuations, we have entered, and may in the future enter,
into contracts to hedge certain risks associated with our assets and operations. In these hedging activities, we have used, and may in the future use, fixed-price, forward, physical purchase and sales contracts, futures, financial swaps and option
contracts traded in the over-the-counter markets or on exchanges. Nevertheless, no single hedging arrangement can adequately address all risks present in a given contract. For example, a forward contract that would be effective in hedging commodity
price volatility risks would not hedge the contracts counterparty credit or performance risk. Therefore, unhedged risks will always continue to exist. While we attempt to manage counterparty credit risk within guidelines established by our
credit policy, we may not be able to successfully manage all credit risk and as such, future cash flows and results of operations could be impacted by counterparty default.
Our investments and projects located outside of the United States expose us to risks related to the laws of other countries, and the
taxes, economic conditions, fluctuations in currency rates, political conditions and policies of foreign governments. These risks might delay or reduce our realization of value from our international projects.
We currently own and might acquire and/or dispose of material energy-related investments and projects outside the United States. The economic,
political and legal conditions and regulatory environment in the countries in which we have interests or in which we might pursue acquisition or investment opportunities present risks that are different from or greater than those in the United
States. These risks include, among others, delays in construction and interruption of business, as well as risks of renegotiation, trade sanctions or nullification of existing contracts and changes in law or tax policy, including with respect to the
prices we realize for the commodities we produce and sell. The uncertainty of the legal environment in certain foreign countries in which we develop or acquire projects or make investments could make it more difficult to obtain nonrecourse project
financing or other financing on suitable terms, could adversely affect the ability of certain customers to honor their obligations with respect to such projects or investments and could impair our ability to enforce our rights under agreements
relating to such projects or investments.
Operations and investments in foreign countries also can present currency exchange rate and
convertibility, inflation and repatriation risk. In certain situations under which we develop or acquire projects or make investments, economic and monetary conditions and other factors could affect our ability to convert to U.S. dollars our
earnings denominated in foreign currencies. In addition, risk from fluctuations in currency exchange rates can arise when our foreign subsidiaries expend or borrow funds in one type of currency, but receive revenue in another. In such cases, an
adverse change in exchange rates can reduce our ability to meet expenses, including debt service obligations. We may or may not put contracts in place designed to mitigate our foreign currency exchange risks. We have some exposures that are not
hedged and which could result in losses or volatility in our results of operations.
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Failure of our service providers or disruptions to our outsourcing relationships might
negatively impact our ability to conduct our business.
We rely on Williams for certain services necessary for us to be able to
conduct our business. Certain of Williams accounting and information technology functions that we rely on are currently provided by third party vendors, and sometimes from service centers outside of the United States. Services provided
pursuant to these agreements could be disrupted. Similarly, the expiration of such agreements or the transition of services between providers could lead to loss of institutional knowledge or service disruptions. Our reliance on Williams and others
as service providers and on Williams outsourcing relationships, and our limited ability to control certain costs, could have a material adverse effect on our business, results of operations and financial condition and on our ability to pay
interest on, and the principal of, the notes.
The execution of the integration strategy following the Merger may not be successful.
The ultimate success of the Merger will depend, in part, on the ability of the combined company to realize the anticipated
benefits from combining these formerly separate businesses. Realizing the benefits of the Merger will depend in part on the effective integration of assets, operations, functions and personnel while maintaining adequate focus on our core businesses.
Any expected cost savings, economies of scale, enhanced liquidity or other operational efficiencies, as well as revenue enhancement opportunities, or other synergies, may not occur.
Our management team expects to face challenges inherent in integrating certain Pre-merger ACMP operations into the West and Northeast G&P
operating areas as well as integrating certain functions that support our business such as environmental, health and safety, engineering and construction and business development. If management is unable to minimize the potential disruption of our
ongoing business and the distraction of management during the integration process, the anticipated benefits of the Merger may not be realized or may only be realized to a lesser extent than expected. In addition, the inability to successfully manage
the integration could have an adverse effect on us.
The integration process could result in the loss of key employees, as well as the
disruption of each of our ongoing businesses or the creation of inconsistencies in standards, controls, procedures and policies. Any or all of those occurrences could adversely affect our ability to maintain relationships with service providers,
customers and employees or to achieve the anticipated benefits of the Merger.
Integration may also result in additional and unforeseen
expenses, which could reduce the anticipated benefits of the Merger and materially and adversely affect our business, operating results and financial condition.
Our allocation from Williams for costs for its defined benefit pension plans and other postretirement benefit plans are affected by
factors beyond our and Williams control.
As we have no employees, employees of Williams and its affiliates provide services
to us. As a result, we are allocated a portion of Williams costs in defined benefit pension plans covering substantially all of Williams or its affiliates employees providing services to us, as well as a portion of the costs of
other postretirement benefit plans covering certain eligible participants providing services to us. The timing and amount of our allocations under the defined benefit pension plans depend upon a number of factors that Williams controls, including
changes to pension plan benefits, as well as factors outside of Williams control, such as asset returns, interest rates and changes in pension laws. Changes to these and other factors that can significantly increase our allocations could have
a significant adverse effect on our financial condition and results of operations.
Increases in interest rates could adversely
impact our unit price, our ability to issue equity or incur debt for acquisitions or other purposes, and our ability to make cash distributions at our intended levels.
Interest rates may increase in the future. As a result, interest rates on future credit facilities and debt offerings could be higher than
current levels, causing our financing costs to increase accordingly. As with other yield-oriented securities, our unit price will be impacted by the level of our cash distributions and implied
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distribution yield. The distribution yield is often used by investors to compare and rank yield-oriented securities for investment decision-making purposes. Therefore, changes in interest rates,
either positive or negative, may affect the yield requirements of investors who invest in our units, and a rising interest rate environment could have an adverse impact on our unit price and our ability to issue equity or incur debt for acquisitions
or other purposes and to make cash distributions at our intended levels.
Risks Related to our Relationship with Williams
Williams, through its ownership of Access Midstream Ventures, L.L.C. (Access Midstream Ventures), indirectly owns and
controls our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner has limited duties to us and it and its affiliates, including Williams and Access Midstream Ventures, may have
conflicts of interest with us and may favor their own interests to the detriment of us and our common unitholders.
Access
Midstream Ventures, which is owned and controlled by Williams, owns and controls our general partner and appoints all of the officers and directors of our general partner, some of whom are also officers and directors of Williams and Access Midstream
Ventures. Although our general partner has a contractual duty when acting in its capacity as our general partner to act in a way that it believes is in our best interest, the directors and officers of our general partner have a fiduciary duty to
manage our general partner in a manner that is beneficial to its sole member, Access Midstream Ventures, and Williams. Conflicts of interest may arise between Williams, Access Midstream Ventures and our general partner, on the one hand, and us and
our unitholders, on the other hand. In resolving these conflicts of interest, our general partner may favor its own interests and the interests of Williams and/or Access Midstream Ventures over our interests and the interests of our common
unitholders. These conflicts include the following situations, among others:
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Neither our partnership agreement nor any other agreement requires Williams or Access Midstream Ventures to pursue a business strategy that favors us. For example, Williams directors and officers have a fiduciary
duty to make decisions in the best interests of the owners of Williams, which may be contrary to our best interests and the interests of our unitholders. Further, Williams is not a party to any agreement that prohibits it from competing against us
in our gas gathering and processing operations and for gathering, processing and acquisition opportunities. It is possible that Williams could preclude us from pursuing opportunities in which Williams has a competitive interest. |
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Our general partner is allowed to take into account the interests of parties other than us, such as Williams or Access Midstream Ventures, in resolving conflicts of interest. |
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Our partnership agreement limits the liability of and reduces the duties owed by our general partner, and also restricts the remedies available to our unitholders for actions that, without the limitations, might
constitute breaches of fiduciary duty. |
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Except in limited circumstances, our general partner has the power and authority to conduct our business without unitholder approval. |
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Williams owns units representing approximately 59% of the limited partner interest in us. If a vote of our limited partners is required in which Williams is entitled to vote, Williams will be able to vote its units in
accordance with its own interests, which may be contrary to our interests or the interests of our unitholders. |
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The executive officers and certain directors of our general partner devote significant time to our business and/or the business of Williams, and will be compensated by Williams for the services rendered to them.
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Our general partner determines the amount and timing of asset purchases and sales, capital expenditures, borrowings, issuance of additional partnership securities and the creation, reduction or increase of reserves,
each of which can affect the amount of cash that is distributed to our unitholders. |
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Our general partner determines the amount and timing of any capital expenditures and, based on the applicable facts and circumstances and, in some instances, with the concurrence of the conflicts committee of its board
of directors, whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus, or an expansion capital expenditure, which does not reduce operating surplus. This determination can affect the amount
of cash that is distributed to our unitholders and to our general partner with respect to its incentive distribution right. |
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Our general partner determines which costs incurred by it and its affiliates are reimbursable by us. |
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Our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make incentive distributions. |
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Our partnership agreement permits us to classify up to $120 million as operating surplus, even if it is generated from asset sales, non-working capital borrowings or other sources that would otherwise constitute capital
surplus. This cash may be used to fund distributions to our general partner in respect of its general partner interest or the incentive distribution rights. |
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Our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities
on our behalf. |
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Our general partner, in certain circumstances, has limited liability regarding our contractual and other obligations and in some circumstances is required to be indemnified by us. |
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Our general partner may exercise its right to call and purchase all of the common units not owned by it and its affiliates if they own more than 80 percent of the common units. |
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Our general partner controls the enforcement of the obligations that it and its affiliates owe to us. |
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Our general partner decides whether to retain separate counsel, accountants or others to perform services for us. |
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Our general partner may elect to cause us to issue common units to it in connection with a resetting of the target distribution levels related to our general partners incentive distribution rights without the
approval of the conflicts committee of the board of directors of our general partner or our unitholders. This election may result in lower distributions to our common unitholders in certain situations. |
Affiliates of our general partner, including Williams, are not limited in their ability to compete with us and may exclude us from
opportunities with which they are involved. In addition, all of the executive officers and certain of the directors of our general partner are also officers and/or directors of Williams, and these persons will owe fiduciary duties to Williams.
While our relationship with Williams and its affiliates is a significant attribute, it is also a source of potential conflicts.
For example, Williams and its affiliates are in the natural gas business and are not restricted from competing with us. Williams and its affiliates may acquire, construct or dispose of natural gas industry assets in the future, some or all of which
may compete with our assets, without any obligation to offer us the opportunity to purchase or construct such assets. In addition, all of the executive officers and certain of the directors of our general partner are also officers and/or directors
of Williams and certain of its affiliates and will owe fiduciary duties to those entities.
S-27
USE OF PROCEEDS
We estimate that the net proceeds to us from this offering of notes will be approximately
$ billion after deducting estimated underwriting discounts and commissions and offering expenses payable by us. We intend to use the net proceeds of this offering to repay
indebtedness, which may include amounts outstanding under our commercial paper program and our Credit Facility, to fund capital expenditures and for general partnership purposes.
In general, indebtedness under our commercial paper program and Credit Facility was incurred primarily to repay our 3.8% Senior Notes due 2015
upon their maturity and for general partnership purposes, including funding capital expenditures, working capital or partnership distributions. At February 3, 2015, we had $730 million in borrowings outstanding under the Credit Facility with a
weighted average interest rate of 3.50% per annum. The Credit Facility will mature on February 2, 2020. At February 20, 2015, we had $1.721 billion in principal amount of short-term notes outstanding under our commercial paper
program, with a weighted average interest rate of approximately 0.5013% per annum and a weighted-average maturity of approximately seven days.
The underwriters participating in this offering or their affiliates may hold our commercial paper notes and therefore will receive a portion
of the net proceeds of this offering. In addition, certain of the underwriters or their respective affiliates are agents, arrangers, bookrunners or lenders under our Credit Facility. To the extent the net proceeds of this offering are used to pay
down the outstanding balance under our Credit Facility, the underwriters or their affiliates will receive a portion of the net proceeds of this offering. Please read Underwriting Relationships in this prospectus supplement.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our consolidated ratio of earnings to fixed charges for each of the periods indicated.
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Year Ended December 31, |
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2014 |
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2013 |
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2012 |
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2011 |
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2010 |
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Ratio of earnings to fixed charges(a) |
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2.87 |
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3.27 |
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|
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3.85 |
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4.70 |
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4.09 |
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(a) |
For purposes of computing the ratio of earnings to fixed charges, earnings is the aggregate of the following items: pre-tax income or loss before income or loss from equity investees; plus fixed charges;
plus distributed income of equity investees; and less capitalized interest. The term fixed charges means the sum of interest incurred and an estimate of the interest within rental expense. |
S-28
CAPITALIZATION
The following table sets forth our historical cash and cash equivalents and capitalization as of December 31, 2014 as presented in
Exhibit 99.1 of our Form 8-K dated February 25, 2015, and as adjusted to reflect the following assumptions:
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the sale of the notes offered by us in this offering, after deducting estimated underwriting discounts and commissions and offering expenses payable by us, and the expected application of the net proceeds of this
offering as described under Use of Proceeds in this prospectus supplement; |
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the repayment of our $750 million aggregate principal amount of 3.8% Senior Notes due 2015 upon their maturity; and |
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additional net borrowings under our commercial paper program and Credit Facility subsequent to December 31, 2014 through February 20, 2015. |
This table is derived from and should be read together with our supplemental consolidated financial statements and the accompanying notes
included in our Current Report on Form 8-K filed on February 25, 2015, which are incorporated by reference in this prospectus supplement. You should also read this table in conjunction with Managements Discussion and Analysis of
Financial Condition and Results of Operations in our Current Report on Form 8-K filed on February 25, 2015, which is incorporated by reference into this prospectus supplement.
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As of December 31, 2014 |
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Historical |
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As Adjusted |
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Cash and cash equivalents |
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$ |
171 |
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$ |
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Short-term debt: |
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Long-term debt due within one year |
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$ |
4 |
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$ |
4 |
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Our short-term credit facility |
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Commercial paper notes |
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798 |
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(1) |
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Total short-term debt |
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802 |
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Long-term debt (less unamortized debt discount): |
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Our credit facility |
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Pre-merger ACMPs credit facility loans |
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640 |
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Our senior notes with various interest rates ranging from 3.35% to 7.25% and maturities from 2015 to 2045 |
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13,564 |
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12,904 |
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notes offered hereby |
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notes offered hereby |
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notes offered hereby |
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Transco notes and debentures with various interest rates ranging from 4.45% to 7.25% and maturities from 2016 to 2042 |
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1,428 |
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1,428 |
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Northwest Pipeline notes and debentures with various interest rates ranging from 5.95% to 7.125% and maturities from 2016 to
2025 |
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694 |
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694 |
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Total long-term debt |
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16,326 |
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Equity: |
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Held by public: |
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Common units |
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3,971 |
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3,971 |
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Held by the general partner and its affiliates: |
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Controlling interests |
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16,621 |
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16,621 |
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Accumulated other comprehensive income (loss) |
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2 |
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2 |
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Noncontrolling interests in consolidated subsidiaries |
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8,091 |
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8,091 |
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Total equity |
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28,685 |
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28,685 |
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Total debt and equity |
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$ |
45,813 |
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$ |
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(1) |
As of February 20, 2015, we had $1.721 billion in principal amount of short-term notes outstanding under our commercial paper program. The outstanding commercial paper notes have a weighted-average maturity of
approximately seven days. |
S-29
DESCRIPTION OF THE NOTES
We will issue $ in aggregate principal amount of
% senior notes due (the notes),
$ in aggregate principal amount of % senior notes due
(the notes) and
$ in aggregate principal amount of % senior notes due
(the notes, and together with the
notes and the notes, the notes) under an indenture (the base indenture), dated as of November 9, 2010, between the Company and The Bank
of New York Mellon Trust Company, N.A., as trustee (the trustee), as amended and supplemented by a supplemental indenture (the supplemental indenture) between the Company and the trustee relating to the issuance of the notes.
The base indenture, as amended and supplemented by the supplemental indenture, is referred to herein as the indenture. The terms of the notes include those stated in the indenture and those made part of the indenture by reference to the
Trust Indenture Act of 1939, as amended (the Trust Indenture Act). Each of the notes, the
notes and the notes will be separate series of securities under the indenture.
The following description of certain terms of the notes supplements, and to the extent inconsistent, replaces, the description under
Description of the Debt Securities in the accompanying base prospectus. The following description and the description under Description of the Debt Securities in the accompanying base prospectus together constitute a summary
of the material provisions of the indenture and the notes. They do not restate those documents in their entirety. We urge you to read the indenture in its entirety, because it, and not this description or the description under Description of
the Debt Securities in the accompanying base prospectus, defines your rights as holders of the notes. Copies of the indenture are available as set forth below under Additional Information. You can find the definitions of
certain terms used in this description under the subheading Certain Definitions. In this description, the terms Company, us, our or we refer only to Williams Partners L.P. and
not to any of our subsidiaries. Certain defined terms used in this Description of the Notes but not defined below under Certain Definitions have the meanings assigned to them in the indenture.
The registered holder of a note will be treated as the owner of it for all purposes. Only registered holders will have rights under the
indenture.
Brief Description of the Notes
The notes:
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are our general unsecured obligations; |
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are equal in right of payment with all of our existing and future senior unsecured indebtedness; |
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are effectively subordinated to any of our existing and future senior secured indebtedness and structurally subordinated to all existing and future indebtedness and other obligations of our Subsidiaries, including trade
payables; and |
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are senior to all of our future subordinated indebtedness. |
Assuming that we had completed
this offering of the notes on December 31, 2014 (and giving effect to the Merger), we would have had outstanding indebtedness of approximately $ billion (including
$ billion in aggregate principal amount of the notes offered hereby), approximately $2.12 billion of which would have consisted of indebtedness of our Subsidiaries.
The indenture will permit us to incur additional indebtedness, including additional senior unsecured indebtedness. The indenture also will not
restrict the ability of our subsidiaries to incur additional indebtedness. See Risks Related to the Notes Restrictions in our debt agreements and the amount of our indebtedness may affect our future financial and operating
flexibility.
We own a noncontrolling interest in Aux Sable Liquid Products Inc., Aux Sable Liquid Products LP, Baton Rouge
Fractionators LLC, Baton Rouge Pipeline LLC, Caiman Energy II, LLC, Cardinal Pipeline Company LLC, Discovery Producer Services LLC, Gulfstream Natural Gas System, L.L.C., Laurel Mountain Midstream
S-30
Ohio, LLC, Laurel Mountain Midstream Operating LLC, Laurel Mountain Midstream, LLC, Overland Pass Pipeline Company LLC, Pacific Connector Gas Pipeline, LLC, Pacific Connector Gas Pipeline, LP,
Pine Needle LNG Company, LLC, Pecan Hill Watering Solutions, LLC, Ranch Westex JV, LLC, and Utica East Ohio Midstream LLC. We use the equity method of accounting for these investments and they will not be classified as Subsidiaries of ours under the
indenture so long as we continue to own a noncontrolling interest in each of them. As a result, the entities listed above will not be subject to the restrictive covenants in the indenture so long as they are not Subsidiaries of ours.
Principal, Maturity and Interest
We will
issue the notes with an initial maximum aggregate principal amount of $ ,
the notes with an initial maximum aggregate principal amount of $ and
the notes with an initial maximum aggregate principal amount of $ .
The notes will mature on , , the
notes will mature on ,
and the notes will mature on
, . We will issue notes in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.
Interest on the notes will accrue at the rate of
% per annum, and will be payable semi-annually in arrears on and
, beginning on , 2015. We will make each interest payment on
the notes to the holders of record at the close of business on the immediately preceding or
(whether or not a Business Day). Interest on the notes will accrue at the rate of
% per annum, and will be payable semi-annually in arrears on and
, beginning on , 2015. We will make each interest payment on
the notes to the holders of record at the close of business on the immediately preceding or
(whether or not a Business Day). Interest on the notes will accrue at the rate of
% per annum, and will be payable semi-annually in arrears on and
, beginning on , 2015. We will make each interest payment on
the notes to the holders of record at the close of business on the immediately preceding or
(whether or not a Business Day).
Interest on the notes will
accrue from the date of original issuance or, if interest has already been paid or duly provided for, from the date it was most recently paid or duly provided for. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day
months. If any interest or other payment date of the notes falls on a day that is not a Business Day, the required payment of principal, premium, if any, or interest will be due on the next succeeding Business Day as if made on the date that payment
was due, and no interest will accrue on that payment for the period from and after that interest or other payment date, as the case may be, to the date of that payment on the next succeeding Business Day.
We may, without the consent of the holders of notes of any series, issue additional notes having the same ranking and the same interest rate,
maturity and other terms as the notes of such series, except the issue date, the public offering price and, if applicable, the initial interest payment date and the initial interest accrual date, and such additional notes may not be fungible for
trading purposes with, and may initially bear a different identifying numbers than, the notes of the applicable series offered hereby. Any additional notes having such similar terms, together with the notes of the applicable series offered hereby,
will constitute a single series of debt securities under the indenture.
Methods of Receiving Payments on the Notes
We will pay all principal, interest and premium, if any, on the notes in the manner described under Same-Day Settlement and
Payment below.
Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar. We may change the paying agent or registrar without prior notice to the holders
of the notes, and we or any of our Subsidiaries may act as paying agent or registrar.
S-31
Transfer and Exchange
A holder may transfer or exchange notes in accordance with the indenture. The registrar and the trustee may require a holder to furnish
appropriate endorsements and transfer documents in connection with a transfer of notes. No service charges will be imposed on the holders by us, the trustee or the registrar for any registration of transfer or exchange of notes, but holders may be
required to pay all taxes due on transfer or exchange. We are not required to transfer or exchange any note selected for redemption. Also, we are not required to transfer or exchange any note for a period of 15 days before mailing notice of any
redemption of notes.
Optional Redemption
We may, at our option, redeem the notes of each series, in whole or in part, at any time or from time to time prior to
, , in the case of the notes,
, , in the case of the
notes and , , in the case
of the notes, at a redemption price equal to the greater of:
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(1) |
100% of the principal amount of the notes to be redeemed, plus accrued interest to the redemption date, and |
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(2) |
as determined by the Quotation Agent, the sum of the present values of the remaining scheduled payments of principal of and interest on the notes to be redeemed (not including any portion of payments of interest accrued
as of the redemption date) discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus basis points in the case of the
notes, basis points in the case of the
notes and basis points in the case of the
notes, plus accrued and unpaid interest to the redemption date. |
We also have the option, with respect to the notes, at any time on or
after , (which is the date that
is months prior to the maturity date of the notes), with respect to the
notes, at any time on or after
, (which is the date that is
months prior to the maturity date of the notes) and with respect to the
notes, at any time on or after
, (which is the date that is
months prior to the maturity date of the notes), to redeem the notes of such series, in whole or in
part, at a redemption price equal to 100% of the principal amount of the notes of such series to be redeemed, plus accrued and unpaid interest thereon to the redemption date.
Selection and Notice
If less than all the notes of any series are to be redeemed, the notes to be redeemed shall be selected by the Trustee by lot or in such manner
as it shall deem appropriate and fair, provided that in the case of notes represented by one or more global securities, interests in such notes shall be selected for redemption by the depositary in accordance with its standard procedures therefor.
No notes of $2,000 or less can be redeemed in part. Notices of optional redemption will be delivered electronically or mailed by first
class mail at least 30 but not more than 60 days before the redemption date to each holder of notes to be redeemed at its registered address. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that relates to that note will state the portion of the principal amount
of that note that is to be redeemed. A new note of the same series and in principal amount equal to the unredeemed portion of the original note will be issued in the name of the holder of the note upon cancellation of the original note. Notes called
for redemption become due on the date fixed for redemption. On and after the redemption date, interest will cease to accrue on notes or portions of them called for redemption.
Mandatory Redemption
We are not required
to make mandatory redemption or sinking fund payments with respect to the notes of any series or to repurchase the notes of any series at the option of the holders.
Certain Covenants
Except as set forth in
this Description of the Notes, neither we nor any of our Subsidiaries will be restricted by the indenture from incurring additional indebtedness or other obligations, from making distributions or paying dividends on our or our
Subsidiaries equity interests or from purchasing our or our Subsidiaries
S-32
equity interests. The indenture does not require the maintenance of any financial ratios or specified levels of net worth or liquidity. In addition, the indenture does not contain any provisions
that would require us to repurchase or redeem any of the notes in situations that may adversely affect the creditworthiness of the notes.
Liens
We will
not, and will not permit any Subsidiary of ours to, issue, assume or guarantee any Indebtedness secured by a Lien, other than Permitted Liens, upon any of our or any of our Subsidiaries property, now owned or hereafter acquired, unless the
notes are equally and ratably secured with such Indebtedness until such time as such Indebtedness is no longer secured by a Lien.
Notwithstanding the preceding paragraph, we may, and may permit any Subsidiary of ours to, issue, assume or guarantee any Indebtedness secured
by a Lien, other than a Permitted Lien, without securing the notes; provided that the aggregate principal amount of all Indebtedness of ours and any Subsidiary of ours then outstanding secured by any such Liens (other than Permitted Liens) does not
exceed 15% of Consolidated Net Tangible Assets.
Merger, Consolidation or Sale of Assets
We may not directly or indirectly consolidate with or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of our assets and properties and the assets and properties of our Subsidiaries (taken as a whole) in one or more related transactions to another Person, unless:
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(1) |
either: (a) we are the survivor; or (b) the Person formed by or surviving any such consolidation or merger (if other than us) or to which such sale, assignment, transfer, lease, conveyance or other disposition
has been made is a Person formed, organized or existing under the laws of the United States, any state of the United States or the District of Columbia; |
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(2) |
the Person formed by or surviving any such consolidation or merger (if other than us) or the Person to which such sale, assignment, transfer, lease, conveyance or other disposition has been made expressly assumes by
supplemental indenture, in form reasonably satisfactory to the trustee, executed by the successor person and delivered to the trustee, the due and punctual payment of the principal of and any premium and interest on the notes of each series and the
performance of all of our obligations under the indenture and the notes; |
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(3) |
we or the Person formed by or surviving any such merger will deliver to the trustee an officers certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment, transfer,
lease, conveyance or other disposition and such supplemental indenture (if any) comply with the indenture and that all conditions precedent in the indenture relating to such transaction have been complied with; and |
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(4) |
immediately after giving effect to such transaction, no Event of Default or event which, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing.
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Upon any consolidation by us with or our merger into any other Person or Persons where we are not the survivor or any sale,
assignment, transfer, lease, conveyance or other disposition of all or substantially all of our properties and assets and the properties and assets of our Subsidiaries (taken as a whole) to any Person or Persons in accordance herewith, the successor
Person formed by such consolidation or into which we are merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, us under
the indenture with the same effect as if such successor Person had been named as the Company therein; and thereafter, except in the case of a lease, the predecessor Person shall be released from all obligations and covenants under the indenture and
the notes.
Although there is a limited body of case law interpreting the phrase substantially all, there is no precise
established definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty as to whether a particular transaction would involve all or substantially all of the properties or
assets of a Person.
S-33
Reports
We will:
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(1) |
file with the trustee, within 30 days after we have filed the same with the Commission, unless such reports are available on the Commissions EDGAR filing system (or any successor thereto), copies of the annual
reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which we may be required to file with the Commission
pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if we are not required to file information, documents or reports pursuant to either of said Sections, then we shall file with the trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents, and reports which may be required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; |
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(2) |
file with the trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by us with
the conditions and covenants of the indenture as may be required from time to time by such rules and regulations; and |
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(3) |
transmit within 30 days after the filing thereof with the trustee, in the manner and to the extent provided in Section 313(c) of the Trust Indenture Act, such summaries of any information, documents and reports
required to be filed by us pursuant to clauses (1) and (2) of this paragraph as may be required by rules and regulations prescribed from time to time by the Commission. |
Events of Default and Remedies
Each of
the following is an Event of Default with respect to the notes of any series, and any references under Description of the Debt Securities in the accompanying base prospectus to events of default described in the first
paragraph under the heading Events of Default therein shall be deemed to be references to the following:
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(a) |
default for 30 days in the payment when due of any interest on the notes of such series; |
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(b) |
default in the payment of the principal of or any premium on the notes of such series when the principal or premium becomes due and payable; |
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(c) |
failure by us duly to observe or perform any other of the covenants or agreements (other than those described in clause (a) or (b) above) in the indenture with respect to the notes of such series, which
failure continues for a period of 60 days, or, in the case of the covenant set forth under Certain Covenants Reports above, which failure continues for a period of 90 days, after the date on which written notice of such
failure, requiring the same to be remedied and stating that such notice is a Notice of Default has been given to us by the trustee, upon direction of holders of at least 25% in principal amount of then outstanding notes of such series;
provided, however, that if such failure is not capable of cure within such 60-day or 90-day period, as the case may be, such 60-day or 90-day period, as the case may be, shall be automatically extended by an additional 60 days so long as
(i) such failure is subject to cure, and (ii) we are using commercially reasonable efforts to cure such failure; and provided, further, that a failure to comply with any such other agreement in the indenture that results from a change in
GAAP shall not be deemed to be an Event of Default; and |
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(d) |
certain events of bankruptcy, insolvency or reorganization described in the indenture with respect to us. |
In case an Event of Default specified in clause (a) or (b) above shall occur and be continuing with respect to the notes of any
series, holders of at least 25%, and in case an Event of Default specified in clause (c) above shall occur and be continuing with respect to the notes of such series, holders of at least a majority, in aggregate principal amount of the notes of
such series then outstanding may declare the principal to be due and payable. If
S-34
an Event of Default described in clause (d) above shall occur and be continuing then the principal amount of all the debt securities then outstanding under the indenture shall be and become
due and payable immediately, without notice or other action by any holder or the trustee, to the full extent permitted by law. Any past or existing default or Event of Default with respect to the notes of any series may be waived by the holders of a
majority in aggregate principal amount of the outstanding notes of such series, except in each case a continuing default (1) in the payment of the principal of, any premium or interest on, or any additional amounts with respect to, any notes of
such series, or (2) in respect of a covenant or provision which cannot be modified or amended without the consent of each holder affected thereby.
The indenture provides that the trustee may withhold notice to the holders of any default with respect to the notes of any series (except in
payment of principal of or interest or premium on the notes of such series) if the trustee considers it in the interest of holders to do so. The indenture contains a provision entitling the trustee to be indemnified by the holders before proceeding
to exercise any trust or power under the indenture at the request of such holders. The indenture provides that the holders of a majority in aggregate principal amount of the then outstanding notes of any series may direct the time, method and place
of conducting any proceedings for any remedy available to the trustee or of exercising any trust or power conferred upon the trustee with respect to the notes of such series; provided, however, that the trustee may decline to follow any such
direction if, among other reasons, the trustee determines that the actions or proceedings as directed would be unduly prejudicial to the holders of the notes of such series not joining in such direction. The right of a holder to institute a
proceeding with respect to the notes of any series will be subject to certain conditions precedent including, without limitation, that in case of an Event of Default specified in clause (a), (b) or (d) of the first paragraph above under
Events of Default and Remedies, holders of at least 25%, or in case of an Event of Default specified in clause (c) of the first paragraph above under Events of Default and Remedies, holders of at least a
majority, in aggregate principal amount of the notes of such series then outstanding make a written request upon the trustee to exercise its powers under the indenture, indemnify the trustee and afford the trustee reasonable opportunity to act.
Notwithstanding the foregoing, each holder has an absolute right to receipt of the principal of, premium, if any, and interest on and
additional amounts with respect to the notes of the applicable series when due and to institute suit for the enforcement thereof. We are required to deliver to the trustee annually a statement regarding compliance with the indenture.
Governing Law
The indenture and the
notes will be governed by, and construed in accordance with, the laws of the State of New York.
Additional Information
We will file the supplemental indenture as an exhibit to a current report on Form 8-K at the completion of this offering. Anyone who receives
this prospectus supplement may also obtain a copy of the base indenture and/ or the supplemental indenture without charge by writing to Williams Partners L.P., One Williams Center, Tulsa, Oklahoma 74172-0172; Attention: Investor Relations.
Book-Entry, Delivery and Form
Except as
set forth below, notes will be issued in registered, global form, without interest coupons, which we refer to as Global Notes. Global Notes will be issued in minimum denominations of $2,000 and integral multiples of $1,000 in excess
thereof. Notes will be issued at the closing of this offering only against payment in immediately available funds.
The Global Notes will
be deposited upon issuance with the trustee as custodian for The Depository Trust Company (DTC), in New York, New York, and registered in the name of DTCs nominee, Cede & Co., in each case for credit to an account of a
direct or indirect participant in DTC as described below.
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Except as set forth below, the Global Notes may be transferred, in whole but not in part, only to
DTC, to a nominee of DTC or to a successor of DTC or its nominee. Beneficial interests in the Global Notes may not be exchanged for notes in registered, certificated form (Certificated Notes) except in the limited circumstances described
below. See Exchange of Certificated Notes for Global Notes. Except in the limited circumstances described below, owners of beneficial interests in the Global Notes will not be entitled to receive physical delivery of notes in
certificated form.
Transfers of beneficial interests in the Global Notes will be subject to the applicable rules and procedures of DTC
and its direct or indirect participants (including, if applicable, those of the Euroclear System (Euroclear) and Clearstream Banking, S.A. (Clearstream)), which may change from time to time.
Depository Procedures
The following
description of the operations and procedures of DTC is provided solely as a matter of convenience. These operations and procedures are solely within the control of DTC and are subject to changes by it. We take no responsibility for these operations
and procedures and urge investors to contact DTC or its participants directly to discuss these matters.
DTC has advised us that DTC is a
limited-purpose trust company created to hold securities for its participating organizations (collectively, the Participants) and to facilitate the clearance and settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants include securities brokers and dealers (including the underwriters), banks, trust companies, clearing corporations and certain other organizations. Access to DTCs
system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly (collectively, the Indirect
Participants). Persons who are not Participants may beneficially own securities held by or on behalf of DTC only through the Participants or the Indirect Participants. The ownership interests in, and transfers of ownership interests in, each
security held by or on behalf of DTC are recorded on the records of the Participants and Indirect Participants.
DTC has also advised us
that, pursuant to procedures established by it:
|
(1) |
upon deposit of the Global Notes, DTC will credit the accounts of the Participants designated by the underwriters with portions of the principal amount of the Global Notes; and |
|
(2) |
ownership of these interests in the Global Notes will be shown on, and the transfer of ownership of these interests will be effected only through, records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of beneficial interest in the Global Notes). |
Investors in the Global Notes who are Participants may hold their interests therein directly through DTC. Investors in the Global Notes who
are not Participants may hold their interests therein indirectly through organizations (including Euroclear and Clearstream) which are Participants. All interests in a Global Note, including those held through Euroclear or Clearstream, may be
subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream may also be subject to the procedures and requirements of such systems. The laws of some states require that certain Persons take physical
delivery in definitive form of securities that they own. Consequently, the ability to transfer beneficial interests in a Global Note to such Persons will be limited to that extent. Because DTC can act only on behalf of the Participants, which in
turn act on behalf of the Indirect Participants, the ability of a Person having beneficial interests in a Global Note to pledge such interests to Persons that do not participate in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing such interests.
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Except as described below, owners of an interest in the Global Notes will not have notes
registered in their names, will not receive physical delivery of Certificated Notes and will not be considered the registered owners or holders thereof under the indenture for any purpose.
Payments in respect of the principal of, and interest and premium, if any, on a Global Note registered in the name of DTC or its nominee will
be payable to DTC in its capacity as the registered holder under the indenture. Under the terms of the indenture, the Company and the trustee will treat the Persons in whose names the notes, including the Global Notes, are registered as the owners
of the notes for the purpose of receiving payments and for all other purposes. Consequently, neither the Company, the trustee nor any agent of ours or of the trustee has or will have any responsibility or liability for:
|
(1) |
any aspect of DTCs records or any Participants or Indirect Participants records relating to, or payments made on account of, beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any of DTCs records or any Participants or Indirect Participants records relating to the beneficial ownership interests in the Global Notes; or |
|
(2) |
any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. |
DTC has advised us that its current practice, at the due date of any payment in respect of securities such as the notes, is to credit the
accounts of the relevant Participants with the payment on the payment date unless DTC has reason to believe that it will not receive payment on such payment date. Each relevant Participant is credited with an amount proportionate to its beneficial
ownership of an interest in the principal amount of the notes as shown on the records of DTC. Payments by the Participants and the Indirect Participants to the beneficial owners of notes will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of DTC, the trustee or us. Neither we nor the trustee will be liable for any delay by DTC or any of its Participants in
identifying the beneficial owners of the notes, and the Company and the trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes.
Transfers between Participants in DTC will be effected in accordance with DTCs procedures, and will be settled in same-day funds, and
transfers between participants in Euroclear and Clearstream will be effected in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the notes described herein, cross-market transfers between the Participants
in DTC, on the one hand, and Euroclear or Clearstream participants, on the other hand, will be effected through DTC in accordance with DTCs rules on behalf of Euroclear or Clearstream, as the case may be, by its depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or
receiving interests in the relevant Global Note in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver
instructions directly to the depositories for Euroclear or Clearstream.
DTC has advised us that it will take any action permitted to be
taken by a holder of notes only at the direction of one or more Participants to whose account DTC has credited the interests in the Global Notes and only in respect of such portion of the aggregate principal amount of the notes as to which such
Participant or Participants has or have given such direction. However, if there is an Event of Default under the notes, DTC reserves the right to exchange the Global Notes for Certificated Notes, and to distribute such notes to its Participants.
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Although DTC, Euroclear and Clearstream have agreed to the foregoing procedures to facilitate
transfers of interests in the Global Notes among participants in DTC, Euroclear and Clearstream, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. Neither the Company
nor the trustee nor any of their respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective Participants or Indirect Participants of their respective obligations under the rules and
procedures governing their operations.
Exchange of Global Notes for Certificated Notes
A Global Note of any series is exchangeable for Certificated Notes of such series in minimum denominations of $2,000 and in integral multiples
of $1,000 in excess thereof if:
|
(1) |
DTC notifies us that it is unwilling or unable to continue as depositary for such Global Notes or that it has ceased to be a clearing agency registered under the Exchange Act and, in either case, we fail to appoint a
successor depositary within 90 days after the date of such notice from DTC; |
|
(2) |
we, at our option and subject to the procedures of DTC, notify the trustee in writing that we elect to cause the issuance of the Certificated Notes of such series; or |
|
(3) |
an Event of Default has occurred and is continuing with respect to the notes of the applicable series. |
In all cases, Certificated Notes delivered in exchange for any Global Note or beneficial interests in Global Notes will be registered in the
names, and issued in any approved denominations, requested by or on behalf of the depositary (in accordance with its customary procedures).
Same-Day
Settlement and Payment
We will make payments in respect of the notes represented by the Global Notes (including principal, interest
and premium, if any) by wire transfer of immediately available funds to the accounts specified by the Global Note Holder. We will make all payments of principal, interest and premium, if any, with respect to Certificated Notes (i) to holders
having an aggregate principal amount of $2,000,000 or less, by check mailed to such holders registered address or (ii) to holders having an aggregate principal amount of more than $2,000,000, by check mailed to such holders
registered address or, upon application by a holder to the registrar not later than the relevant record date or in the case of payments of principal or premium, if any, not later than 15 days prior to the principal payment date, by wire transfer in
immediately available funds to that holders account within the United States (subject to surrender of the Certificated Note in the case of payments of principal or premium), which application shall remain in effect until the holder notifies
the registrar to the contrary in writing. The notes represented by the Global Notes are expected to be eligible to trade in DTCs Same-Day Funds Settlement System, and any permitted secondary market trading activity in such notes will,
therefore, be required by DTC to be settled in immediately available funds. The Company expects that secondary trading in any Certificated Notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in a Global Note
from a Participant in DTC will be credited, and any such crediting will be reported to the relevant Euroclear or Clearstream participant, during the securities settlement processing day (which must be a business day for Euroclear and Clearstream)
immediately following the settlement date of DTC. DTC has advised us that cash received in Euroclear or Clearstream as a result of sales of interests in a Global Note by or through a Euroclear or Clearstream participant to a Participant in DTC will
be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream cash account only as of the business day for Euroclear or Clearstream following DTCs settlement date.
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Certain Definitions
Set forth below are certain defined terms used in the indenture. Reference is made to the indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is provided.
Adjusted Treasury Rate means,
with respect to any redemption date, the rate per annum equal to the semi-annual equivalent yield to maturity of the applicable Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal
amount) equal to the applicable Comparable Treasury Price for that redemption date.
Affiliate of any specified Person
means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, control, as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms
controlling, controlled by and under common control with have correlative meanings.
Board of
Directors means:
|
(1) |
with respect to the Company, the board of directors of the General Partner or any authorized committee thereof; |
|
(2) |
with respect to any corporation, the board of directors of the corporation or any authorized committee thereof; |
|
(3) |
with respect to a limited liability company, the managing member or managing members or board of directors, as applicable, of such limited liability company or any authorized committee thereof; |
|
(4) |
with respect to any other partnership, the board of directors of the general partner of the partnership or any authorized committee thereof; and |
|
(5) |
with respect to any other Person, the board or committee of such Person serving a similar function. |
Business Day means each day that is not a Saturday, Sunday or other day on which banking institutions in New York, New York
or another place of payment are authorized or required by law, regulation or executive order to close.
Capital Stock
means:
|
(1) |
in the case of a corporation, corporate stock; |
|
(2) |
in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; |
|
(3) |
in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited); and |
|
(4) |
any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. |
Commission means the U.S. Securities and Exchange Commission, as from time to time constituted, created under the Exchange
Act or any successor agency.
Comparable Treasury Issue means, with respect to the notes of a series, the United States
Treasury security selected by the Quotation Agent as having an actual or interpolated maturity comparable to the remaining term of the notes of such series being redeemed that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the notes of such series.
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Comparable Treasury Price means, with respect to any redemption date:
|
(1) |
the average of the Reference Treasury Dealer Quotations for that redemption date, after excluding the highest and lowest of the Reference Treasury Dealer Quotations, or |
|
(2) |
if the Quotation Agent obtains fewer than three Reference Treasury Dealer Quotations, the average of all Reference Treasury Dealer Quotations so received. |
Consolidated Net Tangible Assets means at any date of determination, the total amount of assets of us and our Subsidiaries
after deducting therefrom:
|
(1) |
all current liabilities (excluding (A) any current liabilities that by their terms are extendable or renewable at the option of the obligor thereon to a time more than 12 months after the time as of which the
amount thereof is being computed, and (B) current maturities of long-term debt); and |
|
(2) |
the value (net of any applicable reserves) of all goodwill, trade names, trademarks, patents, and other like intangible assets, all as set forth, or on a pro forma basis would be set forth, on our consolidated balance
sheet for our most recently completed fiscal quarter, prepared in accordance with GAAP. |
Domestic
Subsidiary means any Subsidiary of ours that is incorporated or organized under the laws of the United States of America, any state thereof or the District of Columbia.
GAAP means generally accepted accounting principles in the United States, which are in effect from time to time.
General Partner means WPZ GP LLC, a Delaware limited liability company (including any permitted successors and assigns
under the Limited Partnership Agreement).
holder means a Person in whose name a note is registered.
Indebtedness means, with respect to any specified Person, any obligation created or assumed by such Person, whether or not
contingent, for the repayment of money borrowed from others or any guarantee thereof.
International Subsidiary means
each Subsidiary of ours other than a Domestic Subsidiary.
Joint Venture means any Person that is not a direct or
indirect Subsidiary of ours in which we or any of our Subsidiaries owns any Capital Stock.
Lien means any mortgage,
pledge, lien, security interest or other similar encumbrance.
Limited Partnership Agreement means our First Amended
and Restated Agreement of Limited Partnership, dated as of August 3, 2010, among the General Partner and the other parties named therein, as amended, supplemented or restated from time to time.
Non-Recourse Indebtedness means any Indebtedness incurred by any Joint Venture or Non-Recourse Subsidiary which does not
provide for recourse against us or any Subsidiary of ours (other than a Non-Recourse Subsidiary) or any property or asset of ours or any Subsidiary of ours (other than the Capital Stock or the properties or assets of a Joint Venture or Non-Recourse
Subsidiary).
Non-Recourse Subsidiary means any Subsidiary of ours (i) whose principal purpose is to incur
Non-Recourse Indebtedness and/or construct, lease, own or operate the assets financed thereby, or to become a direct or indirect partner, member or other equity participant or owner in a partnership, limited partnership, limited liability
partnership, corporation (including a business trust), limited liability company, unlimited liability company, joint stock company, trust, unincorporated association or joint venture created for such purpose (collectively, a Business
Entity), (ii) who is not an obligor or otherwise bound with respect to any Indebtedness other than Non-Recourse Indebtedness, (iii) substantially all the assets of which Subsidiary or Business Entity are
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limited to (x) those assets being financed (or to be financed), or the operation of which is being financed (or to be financed), in whole or in part by Non-Recourse Indebtedness or
(y) Capital Stock in, or Indebtedness or other obligations of, one or more other Non-Recourse Subsidiaries or Business Entities and (iv) any Subsidiary of a Non-Recourse Subsidiary; provided that such Subsidiary shall be considered to be a
Non-Recourse Subsidiary only to the extent that and for so long as each of the above requirements are met.
Permitted
International Debt means Indebtedness of any International Subsidiary for which neither we nor any Domestic Subsidiary, directly or indirectly, provides any guarantee or other credit support and which is secured, if at all, only by pledges
of or liens on assets (i) held by an International Subsidiary on the date of the indenture, (ii) acquired by an International Subsidiary from a Person not constituting an Affiliate or (iii) acquired by an International Subsidiary from
us, any Domestic Subsidiary or other Affiliate on terms that, in the good faith judgment of our Board of Directors, are no less favorable to us or the relevant Domestic Subsidiary or other Affiliate than those that would have been obtained in a
comparable transaction by us or such Domestic Subsidiary or other Affiliate with an unrelated Person or, if in the good faith judgment of our Board of Directors, no comparable transaction is available with which to compare such transaction, such
transaction is otherwise fair to us or the relevant Domestic Subsidiary or other Affiliate from a financial point of view.
Permitted Liens means:
|
(1) |
any Lien existing on any property at the time of the acquisition thereof and not created in contemplation of such acquisition by us or any of our Subsidiaries, whether or not assumed by us or any of our Subsidiaries;
|
|
(2) |
any Lien existing on any property of a Subsidiary of ours at the time it becomes a Subsidiary of ours and not created in contemplation thereof and any Lien existing on any property of any Person at the time such Person
is merged or liquidated into or consolidated with us or any Subsidiary of ours and not created in contemplation thereof; |
|
(3) |
purchase money and analogous Liens incurred in connection with the acquisition, development, construction, improvement, repair or replacement of property (including such Liens securing Indebtedness incurred within 12
months of the date on which such property was acquired, developed, constructed, improved, repaired or replaced); provided that all such Liens attach only to the property acquired, developed, constructed, improved, repaired or replaced and the
principal amount of the Indebtedness secured by such Lien shall not exceed the gross cost of the property; |
|
(4) |
any Liens created or assumed to secure Indebtedness of ours or of any Subsidiary of ours maturing within 12 months of the date of creation thereof and not renewable or extendible by the terms thereof at the option of
the obligor beyond such 12 months; |
|
(5) |
Liens on accounts receivable and related proceeds thereof arising in connection with a receivables financing and any Lien held by the purchaser of receivables derived from property or assets sold by us or any Subsidiary
of ours and securing such receivables resulting from the exercise of any rights arising out of defaults on such receivables; |
|
(6) |
leases constituting Liens existing on the date of the indenture or thereafter existing and any renewals or extensions thereof; |
|
(7) |
any Lien securing industrial development, pollution control or similar revenue bonds; |
|
(8) |
Liens existing on the date of the indenture; |
|
(9) |
Liens in favor of us or any Subsidiary of ours; |
|
(10) |
Liens securing Indebtedness incurred to refund, extend, refinance or otherwise replace Indebtedness (Refinanced Indebtedness) secured by a Lien permitted to be incurred under the indenture; provided that the
principal amount of such Refinanced Indebtedness does not exceed the principal amount of Indebtedness refinanced (plus the amount of penalties, premiums, fees, accrued interest and reasonable expenses incurred therewith) at the time of refinancing;
|
S-41
|
(11) |
Liens on any assets or properties, or pledges of the Capital Stock, of (a) any Joint Venture owned by us or any Subsidiary of ours or (b) any Non-Recourse Subsidiary, in each case only to the extent securing
Non-Recourse Indebtedness of such Joint Venture or Non-Recourse Subsidiary; |
|
(12) |
Liens on the products and proceeds (including insurance, condemnation, and eminent domain proceeds) of and accessions to, and contract or other rights (including rights under insurance policies and product warranties)
derivative of or relating to, property permitted by the indenture to be subject to Liens but subject to the same restrictions and limitations set forth in the indenture as to Liens on such property (including the requirement that such Liens on
products, proceeds, accessions, and rights secure only obligations that such property is permitted to secure); |
|
(13) |
any Liens securing Indebtedness neither assumed nor guaranteed by us or any Subsidiary of ours nor on which we or they customarily pay interest, existing upon real estate or rights in or relating to real estate
(including rights-of-way and easements) acquired by us or such Subsidiary, which mortgage Liens do not materially impair the use of such property for the purposes for which it is held by us or such Subsidiary; |
|
(14) |
any Lien existing or hereafter created on any office equipment, data processing equipment (including computer and computer peripheral equipment) or transportation equipment (including motor vehicles, aircraft, and
marine vessels); |
|
(15) |
undetermined Liens and charges incidental to construction or maintenance; |
|
(16) |
any Lien created or assumed by us or any Subsidiary of ours on oil, gas, coal or other mineral or timber property owned by us or a Subsidiary of ours; |
|
(17) |
any Lien created by us or any Subsidiary of ours on any contract (or any rights thereunder or proceeds therefrom) providing for advances by us or such Subsidiary to finance gas exploration and development, which Lien is
created to secure Indebtedness incurred to finance such advances; |
|
(18) |
any Lien granted in connection with a cash collateralization or similar arrangement to secure obligations of ours or any Subsidiary of ours to issuing banks in connection with letters of credits issued at the request of
us or any Subsidiary of ours; |
|
(19) |
Liens on cash deposits in the nature of a right of setoff, bankers lien, counterclaim or netting of cash amounts owed arising in the ordinary course of business on deposit accounts; |
|
(20) |
Liens securing Permitted International Debt; |
|
(21) |
Liens not otherwise permitted so long as the aggregate outstanding principal amount of the Indebtedness secured thereby does not exceed $10,000,000 at any time; and |
|
(22) |
Liens occurring in, arising from, or associated with Specified Escrow Arrangements. |
Person means any individual, corporation, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, limited liability company or government or any agency or political subdivision thereof.
Quotation
Agent means the Reference Treasury Dealer appointed as such agent by us.
Reference Treasury Dealer
Quotations means, with respect to any Reference Treasury Dealer and any redemption date, the average, as determined by the Quotation Agent, of the bid and asked prices for the applicable Comparable Treasury Issue (expressed in each case as
a percentage of its principal amount) quoted in writing to the Quotation Agent by that Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding that redemption date.
Reference Treasury Dealers means (i) Barclays Capital Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Wells Fargo Securities, LLC and their successors, unless any of such entities ceases to be a primary U.S. Government securities dealer in the United States (a Primary Treasury Dealer), in which case we shall substitute another Primary
Treasury Dealer; and (ii) any two other Primary Treasury Dealers selected by us.
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Specified Escrow Arrangements means cash deposits at one or more financial
institutions for the purpose of funding any potential shortfall in the daily net cash position of us or any of our Subsidiaries.
Subsidiary means, with respect to any specified Person:
|
(1) |
any corporation, association or other business entity (other than a partnership or limited liability company) of which more than 50% of the total voting power of Voting Stock is at the time owned or controlled, directly
or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof); and |
|
(2) |
any partnership (whether general or limited) or limited liability company (a) the sole general partner or member of which is such Person or a Subsidiary of such Person or (b) if there is more than a single
general partner or member, either (x) the only managing general partners or managing members of which are such Person or one or more Subsidiaries of such Person (or any combination thereof) or (y) such Person owns or controls, directly or
indirectly, a majority of the outstanding general partner interests, member interests or other Voting Stock of such partnership or limited liability company, respectively. |
Voting Stock of any Person as of any date means the Capital Stock of such Person that is at the time entitled (without
regard to the occurrence of any contingency) to vote in the election of the Board of Directors of such Person.
Williams means The Williams Companies, Inc., a Delaware corporation.
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DESCRIPTION OF OTHER INDEBTEDNESS
Williams Partners Notes
As of
December 31, 2014 (and giving effect to the Merger), we had outstanding $13.35 billion aggregate principal amount of senior unsecured notes with various interest rates from 3.35% to 7.25% and maturities ranging from 2015 to 2045 (collectively,
the Williams Partners Notes).
The terms of the Williams Partners Notes are governed by indentures that contain covenants
that, among other things, limit (1) our ability and the ability of our subsidiaries to incur liens on assets to secure certain debt and (2) certain mergers or consolidations and transfers of assets. The terms of the indentures governing
certain of the Williams Partners Notes originally issued by Pre-merger ACMP (the Pre-merger ACMP Notes), of which there are $3.65 billion aggregate principal amount outstanding, also limit the ability of our subsidiaries to guarantee
certain of our indebtedness without also guaranteeing the Pre-merger ACMP Notes, and further require that we offer to repurchase the Pre-merger ACMP Notes upon the occurrence of a change of control followed by a decrease in the rating of the
Pre-merger ACMP Notes (as described in the indentures governing the Pre-merger ACMP Notes). The indentures also contain customary events of default, upon which the trustee or the holders of the Williams Partners Notes may declare all outstanding
Williams Partners Notes to be due and payable immediately.
We may redeem the Williams Partners Notes at our option in whole or in part at
any time or from time to time prior to the respective maturity dates, at the applicable redemption prices described in the indentures governing the Williams Partners Notes. We are not required to make mandatory redemption or sinking fund payments
with respect to the Williams Partners Notes or to repurchase the Williams Partners Notes at the option of the holders.
Transco and Northwest Pipeline
Notes
As of December 31, 2014, Transco had outstanding a total of $1.433 billion aggregate principal amount of senior unsecured
debt issues with various interest rates from 4.45% to 7.25% and maturities ranging from 2016 to 2042 (the Transco Notes). As of December 31, 2014, Northwest Pipeline had outstanding a total of $695 million aggregate principal face
amount of senior unsecured debt issues with various interest rates from 5.95% to 7.125% and maturities ranging from 2016 to 2025 (the Northwest Pipeline Notes).
The indentures governing the Transco Notes and the Northwest Pipeline Notes contain covenants that, among other things, limit Transco and
Northwest Pipelines ability to (1) incur liens securing indebtedness, (2) engage in certain sale and lease-back transactions and (3) consolidate, merge, transfer or lease assets. The indentures also contain customary events of
default including non-payment of principal or interest, failure to comply with covenants, and certain bankruptcy or insolvency events. Northwest Pipelines 7.125% Debentures due 2025 ($85 million aggregate principal amount outstanding as of
December 31, 2014) are not subject to redemption prior to maturity. The remaining Northwest Pipeline Notes, and all of the Transco Notes, may be redeemed, in whole or in part, at any time and from time to time, as provided in the indentures
governing the notes.
Credit Facilities
On February 2, 2015, we entered into a second amended and restated $3.5 billion five-year senior unsecured revolving credit facility
agreement with Transco and Northwest Pipeline as co-borrowers (the Credit Facility). The Credit Facility may, under certain conditions, be increased up to an additional $500 million. The full amount of the Credit Facility is available to
us to the extent not otherwise utilized by Transco and Northwest Pipeline. Transco and Northwest Pipeline each have access to borrow up to $500 million under the Credit Facility to the extent not otherwise utilized by the other co-borrowers.
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On February 3, 2015, we entered into a $1.5 billion short-term credit facility with a
maturity date of August 3, 2015 with an option to extend the maturity date to February 2, 2016 subject to certain circumstances (the Short-Term Credit Facility and, together with the Credit Facility, the WPZ Credit
Facilities). The Short-Term Credit Facility has substantially the same covenants as the Credit Facility. We may not borrow under the Short-Term Credit Facility until all commitments have been utilized under the Credit Facility. In the event of
certain debt incurrences, issuances of equity, and certain asset sales, we will be required to repay any outstanding borrowings and the commitments under the Short-Term Facility will be reduced on a dollar-for-dollar basis with the net cash proceeds
of such events.
Significant financial covenants include:
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In the case of each of the WPZ Credit Facilities: our ratio of debt to EBITDA (each as defined in each of the WPZ Credit Facilities) must be no greater than 5 to 1 except for the fiscal quarter and the two following
fiscal quarters in which one or more acquisitions has been executed, in which case the ratio of debt to EBITDA is to be no greater than 5.5 to 1; and |
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In the case of the Credit Facility: the ratio of debt to capitalization (defined as net worth plus debt) must be no greater than 65 percent for each of Transco and Northwest Pipeline. |
At February 3, 2015, we were in compliance with these financial covenants.
Other than swingline loans available under the Credit Facility, each time funds are borrowed under the WPZ Credit Facilities, the borrower
must choose whether such borrowing will be an alternate base rate borrowing or a Eurodollar borrowing. If such borrowing is an alternate base rate borrowing, interest is calculated on the basis of the greater of (a) the Prime Rate, (b) the
Federal Funds Effective Rate plus 1⁄2 of 1% and (c) a periodic fixed rate equal to the London Interbank Offered Rate (LIBOR) plus 1%, plus, in the case
of each of (a), (b) and (c), an applicable margin. If the borrowing is a Eurodollar borrowing, interest is calculated on the basis of LIBOR for the relevant period plus an applicable margin. Interest on swingline loans under the Credit Facility
is calculated as the sum of the alternate base rate plus an applicable margin. We are also required to pay a commitment fee based on the unused portion of the applicable WPZ Credit Facility. The applicable margin and the commitment fee are
determined for each borrower by reference to a pricing schedule based on such borrowers senior unsecured long-term debt ratings.
The WPZ Credit Facilities contain various covenants that may limit, among other things, a borrowers and its respective material
subsidiaries ability to grant certain liens supporting indebtedness, enter into certain restrictive agreements, enter into certain affiliate transactions or allow any material change in the nature of its business, a borrowers ability to
merge or consolidate, sell all or substantially all of its assets, and a borrowers and its respective subsidiaries ability to make certain distributions during an event of default.
The WPZ Credit Facilities include customary events of default. If an event of default with respect to a borrower occurs under the Credit
Facility, the lenders under the Credit Facility will be able to terminate the commitments for all borrowers and accelerate the maturity of the loans of the defaulting borrower and exercise other rights and remedies pursuant to the Credit Facility.
If an event of default occurs under the Short-Term Credit Facility, the lenders under the Short-Term Credit Facility will be able to terminate the commitments thereunder and accelerate the maturity of the loans thereunder and exercise other rights
and remedies pursuant to the Short-Term Credit Facility.
Subject to receiving commitments for the issuance of letters of credit in the
sufficient amount, the entire Credit Facility may be used for the issuance of letters of credit. As of February 3, 2015, we had commitments for issuance of letters of credit up to $1.125 billion. At February 3, 2015, no letters of credit
had been issued under the Credit Facility, $730 million of loans were outstanding under the Credit Facility and no loans were outstanding under the Short-Term Credit Facility.
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Commercial Paper Program
In February 2015, we entered into an amended and restated commercial paper program pursuant to which we may issue short-term, unsecured
commercial paper notes pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time, with the aggregate principal
amount of notes outstanding under the program at any time not to exceed $3.0 billion. Each of the WPZ Credit Facilities are, subject to the terms and conditions thereof, available to repay the commercial paper notes, if necessary. The maturities of
the commercial paper notes vary but may not exceed 397 days from the date of issue. The commercial paper notes are sold under customary terms in the commercial paper market and are issued at a discount from par, or, alternatively, are sold at par
and bear varying interest rates on a fixed or floating basis.
As of February 20, 2015, we had $1.721 billion in principal amount of
notes outstanding under our commercial paper program. The outstanding commercial paper notes have a weighted-average maturity of approximately seven days and a weighted-average interest rate of approximately 0.5013%.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material U.S. federal income tax consequences of the acquisition, ownership, and disposition of the
notes. It is based on provisions of the U.S. Internal Revenue Code of 1986, as amended (the Code), existing and proposed Treasury regulations promulgated thereunder, and administrative and judicial interpretations thereof, all as of
the date hereof and all of which are subject to change, possibly on a retroactive basis. No ruling from the Internal Revenue Service (the IRS) has been or will be sought with respect to the acquisition, ownership, and disposition of the
notes. Accordingly, no assurance can be given that the IRS will agree with the views expressed in this summary, or that a court will not sustain any challenge by the IRS in the event of litigation. The following relates only to notes that are
acquired in the initial offering for an amount of cash equal to their issue price, which will equal the first price at which a substantial amount of the notes is sold for cash to the public (not including bond houses, brokers, or similar
persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers), and that are held as capital assets (i.e., generally, property held for investment).
This discussion does not address all of the U.S. federal income tax consequences that may be relevant to particular holders in light of their
personal circumstances, or to certain types of holders that may be subject to special tax treatment (such as banks and other financial institutions, employee stock ownership plans, partnerships or other pass-through entities for U.S. federal income
tax purposes, certain former citizens or residents of the United States, controlled foreign corporations, corporations that accumulate earnings to avoid U.S. federal income tax, insurance companies, tax-exempt organizations, dealers in securities
and foreign currencies, brokers, persons who hold the notes as a hedge or other integrated transaction or who hedge the interest rate on the notes, U.S. holders (as defined below) whose functional currency is not the U.S. dollar, or
persons subject to the alternative minimum tax). In addition, this summary does not include any description of the tax laws of any state, local, or non-U.S. jurisdiction that may be applicable to a particular holder and does not consider any aspects
of U.S. federal tax law other than income taxation.
For purposes of this discussion, a U.S. holder is an individual,
corporation, estate, or trust that is a beneficial owner of the notes and that is, for U.S. federal income tax purposes:
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an individual who is a citizen or resident of the United States; |
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a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any state thereof or the District of Columbia;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
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a trust if a court within the United States can exercise primary supervision over its administration, and one or more United States persons have the authority to control all of the substantial decisions of that trust
(or the trust was in existence on August 20, 1996, and validly elected to continue to be treated as a U.S. trust). |
A
non-U.S. holder is an individual, corporation, estate, or trust that is a beneficial owner of the notes and is not a U.S. holder.
The
U.S. federal income tax treatment of a partner in an entity classified as a partnership for U.S. federal income tax purposes that holds the notes generally will depend on such partners particular circumstances and on the activities of the
partnership. Partnerships holding the notes and the partners in such partnerships should consult their own tax advisors.
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U.S. Federal Income Tax Consequences to U.S. Holders
Treatment of Interest
It is expected, and the rest of this discussion assumes, that the notes will be issued without original issue discount for U.S. federal income
tax purposes. Accordingly, stated interest on the notes will generally be taxable to a U.S. holder as ordinary income at the time it is paid or accrued in accordance with the U.S. holders method of accounting for U.S. federal income tax
purposes. If, however, the notes stated redemption price at maturity (generally, the sum of all payments required under the note other than payments of stated interest) exceeds the issue price by more than a de minimis amount, a
U.S. holder will be required to include such excess in income as original issue discount, as it accrues, in accordance with a constant yield method based on a compounding of interest before the receipt of cash payments attributable to this income.
Sale, Exchange, or Other Taxable Disposition of the Notes
In general, upon the sale, exchange, redemption, retirement, or other taxable disposition of a note, a U.S. holder will recognize taxable gain
or loss equal to the difference between (1) the amount of the cash and the fair market value of any property received (less any portion allocable to any accrued and unpaid interest, which will be taxable as interest to the extent not previously
included in income, as described above under U.S. Federal Income Tax Consequences to U.S. Holders Treatment of Interest) and (2) the U.S. holders adjusted tax basis in the note. A U.S. holders adjusted tax basis
in the note will generally be the U.S. holders cost for the note. Gain or loss realized on the sale, exchange, redemption, retirement, or other taxable disposition of a note will generally be capital gain or loss, and will be long term capital
gain or loss if the U.S. holder held the note for more than one year at the time of the sale, exchange, redemption, retirement or other disposition. Long term capital gains recognized by certain non-corporate U.S. holders, including individuals,
will be taxable at a reduced rate. The deductibility of capital losses is subject to limitations.
Medicare tax and reporting
obligations
A U.S. person that is an individual or estate, or a trust that does not fall into a special class of trusts that is
exempt from such tax, will be subject to a 3.8% tax on the lesser of (1) the U.S. persons net investment income for the relevant taxable year and (2) the excess of the U.S. persons modified adjusted gross income for
the taxable year over a certain threshold (which in the case of individuals will be between $125,000 and $250,000 depending on the individuals circumstances). Net investment income generally includes interest income and net gains from the
disposition of the notes, unless such interest income or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). A U.S. holder that
is an individual, estate or trust should consult its tax advisor regarding the applicability of the Medicare tax to its income and gains in respect of its investment in the notes.
Backup Withholding and Information Reporting
In general, a U.S. holder of the notes will be subject to backup withholding with respect to interest on the notes, and the proceeds of a sale
or other taxable disposition of the notes, at the applicable tax rate, unless such holder (a) is an entity that is exempt from withholding and, when required, demonstrates this fact, or (b) provides the payor with its taxpayer
identification number (TIN), certifies that the TIN provided to the payor is correct and that the holder has not been notified by the IRS that such holder is subject to backup withholding due to underreporting of interest or dividends,
and otherwise complies with applicable requirements of the backup withholding rules. In addition, such payments to U.S. holders that are not exempt entities will generally be subject to information reporting requirements. A U.S. holder who does not
provide the payor with its correct TIN may be subject to penalties imposed by the IRS. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. holder generally will be allowed as a credit against
such holders U.S. federal income tax liability and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
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U.S. Federal Income Tax Consequences to Non-U.S. Holders
Treatment of Interest
Subject to the discussion of backup withholding and FATCA below, under the portfolio interest exemption, a non-U.S. holder will
generally not be subject to U.S. federal income tax (or any withholding tax) on payments of interest on the notes if the interest is not effectively connected with its conduct of a U.S. trade or business, provided that:
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the non-U.S. holder does not actually or constructively own 10% or more of the capital or profits interest in us; |
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the non-U.S. holder is not a bank receiving interest on an extension of credit pursuant to a loan agreement entered into in the ordinary course of its trade or business; |
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the non-U.S. holder is not a controlled foreign corporation that is related (actually or constructively) to us through stock ownership; and |
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certain certification requirements are met. |
Under current law, the certification requirement
will be satisfied in any of the following circumstances:
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If a non-U.S. holder provides to us or our paying agent a statement on IRS Form W-8BEN or W8BEN-E (or suitable successor form), together with all appropriate attachments, signed under penalties of perjury,
identifying the non-U.S. holder by name and address and stating, among other things, that the non-U.S. holder is not a United States person. |
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If a note is held through a securities clearing organization, bank, or another financial institution that holds customers securities in the ordinary course of its trade or business, (i) the
non-U.S. holder provides such a form to such organization or institution, and (ii) such organization or institution, under penalty of perjury, certifies to us that it has received such statement from the beneficial owner or another
intermediary and furnishes us or our paying agent with a copy thereof. |
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If a financial institution or other intermediary that holds the note on behalf of the non-U.S. holder has entered into a withholding agreement with the IRS and submits an IRS Form W-8IMY (or suitable successor
form) and certain other required documentation to us or our paying agent. |
If the requirements of the portfolio interest
exemption described above are not satisfied, a 30% withholding tax will apply to the gross amount of interest on the notes that is paid to a non-U.S. holder, unless either: (a) an applicable income tax treaty reduces or eliminates such tax, and
the non-U.S. holder claims the benefit of that treaty by providing a properly completed and duly executed IRS Form W-8BEN or W-8BEN-E (or suitable successor or substitute form) establishing qualification for benefits under the treaty, or
(b) the interest is effectively connected with the non-U.S. holders conduct of a trade or business in the United States and the non-U.S. holder provides an appropriate statement to that effect on a properly completed and duly executed IRS
Form W-8ECI (or suitable successor form).
If a non-U.S. holder is engaged in a trade or business in the United States and interest on a
note is effectively connected with the conduct of that trade or business, the non-U.S. holder will be required to pay U.S. federal income tax on that interest on a net income basis (and the 30% withholding tax described above will not apply provided
the duly executed IRS Form W-8ECI is provided to us or our paying agent) generally in the same manner as a U.S. person. If a non-U.S. holder is eligible for the benefits of an income tax treaty between the United States and its country of residence,
and the non-U.S. holder satisfies certain certification requirements, any interest income that is effectively connected with a U.S. trade or business will be subject to federal income tax in the manner specified by the treaty and generally will only
be subject to tax on a net basis if such income is attributable to a permanent establishment (or a fixed base in the case of an individual) maintained by the non-U.S. holder in the United States. In addition, a non-U.S. holder that is treated as a
corporation for federal income
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tax purposes may be subject to a branch profits tax equal to 30% (or lower applicable treaty rate) of its earnings and profits for the taxable year, subject to adjustments, that are effectively
connected with its conduct of a trade or business in the United States.
Non-U.S. holders that do not timely provide the applicable
withholding agent with the required certification, but that qualify for a reduced rate under an applicable income tax treaty, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S.
holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.
Sale,
Exchange, or Other Taxable Disposition of the Notes
Subject to the discussion of backup withholding and FATCA below, a non-U.S.
holder generally will not be subject to U.S. federal income tax (or any withholding thereof) on any gain (other than any gain attributable to accrued and unpaid interest, which will be taxable as interest and may be subject to the rules described
above under the heading U.S. Federal Income Tax Consequences to Non-U.S. Holders Treatment of Interest) realized by such holder upon a sale, taxable exchange, redemption, retirement, or other taxable disposition of a note, unless:
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the non-U.S. holder is a nonresident alien individual present in the U.S. for 183 days or more during the taxable year of disposition and certain other conditions are met; or |
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the gain is effectively connected with the conduct of a U.S. trade or business of the non-U.S. holder (and, if an applicable income tax treaty so provides, the gain is attributable to a U.S. permanent establishment of
the non-U.S. holder or a fixed base in the case of an individual). |
If the first exception applies, the non-U.S. holder
generally will be subject to U.S. federal income tax at a rate of 30% (or lower applicable treaty rate) on the amount by which its U.S.-source capital gains exceed its U.S.-source capital losses, provided the non-U.S. holder has timely filed U.S.
federal income tax returns with respect to such losses. If the second exception applies, the non-U.S. holder will generally be subject to U.S. federal income tax on the net gain derived from the sale, taxable exchange, redemption, retirement, or
other taxable disposition of the notes in the same manner as a U.S. person. In addition, corporate non-U.S. holders to which the second exception applies may be subject to a 30% branch profits tax (or lower applicable treaty rate) on any such
effectively connected gain, as adjusted for certain items. If a non-U.S. holder is eligible for the benefits of an income tax treaty between the United States and its country of residence, the U.S. federal income tax treatment of any such gain may
be modified in the manner specified by the treaty. Non-U.S. holders should consult their tax advisors regarding any such income tax treaties.
Information Reporting and Backup Withholding
When required, we or our paying agent will report to the IRS and to each non-U.S. holder the amount of any interest paid on the notes in each
calendar year, and the amount of U.S. federal income tax withheld, if any, with respect to these payments. Copies of information returns reporting such interest and withholding that are filed with the IRS may also be made available under the
provisions of an applicable treaty or agreement to the tax authorities of the country in which the non-U.S. holder resides or is established.
Non-U.S. holders who have provided proper certification as to their non-U.S. status or who have otherwise established an exemption will
generally not be subject to backup withholding on payments of interest if neither we nor our agent have actual knowledge or reason to know that such certification is unreliable or that the conditions of the exemption are in fact not satisfied.
Payments of the proceeds from the sale or other disposition of a note to or through a foreign office of a broker generally will not be subject
to information reporting or backup withholding. However, additional information reporting, but generally not backup withholding, may apply to those payments if the broker has certain relationships with the United States.
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Payment of the proceeds from a sale or other disposition of a note (including a retirement or
redemption) to or through the United States office of a broker will be subject to information reporting and backup withholding unless the non-U.S. holder certifies as to its non-U.S. status or otherwise establishes an exemption from information
reporting and backup withholding.
The amount of any backup withholding from a payment to a non-U.S. holder generally will be allowed as a
credit against such holders U.S. federal income tax liability, if any, and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.
Foreign Account Tax Compliance Act
Legislation was enacted in 2010, contained in Sections 1471 through 1474 of the Code (FATCA), that generally will impose a 30% U.S.
federal withholding tax on withholdable payments (as defined below) made to a foreign financial institution, unless such institution enters into an agreement with the Department of Treasury to, among other things, collect and provide to it
substantial information regarding such institutions United States financial account holders, including certain account holders that are foreign entities with United States owners. The legislation also generally imposes a 30% U.S. federal
withholding tax on withholdable payments to a nonfinancial foreign entity unless such entity provides the paying agent with a certification that it does not have any substantial United States owners or a certification identifying the direct and
indirect substantial United States owners of the entity. Withholdable payments include payments of interest payments from sources within the United States, as well as gross proceeds from the sale of any property of a type which can
produce interest from sources within the United States, unless the payments of interest or gross proceeds are effectively connected with the conduct of a United States trade or business and taxed as such. These withholding and reporting requirements
will apply currently with respect to interest on the notes, but will not apply to withholding on gross proceeds on the sale or other taxable disposition of the notes until January 1, 2017. If you are located in a jurisdiction that has an
intergovernmental agreement with the United States governing FATCA, you may be subject to different rules. Prospective investors are urged to consult their own tax advisors regarding the application of the legislation and regulations to the notes.
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UNDERWRITING
We intend to offer the notes through the underwriters named below, for whom Barclays Capital Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Wells Fargo Securities, LLC are acting as representatives. Subject to the terms and conditions contained in the underwriting agreement dated the date of this prospectus supplement between the underwriters named below and us, we have
agreed to sell to the underwriters and the underwriters have severally agreed to purchase, the principal amount of the notes listed opposite their names below.
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Underwriters |
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Principal Amount of % Senior Notes due
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Principal Amount of %
Senior Notes due |
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Principal Amount of % Senior Notes due
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Barclays Capital Inc. |
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$ |
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$ |
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$ |
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated |
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Wells Fargo Securities, LLC |
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Total |
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$ |
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$ |
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$ |
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The underwriters are offering the notes, subject to prior sale, when, as and if issued to and accepted by
them, subject to approval of legal matters by their counsel, including the validity of the notes, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers certificates and legal
opinions. The underwriters have agreed to purchase all of the notes sold pursuant to the underwriting agreement if any of the notes are purchased. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject
orders in whole or in part.
The underwriters have advised us that they propose initially to offer the notes to the public at the public
offering price on the cover page of this prospectus supplement, and may offer the notes to dealers at that price less a concession not in excess of % of the principal amount of
the notes, % of the principal amount of the
notes and % of the principal amount of the notes. The underwriters may allow, and the dealers may reallow, a discount not
in excess of % of the principal amount of the notes, % of the principal
amount of the notes and % of the principal amount of the
notes to other dealers. After the initial offering of the notes to the public, the public offering price, concession and discount may be changed.
The following table shows the underwriting discounts and commissions that we are to pay to the underwriters in connection with this offering
(expressed as a percentage of the principal amount of the notes).
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Paid by Williams Partners L.P. |
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Per note |
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Per note |
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Per note |
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% |
The expenses of the offering, not including the underwriting discounts and commissions, are estimated to be
approximately $500,000 and are payable by us.
The notes are new issues of securities with no established trading market. We do not intend
to apply for listing of the notes on any securities exchange or for quotation of the notes on any automated dealer quotation system. We cannot assure the liquidity of the trading market for the notes or that an active public market for the notes
will develop. If an active public trading market for the notes does not develop, the market price and liquidity of the notes may be adversely affected.
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We have agreed to indemnify the underwriters against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
In
connection with the offering, the underwriters are permitted to engage in transactions that stabilize the market price of any series of notes. Such transactions consist of bids or purchases to peg, fix or maintain the price of the applicable series
of notes. If the underwriters create a short position in any series of notes in connection with the offering, i.e., if they sell more notes of such series than are on the cover page of this prospectus supplement, the underwriters may reduce that
short position by purchasing notes of such series in the open market. Purchases of a security to stabilize the price or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases.
Neither we nor the underwriters make any representation or prediction as to the direction or magnitude of any effect that the
transactions described above may have on the price of the notes of such series. In addition, neither we nor the underwriters make any representation that the underwriters will engage in these transactions or that these transactions, once commenced,
will not be discontinued without notice.
Relationships
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include
securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging financing and brokerage activities. Some of the underwriters and their affiliates have engaged, and
may in the future engage, in commercial banking (including as lenders to us, our affiliates and Williams), investment banking or financial advisory transactions with us, our affiliates and Williams, in the ordinary course of their business. Such
underwriters and their affiliates have received customary compensation and reimbursement of their expenses for these commercial banking, investment banking or financial advisory transactions. As described in Use of Proceeds, the net
proceeds of this offering of the notes by us will be used in part to repay outstanding indebtedness under our commercial paper program. Because the underwriters or their affiliates may hold our commercial paper notes, one or more of the underwriters
or their affiliates may receive a portion of the net proceeds of this offering. In addition, certain of the underwriters or their respective affiliates are agents, arrangers, bookrunners or lenders under our Credit Facility. To the extent the net
proceeds of this offering are used to pay down the outstanding balance under our Credit Facility, the underwriters or their affiliates will receive a portion of the net proceeds of this offering.
In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array
of investments, including serving as counterparties to certain derivative and hedging arrangements, and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own
account and for the accounts of their customers, and such investment and securities activities may involve our securities and/or instruments or those of our affiliates. Certain of the underwriters or their affiliates that have a lending relationship
with us routinely hedge their credit exposure to us consistent with their customary risk management policies. Typically, such underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the
purchase of credit default swaps or the creation of short positions in our securities, including potentially the notes offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the notes offered
hereby. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients
that they acquire, long and/or short positions in such securities and instruments.
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LEGAL MATTERS
Certain matters with respect to the issuance and sale of the notes offered hereby will be passed upon for us by Gibson, Dunn &
Crutcher LLP. Certain legal matters in connection with the notes offered hereby will be passed upon for the underwriters by Latham & Watkins LLP, New York, New York.
EXPERTS
The supplemental consolidated financial statements of Williams Partners L.P. appearing in Williams Partners L.P.s Current
Report on Form 8-K dated February 25, 2015 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon, included therein, and incorporated herein by reference which is based in
part on the report of Deloitte & Touche LLP, independent registered public accounting firm. Such supplemental consolidated financial statements are incorporated herein by reference in reliance upon such reports given on the authority of
such firms as experts in accounting and auditing.
The consolidated financial statements of Williams Partners L.P. as of December 31,
2014 and for the year then ended, and the effectiveness of Williams Partners L.P.s internal control over financial reporting as of December 31, 2014 appearing in Williams Partners L.P.s Annual Report on Form 10-K for
the year ended December 31, 2014 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon, included therein, and incorporated herein by reference. Such consolidated
financial statements and Williams Partners L.P.s managements assessment of the effectiveness of internal control over financial reporting as of December 31, 2014 are incorporated herein by reference in reliance upon such
reports given on the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of
Williams Partners L.P. as of December 31, 2013 and for each of the two years in the period ended December 31, 2013 incorporated in this prospectus supplement and the accompanying base prospectus by reference to the Williams Partners L.P.
Annual Report on Form 10-K for the year ended December 31, 2014 have been so incorporated in reliance upon the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as
experts in auditing and accounting.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement with the SEC under the Securities Act that registers the offer and sale of the notes covered by this
prospectus supplement. The registration statement, including the attached exhibits, contains additional relevant information about us. In addition, we file annual, quarterly and other reports and other information with the SEC. These reports
include, among other disclosures, detailed information on any transactions we may engage in with our general partner and its affiliates, and on fees, commissions, compensation and other benefits paid or accrued to our general partner and its
affiliates. You may read and copy any document we file with the SEC at the SECs Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of
the SECs Public Reference Room. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. Our SEC filings are available on the
SECs website at http://www.sec.gov. Unless specifically listed below, the information contained on the SEC website is not intended to be incorporated by reference in this prospectus supplement and you should not consider that information a
part of this prospectus supplement. You also can obtain information about us at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
INCORPORATION BY REFERENCE
The SEC allows us to incorporate by reference the information we have filed with the SEC. This means that we can disclose
important information to you without actually including the specific information in this prospectus supplement or the accompanying base prospectus by referring you to other documents filed separately with the SEC. The information incorporated by
reference is an important part of this prospectus supplement and the accompanying base prospectus. Information that we later provide to the SEC, and which is deemed to be filed with the SEC, will automatically update information
previously filed with the SEC, and may replace information in this prospectus supplement and the accompanying base prospectus and information previously filed with the SEC.
We incorporate by reference in this prospectus supplement the following documents that we have previously filed with the SEC:
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Our Annual Report on Form 10-K (File No. 1-34831) for the year ended December 31, 2014, as filed with the SEC on February 25, 2015, provided, however, that Items 7 and 7A of the Form 10-K and Exhibit 12
thereto, which were subsequently filed in our Current Report on Form 8-K filed on February 25, 2015, and the rows labeled Adjusted EBITDA and Distributable cash flow in Item 6 of the Form 10-K, are not incorporated
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Our Current Reports on Form 8-K (File No. 1-34831) filed with the SEC on February 3, 2015 and February 25, 2015 (excluding for all such Current Reports the information, if any, furnished under
Item 7.01 thereof and corresponding information furnished under Item 9.01 or included as an exhibit thereto). |
These reports contain important information about us, our financial condition and our results of operations.
All documents that we file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus
supplement and prior to the termination of this offering will also be deemed to be incorporated herein by reference and will automatically update and supersede information in this prospectus supplement. Nothing in this prospectus supplement shall be
deemed to incorporate information furnished to, but not filed with, the SEC pursuant to Item 2.02 or Item 7.01 of Form 8-K (or corresponding information furnished under Item 9.01 or included as an exhibit).
We make available free of charge on or through our Internet website, http://investor.williams.com/williams-partners-lp, our Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K
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and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with,
or furnish it to, the SEC. Information contained on our Internet website is not part of this prospectus supplement and does not constitute a part of this prospectus supplement.
You may obtain any of the documents incorporated by reference in this prospectus supplement from the SEC through the SECs website at the
address provided above. You also may request a copy of any document incorporated by reference in this prospectus supplement (excluding any exhibits to those documents, unless the exhibit is specifically incorporated by reference in this document),
at no cost, by visiting our Internet website at http://www.investor.williams.com/williams-partners-lp, or by writing or calling us at the following address:
Investor Relations
Williams
Partners L.P.
One Williams Center, Suite 5000
Tulsa, Oklahoma 74172-0172
Telephone: (918) 573-2078
You should rely only on the information contained in or incorporated by reference into this prospectus supplement, the accompanying base
prospectus and any free writing prospectus relating to this offering of the notes. Neither we nor the underwriters have authorized anyone to provide you with additional or different information. If anyone provides you with additional, different or
inconsistent information, you should not rely on it. We are offering to sell the notes, and seeking offers to buy the notes, only in jurisdictions where offers and sales are permitted. You should not assume that the information contained in this
prospectus supplement, the accompanying base prospectus or any free writing prospectus is accurate as of any date other than the dates shown in these documents or that any information we have incorporated by reference herein is accurate as of any
date other than the date of the document incorporated by reference. Our business, financial condition, results of operations and prospects may have changed since such dates.
Williams is subject to the information requirements of the Exchange Act, and in accordance therewith files reports and other information with
the SEC. You may read Williams filings on the SECs web site and at the SECs Public Reference Room described above. Williams common stock trades on the NYSE under the symbol WMB. Reports that Williams files with
the NYSE may be inspected at the offices of the NYSE described above. Documents that Williams files with the SEC and the NYSE are not incorporated into, and are not considered a part of, this prospectus supplement or the accompanying base
prospectus.
S-56
PROSPECTUS
WILLIAMS PARTNERS L.P.
COMMON UNITS REPRESENTING LIMITED PARTNER INTERESTS
DEBT SECURITIES
We or selling
securityholders may from time to time offer and sell the common units representing limited partner interests in Williams Partners L.P. described in this prospectus. We may from time to time offer and sell the debt securities of Williams Partners
L.P. described in this prospectus in one or more classes or series. We or selling securityholders may offer and sell these securities at prices and on terms to be determined by market conditions at the time of our offerings. This prospectus
describes some of the general terms that may apply to these securities and the general manner in which they may be offered. Each time we or selling securityholders sell securities pursuant to this prospectus, we will provide a supplement to this
prospectus that contains specific information about the offering and the specific terms of the securities offered. You should read this prospectus and the applicable prospectus supplement and the documents incorporated by reference herein and
therein carefully before you invest in our securities. You should also read the documents we have referred you to in the Where You Can Find More Information section of this prospectus for information about us, including our financial
statements.
Our common units are listed for trading on the New York Stock Exchange under the ticker symbol WPZ. We will
provide information in the applicable prospectus supplement with respect to the trading market, if any, for any debt securities we may offer.
We or selling securityholders will sell the securities being offered hereby through underwriters on a firm commitment basis.
This prospectus may not be used to consummate sales of our securities unless it is accompanied by a prospectus supplement relating to such
securities.
You should rely only on the information incorporated by reference or provided in this prospectus or the applicable prospectus
supplement. We have not authorized anyone else to provide you with different information or to make additional representations. We are not making an offer to sell or soliciting an offer to buy any securities other than the securities described in
this prospectus and the applicable prospectus supplement. We are not making an offer to sell or soliciting an offer to buy any of these securities in any state or jurisdiction where the offer is not permitted or in any circumstances in which such
offer or solicitation is unlawful. You should not assume that the information contained or incorporated by reference in this prospectus or the applicable prospectus supplement is accurate as of any date other than the date on the front of those
documents.
Investing in our common units and debt securities involves a high degree of risk. Limited partnerships are inherently
different from corporations. Please read the Risk Factors referred to on page 4 of this prospectus, and contained in the applicable prospectus supplement and in the documents incorporated
by reference herein and therein before you make any investment in our securities.
Neither the
Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is February 25, 2015
TABLE OF CONTENTS
1
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-3 we filed with the Securities and Exchange Commission (SEC) using a
shelf registration process. Under this shelf registration process, we or selling securityholders may, over time, offer and sell in one or more offerings in any combination, an unlimited number and amount of the common units of Williams
Partners L.P. described in this prospectus. We may also from time to time offer and sell the debt securities of Williams Partners L.P. described in this prospectus in one or more classes or series.
Each time we or selling securityholders sell common units or debt securities with this prospectus, we will describe in a prospectus
supplement, which will be delivered with this prospectus, specific information about the offering and the terms of the particular securities offered. The prospectus supplement also may add to, update, or change the information contained in this
prospectus. If there is any inconsistency between the information contained in this prospectus and any information incorporated by reference herein, on the one hand, and the information contained in the applicable prospectus supplement or
incorporated by reference therein, on the other hand, you should rely on the information in the applicable prospectus supplement or incorporated by reference therein.
Wherever references are made in this prospectus to information that will be included in a prospectus supplement, to the extent permitted by
applicable law, rules, or regulations, we may instead include such information or add, update, or change the information contained in this prospectus by means of a post-effective amendment to the registration statement of which this prospectus is a
part through filings we make with the SEC that are incorporated by reference into this prospectus or by any other method as may then be permitted under applicable law, rules, or regulations.
Statements made in this prospectus, in any prospectus supplement or in any document incorporated by reference in this prospectus or any
prospectus supplement as to the contents of any contract or other document are not necessarily complete. In each instance we refer you to the copy of the contract or other document filed as an exhibit to the registration statement of which this
prospectus is a part, or as an exhibit to the documents incorporated by reference. You may obtain copies of those documents as described in this prospectus under Where You Can Find More Information.
Neither the delivery of this prospectus nor any sale made under it implies that there has been no change in our affairs or that the
information in this prospectus is correct as of any date after the date of this prospectus. You should not assume that the information in this prospectus, including any information incorporated in this prospectus by reference, the accompanying
prospectus supplement or any free writing prospectus prepared by us, is accurate as of any date other than the date on the front of those documents. Our business, financial condition, results of operations and prospects may have changed since that
date.
You should rely only on the information contained in or incorporated by reference in this prospectus or a prospectus supplement. We
have not authorized anyone to provide you with different information. Neither we nor any selling securityholder named in a prospectus supplement is making an offer to sell securities in any jurisdiction where the offer or sale of such securities is
not permitted.
Unless the context clearly indicates otherwise, references in this prospectus to we, our,
us, the Company or like terms refer to Williams Partners L.P. and its subsidiaries. Unless the context clearly indicates otherwise, references to we, our, us or like terms include the
operations of entities in which we do not own a 100 percent ownership interest, including principally Discovery Producer Services LLC, Gulfstream Natural Gas System, L.L.C., Laurel Mountain Midstream, LLC, Aux Sable Liquid Products L.P., Caiman
Energy II, LLC, Overland Pass Pipeline Company LLC and Utica East Ohio Midstream LLC, in which we own interests accounted for as equity investments that are not consolidated in our financial statements. When we refer to our equity investees by name,
we are referring exclusively to their businesses and operations. Unless the context clearly indicates otherwise, references in this prospectus to Williams refer to The Williams Companies, Inc.
1
ABOUT WILLIAMS PARTNERS L.P.
We are a publicly traded Delaware limited partnership formed in 2010. We are an energy infrastructure master limited partnership focused on
connecting North Americas significant hydrocarbon resource plays to growing markets for natural gas, natural gas liquids and olefins through our gas pipeline and midstream businesses.
Our principal executive offices are located at One Williams Center, Tulsa, Oklahoma 74172-0172, and our phone number is 918-573-2000.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), and file
reports and other information with the SEC. These reports include, among other disclosures, detailed information on any transactions we may engage in with our general partner and its affiliates, and on fees, commissions, compensation and other
benefits paid or accrued to our general partner and its affiliates. The public may read and copy any reports or other information that we file with the SEC at the SECs public reference room, 100 F Street NE, Washington, D.C. 20549-2521. The
public may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers
that file electronically with the SEC, including us. The address of the site is http://www.sec.gov. Unless specifically listed under Incorporation by Reference below, the information contained on the SEC website is not intended to be
incorporated by reference in this prospectus and you should not consider that information a part of this prospectus.
Our SEC filings can
also be inspected and copied at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. We will also provide to each person, including any beneficial owners, to whom this prospectus is delivered, at no cost upon
written or oral request, a copy of any or all documents incorporated by reference into this prospectus but not delivered with this prospectus and the applicable prospectus supplement, including exhibits that are specifically incorporated by
reference into such documents. You may request copies of these filings from us by mail at the following address, or by telephone at the following telephone number:
Williams Partners L.P.
Investor Relations
One
Williams Center
Tulsa, Oklahoma 74172-0172
Telephone Number: (800) 600-3782
You may also inspect our SEC reports on our website at http://investor.williams.com/williams-partners-lp. We make available free of charge on
or through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC. Information contained on our website is not intended to be incorporated by reference in this prospectus, and you should not consider that information a part of
this prospectus.
INCORPORATION BY REFERENCE
We are incorporating by reference into this prospectus information that has been previously filed with the SEC, which means we are disclosing
important information to you without actually including the specific
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information in this prospectus by referring you to other documents filed separately with the SEC. The information incorporated by reference is considered part of this prospectus, unless we update
or supersede that information by the information contained in this prospectus or the information we file subsequently that is incorporated by reference into this prospectus or the applicable prospectus supplement. Information that we later provide
to the SEC, and which is deemed to be filed with the SEC, automatically will update information previously filed with the SEC, and may replace information in this prospectus.
We are incorporating by reference in this prospectus the following documents that have been previously filed with the SEC:
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Our Annual Report on Form 10-K (File No. 1-34831) for the year ended December 31, 2014, as filed with the SEC on February 25, 2015, provided, however, that Items 7 and 7A of the Form 10-K and Exhibit 12
thereto, which were subsequently filed in our Current Report on Form 8-K filed on February 25, 2015, are not incorporated herein; |
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Our Current Reports on Form 8-K (File No. 1-34831) filed with the SEC on February 3, 2015 and February 25, 2015 (excluding for all such Current Reports the information, if any, furnished under
Item 7.01 thereof and corresponding information furnished under Item 9.01 or included as an exhibit thereto); and |
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The description of our common units contained in our Registration Statement on Form 8-A (File No. 1-34831) as filed with the SEC on July 26, 2010 and any subsequent
amendment thereto filed for the purpose of updating such description. |
These reports contain important information about us,
our financial condition and our results of operations.
All documents that we file with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this prospectus and prior to the termination of all offerings made pursuant to this prospectus and the applicable prospectus supplement also will be deemed to be incorporated herein by reference. Nothing in this
prospectus shall be deemed to incorporate information furnished to but not filed with the SEC, including pursuant to Item 2.02 or Item 7.01 of Form 8-K (or corresponding information furnished under Item 9.01 or included as an
exhibit).
3
RISK FACTORS
Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we
are subject are similar to those that would be faced by a corporation engaged in a similar business. Before you invest in our securities, you should carefully consider those risk factors included in our most-recent Annual Report on Form 10-K, as
supplemented by our Quarterly Reports on Form 10-Q, that are incorporated herein by reference and those that may be included in the applicable prospectus supplement, together with all of the other information included in this prospectus, the
applicable prospectus supplement and the documents we incorporate by reference in evaluating an investment in our securities.
If
any of the risks discussed in the foregoing documents were actually to occur, our business, financial condition, results of operations or cash flow could be materially adversely affected. In that case, our ability to make distributions to holders of
our common units or pay interest on, or the principal of, any debt securities may be reduced, the trading price of our securities could decline and you could lose all or part of your investment.
4
FORWARD-LOOKING STATEMENTS
The information contained or incorporated by reference in this prospectus includes forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Exchange Act. These forward-looking statements relate to anticipated financial performance, managements plans and
objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters.
All
statements, other than statements of historical facts, included in this prospectus that address activities, events or developments that we expect, believe or anticipate will exist or may occur in the future, are forward-looking statements.
Forward-looking statements can be identified by various forms of words such as anticipates, believes, seeks, could, may, should, continues, estimates,
expects, forecasts, intends, might, goals, objectives, targets, planned, potential, projects, scheduled,
will, assumes, guidance, outlook, in service date, or other similar expressions. These forward-looking statements, as of the day they were made, were based on managements beliefs and
assumptions and on information available to management and include, among others, statements regarding:
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the levels of cash distributions to unitholders; |
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our and Williams future credit ratings; |
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amounts and nature of future capital expenditures; |
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expansion and growth of our business and operations; |
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financial condition and liquidity; |
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cash flow from operations or results of operations; |
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seasonality of certain business components; |
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natural gas, natural gas liquids and olefins prices, supply and demand; and |
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demand for our services. |
Forward-looking statements are based on numerous assumptions,
uncertainties, and risks that could cause future events or results to be materially different from those stated or implied in this prospectus or in the documents incorporated herein by reference. Limited partner units are inherently different from
the capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. You should carefully consider the risk factors listed below and
described in more detail in the documents that are incorporated by reference herein, including Item 1A of Part I, Risk Factors, of our most-recent annual report on Form 10-K, as supplemented by our quarterly reports on Form 10-Q, in
addition to the other information in this prospectus. If any of such risks were actually to occur, our business, results of operations and financial condition could be materially adversely affected. In that case, we might not be able to make
payments of principle and interest on our debt securities or pay distributions on our common units, and the trading price of our debt securities and common units could decline and holders could lose all or part of their investment. Many of the
factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:
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whether we have sufficient cash from operations to enable us to pay current and expected levels of cash distributions, if any, following establishment of cash reserves and payment of fees and expenses, including
payments to our general partner; |
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availability of supplies, market demand, and volatility of prices; |
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inflation, interest rates and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers); |
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the strength and financial resources of our competitors and the effects of competition; |
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whether we are able to successfully identify, evaluate and execute investment opportunities; |
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the ability to acquire new businesses and assets and successfully integrate those operations and assets into our existing businesses, as well as successfully expand our facilities; |
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development of alternative energy sources; |
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the impact of operational and development hazards and unforeseen interruptions; |
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our ability to recover expected insurance proceeds related to the Geismar plant; |
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costs of, changes in, or the results of laws, government regulations (including safety and environmental regulations), environmental liabilities, litigation and rate proceedings; |
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our allocated costs for defined benefit pension plans and other postretirement benefit plans sponsored by our affiliates; |
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changes in maintenance and construction costs; |
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changes in the current geopolitical situation; |
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our exposure to the credit risks of our customers and counterparties; |
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risks related to financing, including restrictions stemming from our debt agreements, future changes in our credit ratings and the availability and cost of capital; |
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the amount of cash distributions from and capital requirements of our investments and joint ventures in which we participate; |
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risks associated with weather and natural phenomena, including climate conditions; |
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acts of terrorism, including cybersecurity threats and related disruptions; and |
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additional risks described in our filings with the SEC. |
Given the uncertainties and risk
factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to
update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.
In addition to causing our actual results to differ, the factors listed above and described in the documents incorporated by reference herein
may cause our intentions to change from those statements of intention set forth in or incorporated into this prospectus. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without
notice, based upon changes in such factors, our assumptions, or otherwise.
Because forward-looking statements involve risks and
uncertainties, we caution that there are important factors, in addition to those listed above and described in the documents incorporated by reference herein, that may cause actual results to differ materially from those contained in the
forward-looking statements. Additional information about risks and uncertainties that could cause actual results to differ materially from forward-looking statements is contained in the documents incorporated by reference herein, and may be included
in the applicable prospectus supplement. The forward-looking statements included in this prospectus, the applicable prospectus supplement and the documents incorporated herein and therein by reference are only made as of the date of such document
and, except as required by securities laws, we undertake no obligation to publicly update forward-looking statements to reflect subsequent events or circumstances.
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USE OF PROCEEDS
Unless we specify otherwise in a prospectus supplement, we intend to use the net proceeds (after the payment of any offering expenses and
underwriting discounts and commissions) from any sale of securities described in this prospectus for general partnership purposes, which may include, among other things:
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paying or refinancing all or a portion of our indebtedness outstanding at the time; and |
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funding working capital, capital expenditures or acquisitions (which may consist of acquisitions of discrete assets or businesses). |
The actual application of proceeds from the sale of any particular offering of securities using this prospectus will be described in the
applicable prospectus supplement relating to such offering. The precise amount and timing of the application of these proceeds will depend upon our funding requirements and the availability and cost of other funds.
Unless otherwise specified in the applicable prospectus supplement, we will not receive any proceeds from the sale of securities by selling
securityholders.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges for Williams Partners L.P. for each of the periods indicated is as follows:
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Years Ended December 31, |
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Ratio of Earnings to Fixed Charges |
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2.87 |
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3.27 |
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3.85 |
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4.70 |
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4.09 |
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For purposes of computing the ratio of earnings to fixed charges, earnings is the aggregate of the
following items: pre-tax income or loss before income or loss from equity investees; plus fixed charges; plus distributed income of equity investees; and less capitalized interest. The term fixed charges means the sum of the following:
interest accrued and an estimate of the interest within rental expense.
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DESCRIPTION OF THE DEBT SECURITIES
The following sets forth certain general terms and provisions of the base indenture under which the debt securities are to be issued, unless
otherwise specified in a prospectus supplement. The particular terms of the debt securities to be sold will be set forth in a prospectus supplement relating to such debt securities.
As used in this description, the words, we, us and our refer to Williams Partners L.P. and not to any of
its subsidiaries or affiliates.
The debt securities will represent our unsecured general obligations, unless otherwise provided in the
applicable prospectus supplement. As indicated in the applicable prospectus supplement, the debt securities will either be senior debt securities or subordinated debt securities and, if applicable, will be the general obligations of any of our
subsidiaries that guarantee such debt securities. Unless otherwise specified in the applicable prospectus supplement, the debt securities will be issued under an indenture, dated as of November 9, 2010 (the indenture), between the
Company and The Bank of New York Mellon Trust Company, N.A., as trustee (the trustee), as amended and supplemented from time to time. The terms of each series of securities issued pursuant to the indenture will be established by a
supplemental indenture or officers certificate relating to such series.
The following summary of certain provisions of the
indenture does not purport to be complete and is subject to, and qualified in its entirety by, reference to all the provisions of the indenture, including the definitions therein of certain terms. Wherever particular sections or defined terms of the
indenture are referred to, it is intended that such sections or defined terms shall be incorporated herein by reference. We urge you to read the indenture filed as an exhibit to the registration statement of which this prospectus is a part because
the indenture, as amended or supplemented from time to time, and not this description, governs your rights as a holder of debt securities.
General
The indenture does not limit the amount of debt securities that may be issued thereunder. The applicable prospectus supplement with
respect to any debt securities will set forth the terms of the debt securities offered pursuant thereto, including some or all of the following:
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the title and series of such debt securities; |
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any limit upon the aggregate principal amount of such debt securities of such series; |
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whether such debt securities will be in global or other form; |
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the date or dates on which principal and any premium on such debt securities is payable, or the method or methods by which such date(s) will be determined; |
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the interest rate or rates (or method by which such rate will be determined), if any; |
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the dates on which any such interest will be payable and the method of payment; |
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whether and under what circumstances any additional amounts are payable with respect to such debt securities; |
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the notice, if any, to holders of such debt securities regarding the determination of interest on a floating rate debt security; |
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the basis upon which interest on such debt securities shall be calculated, if other than that of a 360-day year of twelve 30-day months; |
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if in addition to or other than the Borough of Manhattan, City of New York, the place or places where the principal of and premium, interest or additional amounts, if any, on such debt securities will be payable;
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the terms and conditions upon which such debt securities may be redeemed at our option; |
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any redemption or sinking fund provisions, or the terms of any repurchase at the option of the holder of the debt securities; |
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the denominations of such debt securities, if other than $2,000 and multiples of $1,000 in excess thereof; |
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any rights of the holders of such debt securities to convert the debt securities into other securities or property; |
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the terms, if any, on which payment of principal or any premium, interest or additional amounts on such debt securities will be payable in a currency other than U.S. dollars; |
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the terms, if any, by which the amount of payments of principal or any premium, interest or additional amounts on such debt securities may be determined by reference to an index, formula, financial or economic measure
or other methods; |
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if other than the principal amount thereof, the portion of the principal amount of such debt securities that will be payable upon declaration of acceleration of the maturity thereof; |
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any deletions from, modifications of or additions to the events of default or covenants described herein; |
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whether such debt securities will be subject to defeasance or covenant defeasance; |
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the terms, if any, upon which such debt securities are to be issuable upon the exercise of warrants; |
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any trustees other than The Bank of New York Mellon Trust Company, N.A., and any authenticating or paying agents, transfer agents or registrars or any other agents with respect to such debt securities;
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the terms, if any, on which such debt securities will be subordinate to other debt of ours; |
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whether such debt securities will be guaranteed and the terms thereof; |
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whether such debt securities will be secured by collateral and the terms of such security; and |
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any other specific terms of such debt securities and any other deletions from or additions to or modifications of the indenture with respect to such debt securities. |
This description of debt securities will be deemed modified, amended or supplemented by any description of any series of debt securities set
forth in a prospectus supplement related to that series.
The prospectus supplement may also describe any material United States federal
income tax consequences or other special considerations regarding the applicable series of debt securities, including those relating to:
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debt securities with respect to which payments of principal, premium or interest are determined with reference to an index or formula, including changes in prices of particular securities, currencies or commodities;
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debt securities with respect to which principal, premium or interest is payable in a foreign or composite currency; |
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debt securities that are issued at a discount below their stated principal amount, bearing no interest or interest at a rate that at the time of issuance is below market rates; and |
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variable rate debt securities that are exchangeable for fixed rate debt securities. |
Debt
securities may be presented for exchange, conversion or transfer in the manner, at the places and subject to the restrictions set forth in the indenture, as amended or supplemented, and the applicable prospectus supplement. Such services will be
provided without charge, other than any tax or other governmental charge payable in connection therewith, but subject to the limitations provided in the indenture, as amended or supplemented.
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The indenture does not contain any covenant or other specific provision affording protection to
holders of the debt securities in the event of a highly leveraged transaction or a change in control of the Company, except to the limited extent described below under Consolidation, Merger and Sale of Assets or as provided in any
supplemental indenture.
Guarantees
One or more of our subsidiaries may become a guarantor of a particular series of debt securities if and to the extent provided in a
supplemental indenture or officers certificate relating to such series of debt securities and described in the applicable prospectus supplement. Each of our subsidiaries that becomes a guarantor of the debt securities of such series, and any
of our subsidiaries that is a successor thereto, will fully, irrevocably, unconditionally and absolutely guarantee the due and punctual payment of the principal of, and premium, if any, and interest on such debt securities, and all other amounts due
and payable under the indenture and such debt securities by us to the trustee and the holders of such debt securities. The terms of any such guarantees may provide for their release upon the occurrence of certain events, such as the debt securities
of a series subject to such guarantees achieving an investment grade rating.
Modification and Waiver
The indenture provides we and the trustee may enter into one or more supplemental indentures for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the indenture or of modifying in any manner the rights of the holders of debt securities of a series under the indenture or the debt securities of such series, with the consent of the
holders of a majority (or such greater amount as is provided for with respect to such series) in principal amount of the outstanding debt securities of such series, voting as a single class; provided that no such supplemental indenture may, without
the consent of the holder of each such debt security affected thereby, among other things:
(a) change the stated maturity
of the principal of, or any premium, interest or additional amounts on, such debt securities, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest or any additional amounts thereon, or reduce any
premium payable on redemption thereof or otherwise, or reduce the amount of the principal of debt securities issued with original issue discount that would be due and payable upon an acceleration of the maturity thereof or the amount thereof
provable in bankruptcy, or change the redemption provisions or adversely affect the right of repayment at the option of the holder, or change the place of payment or currency in which the principal of, or any premium, interest or additional amounts
with respect to, any debt security is payable, or impair or affect the right of any holder of debt securities to institute suit for the payment after such payment is due;
(b) reduce the percentage of outstanding debt securities of any series, the consent of the holders of which is required for any
such supplemental indenture, or the consent of whose holders is required for any waiver or reduce the quorum required for voting;
(c) modify any of the provisions of the sections of the indenture relating to supplemental indentures with the consent of the
holders or waivers of past defaults or certain covenants, except to increase any percentage set forth therein or to provide that certain other provisions of the indenture cannot be modified or waived without the consent of each holder affected
thereby; or
(d) make any change that adversely affects the right to convert or exchange any security into or for common
units or other securities, cash or other property in accordance with the terms of the applicable debt security.
The indenture provides
that a supplemental indenture that changes or eliminates any covenant or other provision of the indenture that has expressly been included solely for the benefit of one or more particular series of debt securities, or that modifies the rights of the
holders of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under the indenture of the holders of debt securities of any other series.
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The indenture provides that we and the applicable trustee may, without the consent of the holders
of any series of debt securities issued thereunder, enter into one or more supplemental indentures for any of the following purposes:
(a) to evidence the succession of another person and the assumption by any such successor of our covenants in the indenture and
in the debt securities issued thereunder;
(b) to add to our covenants or to surrender any right or power conferred on us
pursuant to the indenture;
(c) to establish the form and terms of debt securities issued thereunder;
(d) to evidence and provide for a successor trustee under the indenture with respect to one or more series of debt securities
issued thereunder or to provide for or facilitate the administration of the trusts under the indenture by more than one trustee;
(e) to cure any ambiguity, to correct or supplement any provision in the indenture that may be defective or inconsistent with
any other provision of the indenture or to make any other provisions with respect to matters or questions arising under such indenture; provided that no such action pursuant to this clause (e) shall adversely affect the interests of the holders
of any series of debt securities issued thereunder in any material respect;
(f) to add to, delete from or revise the
conditions, limitations and restrictions on the authorized amount, terms or purposes of issue, authentication and delivery of securities under the indenture;
(g) to add any additional events of default with respect to all or any series of debt securities;
(h) to supplement any of the provisions of the indenture as may be necessary to permit or facilitate the defeasance and
discharge of any series of debt securities, provided that such action does not adversely affect the interests of any holder of an outstanding debt security of such series or any other security in any material respect;
(i) to make provisions with respect to the conversion or exchange rights of holders of debt securities of any series;
(j) to pledge to the trustee as security for the debt securities of any series any property or assets;
(k) to add guarantees in respect of the debt securities of one or more series;
(l) to change or eliminate any of the provisions of the indenture, provided that any such change or elimination will become
effective only when there is no security of any series outstanding created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision;
(m) to provide for certificated securities in addition to or in place of global securities;
(n) to qualify the indenture under the Trust Indenture Act of 1939, as amended;
(o) with respect to the debt securities of any series, to conform the text of the indenture or the debt securities of such
series to any provision of the description thereof in our offering memorandum or prospectus relating to the initial offering of such debt securities, to the extent that such provision, in our good faith judgment, was intended to be a verbatim
recitation of a provision of the indenture or such securities; or
(p) to make any other change that does not adversely
affect the rights of holders of any series of debt securities issued thereunder in any material respect.
Events of Default
Unless otherwise provided in the supplemental indenture or officers certificate establishing the terms of any series of debt securities
and the prospectus supplement relating to such series, the following will be events of
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default (each, and Event of Default) under the indenture with respect to each series of debt securities issued thereunder:
(a) default for 30 days in the payment when due of interest on, or any additional amount in respect of, any such series of debt
securities;
(b) default in the payment of principal or any premium on the debt securities of such series when due;
(c) default in the payment, if any, of any sinking fund installment when and as due by the terms of any debt security of such
series, subject to any cure period that may be specified in any debt security of such series;
(d) failure by us for 60
days after written notice is given to us by the applicable trustee upon instruction from holders of at least 25% in principal amount of the then outstanding debt securities of such series to comply with any of the other agreements in the indenture
and stating that such notice is a Notice of Default under the indenture; provided, that if such failure cannot be remedied within such 60-day period, such period shall be automatically extended by another 60 days so long as (i) such
failure is subject to cure and (ii) we are using commercially reasonable efforts to cure such failure; and provided, further, that a failure to comply with any such other agreement in the indenture that results from a change in generally
accepted accounting principles shall not be deemed to be an event of default;
(e) certain events of bankruptcy, insolvency
or reorganization of us; and
(f) any other event of default provided in a supplemental indenture or officers
certificate with respect to a particular series of debt securities, provided that any event of default that results from a change in generally accepted accounting principles shall not be deemed to be an event of default.
In case an event of default specified in clause (a) or (b) above shall occur and be continuing with respect to any series of debt
securities, holders of at least 25%, and in case an event of default specified in any clause other than clause (a), (b) or (e) above shall occur and be continuing with respect to any series of debt securities, holders of at least a
majority, in aggregate principal amount of the debt securities of such series then outstanding may declare the principal (or, in the case of discounted debt securities, the amount specified in the terms thereof) of such series to be due and payable.
If an event of default described in clause (e) above shall occur and be continuing then the principal amount (or, in the case of discounted debt securities, the amount specified in the terms thereof) of all the debt securities outstanding shall
be and become due and payable immediately, without notice or other action by any holder or the applicable trustee, to the full extent permitted by law. Any past or existing default or event of default with respect to particular series of debt
securities under such indenture may be waived by the holders of a majority in aggregate principal amount of the outstanding debt securities of such series, except in each case a continuing default (1) in the payment of the principal of, any
premium or interest on, or any additional amounts with respect to, any debt security of such series, or (2) in respect of a covenant or provision which cannot be modified or amended without the consent of each holder affected thereby.
The indenture provides that the applicable trustee may withhold notice to the holders of any default with respect to any series of debt
securities (except in payment of principal of or interest or premium on, or additional amounts or a sinking fund payment in respect of, the debt securities) if the applicable trustee considers it in the interest of holders to do so.
The indenture contains a provision entitling the applicable trustee to be indemnified by the holders before proceeding to exercise any trust
or power under the indenture at the request of such holders. The indenture provides that the holders of a majority in aggregate principal amount of the then outstanding debt securities of any series may direct the time, method and place of
conducting any proceedings for any remedy available to the applicable trustee or of exercising any trust or power conferred upon the applicable trustee with respect to the debt securities of such series; provided, however, that the applicable
trustee may decline to follow any such direction if, among other reasons, the applicable trustee determines that the actions or proceedings as directed would be unduly prejudicial to the holders of the debt securities of such series not joining in
such direction. The
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right of a holder to institute a proceeding with respect to a series of debt securities will be subject to certain conditions precedent including, without limitation, that in case of an event of
default specified in clause (a), (b) or (e) of the first paragraph above under Events of Default, holders of at least 25%, or in case of an event of default other than specified in clause (a), (b) or (e) of the
first paragraph above under Events of Default, holders of at least a majority, in aggregate principal amount of the debt securities of such series then outstanding make a written request upon the applicable trustee to exercise its
powers under such indenture, indemnify the applicable trustee and afford the applicable trustee reasonable opportunity to act. Notwithstanding the foregoing, the holder has an absolute right to receipt of the principal of, premium, if any, and
interest on and additional amounts with respect to the debt securities when due and to institute suit for the enforcement thereof.
Certain Covenants
Merger, Consolidation or Sale of Assets
The indenture provides that we may not directly or indirectly consolidate with or merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of our assets and properties and the assets and properties of our subsidiaries (taken as a whole) in one or more related transactions to another Person, unless:
(1) either: (a) we are the survivor; or (b) the Person formed by or surviving any such consolidation or merger (if
other than us) or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made is a Person formed, organized or existing under the laws of the United States, any state of the United States or the District of
Columbia;
(2) the Person formed by or surviving any such consolidation or merger (if other than us) or the Person to which
such sale, assignment, transfer, lease, conveyance or other disposition has been made expressly assumes by supplemental indenture, in form reasonably satisfactory to the trustee, executed by the successor person and delivered to the trustee, the due
and punctual payment of the principal of and any premium and interest on the debt securities and the performance of all of our obligations under the indenture and the debt securities;
(3) we or the Person formed by or surviving any such merger will deliver to the trustee an officers certificate and an
opinion of counsel, each stating that such consolidation, merger, sale, assignment, transfer, ease, conveyance or other disposition and such supplemental indenture (if any) comply with the indenture and that all conditions precedent in the indenture
relating to such transaction have been complied with; and
(4) immediately after giving effect to such transaction, no
Event of Default or event which, after notice or lapse of time, or both, would become an Event of Default, shall have occurred and be continuing.
Upon any consolidation by us with or our merger into any other Person or Persons where we are not the survivor or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of our properties and assets and the properties and assets of our subsidiaries (taken as a whole) to any Person or Persons in accordance herewith, the successor Person
formed by such consolidation or into which we are merged or to which such sale, assignment, transfer, lease, conveyance or other disposition is made shall succeed to, and be substituted for, and may exercise every right and power of, us under the
indenture with the same effect as if such successor Person had been named as the Company therein; and thereafter, except in the case of a lease, the predecessor Person shall be released from all obligations and covenants under the indenture and the
debt securities.
As used above, Person means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, limited liability company or government or any agency or political subdivision thereof.
Although there is a limited body of case law interpreting the phrase substantially all, there is no precise established definition
of the phrase under applicable law. Accordingly, in certain circumstances there may be a
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degree of uncertainty as to whether a particular transaction would involve all or substantially all of the properties or assets of a Person.
Payment of Principal, any Premium, Interest or Additional Amounts.
The indenture provides that we will duly and punctually pay the principal of, and premium and interest on or any additional amounts payable
with respect to, any debt securities of any series in accordance with their terms.
Maintenance of Office or Agency.
The indenture provides that we will be required to maintain an office or agency in each place of payment for each series of debt securities for
notice and demand purposes and for the purposes of presenting or surrendering debt securities for payment, registration of transfer or exchange.
Reports.
The indenture provides
that we will:
(1) file with the trustee, within 30 days after we have filed the same with the SEC, unless such reports are
available on the SECs EDGAR filing system (or any successor thereto), copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by
rules and regulations prescribe) which we may be required to file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if we are not required to file information, documents or reports pursuant to either of said
Sections, then we shall file with the trustee and the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such of the supplementary and periodic information, documents, and reports which may be required pursuant to
Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;
(2) file with the trustee and the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such
additional information, documents and reports with respect to compliance by us with the conditions and covenants of the indenture as may be required from time to time by such rules and regulations; and
(3) transmit within 30 days after the filing thereof with the trustee, in the manner and to the extent provided in
Section 313(c) of the Trust Indenture Act, such summaries of any information, documents and reports required to be filed by us pursuant to clauses (1) and (2) of this paragraph as may be required by rules and regulations prescribed
from time to time by the SEC.
Additional Covenants.
Any additional covenants with respect to any series of debt securities will be set forth in the supplemental indenture or officers
certificate and prospectus supplement relating thereto.
Conversion Rights
The terms and conditions, if any, upon which the debt securities of any series are convertible into common units or other securities will be
set forth in the applicable supplemental indenture or officers certificate and prospectus supplement relating thereto. Such terms will include the conversion price (or manner of calculation thereof), the conversion period, provisions as to
whether conversion will be at our option or the option of the holders, the events requiring an adjustment of the conversion price, provisions affecting conversion in the event of redemption of such debt securities and any restrictions on conversion.
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Redemption; Repurchase at the Option of the Holder; Sinking Fund
The terms and conditions, if any, upon which (a) the debt securities of any series are redeemable at our option, (b) the holder of
debt securities of any series may cause us to repurchase such debt securities or (c) the debt securities of any series are subject to any sinking fund will be set forth in the applicable supplemental indenture or officers certificate and
prospectus supplement relating thereto.
Repurchases on the Open Market
We or any affiliate of ours may at any time or from time to time repurchase any debt security in the open market or otherwise. Such debt
securities may, at our option or the option of our relevant affiliate, be held, resold or surrendered to the trustee for cancellation.
Discharge,
Defeasance and Covenant Defeasance
The indenture provides, with respect to each series of debt securities issued thereunder, that we
may satisfy and discharge our obligations under the indenture with respect to debt securities of such series if:
(a) (i) all debt securities of such
series previously authenticated and delivered, with certain exceptions, have been accepted by the applicable trustee for cancellation; or
(ii) the debt securities of such series have become due and payable, or mature within one year, or all of them are to be called
for redemption within one year under arrangements satisfactory to the applicable trustee for giving the notice of redemption and we irrevocably deposit in trust with the applicable trustee, as trust funds solely for the benefit of the holders of
such debt securities, for that purpose, money or governmental obligations or a combination thereof sufficient (in the opinion of a nationally recognized independent registered public accounting firm expressed in a written certification thereof
delivered to the applicable trustee) to pay the entire indebtedness on the debt securities of such series to maturity or redemption, as the case may be;
(b) we have paid all other sums payable by us under the indenture; and
(c) we deliver to the applicable trustee an officers certificate and an opinion of counsel, in each case stating that all
conditions precedent provided for in the indenture relating to the satisfaction and discharge of the indenture with respect to the debt securities of such series have been complied with.
Notwithstanding such satisfaction and discharge, our obligations to compensate and indemnify the trustee, to pay additional amounts, if any,
in respect of debt securities in certain circumstances and to convert or exchange debt securities pursuant to the terms thereof and our obligations and the obligations of the trustee to hold funds in trust and to apply such funds pursuant to the
terms of the indenture, with respect to issuing temporary debt securities, with respect to the registration, transfer and exchange of debt securities, with respect to the replacement of mutilated, destroyed, lost or stolen debt securities and with
respect to the maintenance of an office or agency for payment, shall in each case survive such satisfaction and discharge.
Unless
inapplicable to debt securities of a series pursuant to the terms thereof, the indenture provides that
(i) we will be
deemed to have paid and will be discharged from any and all obligations in respect of the debt securities issued thereunder of any series, and the provisions of such indenture will, except as noted below, no longer be in effect with respect to the
debt securities of such series (defeasance) and (ii) (1) we may omit to comply with the covenant under Consolidation, Merger and Sale of Assets and any other additional covenants established pursuant to the
terms of such series, and such omission shall be deemed not to be an event of default under clause (d) or (f) of the first paragraph of Events of Default and (2) the occurrence of any event described in clause
(f) of the first paragraph of Events of Default shall not be deemed to be an event of default, in each case with respect to the outstanding debt securities of such series
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((1) and (2) of this clause (ii), covenant defeasance); provided that the following conditions shall have been satisfied with respect to such series:
(a) we have irrevocably deposited in trust with the applicable trustee, as trust funds solely for the benefit of the holders of
the debt securities of such series, for that purpose, money or government obligations or a combination thereof sufficient (in the opinion of a nationally recognized independent registered public accounting firm expressed in a written certification
thereof delivered to the applicable trustee) without consideration of any reinvestment to pay and discharge the principal of, premium, if any, and accrued interest and additional amounts on the outstanding debt securities of such series to maturity
or earlier redemption (irrevocably provided for under arrangements satisfactory to the applicable trustee), as the case may be;
(b) such defeasance or covenant defeasance will not result in a breach or violation of, or constitute a default under, the
indenture or any other material agreement or instrument to which we are a party or by which we are bound;
(c) no event of
default or event which with notice or lapse of time would become an event of default with respect to such debt securities of such series shall have occurred and be continuing on the date of such deposit;
(d) we shall have delivered to such trustee an opinion of counsel as described in the indenture to the effect that the holders
of the debt securities of such series will not recognize income, gain or loss for federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred;
(e) we have
delivered to the applicable trustee an officers certificate and an opinion of counsel, in each case stating that all conditions precedent provided for in the indenture relating to the defeasance contemplated have been complied with;
(f) if the debt securities are to be redeemed prior to their maturity, notice of such redemption shall have been duly given or
provision therefor satisfactory to the trustee shall have been made; and
(g) any such defeasance or covenant defeasance
shall comply with any additional or substitute terms provided for by the terms of the debt securities of such series.
Notwithstanding a
defeasance, among other obligations, our obligations with respect to the following will survive with respect to the debt securities of such series until otherwise terminated or discharged under the terms of the indenture:
(a) the rights of holders of outstanding debt securities of such series to receive payments in respect of the principal of, interest on or
premium or additional amounts, if any, payable in respect of, such debt securities when such payments are due from the trust referred in clause (a) in the preceding paragraph and any rights of such holders to convert or exchange such debt
securities for other securities or property;
(b) the issuance of temporary debt securities, the registration, transfer and exchange of
debt securities, the replacement of mutilated, destroyed, lost or stolen debt securities and the maintenance of an office or agency for payment and holding payments in trust;
(c) the rights, powers, trusts, duties and immunities of the trustee, and our obligations in connection therewith; and
(d) the defeasance or covenant defeasance provisions of the indenture.
Limitation of Liability
Our unitholders,
our general partner and its directors, officers and members will not be liable for our obligations under the debt securities, the indenture or the guarantees or for any claim based on, or in respect of,
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such obligations. By accepting a debt security, each holder of that debt security will have agreed to this provision and waived and released any such liability on the part of our unitholders, our
general partner and its directors, officers and members. This waiver and release are part of the consideration for our issuance of the debt securities. It is the view of the SEC that a waiver of liabilities under the federal securities laws is
against public policy and unenforceable.
Applicable Law
The indenture provides that the debt securities and the indenture will be governed by and construed in accordance with the laws of the State of
New York.
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DESCRIPTION OF THE COMMON UNITS
The Units
The common units represent
limited partner interests in us. The holders of common units are entitled to participate in partnership distributions and exercise the rights or privileges available to limited partners under our partnership agreement. For a description of the
relative rights and preferences of holders of common units in and to partnership distributions, please read this section and Provisions of Our Partnership Agreement Relating to Cash Distributions. For a description of the rights and
privileges of limited partners under our partnership agreement, including voting rights, please read The Partnership Agreement.
Transfer
Agent and Registrar
Duties
Computershare Trust Company, N.A. serves as registrar and transfer agent for the common units. We pay all fees charged by the transfer agent
for transfers of common units, except the following that must be paid by unitholders:
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surety bond premiums to replace lost or stolen certificates, taxes and other governmental charges; |
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special charges for services requested by a holder of a common unit; and |
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other similar fees or charges. |
There is no charge to unitholders for disbursements of our
cash distributions. We will indemnify the transfer agent against all claims and losses that may arise out of all actions of the transfer agent or its agents or subcontractors for their activities in that capacity, except for any liability due to any
gross negligence or willful misconduct of the transfer agent or its agents or subcontractors.
Resignation or Removal
The transfer agent may resign, by notice to us, or be removed by us. The resignation or removal of the transfer agent will become effective
upon our appointment of a successor transfer agent and registrar and its acceptance of the appointment. If no successor has been appointed and has accepted the appointment within 30 days after notice of the resignation or removal, our general
partner may act as the transfer agent and registrar until a successor is appointed.
Transfer of Common Units
By transfer of common units or the issuance of common units in a merger or consolidation in accordance with our partnership agreement, each
transferee of common units will be admitted as a limited partner with respect to the common units transferred when such transfer and admission is reflected in our books and records. Additionally, each transferee:
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represents that the transferee has the capacity, power and authority to enter into our partnership agreement; |
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automatically becomes bound by the terms and conditions of, and is deemed to have executed, our partnership agreement; and |
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gives the consents and approvals contained in our partnership agreement. |
Our general partner
will cause any transfers to be recorded on our books and records no less frequently than quarterly.
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We may, at our discretion, treat the nominee holder of a common unit as the absolute owner. In
that case, the beneficial holders rights are limited solely to those that it has against the nominee holder as a result of any agreement between the beneficial owner and the nominee holder.
Common units are securities and are transferable according to the laws governing transfer of securities. Until a common unit has been
transferred on our books, we and the transfer agent may treat the record holder of the unit as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations. In addition to other rights acquired upon
transfer, the transferor gives the transferee the right to become a substituted limited partner for the transferred common units.
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PROVISIONS OF OUR PARTNERSHIP AGREEMENT RELATING TO CASH
DISTRIBUTIONS
Set forth below is a summary of the significant provisions of our partnership agreement that relate to cash
distributions.
Distributions of Available Cash
General
Our
partnership agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash, as defined in the partnership agreement, to unitholders of record on the applicable record date.
Definition of Available Cash
Available cash, for any quarter, generally means all cash and cash equivalents on hand at the end of that quarter:
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less, the amount of cash reserves established by our general partner to: |
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provide for the proper conduct of our business (including reserves for future capital expenditures and for anticipated credit needs); |
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comply with applicable law, any of our debt instruments or other agreements; or |
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provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters; |
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plus, if our general partner so determines, all or a portion of cash and cash equivalents on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made
after the end of the quarter for which the determination is being made. |
Working capital borrowings are borrowings used
solely for working capital purposes or to pay distributions made pursuant to a credit facility, commercial paper facility or other similar financing arrangement, provided that when incurred it is the intent of the borrower to repay such borrowings
within twelve months from sources other than additional working capital borrowings.
Operating Surplus and Capital Surplus
General
All cash
distributed will be characterized as either operating surplus or capital surplus. Our partnership agreement requires that we distribute available cash from operating surplus differently than available cash from capital
surplus.
Definition of Operating Surplus
Operating surplus for any period generally means:
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$120 million (as described below); plus |
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all of our cash receipts after the closing of our initial public offering, excluding cash receipts from interim capital transactions, which include the following: |
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borrowings (including sales of debt securities) that are not working capital borrowings; |
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sales of equity interests; |
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sales or other dispositions of assets outside the ordinary course of business and not as part of normal retirements or replacements; and |
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capital contributions received; |
provided that cash receipts from the termination of any hedging contract
prior to the expiration of its stipulated settlement or termination date shall be included in equal quarterly installments over the remaining scheduled life of such hedging contract; plus
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cash receipts from working capital borrowings made after the end of the period but on or before the date of determination of operating surplus for the period; plus |
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cash distributions paid on equity issued (including incremental distributions on incentive distribution rights) to finance all or a portion of the construction, acquisition or improvement of a capital improvement or
replacement of a capital asset (such as equipment or facilities) in respect of the period beginning on the date that we enter into a binding obligation to commence the construction, acquisition or improvement of a capital improvement or replacement
of a capital asset and ending on the earlier to occur of the date the capital improvement or capital asset commences commercial service and the date that it is abandoned or disposed of; plus |
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cash distributions paid on equity issued (including incremental distributions on incentive distribution rights) to pay the construction period interest on debt incurred, or to pay construction period distributions on
equity issued, to finance the capital improvements or capital assets referred to above; plus |
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in connection with our merger with the entity formerly known as Williams Partners L.P. (Legacy Williams Partners), beginning with the first quarter of 2015, an amount equal to operating surplus (as defined
in the Legacy Williams Partners partnership agreement) less cumulative distributions of available cash to Legacy Williams Partners general partner and limited partners from the operating surplus (as defined in the Legacy Williams Partners
partnership agreement) of Legacy Williams Partners and its subsidiaries immediately prior to the closing of the Merger; less |
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all of our operating expenditures (as defined below) for the period beginning on the closing date of our initial public offering and ending on the last day of such period; less |
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the amount of cash reserves established by our general partner to provide funds for future operating expenditures; less |
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all working capital borrowings not repaid within twelve months after having been incurred; less |
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any loss realized on disposition of an investment capital expenditure. |
As described above,
operating surplus does not reflect actual cash on hand that is available for distribution to our unitholders and is not limited to cash generated by our operations. For example, it includes a basket of $120 million that will enable us, if we choose,
to distribute as operating surplus cash we receive in the future from non-operating sources such as asset sales, issuances of securities and long-term borrowings that would otherwise be distributed as capital surplus. In addition, the effect of
including, as described above, certain cash distributions on equity interests in operating surplus is to increase operating surplus by the amount of any such cash distributions. As a result, we may also distribute as operating surplus up to the
amount of any such cash that we receive from non-operating sources.
The proceeds of working capital borrowings increase operating surplus
and repayments of working capital borrowings are generally operating expenditures, as described below, and thus reduce operating surplus when made. However, if a working capital borrowing is not repaid during the twelve-month period following the
borrowing, it will be deemed repaid at the end of such period, thus decreasing operating surplus at such time. When such working capital borrowing is in fact repaid, it will be excluded from operating expenditures because operating surplus will have
been previously reduced by the deemed repayment.
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We define operating expenditures in the partnership agreement, and it generally means all of our
cash expenditures, including, but not limited to, taxes, reimbursement of expenses to our general partner and its affiliates, payments made in the ordinary course of business under interest rate hedge agreements or commodity hedge contracts
(provided that (i) with respect to amounts paid in connection with the initial purchase of an interest rate hedge contract or a commodity hedge contract, such amounts will be amortized over the life of the applicable interest rate hedge
contract or commodity hedge contract and (ii) payments made in connection with the termination of any interest rate hedge contract or commodity hedge contract prior to the expiration of its stipulated settlement or termination date will be
included in operating expenditures in equal quarterly installments over the remaining scheduled life of such interest rate hedge contract or commodity hedge contract), officer compensation, repayment of working capital borrowings, debt service
payments and estimated maintenance capital expenditures (except as provided in the third bullet below), provided that operating expenditures does not include:
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repayments (when actually repaid) of working capital borrowings deducted from operating surplus; |
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payments (including prepayments and prepayment penalties) of principal of and premium on indebtedness other than working capital borrowings; |
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expansion capital expenditures, actual maintenance capital expenditures and investment capital expenditures (each as defined in our partnership agreement); |
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payment of transaction expenses (including taxes) relating to interim capital transactions (as defined below); |
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distributions to our partners (including distributions in respect of incentive distribution rights); or |
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repurchases of partnership interests, other than to satisfy obligations under employee benefit plans, or reimbursement expenses of our general partner for such purchases. |
Estimates (made in good faith by the Board of Directors of our general partner with the concurrence of the Conflicts Committee of the Board)
of the average quarterly maintenance capital expenditures (as defined in our partnership agreement) that we will need to incur over the long term to maintain the operating capacity and/or operating income of the partnership are operating expenses.
Such estimates are to be made at least annually and whenever an event occurs that is likely to result in a material adjustment to the amount of future estimated maintenance capital expenditures, such adjustments to be prospective only. Pursuant to
our partnership agreement, capital expenditures that are made in part for maintenance capital expenditures and in part for other purposes will be allocated by our general partner.
Definition of Capital Surplus
Capital surplus is defined in our partnership agreement as any distribution of available cash in excess of our cumulative operating surplus.
Accordingly, capital surplus would generally be generated by:
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borrowings, refinancing or refundings of indebtedness (other than working capital borrowings and other than for items purchased on open account or for a deferred purchase price in the ordinary course of business);
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sales of our equity and debt securities; and |
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sales or other dispositions of assets for cash, other than sales or other dispositions of inventory, accounts receivable and other assets sold or disposed of in the ordinary course of business or assets sold or disposed
of as part of normal retirements or replacements of assets; and |
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capital contributions received. |
Characterization of Cash Distributions
Our partnership agreement requires that we treat all available cash distributed as coming from operating surplus until the sum of all available
cash distributed as operating surplus equals the operating surplus from the
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closing date of our initial public offering through the close of the quarter immediately preceding such distribution. Our partnership agreement requires that we treat any amount distributed in
excess of operating surplus, regardless of its source, as capital surplus. We do not anticipate that we will make any distributions from capital surplus.
Capital Expenditures
Estimated
maintenance capital expenditures reduce operating surplus, but expansion capital expenditures, actual maintenance capital expenditures and investment capital expenditures do not. Maintenance capital expenditures are those capital expenditures
required to maintain our long-term operating capacity and/or operating income. A primary component of maintenance capital expenditures is well connection expenditures required to replace expected reductions in natural gas gathering volumes handled
by our facilities. Other components of maintenance capital expenditures include expenditures for routine equipment and pipeline maintenance or replacement due to obsolescence. Maintenance capital expenditures also include interest (and related fees)
on debt incurred and distributions on equity issued (including incremental distributions on incentive distribution rights) to finance all or any portion of the construction or development of a replacement asset that is paid in respect of the period
that begins when we enter into a binding obligation to commence constructing or developing a replacement asset and ending on the earlier to occur of the date that any such replacement asset commences commercial service and the date that it is
abandoned or disposed of. Capital expenditures made solely for investment purposes are not considered to be maintenance capital expenditures.
Because our maintenance capital expenditures can be irregular, the amount of our actual maintenance capital expenditures may differ
substantially from period to period, which could cause similar fluctuations in the amounts of operating surplus and adjusted operating surplus if we subtracted actual maintenance capital expenditures from operating surplus.
Our partnership agreement requires that an estimate of the average quarterly maintenance capital expenditures necessary to maintain our
operating capacity and/or operating income (as the Board of Directors of our general partner, with the concurrence of its conflicts committee, deems appropriate) over the long-term be subtracted from operating surplus each quarter as opposed to the
actual amounts spent. The amount of estimated maintenance capital expenditures deducted from operating surplus for those periods is subject to review and change by our general partner (with the concurrence of the conflicts committee of our Board of
Directors) at least once a year, provided that any change is approved by our conflicts committee. The estimate is made at least annually and whenever an event occurs that is likely to result in a material adjustment to the amount of our maintenance
capital expenditures, such as a major acquisition or the introduction of new governmental regulations that will impact our business. For purposes of calculating operating surplus, any adjustment to this estimate will be prospective only.
The use of estimated maintenance capital expenditures in calculating operating surplus has the following effects:
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it reduces the risk that maintenance capital expenditures in any one quarter will be large enough to render operating surplus less than the minimum quarterly distribution to be paid on all the units for the quarter;
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it increases our ability to distribute as operating surplus cash we receive from non-operating sources; and |
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it is more difficult for us to raise our distribution above the minimum quarterly distribution and pay incentive distributions on the incentive distribution rights held by our general partner. |
Expansion capital expenditures are those capital expenditures that we expect will increase our operating capacity or operating income over the
long term. Examples of expansion capital expenditures include the acquisition of equipment, or the construction, development or acquisition of additional pipeline or treating
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capacity or new compression capacity, to the extent such capital expenditures are expected to expand our long-term operating capacity or operating income. Expansion capital expenditures also
include interest (and related fees) on debt incurred to finance all or any portion of the construction of such capital improvement in respect of the period that commences when we enter into a binding obligation to commence construction of a capital
improvement and ending on the earlier to occur of the date any such capital improvement commences commercial service and the date that it is abandoned or disposed of. Capital expenditures made solely for investment purposes are not considered
expansion capital expenditures.
Investment capital expenditures are those capital expenditures that are neither maintenance capital
expenditures nor expansion capital expenditures. Investment capital expenditures largely consist of capital expenditures made for investment purposes. Examples of investment capital expenditures include traditional capital expenditures for
investment purposes, such as purchases of securities, as well as other capital expenditures that might be made in lieu of such traditional investment capital expenditures, such as the acquisition of a capital asset for investment purposes or
development of facilities that are in excess of the maintenance of our existing operating capacity or operating income, but which are not expected to expand, for more than the short term, our operating capacity or operating income.
As described above, neither investment capital expenditures nor expansion capital expenditures are included in operating expenditures, and
thus do not reduce operating surplus. Because expansion capital expenditures include interest payments (and related fees) on debt incurred to finance all or a portion of the construction, replacement or improvement of a capital asset (such as
gathering pipelines or treating facilities) in respect of the period that begins when we enter into a binding obligation to commence construction of the capital asset and ending on the earlier to occur of the date the capital asset commences
commercial service or the date that it is abandoned or disposed of, such interest payments are also not subtracted from operating surplus. Losses on disposition of an investment capital expenditure reduce operating surplus when realized and cash
receipts from an investment capital expenditure is treated as a cash receipt for purposes of calculating operating surplus only to the extent the cash receipt is a return on principal.
Capital expenditures that are made in part for maintenance capital purposes, investment capital purposes and/or expansion capital purposes are
allocated as maintenance capital expenditures, investment capital expenditures or expansion capital expenditure by our general partner.
Distributions
of Available Cash from Operating Surplus
Our partnership agreement requires that we make distributions of available cash from
operating surplus with respect to any quarter in the following manner:
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first, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter;
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second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly
distribution on the common units as of such quarter; |
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thereafter, in the manner described in Incentive Distribution Rights below. |
The preceding discussion is based on the assumptions that our general partner maintains its 2.0% general partner interest and that we do not
issue additional classes of equity interests.
Incentive Distribution Rights
Incentive distribution rights represent the right to receive an increasing percentage of quarterly distributions of available cash from
operating surplus after the minimum quarterly distribution and the target distribution
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levels have been achieved. Our general partner currently holds the incentive distribution rights, but may transfer these rights separately from its general partner interest, subject to
restrictions in the partnership agreement.
The following discussion assumes that our general partner maintains its 2.0% general partner
interest, that there are no arrearages on common units and that our general partner continues to own the incentive distribution rights.
If, for any quarter, we have distributed available cash from operating surplus to the common unitholders in an amount equal to the minimum
quarterly distribution, then, subject to the proration and reduction described below, we will distribute any additional available cash from operating surplus for that quarter among the unitholders and the general partner in the following manner:
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first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives the receives any unpaid arrearages in payment of the minimum quarterly distribution on the common units
with respect to such quarter; |
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second, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives the receives a total of $0.388125 per unit for that quarter (the first target distribution);
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third, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until each unitholder receives a total of $0.421875 per unit for that quarter (the second target distribution);
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fourth, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until each unitholder receives $0.50625 per unit for that quarter (the third target distribution); and |
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thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner. |
The percentage interests set forth above for our general partner assume that our general partner maintains its 2% general partner interest,
that our general partner has not transferred the incentive distribution rights and that we do not issue additional classes of equity securities.
Percentage Allocations of Available Cash from Operating Surplus
The following table illustrates the percentage allocations of available cash from operating surplus between the unitholders and our general
partner based on the specified target distribution levels. The amounts set forth under Marginal percentage interest in distributions are the percentage interests of our general partner and the unitholders in any available cash from
operating surplus we distribute up to and including the corresponding amount in the column Total quarterly distribution per unit. The percentage interests shown for our unitholders and our general partner for the minimum quarterly
distribution are also applicable to quarterly distribution amounts that are less than the minimum quarterly distribution. The percentage interests set forth below for our general partner include its 2.0% general partner interest, assume our general
partner has contributed any additional capital to maintain its 2.0% general partner interest and has not transferred its incentive distribution rights and there are no arrearages on common units.
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Total Quarterly
Distribution Per Unit |
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Marginal Percentage Interest in Distributions |
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Unitholders |
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General Partner |
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Minimum Quarterly Distribution |
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$0.3375 |
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98.0 |
% |
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2.0 |
% |
First Target Distribution |
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up to $0.388125 |
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98.0 |
% |
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2.0 |
% |
Second Target Distribution |
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above $0.388125 up to $0.421875 |
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85.0 |
% |
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15.0 |
% |
Third Target Distribution |
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above $0.421875 up to $0.50625 |
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75.0 |
% |
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25.0 |
% |
Thereafter |
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above $0.50625 |
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50.0 |
% |
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50.0 |
% |
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General Partners Right to Reset Incentive Distribution Levels
Our general partner, as the holder of our incentive distribution rights, has the right under our partnership agreement to elect to relinquish
the right to receive incentive distribution payments based on the initial cash target distribution levels and to reset, at higher levels, the minimum quarterly distribution amount and cash target distribution levels upon which the incentive
distribution payments to our general partner would be set. Our general partners right to reset the minimum quarterly distribution amount and the target distribution levels upon which the incentive distributions payable to our general partner
are based may be exercised, without approval of our unitholders or the conflicts committee of our general partner, at any time when there are no subordinated units outstanding and we have made cash distributions to the holders of the incentive
distribution rights at the highest level of incentive distribution for each of the prior four consecutive fiscal quarters. The reset minimum quarterly distribution amount and target distribution levels will be higher than the minimum quarterly
distribution amount and the target distribution levels prior to the reset such that our general partner will not receive any incentive distributions under the reset target distribution levels until cash distributions per unit following this event
increase as described below. We anticipate that our general partner would exercise this reset right in order to facilitate acquisitions or internal growth projects that would otherwise not be sufficiently accretive to cash distributions per common
unit, taking into account the existing levels of incentive distribution payments being made to our general partner.
In connection with
the resetting of the minimum quarterly distribution amount and the target distribution levels and the corresponding relinquishment by our general partner of incentive distribution payments based on the target cash distributions prior to the reset,
our general partner will be entitled to receive a number of newly issued common units based on a predetermined formula described below that takes into account the cash parity value of the average cash distributions related to the
incentive distribution rights received by our general partner for the two quarters prior to the reset event as compared to the average cash distributions per common unit during this period. Our general partners general partner interest in us
(currently 2.0%) will be maintained at the percentage immediately prior to the reset election.
The number of common units that our
general partner would be entitled to receive from us in connection with a resetting of the minimum quarterly distribution amount and the target distribution levels then in effect would be equal to the quotient determined by dividing (x) the
average amount of cash distributions received by our general partner in respect of its incentive distribution rights during the two consecutive fiscal quarters ended immediately prior to the date of such reset election by (y) the average of the
amount of cash distributed per common unit during each of these two quarters.
Following a reset election by our general partner, the
minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per unit for the two fiscal quarters immediately preceding the reset election (which amount we refer to as the reset minimum
quarterly distribution) and the target distribution levels will be reset to be correspondingly higher such that we would distribute all of our available cash from operating surplus for each quarter thereafter as follows:
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first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until each unitholder receives an amount per unit equal to 115.0% of the reset minimum quarterly distribution for that quarter;
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second, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until each unitholder receives an amount per unit equal to 125.0% of the reset minimum quarterly distribution for the quarter;
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third, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until each unitholder receives an amount per unit equal to 150.0% of the reset minimum quarterly distribution for the quarter;
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thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner. |
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Distributions from Capital Surplus
How Distributions from Capital Surplus Will Be Made
Our partnership agreement requires that we make distributions of available cash from capital surplus, if any, in the following manner:
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first, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until the minimum quarterly distribution is reduced to zero, as described below; |
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second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until we distribute for each common unit, an amount of available cash from capital surplus equal to any unpaid arrearages
in payment of the minimum quarterly distribution on the common units; and |
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thereafter, we will make all distributions of available cash from capital surplus as if they were from operating surplus. |
The preceding paragraph assumes that our general partner maintains its 2.0% general partner interest and that we do not issue additional
classes of equity securities.
Effect of a Distribution from Capital Surplus
Our partnership agreement treats a distribution of capital surplus as the repayment of the initial unit price from our initial public offering,
which is a return of capital. The initial public offering price less any distributions of capital surplus per unit is referred to in the partnership agreement as the unrecovered initial unit price. Each time a distribution of available cash from
capital surplus is made, the minimum quarterly distribution and the target distribution levels will be reduced in the same proportion that the distribution had to the fair market value of the common units immediately prior to the announcement of the
distribution. Because distributions of capital surplus will reduce the minimum quarterly distribution, after any of these distributions are made, it may be easier for our general partner to receive incentive distributions. However, any distribution
of capital surplus before the unrecovered initial unit price is reduced to zero cannot be applied to the payment of the minimum quarterly distribution or any arrearages.
If we distribute available cash from capital surplus on a common unit in an amount equal to the fair market value of the common units
immediately prior to the announcement of such distribution, we will reduce the minimum quarterly distribution and target distribution levels to zero and will then make all future distributions from operating surplus, with 50.0% being paid to the
holders of units and 50.0% to our general partner. The preceding discussion assumes that our general partner maintains its 2.0% general partner interest and has not transferred the incentive distribution rights and that we do not issue additional
classes of equity securities.
Adjustment to the Minimum Quarterly Distribution and Target Distribution Levels
In addition to adjusting the minimum quarterly distribution and target distribution levels to reflect a distribution of capital surplus, if we
combine our units into fewer units or subdivide our units into a greater number of units, our partnership agreement specifies that the following items will be proportionately adjusted:
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the minimum quarterly distribution; |
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the target distribution levels |
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the unrecovered initial unit price; and |
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other amounts calculated on a per unit basis (including the per unit amount of any outstanding arrearages in payment of the minimum quarterly distribution). |
For example, if a two-for-one split of the units should occur, the minimum quarterly distribution, the target distribution levels and the
initial unit price would each be reduced to 50.0% of its initial level. Our partnership agreement provides that we do not make any adjustment by reason of the issuance of additional units for cash or property.
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In addition, if as a result of a change in law or interpretation thereof, we or any of our
subsidiaries is treated as an association taxable as a corporation or is otherwise subject to additional taxation as an entity for U.S. federal, state, local or non-U.S. income or withholding tax purposes, our general partner may, in its sole
discretion, reduce the minimum quarterly distribution and the target distribution levels for each quarter by multiplying each distribution level by a fraction, the numerator of which is available cash for that quarter (after deducting our general
partners estimate of our additional aggregate liability for the quarter for such income and withholdings taxes payable by reason of such change in law or interpretation) and the denominator of which is the sum of (1) available cash for
that quarter, plus (2) our general partners estimate of our additional aggregate liability for the quarter for such income and withholding taxes payable by reason of such change in law or interpretation thereof. To the extent that the
actual tax liability differs from the estimated tax liability for any quarter, the difference will be accounted for in distributions with respect to subsequent quarters.
Distributions of Cash Upon Liquidation
Overview
If we
dissolve in accordance with the partnership agreement, we will sell or otherwise dispose of our assets in a process called liquidation. We will first apply the proceeds of liquidation to the payment of our creditors. We will distribute any remaining
proceeds to the unitholders and the general partner, in accordance with their capital account balances, as adjusted to reflect any gain or loss upon the sale or other disposition of our assets in liquidation.
The allocations of gain and loss upon liquidation are intended, to the extent possible, to entitle the holders of units to a repayment of the
initial value contributed by them to us for their units, which we refer to as the initial unit price for each unit.
Manner of Adjustments for Gain
The manner of the adjustment for gain is set forth in the partnership agreement. Upon our liquidation, we will allocate any gain in the
following manner:
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first, to our general partner until the allocated net gain and income equals the net loss allocated to our general partner; |
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second, 98.0% to the common unitholders, pro rata, and 2.0% to our general partner, until the capital account for each common unit is equal to the sum of: |
(1) the unrecovered initial unit price for that common unit; plus
(2) the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs, reduced by any
distribution from operating surplus with respect to such unit for such quarter; and
(3) any unpaid arrearages in payment
of the minimum quarterly distribution;
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third, 98.0% to all unitholders, pro rata, and 2.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: |
(1) the sum of the excess of the first target distribution per unit over the minimum quarterly distribution per unit for each
quarter of our existence; less
(2) the cumulative amount per unit of any distributions of available cash from operating
surplus in excess of the minimum quarterly distribution per unit that we distributed 98.0% to the unitholders, pro rata, and 2.0% to our general partner, for each quarter of our existence;
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fourth, 85.0% to all unitholders, pro rata, and 15.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: |
(1) the sum of the excess of the second target distribution per unit over the first target distribution per unit for each
quarter of our existence; less
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(2) the cumulative amount per unit of any distributions of available cash from
operating surplus in excess of the first target distribution per unit that we distributed 85.0% to the unitholders, pro rata, and 15.0% to our general partner for each quarter of our existence;
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fifth, 75.0% to all unitholders, pro rata, and 25.0% to our general partner, until we allocate under this paragraph an amount per unit equal to: |
(1) the sum of the excess of the third target distribution per unit over the second target distribution per unit for each
quarter of our existence; less
(2) the cumulative amount per unit of any distributions of available cash from operating
surplus in excess of the second target distribution per unit that we distributed 75.0% to the unitholders, pro rata, and 25.0% to our general partner for each quarter of our existence; and
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thereafter, 50.0% to all unitholders, pro rata, and 50.0% to our general partner. |
The
percentage interests set forth above for our general partner assume that our general partner maintains its 2% general partner interest, that our general partner has not transferred the incentive distribution rights and that we do not issue
additional classes of equity securities.
Manner of Adjustments for Losses
Upon our liquidation we will generally allocate any loss in the following manner:
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first, 98.0% to the holders of common units in proportion to the positive balances in their capital accounts and 2.0% to our general partner, until the capital accounts of the common unitholders have been
reduced to zero; |
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second; to our general partner and the unitholders pro rata, provided that such allocation does not cause any unitholder to have a deficit in its adjusted capital account; and |
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thereafter, 100.0% to our general partner. |
The percentage interests set forth
above for our general partner assume that our general partner maintains its 2% general partner interest, that our general partner has not transferred the incentive distribution rights and that we do not issue additional classes of equity securities.
Adjustments to Capital Accounts
Our partnership agreement requires that we make adjustments to capital accounts upon the issuance of additional units. In this regard, our
partnership agreement specifies that we allocate any unrealized and, for tax purposes, unrecognized gain or loss resulting from the adjustments to the unitholders and our general partner in the same manner as we allocate gain or loss upon
liquidation. In the event that we make positive adjustments to the capital accounts upon the issuance of additional units, our partnership agreement requires that we allocate any later negative adjustments to the capital accounts resulting from the
issuance of additional units or upon our liquidation in a manner which results, to the extent possible, in the general partners capital account balances equaling the amount which they would have been if no earlier positive adjustments to the
capital accounts had been made.
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THE PARTNERSHIP AGREEMENT
The following is a summary of the material provisions of our partnership agreement. Our partnership agreement is incorporated by reference as
an exhibit to the registration statement of which this prospectus constitutes a part. We will provide prospective investors with a copy of this agreement upon request at no charge.
We summarize the following provisions of our partnership agreement elsewhere in this prospectus:
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with regard to distributions of available cash, please read Provisions of Our Partnership Agreement Relating to Cash Distributions; |
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with regard to the transfer of common units, please read Description of the Common Units Transfer of Common Units; and |
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with regard to allocations of taxable income and taxable loss, please read Material Tax Considerations. |
Organization and Duration
We were
organized in January 2010 and have a perpetual existence.
Purpose
Our purpose, as set forth in our partnership agreement, is limited to any business activity that is approved by our general partner and that
lawfully may be conducted by a limited partnership organized under Delaware law; provided, that our general partner shall not cause us to engage, directly or indirectly, in any business activity that the general partner determines would be
reasonably likely to cause us to be treated as an association taxable as a corporation or otherwise taxable as an entity for federal income tax purposes.
Although our general partner has the ability to cause us, our operating companies or their subsidiaries to engage in activities other than
natural gas transportation, gathering, treating and processing, storage, NGL fractionation, oil transportation and production handling platform services, our general partner has no current plans to do so and may decline to do so free of any
fiduciary duty or obligation whatsoever to us or the limited partners, including any duty to act in good faith or in the best interests of us or the limited partners. Our general partner is generally authorized to perform all acts it determines to
be necessary or appropriate to carry out our purposes and to conduct our business.
Cash Distributions
Our partnership agreement specifies the manner in which we will make cash distributions to holders of our common units and other partnership
securities as well as to our general partner in respect of its general partner interest and its incentive distribution rights. For a description of these cash distribution provisions, please read Provisions of our Partnership Agreement
Relating to Cash Distributions.
Capital Contributions
Unitholders are not obligated to make additional capital contributions, except as described below under Limited
Liability.
For a discussion of our general partners right to contribute capital to maintain its 2% general partner interest
if we issue additional units, please read Issuance of Additional Partnership Interests.
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Limited Liability
Participation in the Control of Our Partnership
Assuming that a limited partner does not participate in the control of our business within the meaning of the Delaware Act and that he
otherwise acts in conformity with the provisions of the partnership agreement, his liability under the Delaware Act will be limited, subject to possible exceptions, to the amount of capital he is obligated to contribute to us for his common units
plus his share of any undistributed profits and assets. However, if it were determined that the right, or exercise of the right, by the limited partners as a group:
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to remove or replace our general partner; |
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to approve some amendments to our partnership agreement; or |
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to take other action under our partnership agreement; |
constituted participation in the control of
our business for the purposes of the Delaware Act, then the limited partners could be held personally liable for our obligations under the laws of Delaware, to the same extent as our general partner. This liability would extend to persons who
transact business with us under the reasonable belief that the limited partner is a general partner. Neither our partnership agreement nor the Delaware Act specifically provides for legal recourse against our general partner if a limited partner
were to lose limited liability through any fault of our general partner. While this does not mean that a limited partner could not seek legal recourse, we know of no precedent for this type of a claim in Delaware case law.
Unlawful Partnership Distribution
Under the Delaware Act, a limited partnership may not make a distribution to a partner if, after the distribution, all liabilities of the
limited partnership, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property of the partnership, would exceed the fair value of the assets of
the limited partnership. For the purpose of determining the fair value of the assets of a limited partnership, the Delaware Act provides that the fair value of property subject to liability for which recourse of creditors is limited shall be
included in the assets of the limited partnership only to the extent that the fair value of that property exceeds the nonrecourse liability. The Delaware Act provides that a limited partner who receives a distribution and knew at the time of the
distribution that the distribution was in violation of the Delaware Act shall be liable to the limited partnership for the amount of the distribution for three years. Under the Delaware Act, a substituted limited partner of a limited partnership is
liable for the obligations of his assignor to make contributions to the partnership, except that such person is not obligated for liabilities unknown to him at the time he became a limited partner and that could not be ascertained from the
partnership agreement.
Failure to Comply with the Limited Liability Provisions of Jurisdictions in Which We Do Business
Our subsidiaries conduct business in a number of states and may conduct business in other states in the future. Maintenance of our
limited liability may require compliance with legal requirements in the jurisdictions in which our operating companies conduct business, including qualifying our subsidiaries to do business there. Limitations on the liability of members or limited
partners for the obligations of a limited liability company or limited partnership have not been clearly established in many jurisdictions. If, by virtue of our ownership interest in our operating companies or otherwise, it were determined that we
were conducting business in any state without compliance with the applicable limited partnership or limited liability company statute, or that the right or exercise of the right by the limited partners as a group to remove or replace our general
partner, to approve some amendments to our partnership agreement, or to take other action under our partnership agreement constituted participation in the control of our business for purposes of the statutes of any relevant jurisdiction,
then the limited partners could be held personally liable for our obligations under the law of that jurisdiction to the same extent as our general partner under the circumstances. We will operate in a manner that our general partner considers
reasonable and necessary or appropriate to preserve the limited liability of the limited partners.
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Voting Rights
The following is a summary of the unitholder vote required for approval of the matters specified below. Matters that require the approval of a
unit majority require the approval of a majority of the common units.
In voting their common units, our general partner and
its affiliates have no fiduciary duty or obligation whatsoever to us or the limited partners, including any duty to act in good faith or in the best interests of us and the limited partners.
Issuance of additional units |
No approval right. |
Amendment of our partnership agreement |
Certain amendments may be made by our general partner without the approval of the unitholders. Other amendments generally require the approval of a unit majority. Please read Amendment of the Partnership Agreement.
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Merger of our partnership or the sale of all or substantially all of our assets |
Unit majority in certain circumstances. Please read Merger, Consolidation, Conversion, Sale or Other Disposition of Assets. |
Dissolution of our partnership |
Unit majority. Please read Dissolution. |
Continuation of our partnership upon dissolution |
Unit majority. Please read Dissolution. |
Withdrawal of our general partner |
Under most circumstances, the approval of a majority of the common units, excluding common units held by our general partner and its affiliates, is required for the withdrawal of our general partner prior to June 30, 2020 in a manner that
would cause a dissolution of our partnership. Please read Withdrawal or Removal of Our General Partner. |
Removal of our general partner |
Not less than 66 2/3% of the outstanding units, voting as a single class, including units held by our general partner and its affiliates. Please read Withdrawal or Removal of Our General Partner. |
Transfer of the general partner interest |
Our general partner may transfer all, but not less than all, of its general partner interest in us without a vote of our unitholders to an affiliate or another person in connection with its merger or consolidation with or into, or sale of all or
substantially all of its assets to, such person. The approval of a majority of the common units, excluding common units held by our general partner and its affiliates, is required in other circumstances for a transfer of the general partner interest
to a third party prior to June 30, 2020. Please read Transfer of General Partner Interest. |
Transfer of incentive distribution rights |
Except for transfers to an affiliate or to another person as part of our general partners merger or consolidation, sale of all or substantially all of its assets, the sale of all of
the ownership interests in our general partner, the pledge, hypothecation, mortgage, encumbrance, grant of a lien, collateralization, or other grant of a security interest in the |
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incentive distribution rights in favor a person providing bona-fide debt financing to such holder as security or collateral for such debt financing and the transfer of incentive distribution
rights in connection with exercise of any remedy of such person in connection therewith, the approval of a majority of the common units, excluding common units held by our general partner and its affiliates, is required in most circumstances for a
transfer of the incentive distribution rights to a third party prior to June 30, 2020. Please read Transfer of Incentive Distribution Rights. |
Transfer of ownership interests in our general partner |
No approval required at any time. Please read Transfer of Ownership Interests in Our General Partner. |
If any person
or group other than our general partner and its affiliates acquires beneficial ownership of 20% or more of any class of units, that person or group loses voting rights on all of its units. This loss of voting rights does not apply to any person or
group that acquires the units from our general partner, its affiliates, their direct transferees and their indirect transferees approved by our general partner in its sole discretion or to any person or group who acquires the units (provided that,
at or prior to such acquisition, our general partner has notified such person or group that the voting limitation shall not apply to them).
Issuance
of Additional Partnership Interests
Our partnership agreement authorizes us to issue an unlimited number of additional partnership
interests, subject to the limitations imposed by the New York Stock Exchange, for the consideration and on the terms and conditions determined by our general partner without the approval of the unitholders.
It is possible that we will fund acquisitions through the issuance of additional common units or other partnership interests. Holders of any
additional common units we issue will be entitled to share equally with the then-existing holders of common units in our distributions of available cash. In addition, the issuance of additional common units or other partnership interests may dilute
the value of the interests of the then-existing holders of common units in our net assets.
In accordance with Delaware law and the
provisions of our partnership agreement, we may also issue additional partnership interests that, as determined by our general partner, may have special voting rights to which the common units are not entitled. In addition, our partnership agreement
does not prohibit our subsidiaries from issuing equity securities, which may effectively rank senior to the common units.
Upon issuance
of additional partnership interests (other than the issuance of common units upon conversion of outstanding Class B units or the issuance of common units upon a reset of the incentive distribution rights) our general partner will be entitled, but
not required, to make additional capital contributions to the extent necessary to maintain its 2.0% general partner interest in us. Our general partners 2.0% interest in us will be reduced if we issue additional units in the future (other than
in those circumstances described above) and our general partner does not contribute a proportionate amount of capital to us to maintain its 2.0% general partner interest. Moreover, our general partner has the right, which it may from time to time
assign in whole or in part to any of its affiliates, to purchase common units or other partnership interests whenever, and on the same terms that, we issue those interests to persons other than our general partner and its affiliates and beneficial
owners, to the extent necessary to maintain the percentage interest of the general partner and its affiliates, including such interest represented by common units, that existed immediately prior to each issuance. The holders of common units do not
have preemptive rights under our partnership agreement to acquire additional common units or other partnership interests.
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Amendment of the Partnership Agreement
General
Amendments
to our partnership agreement may be proposed only by or with the consent of our general partner. However, our general partner has no duty or obligation to propose any amendment and may decline to do so free of any fiduciary duty or obligation
whatsoever to us or the limited partners, including any duty to act in good faith or in the best interests of us or the limited partners. In order to adopt a proposed amendment, other than the amendments discussed below, our general partner is
required to seek written approval of the holders of the number of units required to approve the amendment or to call a meeting of the limited partners to consider and vote upon the proposed amendment. Except as described below, an amendment must be
approved by a unit majority.
Prohibited Amendments
No amendment may be made that would:
(1) enlarge the obligations of any limited partner without its consent, unless approved by at least a majority of the type or
class of limited partner interests so affected; or
(2) enlarge the obligations of, restrict in any way any action by or
rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by us to our general partner or any of its affiliates without the consent of our general partner, which consent may be given or withheld at its option.
The provision of our partnership agreement preventing the amendments having the effects described in clauses (1) or (2) above can be
amended upon the approval of the holders of at least 90.0% of the outstanding units (including units owned by our general partner and its affiliates). As of February 3, 2015, our general partner and its affiliates owned approximately 58.9% of
our outstanding common and Class B units.
No Unitholder Approval
Our general partner may generally make amendments to our partnership agreement without the approval of any limited partner to reflect:
(1) a change in our name, the location of our principal place of business, our registered agent or our registered office;
(2) the admission, substitution, withdrawal or removal of partners in accordance with our partnership agreement;
(3) a change that our general partner determines to be necessary or appropriate to qualify or continue our qualification as a
limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or to ensure that neither we nor any of our subsidiaries will be treated as an association taxable as a corporation or otherwise
taxed as an entity for federal income tax purposes (to the extent not already so treated);
(4) a change in our fiscal year
or taxable year and related changes;
(5) an amendment that is necessary, in the opinion of our counsel, to prevent us or
our general partner or its directors, officers, agents or trustees from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisers Act of 1940 or plan asset regulations adopted under
the Employee Retirement Income Security Act of 1974, or ERISA, whether or not substantially similar to plan asset regulations currently applied or proposed;
(6) an amendment that our general partner determines to be necessary or appropriate in connection with the creation,
authorization or issuance of additional partnership interests or the right to acquire partnership interests;
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(7) any amendment expressly permitted in our partnership agreement to be made by
our general partner acting alone;
(8) an amendment effected, necessitated or contemplated by a merger agreement that has
been approved under the terms of our partnership agreement;
(9) any amendment that our general partner determines to be
necessary or appropriate for the formation by us of, or our investment in, any corporation, partnership or other entity, as otherwise permitted by our partnership agreement;
(10) conversions into, mergers with or conveyances to another limited liability entity that is newly formed and has no assets,
liabilities or operations at the time of the conversion, merger or conveyance other than those it receives by way of the conversion, merger or conveyance; or
(11) any other amendments substantially similar to any of the matters described in clauses (1) through (10) above.
In addition, our general partner may make amendments to our partnership agreement without the approval of any limited partner if our
general partner determines that those amendments:
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do not adversely affect the limited partners (or any particular class of limited partners) in any material respect; |
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are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in
any federal or state statute; |
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are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are
or will be listed for trading; |
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are necessary or appropriate for any action taken by our general partner relating to splits or combinations of units under the provisions of our partnership agreement; or |
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are required to effect the intent of the provisions of our partnership agreement or are otherwise contemplated by our partnership agreement. |
Opinion of Counsel and Unitholder Approval
Any amendment that our general partner determines adversely affects in any material respect one or more particular classes of limited partners
will require the approval of at least a majority of the class or classes so affected, but no vote will be required by any class or classes of limited partners that our general partner determines are not adversely affected in any material respect.
Any amendment that would have a material adverse effect on the rights or preferences of any type or class of outstanding units in relation to other classes of units will require the approval of at least a majority of the type or class of units so
affected. Any amendment that reduces the voting percentage required to take any action, other than to remove the general partner or call a meeting, is required to be approved by the affirmative vote of limited partners whose aggregate outstanding
units constitute not less than the voting requirement sought to be reduced. Any amendment that increases the voting percentage required to remove the general partner or call a meeting of unitholders must be approved by the affirmative vote of
limited partners whose aggregate outstanding units constitute not less than the voting requirement sought to be increased. For amendments of the type not requiring unitholder approval, our general partner is not required to obtain an opinion of
counsel that an amendment will neither result in a loss of limited liability to the limited partners nor result in our being treated as a taxable entity for federal income tax purposes in connection with any of the amendments. No other amendments to
our partnership agreement will become effective without the approval of holders of at least 90% of the outstanding units, voting as a single class, unless we first obtain an opinion of counsel to the effect that the amendment will not affect the
limited liability under applicable law of any of our limited partners.
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Merger, Consolidation, Conversion, Sale or Other Disposition of Assets
A merger, consolidation or conversion of us requires the prior consent of our general partner. However, our general partner has no duty or
obligation to consent to any merger, consolidation or conversion and may decline to do so free of any fiduciary duty or obligation whatsoever to us or the limited partners, including any duty to act in good faith or in the best interest of us or the
limited partners. Our partnership agreement generally prohibits our general partner, without the prior approval of the holders of a unit majority, from causing us to sell, exchange or otherwise dispose of all or substantially all of our assets in a
single transaction or a series of related transactions. Our general partner may, however, mortgage, pledge, hypothecate or grant a security interest in all or substantially all of our assets without such approval. Our general partner may also sell
all or substantially all of our assets under a foreclosure or other realization upon those encumbrances without such approval. Finally, our general partner may consummate any merger without the prior approval of our unitholders if we are the
surviving entity in the transaction, our general partner has received an opinion of counsel regarding limited liability and tax matters, the transaction would not result in a material amendment to the partnership agreement (other than an amendment
that the general partner could adopt without the consent of the limited partners), each of our units will be an identical unit of our partnership following the transaction and the partnership interests to be issued do not exceed 20% of our
outstanding partnership interests (other than the incentive distribution rights) immediately prior to the transaction.
If the conditions
specified in our partnership agreement are satisfied, our general partner may convert us or any of our subsidiaries into a new limited liability entity or merge us or any of our subsidiaries into, or convey all of our assets to, a newly formed
entity, if the sole purpose of that conversion, merger or conveyance is to effect a mere change in our legal form into another limited liability entity, our general partner has received an opinion of counsel regarding limited liability and tax
matters and the governing instruments of the new entity provide the limited partners and our general partner with the same rights and obligations as contained in our partnership agreement. Our unitholders are not entitled to dissenters rights
of appraisal under our partnership agreement or applicable Delaware law in the event of a conversion, merger or consolidation, a sale of substantially all of our assets or any other similar transaction or event.
Dissolution
We will continue as a
limited partnership until dissolved under our partnership agreement. We will dissolve upon:
(1) the election of our
general partner to dissolve us, if approved by the holders of units representing a unit majority;
(2) there being no
limited partners, unless we are continued without dissolution in accordance with applicable Delaware law;
(3) the entry of
a decree of judicial dissolution of our partnership; or
(4) the withdrawal or removal of our general partner or any other
event that results in its ceasing to be our general partner other than by reason of a transfer of its general partner interest in accordance with our partnership agreement or its withdrawal or removal following the approval and admission of a
successor.
Upon a dissolution under the last clause above, the holders of a unit majority may also elect, within specific time
limitations, to continue our business on the same terms and conditions described in our partnership agreement by appointing as a successor general partner an entity approved by the holders of units representing a unit majority, subject to our
receipt of an opinion of counsel to the effect that:
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the action would not result in the loss of limited liability under Delaware law of any limited partner; and |
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neither our partnership, our operating companies nor any of our other subsidiaries would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon
the exercise of that right to continue (to the extent not already so treated or taxed). |
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Liquidation and Distribution of Proceeds
Upon our dissolution, unless our business is continued, the liquidator authorized to wind up our affairs will, acting with all of the powers of
our general partner that are necessary or appropriate, liquidate our assets and apply the proceeds of the liquidation as described in Provisions of our Partnership Agreement Relating to Cash Distributions Distributions of Cash
Upon Liquidation. The liquidator may defer liquidation or distribution of our assets for a reasonable period of time or distribute assets to partners in kind if it determines that a sale would be impractical or would cause undue loss to our
partners.
Withdrawal or Removal of Our General Partner
Except as described below, our general partner has agreed not to withdraw voluntarily as our general partner prior to June 30, 2020
without obtaining the approval of the holders of at least a majority of the outstanding common units, excluding common units held by our general partner and its affiliates, and furnishing an opinion of counsel regarding limited liability and tax
matters. On or after June 30, 2020, our general partner may withdraw as general partner without first obtaining approval of any unitholder by giving 90 days written notice, and that withdrawal will not constitute a violation of our
partnership agreement. Notwithstanding the information above, our general partner may withdraw without unitholder approval upon 90 days notice to the limited partners if at least 50 percent of the outstanding common units are held or
controlled by one person and its affiliates, other than our general partner and its affiliates. In addition, our partnership agreement permits our general partner, in some instances, to sell or otherwise transfer all of its general partner interest
in us without the approval of the unitholders. Please read Transfer of General Partner Interest and Transfer of Incentive Distribution Rights.
Upon withdrawal of our general partner under any circumstances, other than as a result of a transfer by our general partner of all or a part
of its general partner interest in us, the holders of a unit majority may select a successor to that withdrawing general partner. If a successor is not elected, or is elected but an opinion of counsel regarding limited liability and tax matters
cannot be obtained, we will be dissolved, wound up and liquidated, unless within a specified period after that withdrawal, the holders of a unit majority agree in writing to continue our business and to appoint a successor general partner. Please
read Dissolution.
Our general partner may not be removed unless that removal is approved by the vote of the
holders of not less than 66 2/3 percent of the outstanding units, voting together as a single class, including units held by our general partner and its affiliates, and we receive an opinion of counsel regarding limited liability and tax matters.
Any removal of our general partner is also subject to the approval of a successor general partner by the vote of the holders of a majority of the outstanding common units (including the units held by our general partner and its affiliates). The
ownership of more than 33 1/3 percent of the outstanding units by our general partner and its affiliates gives them the ability to prevent our general partners removal.
In the event of the removal of our general partner under circumstances where cause exists or withdrawal of our general partner where that
withdrawal violates our partnership agreement, a successor general partner will have the option to purchase the general partner interest and incentive distribution rights of the departing general partner for a cash payment equal to the fair market
value of those interests. Under all other circumstances where our general partner withdraws or is removed by the limited partners, including under circumstances where cause does not exist, the departing general partner will have the right to require
the successor general partner to purchase its general partner interest and the incentive distribution rights in exchange for an amount in cash equal to the fair market value of the interests at the time. In each case, this fair market value will be
determined by agreement between the departing general partner and the successor general partner. If no agreement is reached, an independent investment banking firm or other independent expert selected by the departing general partner and the
successor general partner will determine the fair market value. Or, if the departing general partner and the successor general partner cannot agree upon an expert, then an expert chosen by agreement of the experts selected by each of them will
determine the fair market value.
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If the option described above is not exercised by either the departing general partner or the
successor general partner, the departing general partners general partner interest and all of its or its affiliates incentive distribution rights will automatically convert into common units equal to the fair market value of those
interests as determined by an investment banking firm or other independent expert selected in the manner described in the preceding paragraph.
In addition, we will be required to reimburse the departing general partner for all amounts due the departing general partner, including,
without limitation, all employee-related liabilities, including severance liabilities incurred as a result of the termination of any employees employed for our benefit by the departing general partner or its affiliates.
Transfer of General Partner Interest
Except for transfer by our general partner of all, but not less than all, of its general partner interest in us to:
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an affiliate of our general partner (other than an individual); or |
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another entity as part of the merger or consolidation of our general partner with or into another entity or the transfer by our general partner of all or substantially all of its assets to another entity,
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our general partner may not transfer all or any of its general partner interest to another person prior to June 30, 2020 without the
approval of the holders of at least a majority of the outstanding common units, excluding common units held by our general partner and its affiliates. As a condition of this transfer, the transferee must, among other things, assume the rights and
duties of our general partner, agree to be bound by the provisions of our partnership agreement and furnish an opinion of counsel regarding limited liability and tax matters.
Our general partner and its affiliates may at any time transfer common units to one or more persons without unitholder approval.
Transfer of Incentive Distribution Rights
Our general partner or its affiliates or a subsequent holder may (i) transfer its incentive distribution rights to an affiliate of the
holder (other than an individual) or another entity as part of the merger or consolidation of such holder with or into another entity, the sale of all of the ownership interests in such holder or the sale of all or substantially all of such
holders assets to that entity or (ii) pledge, hypothecate, mortgage, encumber, grant a lien, collateralize, or grant a security interest in the incentive distribution rights in favor of a person providing bona-fide debt financing to such
holder as security or collateral for such debt financing and the transfer of incentive distribution rights in connection with exercise of any remedy of such person in connection therewith, without the prior approval of the unitholders. Prior to
June 30, 2020, any other transfer of incentive distribution rights will require the affirmative vote of holders of a majority of the outstanding common units, excluding common units held by our general partner and its affiliates. On or after
June 30, 2020, the incentive distribution rights will be freely transferable.
Transfer of Ownership Interests in Our General Partner
At any time, the owners of our general partner may sell or transfer all or part their ownership interests in our general partner to an
affiliate or a third party without the approval of our unitholders.
Change of Management Provisions
Our partnership agreement contains specific provisions that are intended to discourage a person or group from attempting to remove WPZ GP LLC
as our general partner or from otherwise changing our management. Please read Withdrawal or Removal of Our General Partner for a discussion of certain consequences of the
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removal of our general partner. If any person or group, other than our general partner and its affiliates, acquires beneficial ownership of 20% or more of any class of units, that person or group
loses voting rights on all of its units. This loss of voting rights does not apply in certain circumstances. Please read Meetings; Voting.
Limited Call Right
If at any time our
general partner and its affiliates own more than 80% of the then-issued and outstanding limited partner interests of any class, our general partner will have the right, which it may assign in whole or in part to any of its affiliates or beneficial
owners thereof or to us, to acquire all, but not less than all, of the limited partner interests of the class held by unaffiliated persons as of a record date to be selected by our general partner, on at least 10, but not more than 60, days
notice. The purchase price in the event of a purchase under these circumstances would be the greater of:
(1) the highest price paid by
our general partner or any of its affiliates for any limited partner interests of the class purchased within the 90 days preceding the date on which our general partner first mails notice of its election to purchase those limited partner interests;
and
(2) the average of the daily closing prices of the partnership securities of such class over the 20 trading days preceding the date
three days before the date the notice is mailed.
As a result of our general partners right to purchase outstanding limited partner
interests, a holder of limited partner interests may have his limited partner interests purchased at an undesirable time or a price that may be lower than market prices at various times prior to such purchase or lower than a unitholder may
anticipate the market price to be in the future. The tax consequences to a unitholder of the exercise of this call right are the same as a sale by that unitholder of his common units in the market. Please read Material Tax
Considerations Disposition of Common Units.
Meetings; Voting
Except as described below regarding certain persons or groups owning 20% or more of any class of units then outstanding, record holders of
units on the record date will be entitled to notice of, and to vote at, meetings of our limited partners and to act upon matters for which approvals may be solicited.
Our general partner does not anticipate that any meeting of our unitholders will be called in the foreseeable future. Any action that is
required or permitted to be taken by the unitholders may be taken either at a meeting of the unitholders or without a meeting, if consents in writing describing the action so taken are signed by holders of the number of units necessary to authorize
or take that action at a meeting. Meetings of the unitholders may be called by our general partner or by unitholders owning at least 20% of the outstanding units of the class for which a meeting is proposed. Unitholders may vote either in person or
by proxy at meetings. The holders of a majority of the outstanding units of the class or classes for which a meeting has been called, represented in person or by proxy, will constitute a quorum, unless any action by the unitholders requires approval
by holders of a greater percentage of the units, in which case the quorum will be the greater percentage.
Each record holder of a unit
has a vote according to his percentage interest in us, although additional limited partner interests having special voting rights could be issued. Please read Issuance of Additional Partnership Interests. However, if at any
time any person or group, other than our general partner and its affiliates, or a direct or subsequently approved (at the time of transfer) transferee of our general partner or its affiliates and purchasers specifically approved by our general
partner in its sole discretion, acquires, in the aggregate, beneficial ownership of 20% or more of any class of units then outstanding, that person or group will lose voting rights on all of its units and the units may not be voted on any matter and
will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes, determining the presence of a quorum or for other similar purposes. Common units held in nominee or street name account will be
voted by the
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broker or other nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and his nominee provides otherwise. Except as our
partnership agreement otherwise provides, subordinated units will vote together with common units, as a single class.
Any notice, demand,
request, report or proxy material required or permitted to be given or made to record holders of common units under our partnership agreement will be delivered to the record holder by us or by the transfer agent.
Status as Limited Partner
By transfer of
common units in accordance with our partnership agreement, each transferee of common units shall be admitted as a limited partner with respect to the common units transferred when such transfer and admission are reflected in our books and records.
Except as described under Limited Liability, the common units will be fully paid, and unitholders will not be required to make additional contributions.
Non-Citizen Assignees; Redemption
If our
general partner, with the advice of counsel, determines we are subject to U.S. federal, state or local laws or regulations that, in the reasonable determination of our general partner, create a substantial risk of cancellation or forfeiture of any
property that we have an interest in because of the nationality, citizenship or other related status of any limited partner, then our general partner may adopt such amendments to our partnership agreement as it determines necessary or advisable to:
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obtain proof of the nationality, citizenship or other related status of our member (and their owners, to the extent relevant); and |
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permit us to redeem the units held by any person whose nationality, citizenship or other related status creates substantial risk of cancellation or forfeiture of any property or who fails to comply with the procedures
instituted by our general partner to obtain proof of the nationality, citizenship or other related status. The redemption price in the case of such a redemption will be the average of the daily closing prices per unit for the 20 consecutive trading
days immediately prior to the date set for redemption. |
Non-Taxpaying Assignees; Redemption
In the event any rates that we charge our customers become regulated by the Federal Energy Regulatory Commission, to avoid any adverse effect
on the maximum applicable rates chargeable to customers by us, or in order to reverse an adverse determination that has occurred regarding such maximum rate, our partnership agreement provides our general partner the power to amend the agreement. If
our general partner, with the advice of counsel, determines that our not being treated as an association taxable as a corporation or otherwise taxable as an entity for U.S. federal income tax purposes, coupled with the tax status (or lack of proof
thereof) of one or more of our limited partners, has, or is reasonably likely to have, a material adverse effect on the maximum applicable rates chargeable to customers by us, then our general partner may adopt such amendments to our partnership
agreement as it determines necessary or advisable to:
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obtain proof of the U.S. federal income tax status of our member (and their owners, to the extent relevant); and |
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permit us to redeem the units held by any person whose tax status has or is reasonably likely to have a material adverse effect on the maximum applicable rates or who fails to comply with the procedures instituted by
our general partner to obtain proof of the U.S. federal income tax status. The redemption price in the case of such a redemption will be the average of the daily closing prices per unit for the 20 consecutive trading days immediately prior to the
date set for redemption. |
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Indemnification
Under our partnership agreement, in most circumstances, we will indemnify the following persons, to the fullest extent permitted by law, from
and against all losses, claims, damages or similar events:
(1) our general partner;
(2) any departing general partner;
(3) any person who is or was an affiliate of our general partner or any departing general partner;
(4) any person who is or was a manager, managing member, director, officer, employee, agent, fiduciary or trustee of our
partnership, our subsidiaries, our general partner, any departing general partner or any of their affiliates;
(5) any
person who is or was serving as a manager, managing member, director, officer, employee, agent, fiduciary or trustee of another person owing a fiduciary duty to us or our subsidiaries;
(6) any person who controls our general partner or any departing general partner; and
(7) any person designated by our general partner.
Any indemnification under these provisions will only be out of our assets. Unless our general partner otherwise agrees, it will not be
personally liable for, or have any obligation to contribute or lend funds or assets to us to enable us to effectuate, indemnification. We may purchase insurance against liabilities asserted against and expenses incurred by persons for our
activities, regardless of whether we would have the power to indemnify the person against liabilities under our partnership agreement.
Reimbursement
of Expenses
Our partnership agreement requires us to reimburse our general partner and its affiliates for all expenses they incur or
payments they make on our behalf. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf and expenses allocated to our general partner by its affiliates. Our
general partner is entitled to determine in good faith the expenses that are allocable to us.
Books and Reports
Our general partner is required to keep appropriate books of our business at our principal offices. These books will be maintained for both tax
and financial reporting purposes on an accrual basis. For tax and fiscal reporting purposes, our fiscal year is the calendar year.
We
will furnish or make available to record holders of our common units, within 90 days (or such shorter time as required by SEC rules) after the close of each fiscal year, an annual report containing financial statements for such fiscal year,
presented in accordance with U.S. GAAP, including a balance sheet and statements of operations, partnership equity and cash flows, in each case audited by our independent public accountants. Except for our fourth quarter, we will also furnish or
make available within 45 days (or such shorter time as required by SEC rules) after the close of each quarter a report containing unaudited financial statements and such other information as may be required by applicable law, regulation or rule of
the New York Stock Exchange. We will be deemed to have made any such report available if we file such report with the SEC on EDGAR or make the report available on a publicly available website which we maintain.
We will furnish each record holder with information reasonably required for federal and state tax reporting purposes within 90 days after the
close of each calendar year. This information is expected to be furnished in summary form so that some complex calculations normally required of partners can be avoided. Our ability to furnish this summary information to our unitholders will depend
on their cooperation in supplying us with
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specific information. Every unitholder will receive information to assist him in determining his federal and state tax liability and in filing his federal and state income tax returns, regardless
of whether he supplies us with the necessary information.
Right to Inspect Our Books and Records
Our partnership agreement provides that a limited partner can, for a purpose reasonably related to his interest as a limited partner, upon
reasonable written demand stating the purpose of such demand and at his own expense, have furnished to him:
(1) a current
list of the name and last known address of each partner;
(2) a copy of our tax returns;
(3) information as to the amount of cash, and a description and statement of the agreed value of any other property or
services, contributed or to be contributed by each partner and the date on which each partner became a partner;
(4) copies
of our partnership agreement, our certificate of limited partnership and related amendments and powers of attorney under which they have been executed;
(5) information regarding the status of our business and our financial condition; and
(6) any other information regarding our affairs as is just and reasonable.
Our general partner may, and intends to, keep confidential from the limited partners trade secrets or other information the disclosure of
which our general partner believes in good faith is not in our best interests or that we are required by law or by agreements with third parties to keep confidential.
Fiduciary and Other Duties
The Delaware
Revised Uniform Limited Partnership Act, (Delaware Act) provides that Delaware limited partnerships may, in their partnership agreements, expand, restrict or eliminate the duties (including fiduciary duties) otherwise owed by a general
partner to limited partners and the partnership. Our partnership agreement contains various provisions modifying and restricting the duties that might otherwise be owed by our general partner. We have adopted these provisions to allow our general
partner or its affiliates to engage in transactions with us that otherwise might be prohibited by state law fiduciary standards and to take into account the interests of other parties in addition to our interests when resolving conflicts of
interest. We believe this is appropriate and necessary because the board of directors of our general partner has fiduciary duties to manage our general partner in a manner beneficial both to its owner, Williams, as well as to you. Without these
modifications, the general partners ability to make decisions involving conflicts of interests would be restricted. The modifications to the fiduciary standards benefit our general partner by enabling it to take into consideration all parties
involved in the proposed action. These modifications also strengthen the ability of our general partner to attract and retain experienced and capable directors. These modifications represent a detriment to the common unitholders because they
restrict the remedies available to unitholders for actions that, without those limitations, might constitute breaches of fiduciary duty, as described below, and permit our general partner to take into account the interests of third parties in
addition to our interests when resolving conflicts of interest. The following is a summary of:
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the fiduciary duties imposed on our general partner by, and the rights and remedies of unitholders under, the Delaware Act; and |
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material modifications of these duties contained in our partnership agreement. |
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State law fiduciary duty standards and unitholder rights and remedies |
Fiduciary duties are generally considered to include an obligation to act with due care and loyalty. The duty of care, in the absence of a provision in a partnership agreement providing otherwise, would generally require a general partner to act
for the partnership in the same manner as a prudent person would act on his own behalf. The duty of loyalty, in the absence of a provision in a partnership agreement providing otherwise, would generally prohibit a general partner of a Delaware
limited partnership from taking any action or engaging in any transaction where a conflict of interest is present. |
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The Delaware Act generally provides that a limited partner may institute legal action on behalf of the partnership to recover damages from a third party where a general partner has refused to institute the action or
where an effort to cause a general partner to do so is not likely to succeed. These actions include actions against a general partner for breach of its duties or of the partnership agreement. In addition, the statutory or case law of some
jurisdictions may permit a limited partner to institute legal action on behalf of himself and all other similarly situated limited partners to recover damages from a general partner for violations of its duties to the limited partners.
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Modifications in our partnership agreement |
Our partnership agreement contains provisions that waive or consent to conduct by our general partner and its affiliates that might otherwise raise issues as to compliance with duties or applicable law. For example, our partnership agreement
provides that when our general partner is acting in its capacity as our general partner, as opposed to in its individual capacity, it must act in good faith and will not be subject to any other standard under applicable law. In addition,
our partnership agreement provides that when our general partner is acting in its individual capacity, as opposed to in its capacity as our general partner, it may act without any fiduciary obligation to us or our unitholders whatsoever. These
standards reduce the obligations to which our general partner would otherwise be held under applicable Delaware law. |
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Our partnership agreement generally provides that affiliated transactions by the partnership and resolutions of conflicts of interest in the operation of the partnership not involving a vote of unitholders and that are
not approved by the conflicts committee of the board of directors of our general partner must be: |
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on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or |
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fair and reasonable to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us).
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If our general partner does not seek approval from the conflicts committee and the board of directors of our general partner determines that the resolution or course of action taken with respect to the conflict of
interest satisfies either of the standards set forth in the bullet points above, then it will be presumed that, in making its decision, the board of directors, which may include board members affected by the conflict of interest, acted in good
faith, and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. These standards reduce the obligations to which
our general partner would otherwise be held. |
In addition to the other more specific provisions limiting the obligations of
our general partner, our partnership agreement further provides that our general partner, its affiliates and their officers and directors will not be liable for monetary damages to us or our limited partners for errors of judgment or for any acts or
omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that our general partner, such affiliate or such person acted in bad faith or engaged in fraud or willful misconduct or, in the case
of a criminal matter, acted with knowledge that the conduct was unlawful.
In order to become one of our limited partners, a common
unitholder is required to agree to be bound by the provisions in the partnership agreement, including the provisions discussed above. Please read Description of the Common Units Transfer of Common Units. This is in accordance with
the policy of the Delaware Act favoring the principle of freedom of contract and the enforceability of partnership agreements. The failure of a limited partner to sign our partnership agreement does not render the partnership agreement unenforceable
against that person.
Under the partnership agreement, we must indemnify, among others, our general partner and its officers, directors
and managers, to the fullest extent permitted by law, against liabilities, costs and expenses incurred by our general partner or these other persons. We must provide this indemnification unless there has been a final and non-appealable judgment by a
court of competent jurisdiction determining that these persons acted in bad faith or engaged in fraud or willful misconduct. We also must provide this indemnification for criminal proceedings unless our general partner or these other persons acted
with knowledge that their conduct was unlawful. Thus, our general partner could be indemnified for its negligent acts if it meets the requirements set forth above. To the extent that these provisions purport to include indemnification for
liabilities arising under the Securities Act, in the opinion of the SEC such indemnification is contrary to public policy and therefore unenforceable. If you have questions regarding the fiduciary duties of our general partner please read The
Partnership Agreement Indemnification.
Applicable Law; Forum, Venue and Jurisdiction
Our partnership agreement is governed by Delaware law. Our partnership agreement requires that any claims, suits, actions or proceedings:
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arising out of or relating in any way to the partnership agreement (including any claims, suits or actions to interpret, apply or enforce the provisions of the partnership agreement) or the duties, obligations or
liabilities among limited partners or of limited partners, or the rights or powers of, or restrictions on, the limited partners or us; |
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brought in a derivative manner on our behalf; |
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asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee of us or our general partner, or owed by our general partner, to us or the limited partners; |
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asserting a claim arising pursuant to any provision of the Delaware Act; and |
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asserting a claim governed by the internal affairs doctrine |
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shall be exclusively brought in the Court of Chancery of the State of Delaware, regardless of whether such
claims, suits, actions or proceedings sound in contract, tort, fraud or otherwise, are based on common law, statutory, equitable, legal or other grounds, or are derivative or direct claims. By purchasing a common unit, a limited partner is
irrevocably consenting to these limitations and provisions regarding claims, suits, actions or proceedings and submitting to the exclusive jurisdiction of the Court of Chancery of the State of Delaware in connection with any such claims, suits,
actions or proceedings.
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MATERIAL TAX CONSIDERATIONS
This section summarizes the material U.S. federal income tax consequences that may be relevant to prospective unitholders who are individual
citizens or residents of the United States and, unless otherwise noted in the following discussion, is the opinion of Andrews Kurth LLP, our tax counsel, insofar as it relates to legal conclusions with respect to matters of U.S. federal income tax
law. This section is based upon current provisions of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code), existing and proposed Treasury regulations promulgated thereunder (the Treasury Regulations) and
current administrative rulings and court decisions, all of which are subject to change. Changes in these authorities may cause the tax consequences to a prospective unitholder to vary substantially from the consequences described below. Unless the
context otherwise requires, references in this section to us or we are references to Williams Partners L.P. and our operating subsidiaries.
The following discussion does not address all U.S. federal income tax matters that affect us or our unitholders and does not describe the
application of the alternative minimum tax that may be applicable to certain unitholders. To the extent that this section relates to taxation by a state, local or other jurisdiction within the U.S., such discussion is intended to provide only
general information. Moreover, the discussion focuses on unitholders who are individual citizens or residents of the U.S. and has only limited application to corporations, estates, trusts, nonresident aliens or other unitholders subject to
specialized tax treatment, such as tax-exempt institutions, foreign persons, individual retirement accounts (IRAs), real estate investment trusts (REITs), employee benefit plans or mutual funds. Accordingly, we encourage each prospective unitholder
to consult the unitholders own tax advisor in analyzing the federal, state, local and foreign tax consequences particular to that unitholder of the ownership or disposition of the common units and potential changes in applicable tax laws.
We are relying on opinions and advice of Andrews Kurth LLP with respect to the matters described herein. An opinion of counsel represents only
that counsels best legal judgment and does not bind the IRS or the courts. Accordingly, the opinions and statements made in this discussion may not be sustained by a court if contested by the IRS. Any contest of this sort with the IRS may
materially and adversely impact the market for the common units and the prices at which the common units trade. In addition, our costs of any contest with the IRS, principally legal, accounting and related fees, will reduce our cash available for
distribution and thus will be borne indirectly by our unitholders and our general partner. Furthermore, the tax treatment of us, or of an investment in us, may be significantly modified by future legislative or administrative changes or court
decisions, which might be applied retroactively.
Andrews Kurth LLP has not rendered an opinion on the state, local or foreign tax
consequences of an investment in us, and, for the reasons described below, has not rendered an opinion with respect to the following specific U.S. federal income tax issues: (i) the treatment of a unitholder whose common units are loaned to a
short seller to cover a short sale of common units (please read Tax Consequences of Unit Ownership Treatment of Short Sales); (ii) whether our monthly convention for allocating taxable income and losses is permitted by
existing Treasury Regulations (please read Disposition of Common Units Allocations Between Transferors and Transferees); and (iii) whether our method for taking into account Section 743 adjustments is sustainable
in certain cases (please read Tax Consequences of Unit Ownership Section 754 Election and Uniformity of Common Units).
Partnership Status
A partnership is not
a taxable entity and incurs no federal income tax liability. Instead, each partner of a partnership is required to take into account the partners share of items of income, gain, loss and deduction of the partnership in computing the
partners U.S. federal income tax liability, regardless of whether cash distributions are made to him by the partnership. Distributions by a partnership to a partner are generally not taxable to the partner unless the amount of cash distributed
to him is in excess of the partners adjusted basis in the partners partnership interest.
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Section 7704 of the Internal Revenue Code provides that publicly traded partnerships will,
as a general rule, be taxed as corporations for U.S. federal income tax purposes. However, an exception, referred to as the Qualifying Income Exception, exists with respect to publicly traded partnerships of which 90% or more of the
gross income for every taxable year consists of qualifying income. Qualifying income includes income and gains derived from the transportation, storage, processing and marketing of crude oil, natural gas and products thereof. Other types
of qualifying income include interest (other than from a financial business), dividends, gains from the sale of real property and gains from the sale or other disposition of capital assets held for the production of income that otherwise constitutes
qualifying income. We estimate that less than 3% of our current gross income is not qualifying income; however, this estimate could change from time to time. Based upon and subject to this estimate, the factual representations made by us and our
general partner and a review of the applicable legal authorities, Andrews Kurth LLP is of the opinion that at least 90% of our current gross income constitutes qualifying income. The portion of our income that is qualifying income may change from
time to time.
No ruling has been sought from the IRS and the IRS has made no determination as to our status as a partnership or the
status of each of our operating companies as a disregarded entity for U.S. federal income tax purposes. Instead, we will rely on the opinion of Andrews Kurth LLP that, based upon the Internal Revenue Code, the Treasury Regulations, published revenue
rulings and court decisions and the representations described below, we will be classified as a partnership and our operating companies will be disregarded as an entity separate from us for U.S. federal income tax purposes.
In rendering its opinion, Andrews Kurth LLP has relied on factual representations made by us and our general partner. The representations made
by us and our general partner upon which Andrews Kurth LLP has relied include:
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Neither we nor our operating companies have elected or will elect to be treated as a corporation; and |
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For each taxable year, more than 90% of our gross income has been and will be income that Andrews Kurth LLP has opined or will opine is qualifying income within the meaning of Section 7704(d) of the
Internal Revenue Code. |
We believe that these representations have been true in the past and expect that these
representations will continue to be true in the future.
If we fail to meet the Qualifying Income Exception, other than a failure that is
determined by the IRS to be inadvertent and that is cured within a reasonable time after discovery (in which case the IRS may also require us to make adjustments with respect to our unitholders or pay other amounts), we will be treated as
transferring all of our assets, subject to liabilities, to a newly formed corporation, on the first day of the year in which we fail to meet the Qualifying Income Exception, in return for stock in that corporation, and then as distributing that
stock to our unitholders in liquidation. This deemed contribution and liquidation should be tax-free to our unitholders and us so long as we, at that time, do not have liabilities in excess of the tax basis of our assets. Thereafter, we would be
treated as a corporation for U.S. federal income tax purposes.
The present U.S. federal income tax treatment of publicly traded
partnerships, including us, or an investment in our common units may be modified by administrative, legislative or judicial interpretation at any time. For example, from time to time members of the U.S. Congress and the President propose and
consider substantive changes to the existing federal income tax laws that would affect publicly traded partnerships, including the elimination of partnership tax treatment for publicly traded partnerships. Any modification to the U.S. federal income
tax laws and interpretations thereof may or may not be retroactively applied and could make it more difficult or impossible to meet the exception for us to be treated as a partnership for U.S. federal income tax purposes. We are unable to predict
whether any such changes will ultimately be enacted. However, it is possible that a change in law could affect us and may be applied retroactively. Any such changes could negatively impact the value of an investment in our common units.
If for any reason we were treated as a corporation for U.S. federal income tax purposes in any taxable year, our items of income, gain, loss
and deduction would be reflected only on our tax return rather than being passed
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through to our unitholders, and our net income would be taxed to us at corporate rates. In addition, any distribution made to a unitholder would be treated as taxable dividend income, to the
extent of our current and accumulated earnings and profits, or, in the absence of earnings and profits, a nontaxable return of capital, to the extent of the unitholders tax basis in the partners common units, or taxable capital gain,
after the unitholders tax basis in the partners common units is reduced to zero. Accordingly, taxation as a corporation would result in a material reduction in a unitholders cash flow and after-tax return and thus would likely
result in a substantial reduction of the value of the common units.
The remainder of this discussion is based on Andrews Kurth LLPs
opinion that we will be treated as a partnership for U.S. federal income tax purposes.
Tax Consequences of Unit Ownership
Limited Partner Status
Unitholders
who are admitted as limited partners of Williams Partners L.P. will be treated as partners of Williams Partners L.P. for U.S. federal income tax purposes. Also, unitholders whose common units are held in street name or by a nominee and who have the
right to direct the nominee in the exercise of all substantive rights attendant to the ownership of their common units will be treated as partners of Williams Partners L.P. for U.S. federal income tax purposes.
A beneficial owner of common units whose units have been transferred to a short seller to complete a short sale would appear to lose the
unitholders status as a partner with respect to those units for U.S. federal income tax purposes. Please read Treatment of Short Sales.
Items of our income, gain, loss or deduction would not appear to be reportable by a unitholder who is not a partner for U.S. federal income
tax purposes, and any cash distributions received by a unitholder who is not a partner for U.S. federal income tax purposes would therefore appear to be fully taxable as ordinary income. These holders are urged to consult their own tax advisors with
respect to their tax consequences of holding common units in Williams Partners L.P. for U.S. federal income tax purposes. The references to unitholders in the discussion that follows are to persons who are treated as partners in Williams
Partners L.P. for U.S. federal income tax purposes.
Flow-Through of Taxable Income
Subject to the discussion below under Entity-Level Collections, we do not pay any U.S. federal income tax. Instead, each
unitholder will be required to report on the unitholders income tax return the unitholders share of our income, gains, losses and deductions without regard to whether we make cash distributions to him. Consequently, we may allocate
income to a unitholder even if he has not received a cash distribution. Each unitholder will be required to include in income the unitholders allocable share of our income, gains, losses and deductions for our taxable year or years ending with
or within the unitholders taxable year. Our taxable year ends on December 31.
Treatment of Distributions
Distributions made by us to a unitholder generally will not be taxable to the unitholder for U.S. federal income tax purposes, except to the
extent the amount of any such cash distribution exceeds the unitholders tax basis in the unitholders common units immediately before the distribution. Cash distributions made by us to a unitholder in an amount in excess of the
unitholders tax basis in the unitholders common units generally will be considered to be gain from the sale or exchange of the common units, taxable in accordance with the rules described under Disposition of Common
Units below. Any reduction in a unitholders share of our liabilities for which no partner, including our general partner, bears the economic risk of loss, known as nonrecourse liabilities, will be treated as a distribution by
us of cash to that unitholder. To the extent our
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distributions cause a unitholders at risk amount to be less than zero at the end of any taxable year, he must recapture any losses deducted in previous years. Please read
Limitations on Deductibility of Losses.
A decrease in a unitholders percentage interest in us because of our
issuance of additional common units will decrease the unitholders share of our nonrecourse liabilities, and thus will result in a corresponding deemed distribution of cash. This deemed distribution may constitute a non-pro rata distribution. A
non-pro rata distribution of money or property, including a deemed distribution, may result in ordinary income to a unitholder, regardless of the unitholders tax basis in the unitholders common units, if the distribution reduces the
unitholders share of our unrealized receivables, including depreciation recapture, and/or substantially appreciated inventory items, both as defined in Section 751 of the Internal Revenue Code, and collectively,
Section 751 Assets. To that extent, the unitholder will be treated as having been distributed the unitholders proportionate share of the Section 751 Assets and then having exchanged those assets with us in return for the
non-pro rata portion of the actual distribution made to him. This latter deemed exchange will generally result in the unitholders realization of ordinary income, which will equal the excess of the non-pro rata portion of that distribution over
the unitholders tax basis (generally zero) in the Section 751 Assets deemed relinquished in the exchange.
Basis of Common Units
A unitholders initial tax basis in the unitholders common units will be the amount he paid for the common units
increased by the unitholders initial allocable share of our nonrecourse liabilities. That basis generally will be (i) increased by the unitholders share of our income and by any increases in the unitholders share of our
nonrecourse liabilities, and (ii) decreased, but not below zero, by distributions from us, by the unitholders share of our losses, by any decreases in the unitholders share of our nonrecourse liabilities and by the unitholders
share of our expenditures that are not deductible in computing taxable income and are not required to be capitalized. A unitholder will have no share of our debt that is recourse to our general partner, but will have a share, generally based on the
unitholders share of our profits, of our nonrecourse liabilities. Please read Disposition of Common Units Recognition of Gain or Loss.
Limitations on Deductibility of Losses
The deduction by a unitholder of that unitholders share of our losses will be limited to the tax basis the unitholder has in the
unitholders common units and, in the case of an individual, estate, trust or corporate unitholder (if more than 50% of the value of the corporate unitholders stock is owned directly or indirectly by or for five or fewer individuals or
some tax-exempt organizations), to the amount for which the unitholder is considered to be at risk with respect to our activities, if that amount is less than the unitholders tax basis. A unitholder subject to these limitations
must recapture losses deducted in previous years to the extent that distributions cause the unitholders at risk amount to be less than zero at the end of any taxable year. Losses disallowed to a unitholder or recaptured as a result of these
limitations will carry forward and will be allowable as a deduction in a later year to the extent that the unitholders tax basis or at risk amount, whichever is the limiting factor, is subsequently increased, provided such losses are otherwise
allowable. Upon the taxable disposition of a unit, any gain recognized by a unitholder can be offset by losses that were previously suspended by the at risk limitation but may not be offset by losses suspended by the basis limitation. Any loss
previously suspended by the at risk limitation in excess of that gain would no longer be utilizable.
In general, a unitholder will be at
risk to the extent of the tax basis of the unitholders common units, excluding any portion of that basis attributable to the unitholders share of our nonrecourse liabilities, reduced by (i) any portion of that basis representing
amounts otherwise protected against loss because of a guarantee, stop loss agreement or other similar arrangement and (ii) any amount of money he borrows to acquire or hold the unitholders common units, if the lender of those borrowed
funds owns an interest in us, is related to another unitholder or can look only to the common units for repayment. A unitholders at risk amount will increase or decrease as the tax basis of the unitholders units increases or decreases,
other than tax basis increases or decreases attributable to increases or decreases in the unitholders share of our nonrecourse liabilities.
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In addition to the basis and at risk limitations on the deductibility of losses, the passive loss
limitations generally provide that individuals, estates, trusts and some closely-held corporations and personal service corporations are permitted to deduct losses from passive activities, which are generally trade or business activities in which
the taxpayer does not materially participate, only to the extent of the taxpayers income from those passive activities. The passive loss limitations are applied separately with respect to each publicly traded partnership. Consequently, any
passive losses we generate will only be available to offset our passive income generated in the future and will not be available to offset income from other passive activities or investments, including our investments or a unitholders
investments in other publicly traded partnerships, or a unitholders salary or active business income. Passive losses that are not deductible because they exceed a unitholders share of income we generate may be deducted in full when the
unitholder disposes of the unitholders entire investment in us in a fully taxable transaction with an unrelated party. The passive loss limitations are applied after other applicable limitations on deductions, including the at risk rules and
the basis limitation.
A unitholders share of our net income may be offset by any of our suspended passive losses, but it may not be
offset by any other current or carryover losses from other passive activities, including those attributable to other publicly traded partnerships.
Limitations on Interest Deductions
The deductibility of a non-corporate taxpayers investment interest expense is generally limited to the amount of that
taxpayers net investment income. Investment interest expense includes:
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interest on indebtedness properly allocable to property held for investment; |
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our interest expense attributed to portfolio income; and |
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the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income. |
The computation of a unitholders investment interest expense will take into account interest on any margin account borrowing or other
loan incurred to purchase or carry a unit. Net investment income includes gross income from property held for investment and amounts treated as portfolio income under the passive loss rules, less deductible expenses, other than interest, directly
connected with the production of investment income, but generally does not include gains attributable to the disposition of property held for investment or qualified dividend income (if applicable). A unitholders share of a publicly traded
partnerships portfolio income and, according to the IRS, net passive income will be treated as investment income for purposes of the investment interest expense limitation.
Entity-Level Collections
If we
are required or elect under applicable law to pay any U.S. federal, state, local or non-U.S. income tax on behalf of any unitholder or our general partner or any former unitholder, we are authorized to pay those taxes from our funds. That payment,
if made, will be treated as a distribution of cash to the unitholder on whose behalf the payment was made. If the payment is made on behalf of a unitholder whose identity cannot be determined, we are authorized to treat the payment as a distribution
to all current unitholders. We are authorized to amend our partnership agreement in the manner necessary to maintain uniformity of intrinsic tax characteristics of common units and to adjust later distributions, so that after giving effect to these
distributions, the priority and characterization of distributions otherwise applicable under our partnership agreement is maintained as nearly as is practicable. Payments by us as described above could give rise to an overpayment of tax on behalf of
an individual unitholder in which event the unitholder would be required to file a claim in order to obtain a credit or refund.
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Allocation of Income, Gain, Loss and Deduction
In general, if we have a net profit, our items of income, gain, loss and deduction will be allocated among our general partner and the
unitholders in accordance with their percentage interests in us. At any time that incentive distributions are made to our general partner, gross income will be allocated to the general partner to the extent of these distributions. If we have a net
loss for an entire taxable year, that loss will be allocated first to our general partner and the unitholders in accordance with their percentage interests in us to the extent of their positive capital accounts and, second, to our general partner.
Specified items of our income, gain, loss and deduction generally will be allocated under Section 704(c) of the Code (or the
principles of Section 704(c) of the Code) to account for any difference between the tax basis and fair market value of our assets at the time such assets are contributed to us and at the time of any subsequent offering of our common units (a
Book-Tax Disparity). As a result, the federal income tax burden associated with any Book-Tax Disparity immediately prior to an offering generally will be borne by the partners holding interests in us prior to such offering. In addition,
items of recapture income will be specially allocated to the extent possible to the unitholder who was allocated the deduction giving rise to the treatment of that gain as recapture income in order to minimize the recognition of ordinary income by
other unitholders. Finally, although we do not expect that our operations will result in the creation of negative capital accounts, if negative capital accounts nevertheless result, items of our income and gain will be allocated in such amount and
manner as is needed to eliminate the negative balance as quickly as possible.
An allocation of items of our income, gain, loss or
deduction, other than an allocation required by the Internal Revenue Code to eliminate a Book-Tax Disparity, will generally be given effect for U.S. federal income tax purposes in determining a partners share of an item of income, gain, loss
or deduction only if the allocation has substantial economic effect. In any other case, a partners share of an item will be determined on the basis of the unitholders interest in us, which will be determined by taking into account all
the facts and circumstances including (i) the partners relative contributions to us, (ii) the interests of all the partners in profits and losses, (iii) the interest of all the partners in cash flow and (iv) the rights of
all the partners to distributions of capital upon liquidation. Andrews Kurth LLP is of the opinion that, with the exception of the issues described in Section 754 Election and Disposition of Common Units
Allocations Between Transferors and Transferees, allocations under our partnership agreement will be given effect for U.S. federal income tax purposes in determining a partners share of an item of income, gain, loss or deduction.
Treatment of Short Sales
A
unitholder whose common units are loaned to a short seller to cover a short sale of common units may be considered as having disposed of those units. If so, such unitholder would no longer be treated for tax purposes as a partner with
respect to those common units during the period of the loan and may recognize gain or loss from the disposition. As a result, during this period:
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any of our income, gain, loss or deduction with respect to those common units would not be reportable by the unitholder; |
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any cash distributions received by the unitholder as to those common units would be fully taxable; and |
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all of these distributions may be subject to tax as ordinary income. |
Andrews Kurth LLP has
not rendered an opinion regarding the tax treatment of a unitholder whose common units are loaned to a short seller to cover a short sale of common units; therefore, unitholders desiring to assure their status as partners and avoid the risk of gain
recognition from a loan to a short seller are urged to consult a tax advisor to discuss whether it is advisable to modify any applicable brokerage account agreements to prohibit their brokers from borrowing and loaning their common units. The IRS
has previously announced that it is studying issues relating to the tax treatment of short sales of partnership interests. Please also read Disposition of Common Units Recognition of Gain or Loss.
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Tax Rates
Under current law, the highest marginal U.S. federal income tax rate applicable to ordinary income of individuals is 39.6% and the highest
marginal U.S. federal income tax rate applicable to long-term capital gains (generally, gains from the sale or exchange of certain investment assets held for more than one year) of individuals is 20%. These rates are subject to change by new
legislation at any time.
In addition, a 3.8% net investment tax, or NIIT, applies to certain net investment income earned by individuals,
estates and trusts. For these purposes, net investment income generally includes a unitholders allocable share of our income and gain realized by a unitholder from a sale of common units. In the case of an individual, the tax will be imposed
on the lesser of (i) the unitholders net investment income or (ii) the amount by which the unitholders modified adjusted gross income exceeds specified threshold levels depending on a unitholders federal income tax filing
status. In the case of an estate or trust, the tax will be imposed on the lesser of (i) undistributed net investment income, or (ii) the excess adjusted gross income over the dollar amount at which the highest income tax bracket applicable
to an estate or trust begins. Prospective unitholders are urged to consult with their tax advisors as to the impact of the NIIT on an investment in our common units.
Section 754 Election
We have
made the election permitted by Section 754 of the Internal Revenue Code. That election is irrevocable without the consent of the IRS. The election will generally permit us to adjust a common unit purchasers tax basis in our assets
(inside basis) under Section 743(b) of the Internal Revenue Code to reflect the unitholders purchase price. The Section 743(b) adjustment separately applies to any transferee of a unitholder who purchases outstanding
common units from the unitholder based upon the values and tax bases of our assets at the time of the transfer to the transferee. The Section 743(b) adjustment does not apply to a person who purchases common units directly from us, and belongs
only to the purchaser and not to other unitholders. For purposes of this discussion, a unitholders inside basis in our assets will be considered to have two components: (i) the unitholders share of our tax basis in our assets
(common basis) and (ii) the unitholders Section 743(b) adjustment to that basis.
Where the remedial
allocation method is adopted (which we have adopted), Treasury Regulations under Section 743 of the Internal Revenue Code require a portion of the Section 743(b) adjustment attributable to recovery property that is subject to depreciation
under Section 168 of the Internal Revenue Code to be depreciated over the remaining cost recovery period for the propertys unamortized Book-Tax Disparity. Under Treasury Regulation Section 1.167(c)-1(a)(6), a Section 743(b)
adjustment attributable to property subject to depreciation under Section 167 of the Internal Revenue Code, rather than cost recovery deductions under Section 168, is generally required to be depreciated using either the straight-line
method or the 150% declining balance method. Under our partnership agreement, our general partner is authorized to take a position to preserve the uniformity of units even if that position is not consistent with these and any other Treasury
Regulations. Please read Uniformity of Common Units.
We depreciate the portion of a Section 743(b) adjustment
attributable to unrealized appreciation in the value of our assets, to the extent of any unamortized Book-Tax Disparity, using a rate of depreciation or amortization derived from the depreciation or amortization method and useful life applied to the
propertys unamortized Book-Tax Disparity, or treat that portion as non-amortizable to the extent attributable to property which is not amortizable. This method is consistent with methods employed by other publicly traded partnerships but is
arguably inconsistent with Treasury Regulation Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our assets. To the extent this Section 743(b) adjustment is attributable to appreciation in value in
excess of the unamortized Book-Tax Disparity, we will apply the rules described in the Treasury Regulations and legislative history. If we determine that this position cannot reasonably be taken, we may take a depreciation or amortization position
under which all purchasers acquiring common units in the same month would receive depreciation or amortization deductions, whether attributable to common basis or a Section 743(b) adjustment, based upon the same applicable rate as if they had
purchased a direct interest in our assets. If this
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position is adopted, it may result in lower annual depreciation or amortization deductions than would otherwise be allowable to some unitholders. Please read Uniformity of Common
Units. A unitholders tax basis for the unitholders common units is reduced by the unitholders share of our deductions (whether or not such deductions were claimed on an individuals income tax return) so that any
position we take that understates deductions will overstate the common unitholders basis in the unitholders common units, which may cause the unitholder to understate gain or overstate loss on any sale of such units. Please read
Disposition of Common Units Recognition of Gain or Loss. Andrews Kurth LLP has not rendered an opinion as to whether our method for taking into account Section 743 adjustments is sustainable for property subject to
depreciation under Section 167 of the Internal Revenue Code or if we use an aggregate approach as described above, as there is no direct or indirect controlling authority addressing the validity of these positions. Moreover, the IRS may
challenge our position with respect to depreciating or amortizing the Section 743(b) adjustment we take to preserve the uniformity of the units. If such a challenge were sustained, the gain from the sale of units might be increased without the
benefit of additional deductions.
The calculations involved in the Section 754 election are complex and will be made on the basis of
assumptions as to the value of our assets and other matters. For example, the allocation of the Section 743(b) adjustment among our assets must be made in accordance with the Internal Revenue Code. The IRS could seek to reallocate some or all
of any Section 743(b) adjustment we allocated to our tangible assets to goodwill instead. Goodwill, an intangible asset, is generally nonamortizable or amortizable over a longer period of time or under a less accelerated method than our
tangible assets. We cannot assure you that the determinations we make will not be successfully challenged by the IRS and that the deductions resulting from them will not be reduced or disallowed altogether. Should the IRS require a different basis
adjustment to be made, and should, in our opinion, the expense of compliance exceed the benefit of the election, we may seek permission from the IRS to revoke our Section 754 election. If permission is granted, a subsequent purchaser of units
may be allocated more income than he would have been allocated had the election not been revoked.
Tax Treatment of Operations
Accounting Method and Taxable Year
We use the year ending December 31 as our taxable year and the accrual method of accounting for federal income tax purposes. Each
unitholder will be required to include in income the unitholders share of our income, gain, loss and deduction for our taxable year or years ending within or with the unitholders taxable year. In addition, a unitholder who has a taxable
year ending on a date other than December 31 and who disposes of all of the unitholders common units following the close of our taxable year but before the close of the unitholders taxable year must include the unitholders
share of our income, gain, loss and deduction in income for the unitholders taxable year, with the result that he will be required to include in income for the unitholders taxable year the unitholders share of more than one year of
our income, gain, loss and deduction. Please read Disposition of Common Units Allocations Between Transferors and Transferees.
Tax Basis, Depreciation and Amortization
The tax basis of our assets is used for purposes of computing depreciation and cost recovery deductions and, ultimately, gain or loss on the
disposition of these assets. The federal income tax burden associated with the difference between the fair market value of our assets and their tax basis immediately prior to the time we issue common units in an offering will be borne by our
partners holding interests in us prior to such offering. Please read Tax Consequences of Unit Ownership Allocation of Income, Gain, Loss and Deduction.
To the extent allowable, we may elect to use the depreciation and cost recovery methods, including bonus depreciation to the extent
applicable, that will result in the largest deductions being taken in the early years after assets subject to these allowances are placed in service. Property we subsequently acquire or construct may be depreciated using accelerated methods
permitted by the Internal Revenue Code.
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If we dispose of depreciable property by sale, foreclosure or otherwise, all or a portion of any
gain, determined by reference to the amount of depreciation previously deducted and the nature of the property, may be subject to the recapture rules and taxed as ordinary income rather than capital gain. Similarly, a unitholder who has taken cost
recovery or depreciation deductions with respect to property we own will likely be required to recapture some or all of those deductions as ordinary income upon a sale of the unitholders interest in us. Please read Tax
Consequences of Unit Ownership Allocation of Income, Gain, Loss and Deduction and Disposition of Common Units Recognition of Gain or Loss.
The costs we incur in offering and selling our common units (called syndication expenses) must be capitalized and cannot be
deducted currently, ratably or upon our termination. While there are uncertainties regarding the classification of costs as organization expenses, which may be amortized by us, and as syndication expenses, which may not be amortized by us, the
underwriting discount we incur will be treated as syndication expenses.
Valuation and Tax Basis of Our Properties
The federal income tax consequences of the ownership and disposition of common units will depend in part on our estimates of the relative fair
market values, and the tax bases, of our assets. Although we may from time to time consult with professional appraisers regarding valuation matters, we will make many of the relative fair market value estimates ourselves. These estimates and
determinations of tax basis are subject to challenge and will not be binding on the IRS or the courts. If the estimates of fair market value or basis are later found to be incorrect, the character and amount of items of income, gain, loss or
deduction previously reported by unitholders could change, and unitholders could be required to adjust their tax liability for prior years and incur interest and penalties with respect to those adjustments.
Disposition of Common Units
Recognition of Gain or
Loss
A unitholder will be required to recognize gain or loss on a sale of common units equal to the difference between the
unitholders amount realized and the unitholders tax basis for the common units sold. A unitholders amount realized will equal the sum of the cash or the fair market value of other property the unitholder receives plus the
unitholders share of our liabilities attributable to the common units sold. Because the amount realized includes a unitholders share of our liabilities, the gain recognized on the sale of common units could result in a tax liability in
excess of any cash received from the sale.
Prior distributions from us that in the aggregate were in excess of the cumulative net taxable
income for a common unit and, therefore, decreased a unitholders tax basis in that common unit will, in effect, become taxable income if the common unit is sold at a price greater than the unitholders tax basis in that common unit, even
if the price received is less than the unitholders original cost.
Except as noted below, gain or loss recognized by a unitholder,
other than a dealer in units, on the sale or exchange of a common unit will generally be taxable as capital gain or loss. Capital gain recognized by an individual on the sale of units held for more than one year will generally be taxed
at the U.S. federal income tax rate applicable to long-term capital gains. However, a portion of this gain or loss, which will likely be substantial, will be separately computed and taxed as ordinary income or loss under Section 751 of the
Internal Revenue Code to the extent attributable to assets giving rise to depreciation recapture or other unrealized receivables or inventory items that we own. The term unrealized receivables includes potential
recapture items, including depreciation recapture. Ordinary income attributable to unrealized receivables, inventory items and depreciation recapture may exceed net taxable gain realized on the sale of a common unit and may be recognized even if
there is a net taxable loss realized on the sale of a unit. Thus, a unitholder may recognize both ordinary income and a capital loss upon a sale of units. Capital losses may offset capital gains and no more than $3,000 of ordinary income each year,
in the case of individuals, and may only be used to offset capital gains in the case of
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corporations. Both ordinary income and capital gain recognized by a unitholder on the sale or exchange of a common unit may be subject to the NIIT in certain circumstances. Please read
Tax Consequences of Unit Ownership Tax Rates.
The IRS has ruled that a partner who acquires interests in a
partnership in separate transactions must combine those interests and maintain a single adjusted tax basis for all those interests. Upon a sale or other disposition of less than all of those interests, a portion of that tax basis must be allocated
to the interests sold using an equitable apportionment method, which generally means that the tax basis allocated to the interest sold equals an amount that bears the same relation to the partners tax basis in the unitholders
entire interest in the partnership as the value of the interest sold bears to the value of the partners entire interest in the partnership. Treasury Regulations under Section 1223 of the Internal Revenue Code allow a selling unitholder
who can identify common units transferred with an ascertainable holding period to elect to use the actual holding period of the common units transferred. Thus, according to the ruling discussed above, a common unitholder will be unable to select
high or low basis common units to sell as would be the case with corporate stock, but, according to the Treasury Regulations, may designate specific common units sold for purposes of determining the holding period of common units transferred. A
unitholder electing to use the actual holding period of common units transferred must consistently use that identification method for all subsequent sales or exchanges of common units. A unitholder considering the purchase of additional common units
or a sale of common units purchased in separate transactions is urged to consult the unitholders tax advisor as to the possible consequences of this ruling and application of the Treasury Regulations.
Specific provisions of the Internal Revenue Code affect the taxation of some financial products and securities, including partnership
interests, by treating a taxpayer as having sold an appreciated partnership interest, one in which gain would be recognized if it were sold, assigned or terminated at its fair market value, if the taxpayer or related persons enter(s)
into:
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in each case, with respect to the partnership interest or substantially
identical property.
Moreover, if a taxpayer has previously entered into a short sale, an offsetting notional principal contract or a
futures or forward contract with respect to the partnership interest, the taxpayer will be treated as having sold that position if the taxpayer or a related person then acquires the partnership interest or substantially identical property. The
Secretary of the Treasury is also authorized to issue regulations that treat a taxpayer that enters into transactions or positions that have substantially the same effect as the preceding transactions as having constructively sold the financial
position.
Allocations Between Transferors and Transferees
In general, our taxable income or loss will be determined annually, will be prorated on a monthly basis and will be subsequently apportioned
among the unitholders in proportion to the number of common units owned by each of them as of the opening of the applicable exchange on the first business day of the month, which we refer to in this discussion as the Allocation Date.
However, gain or loss realized on a sale or other disposition of our assets other than in the ordinary course of business will be allocated among the unitholders on the Allocation Date in the month in which that gain or loss is recognized. As a
result, a unitholder transferring common units may be allocated income, gain, loss and deduction realized after the date of transfer.
Although simplifying conventions are contemplated by the Internal Revenue Code and most publicly traded partnerships use similar simplifying
conventions, the use of this method may not be permitted under existing
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Treasury Regulations as there is no direct or indirect controlling authority on this issue. The Department of the Treasury and the IRS have issued proposed Treasury Regulations that provide a
safe harbor pursuant to which a publicly traded partnership may use a similar monthly simplifying convention to allocate tax items among transferor and transferee unitholders, although such tax items must be prorated on a daily basis. Nonetheless,
the proposed regulations do not specifically authorize the use of the proration method we have adopted. Existing publicly traded partnerships are entitled to rely on these proposed Treasury Regulations; however, they are not binding on the IRS and
are subject to change until final Treasury Regulations are issued. Accordingly, Andrews Kurth LLP has not rendered an opinion on the validity of this method of allocating income and deductions between transferor and transferee unitholders because
the issue has not been finally resolved by the IRS or the courts. If this method is not allowed under the Treasury Regulations, or only applies to transfers of less than all of the unitholders interest, our taxable income or losses might be
reallocated among the unitholders. We are authorized to revise our method of allocation between transferor and transferee unitholders, as well as unitholders whose interests vary during a taxable year, to conform to a method permitted under future
Treasury Regulations.
A unitholder who owns common units at any time during a quarter and who disposes of them prior to the record date
set for a cash distribution for that quarter will be allocated items of our income, gain, loss and deduction attributable to the month of disposition but will not be entitled to receive that cash distribution.
Notification Requirements
A
unitholder who sells any of the unitholders common units is generally required to notify us in writing of that sale within 30 days after the sale (or, if earlier, January 15 of the year following the sale). A purchaser of common units who
purchases common units from another unitholder is also generally required to notify us in writing of that purchase within 30 days after the purchase. Upon receiving such notifications, we are required to notify the IRS of that transaction and to
furnish specified information to the transferor and transferee. Failure to notify us of a transfer of common units may, in some cases, lead to the imposition of penalties. However, these reporting requirements do not apply to a sale by an individual
who is a citizen of the U.S. and who effects the sale or exchange through a broker who will satisfy such requirements.
Constructive Termination
We will be considered to have constructively terminated as a partnership for U.S. federal income tax purposes upon the
sale or exchange of our interests that, in the aggregate, constitute 50% or more of the total interests in our capital and profits within a 12-month period. For such purposes, multiple sales of the same common unit are counted only once. A
constructive termination results in the closing of our taxable year for all unitholders. In the case of a unitholder reporting on a taxable year other than a calendar year, the closing of our taxable year may result in more than 12 months of our
taxable income or loss being includable in the unitholders taxable income for the year of termination. A constructive termination occurring on a date other than December 31 will result in us filing two tax returns for one fiscal year and
the cost of the preparation of these returns will be borne by all unitholders. However, pursuant to an IRS relief procedure for publicly traded partnerships that have constructively terminated, the IRS may allow, among other things, that we provide
a single Schedule K-1 for the taxable year in which the termination occurs. We would be required to make new tax elections after a termination, including a new election under Section 754 of the Internal Revenue Code, and a termination would
result in a deferral of our deductions for depreciation. A termination could also result in penalties if we were unable to determine that the termination had occurred. Moreover, a termination might either accelerate the application of, or subject us
to, any tax legislation enacted before the termination.
Uniformity of Common Units
Because we cannot match transferors and transferees of common units and because of other reasons, we must maintain uniformity of the economic
and tax characteristics of the common units to a purchaser of these common units. In the absence of uniformity, we may be unable to completely comply with a number of U.S.
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federal income tax requirements, both statutory and regulatory. A lack of uniformity can result from a literal application of Treasury Regulation Section 1.167(c)-1(a)(6). Any non-uniformity
could have a negative impact on the value of the common units. Please read Tax Consequences of Unit Ownership Section 754 Election.
We depreciate the portion of a Section 743(b) adjustment attributable to unrealized appreciation in the value of our assets, to the
extent of any unamortized Book-Tax Disparity, using a rate of depreciation or amortization derived from the depreciation or amortization method and useful life applied to the propertys unamortized Book-Tax Disparity, or treat that portion as
nonamortizable, to the extent attributable to property which is not amortizable, consistent with the Treasury Regulations under Section 743 of the Internal Revenue Code, even though that position may be inconsistent with Treasury Regulation
Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our assets. Please read Tax Consequences of Unit Ownership Section 754 Election. To the extent that the
Section 743(b) adjustment is attributable to appreciation in value in excess of the unamortized Book-Tax Disparity, we will apply the rules described in the Treasury Regulations and legislative history. If we determine that this position cannot
reasonably be taken, we may adopt a depreciation and amortization position under which all purchasers acquiring common units in the same month would receive depreciation and amortization deductions, whether attributable to common basis or a
Section 743(b) adjustment, based upon the same applicable rate as if they had purchased a direct interest in our assets. If this position is adopted, it may result in lower annual depreciation and amortization deductions than would otherwise be
allowable to some unitholders and risk the loss of depreciation and amortization deductions not taken in the year that these deductions are otherwise allowable. This position will not be adopted if we determine that the loss of depreciation and
amortization deductions will have a material adverse effect on the unitholders. If we choose not to utilize this aggregate method, we may use any other reasonable depreciation and amortization method to preserve the uniformity of the intrinsic tax
characteristics of any units that would not have a material adverse effect on the unitholders. In either case, and as stated above under Tax Consequences of Unit Ownership Section 754 Election, Andrews Kurth LLP, has
not rendered an opinion with respect to these methods. Moreover, the IRS may challenge any method of depreciating the Section 743(b) adjustment described in this paragraph. If this challenge were sustained, the uniformity of common units might
be affected, and the gain from the sale of common units might be increased without the benefit of additional deductions. Please read Disposition of Common Units Recognition of Gain or Loss.
Tax-Exempt Organizations and Other Investors
Ownership of common units by employee benefit plans, other tax-exempt organizations, non-resident aliens, non-U.S. corporations and other
non-U.S. persons raises issues unique to those investors and, as described below to a limited extent, may have substantially adverse tax consequences to them. Tax-exempt entities and non-U.S persons, are encouraged to consult their tax advisors
before investing in our common units.
Employee benefit plans and most other organizations exempt from U.S. federal income tax, including
individual retirement accounts and other retirement plans, are subject to U.S. federal income tax on unrelated business taxable income. Virtually all of our income allocated to a unitholder that is a tax-exempt organization will be unrelated
business taxable income and will be taxable to it.
Non-resident aliens and non-U.S. corporations, trusts or estates that own common units
will be considered to be engaged in business in the U.S. because of the ownership of common units. As a consequence, they will be required to file U.S. federal tax returns to report their share of our income, gain, loss or deduction and pay U.S.
federal income tax at regular rates on their share of our net income or gain. Moreover, under rules applicable to publicly traded partnerships, distributions to non-U.S. unitholders are subject to withholding at the highest applicable effective tax
rate. Each non-U.S. unitholder must obtain a taxpayer identification number from the IRS and submit that number to our transfer agent on a Form W-8BEN, W-8BEN-E or applicable substitute form in order to obtain credit for these withholding taxes. A
change in applicable law may require us to change these procedures.
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In addition, because a non-U.S. corporation that owns common units will be treated as engaged in
a U.S. trade or business, that corporation may be subject to the U.S. branch profits tax at a rate of 30%, in addition to regular U.S. federal income tax, on its share of our income and gain, as adjusted for changes in the non-U.S.
corporations U.S. net equity, which is effectively connected with the conduct of a U.S. trade or business. That tax may be reduced or eliminated by an income tax treaty between the U.S. and the country in which the non-U.S.
corporate unitholder is a qualified resident. In addition, this type of unitholder is subject to special information reporting requirements under Section 6038C of the Internal Revenue Code.
A non-U.S. unitholder who sells or otherwise disposes of a common unit will be subject to U.S. federal income tax on gain realized from the
sale or disposition of that common unit to the extent the gain is effectively connected with a U.S. trade or business of the non-U.S. unitholder. Under a ruling published by the IRS, interpreting the scope of effectively connected
income, a non-U.S. unitholder would be considered to be engaged in a trade or business in the U.S. by virtue of the U.S. activities of the partnership, and part or all of that unitholders gain would be effectively connected with that
unitholders indirect U.S. trade or business. Moreover, under the Foreign Investment in Real Property Tax Act, a non-U.S. unitholder generally will be subject to U.S. federal income tax upon the sale or disposition of a common unit if
(i) he owned (directly or constructively applying certain attribution rules) more than 5% of our common units at any time during the five-year period ending on the date of such disposition and (ii) 50% or more of the fair market value of
all of our assets consisted of U.S. real property interests at any time during the shorter of the period during which the unitholder held the common units or the 5-year period ending on the date of disposition.
Administrative Matters
Information Returns and
Audit Procedures
We intend to furnish to each unitholder, within 90 days after the close of each taxable year, specific tax
information, including a Schedule K-1, which describes the unitholders share of our income, gain, loss and deduction for our preceding taxable year. In preparing this information, which will not be reviewed by counsel, we will take various
accounting and reporting positions, some of which have been mentioned earlier, to determine each unitholders share of income, gain, loss and deduction. We cannot assure you that those positions will yield a result that conforms to the
requirements of the Internal Revenue Code, Treasury Regulations or administrative interpretations of the IRS. Neither we nor Andrews Kurth LLP can assure prospective unitholders that the IRS will not successfully contend in court that those
positions are impermissible. Any challenge by the IRS could negatively affect the value of the units.
The IRS may audit our U.S. federal
income tax information returns. Adjustments resulting from an IRS audit may require each unitholder to adjust a prior years tax liability, and possibly may result in an audit of the unitholders return. Any audit of a unitholders
return could result in adjustments not related to our returns as well as those related to our returns.
Partnerships generally are treated
as entities separate from their owners for purposes of U.S. federal income tax audits, judicial review of administrative adjustments by the IRS and tax settlement proceedings. The tax treatment of partnership items of income, gain, loss and
deduction are determined in a partnership proceeding rather than in separate proceedings with the partners. The Internal Revenue Code requires that one partner be designated as the Tax Matters Partner for these purposes. The partnership
agreement names our general partner as our Tax Matters Partner.
The Tax Matters Partner has made and will make some elections on our
behalf and on behalf of unitholders. In addition, the Tax Matters Partner can extend the statute of limitations for assessment of tax deficiencies against unitholders for items in our returns. The Tax Matters Partner may bind a unitholder with less
than a 1% profits interest in us to a settlement with the IRS unless that unitholder elects, by filing a statement with the IRS, not to give that authority to the Tax Matters Partner. The Tax Matters Partner may seek judicial review, by which all
the unitholders are bound, of a final partnership administrative adjustment and, if the Tax Matters Partner fails
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to seek judicial review, judicial review may be sought by any unitholder having at least a 1% interest in profits or by any group of unitholders having in the aggregate at least a 5% interest in
profits. However, only one action for judicial review will go forward, and each unitholder with an interest in the outcome may participate in that action.
A unitholder must file a statement with the IRS identifying the treatment of any item on the unitholders U.S. federal income tax return
that is not consistent with the treatment of the item on our return. Intentional or negligent disregard of this consistency requirement may subject a unitholder to substantial penalties.
Nominee Reporting
Persons who
hold an interest in us as a nominee for another person are required to furnish to us:
(a) the name, address and taxpayer identification
number of the beneficial owner and the nominee,
(b) a statement regarding whether the beneficial owner is:
(1) a person that is not a U.S. person;
(2) a non-U.S. government, an international organization or any wholly owned agency or instrumentality of either of the
foregoing; or
(3) a tax-exempt entity;
(c) the amount and description of common units held, acquired or transferred for the beneficial owner; and
(d) specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for
purchases, as well as the amount of net proceeds from sales.
Brokers and financial institutions are required to furnish additional
information, including whether they are U.S. persons and specific information on common units they acquire, hold or transfer for their own account. A penalty of $100 per failure, up to a maximum of $1.5 million per calendar year, is imposed by the
Internal Revenue Code for failure to report that information to us. The nominee is required to supply the beneficial owner of the common units with the information furnished to us.
Accuracy-Related Penalties
Certain penalties may be imposed under the Internal Revenue Code as a result of an underpayment of tax that is attributable to one or more
specified causes, including negligence or disregard of rules or regulations, substantial understatements of income tax and substantial valuation misstatements. No penalty will be imposed, however, for any portion of an underpayment if it is shown
that there was a reasonable cause for the underpayment of that portion and that the taxpayer acted in good faith regarding the underpayment of that portion. We do not anticipate that any accuracy-related penalties will be assessed against us.
Reportable Transactions
If we
were to engage in a reportable transaction, we (and possibly our unitholders and others) would be required to make a detailed disclosure of the transaction to the IRS. A transaction may be a reportable transaction based upon any of
several factors, including the fact that it is a type of tax avoidance transaction publicly identified by the IRS as a listed transaction or that it produces certain kinds of losses for partnerships, individuals, S corporations, and
trusts in excess of $2 million in any single tax year, or $4 million in any combination of six successive tax years. Our participation in a reportable transaction could increase the likelihood that our U.S. federal income tax information return (and
possibly our unitholders tax returns) would be audited by the IRS. Please read Information Returns and Audit Procedures.
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Moreover, if we were to participate in a reportable transaction with a significant purpose to
avoid or evade tax, or in any listed transaction, our unitholders may be subject to the following additional consequences:
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accuracy-related penalties with a broader scope, significantly narrower exceptions, and potentially greater amounts than described in Accuracy-Related Penalties; |
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for those persons otherwise entitled to deduct interest on U.S. federal tax deficiencies, nondeductibility of interest on any resulting tax liability; and |
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in the case of a listed transaction, an extended statute of limitations. |
We do not expect to
engage in any reportable transactions.
State, Local and Other Tax Considerations
In addition to U.S. federal income taxes, unitholders may be subject to other taxes, such as state and local income taxes, unincorporated
business taxes, and estate, inheritance or intangible taxes that may be imposed by the various jurisdictions in which we do business or own property or in which you are a resident. We currently own property or conduct business in various states,
most of which impose personal income taxes on individuals. Most of these states also impose an income tax on corporations and other entities. Moreover, we may also own property or do business in other jurisdictions in the future that impose income
or similar taxes on nonresident individuals. Although an analysis of those various taxes is not presented here, each prospective unitholder should consider their potential impact on the unitholders investment in us. A unitholder may be
required to file state income tax returns and to pay state income taxes in many of these states in which we do business or own property and may be subject to penalties for failure to comply with those requirements. In some states, tax losses may not
produce a tax benefit in the year incurred and may not be available to offset income in subsequent taxable years. We determine our depreciation and cost recovery allowances using U.S. federal income tax methods and may use methods that result in the
largest deductions being taken in the early years after assets are placed in service. Some of the jurisdictions in which we do business or own property may not conform to these federal depreciation methods. A successful challenge to these methods
could adversely affect the amount of taxable income or loss being allocated to our unitholders for state tax purposes. It also could affect the amount of gain from a unitholders sale of common units and could have a negative impact on the
value of the common units or result in audit adjustments to the unitholders state tax returns.
Some of the states may require us,
or we may elect, to withhold a percentage of income from amounts to be distributed to a unitholder who is not a resident of the state. Withholding, the amount of which may be greater or less than a particular unitholders income tax liability
to the state, generally does not relieve a nonresident unitholder from the obligation to file an income tax return. Amounts withheld will be treated as if distributed to unitholders for purposes of determining the amounts distributed by us. Please
read Tax Consequences of Unit Ownership Entity-Level Collections. Based on current law and our estimate of our future operations, our general partner anticipates that any amounts required to be withheld will not be
material.
It is the responsibility of each unitholder to investigate the legal and tax consequences, under the laws of pertinent
jurisdictions, of the unitholders investment in us. Accordingly, each prospective unitholder is urged to consult, and depend on, the unitholders own tax counsel or other advisor with regard to those matters. Further, it is the
responsibility of each unitholder to file all state, local and non-U.S., as well as U.S. federal tax returns, that may be required of it. Andrews Kurth LLP has not rendered an opinion on the state, local, alternative minimum tax or non-U.S. tax
consequences of an investment in us.
Tax Consequences of Ownership of Debt Securities
A description of the material U.S. federal income tax consequences of the acquisition, ownership and disposition of debt securities will be set
forth in a prospectus supplement relating to the offering of debt securities.
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INVESTMENT IN WILLIAMS PARTNERS L.P. BY EMPLOYEE BENEFIT PLANS
An investment in us by certain employee benefit plans may be subject to additional considerations because the investments of these
plans are subject to the fiduciary responsibility and prohibited transaction provisions of ERISA and the restrictions imposed by Section 4975 of the Internal Revenue Code, and provisions under any federal, state, local, non-U.S. or other laws
or regulations that are similar to such provisions of the Internal Revenue Code or ERISA (collectively, Similar Laws). For these purposes the term employee benefit plan includes, but is not limited to, qualified pension,
profit-sharing and stock bonus plans, Keogh plans, simplified employee pension plans and tax deferred annuities or individual retirement accounts or annuities, or IRAs established or maintained by an employer or employee organization, and entities
whose underlying assets are considered to include plan assets, within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA or any applicable Similar Laws, of such plans, accounts and arrangements.
ERISA and the Internal Revenue Code impose certain duties on persons who are fiduciaries of an employee benefit plan and prohibit certain
transactions involving the assets of an employee benefit plan and its fiduciaries or other interested parties. Under ERISA and the Internal Revenue Code, any person who exercises any discretionary authority or control over the administration of an
employee benefit plan or the management or disposition of the assets of such a plan, or who renders investment advice for a fee or other compensation (direct or indirect) to an employee benefit plan, is generally considered to be a fiduciary of the
employee benefit plan. In considering an investment in us, among other things, consideration should be given to:
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whether the investment satisfies the prudence requirements under Section 404(a)(1)(B) of ERISA; |
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whether in making the investment, the plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA; |
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whether the investment will result in recognition of unrelated business taxable income by the plan and, if so, the potential after-tax investment return. Please read Material Tax
Considerations Tax-Exempt Organizations and Other Investors; |
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whether the investment is permitted under the terms of the applicable documents governing the plan; |
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whether in making the investment, the plan will be considered to hold as plan assets (1) only the investment in us or (2) an undivided interest in our underlying assets; and |
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whether making such an investment will comply with the delegation of control and prohibited transaction provisions of ERISA, the Internal Revenue Code and any other applicable Similar Laws. |
Section 406 of ERISA and Section 4975 of the Internal Revenue Code prohibit employee benefit plans from engaging in specified
transactions involving plan assets with parties that, with respect to the plan, are parties in interest, within the meaning of Section 3(14) of ERISA or disqualified persons, within the meaning of Section 4975 of
the Internal Revenue Code unless an exemption is available. A party in interest or disqualified person who engages in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Internal
Revenue Code. In addition, the fiduciary of the employee benefit plan that engaged in such a non-exempt prohibited transaction may be subject to excise taxes, penalties and liabilities under ERISA and the Internal Revenue Code. The prohibited
transaction rules are complex, and persons involved in prohibited transactions are subject to penalties. For that reason, potential employee benefit plan investors should consult with their counsel to determine the consequences under ERISA and the
Internal Revenue Code of their acquisition and ownership of us.
In addition to considering whether the purchase of our units is a
prohibited transaction, a fiduciary should consider whether the plan will, by investing in us, be deemed to own an undivided interest in our assets, with the result that our general partner would also be a fiduciary of such plan and our operations
would be subject to the regulatory restrictions of ERISA, including its prohibited transaction rules, as well as the prohibited transaction rules of the Internal Revenue Code, ERISA and any other Similar Laws. The Department of Labor regulations
provide guidance with respect to whether, in certain circumstances, the assets of an entity in which employee
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benefit plans acquire equity interests would be deemed plan assets. Under these regulations, an entitys assets would not be considered to be plan assets if, among
other things:
(a) the equity interests acquired by the employee benefit plan are publicly offered
securities i.e., the equity interests are widely held by 100 or more investors independent of the issuer and each other, are freely transferable (as defined in the regulations) and are either part of a class registered
under certain provisions of the federal securities laws or sold to the plan as part of a public offering under certain conditions;
(b) the entity is an operating company, i.e., it is primarily engaged in the production or sale of a
product or service, other than the investment of capital, either directly or through a majority-owned subsidiary or subsidiaries; or
(c) there is no significant investment by benefit plan investors, (as defined in the regulations) which is defined
to mean that less than 25% of the value of each class of equity interest, disregarding certain interests held by our general partner, its affiliates and certain other persons, is held by such benefit plan investors.
With respect to an investment in us, we believe that our assets should not be considered plan assets under these regulations
because it is expected that the investment will satisfy the requirements in (a) and (b) above and may also satisfy the requirement in (c) above (although we do not monitor the level of benefit plan investors as required for compliance
with (c)).
The foregoing discussion of issues arising for employee benefit plan investments under ERISA and the Internal Revenue Code is
general in nature and is not intended to be all inclusive, nor should it be construed as legal advice. In light of the complexity of these rules and the excise taxes, penalties and liabilities that may be imposed on persons who engage in prohibited
transactions or other violations, plan fiduciaries contemplating a purchase of our units should consult with their own counsel regarding the consequences under ERISA and the Internal Revenue Code and other Similar Laws.
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PLAN OF DISTRIBUTION
We may sell the common units or debt securities through underwriters or dealers in firm commitment underwritings. The selling securityholders
named in the applicable prospectus supplement may sell common units held by them through underwriters or dealers in firm commitment underwritings. To the extent required, this prospectus may be amended or supplemented from time to time to describe a
particular plan of distribution. The place and time of delivery for the securities in respect of which this prospectus is delivered will be set forth in the accompanying prospectus supplement.
If we or any selling securityholders sell securities in respect of which this prospectus is delivered, we or such selling securityholders will
enter into an underwriting agreement with the underwriters chosen for such sale at the time of sale to them. We will set forth the names of the underwriters and the terms of the transaction in a prospectus supplement, which will be used by the
underwriters to make resales of the securities in respect of which this prospectus is delivered to the public. We or such selling securityholders may indemnify the underwriters under the underwriting agreement against specified liabilities,
including liabilities under the Securities Act. The underwriters may also engage in transactions with or perform services for us or such selling securityholders in the ordinary course of business.
The common units or debt securities of the series offered will be acquired by the underwriters for their own account. The underwriters may
resell the common units or debt securities in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase the
common units or debt securities of the series offered will be subject to certain conditions. The underwriters will be obligated to purchase all the common units or debt securities of the series offered if any of the securities are purchased. Any
initial public offering price and any discounts or concessions allowed or re-allowed or paid to dealers may be changed from time to time.
In connection with offerings of securities under the registration statement of which this prospectus forms a part, and in compliance with
applicable law, underwriters, brokers or dealers may engage in transactions that stabilize or maintain the market price of the securities at levels above those that might otherwise prevail in the open market. Specifically, underwriters, brokers or
dealers may over-allot in connection with offerings, creating a short position in the securities for their own accounts. For the purpose of covering a syndicate short position or stabilizing the price of the securities, the underwriters, brokers or
dealers may place bids for the securities or effect purchases of the securities in the open market. Finally, the underwriters may impose a penalty whereby selling concessions allowed to syndicate members or other brokers or dealers for distribution
of the securities in offerings may be reclaimed by the syndicate if the syndicate repurchases previously distributed securities in transactions to cover short positions, in stabilization transactions or otherwise. These activities may stabilize,
maintain or otherwise affect the market price of the securities, which may be higher than the price that might otherwise prevail in the open market, and, if commenced, may be discontinued at any time.
The debt securities, when first issued, will have no established trading market. The debt securities of the series offered may or may not be
listed on a national securities exchange. No assurances can be given that there will be a market for the debt securities. Any underwriters to whom debt securities are sold for public offering and sale may make a market in such debt securities, but
such underwriters will not be obligated to do so and may discontinue any market making at any time without notice. No assurance can be given as to the liquidity of the trading market for any such debt securities.
Underwriters and dealers that participate in the distribution of the common units or debt securities may be underwriters as defined in the
Securities Act, and any discounts or commissions received by them from us and any profit on the resale of the common units or debt securities by them may be treated as underwriting discounts and commissions under the Securities Act. Any underwriters
will be identified and their compensation will be described in a prospectus supplement.
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SELLING SECURITYHOLDERS
Information about selling securityholders, where applicable, will be set forth in a prospectus supplement, in a post-effective amendment, or
in filings we make with the SEC under the Exchange Act that are incorporated by reference.
LEGAL MATTERS
Gibson, Dunn & Crutcher LLP has rendered an opinion with respect to the validity of the securities being offered by this
prospectus. Andrews Kurth LLP, Houston, Texas, has rendered an opinion with respect to certain tax matters. We have filed these opinions as exhibits to the registration statement of which this prospectus is a part. If the validity of any securities
is also passed upon by counsel for the underwriters of an offering of those securities, that counsel will be named in the prospectus supplement relating to that offering.
EXPERTS
The supplemental consolidated financial statements of Williams Partners L.P. appearing in Williams Partners L.P.s Current
Report on Form 8-K dated February 25, 2015 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon, included therein, and incorporated herein by reference which is based in part
on the report of Deloitte & Touche LLP, independent registered public accounting firm. Such supplemental consolidated financial statements are incorporated herein by reference in reliance upon such reports given on the authority of such
firms as experts in accounting and auditing.
The consolidated financial statements of Williams Partners L.P. as of December 31, 2014 and
for the year then ended, and the effectiveness of Williams Partners L.P.s internal control over financial reporting as of December 31, 2014 appearing in Williams Partners L.P.s Annual Report on Form 10-K for the year ended
December 31, 2014 have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon, included therein, and incorporated herein by reference. Such consolidated financial statements
and Williams Partners L.P.s managements assessment of the effectiveness of internal control over financial reporting as of December 31, 2014 are incorporated herein by reference in reliance upon such reports given on the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of Williams Partners L.P. as of December 31,
2013 and for each of the two years in the period ended December 31, 2013 incorporated in this Prospectus by reference to the Williams Partners L.P. Annual Report on Form 10-K for the year ended December 31, 2014 have been so incorporated in reliance
upon the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
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$ % Senior Notes
due
$ % Senior Notes
due
$ % Senior Notes
due
PROSPECTUS
SUPPLEMENT
February , 2015
Joint Book-Running Managers
Barclays
BofA Merrill Lynch
Wells Fargo Securities
Williams Partners (NYSE:WPZ)
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