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Mail Stop 0308
May 26, 2005
Richard H. Bachman, Executive Vice President
Enterprise GP Holdings L.P.
2727 North Loop West, Suite 101
Houston, TX 77008-1044
Re: Enterprise GP Holdings L.P.
Registration Statement on Form S-1
Filed April 26, 2005
File No. 333-124320
Dear Mr. Bachman:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Prospectus Cover Page
1. We note a number of blank spaces on your prospectus cover page
and
throughout your registration statement for information that you
are
not entitled to omit under Rule 430A, such as the anticipated
price
range. Please note that we may have additional comments once you
have provided this disclosure. Therefore, please allow us
sufficient
time to review your complete disclosure prior to any distribution
of
preliminary prospectuses.
2. In the first full paragraph, fifth sentence, please delete the
word "leading" when describing your subsidiary. This type of
language is not appropriate for cover page disclosure.
3. Also, please delete the sixth sentence of the first full
paragraph. Stating your expected distribution rate likewise is
not
required by Item 501 of Regulation S-K and otherwise is not
appropriate for cover page disclosure.
4. Further, please eliminate the label "joint book-running
managers"
above the named underwriters.
Artwork
5. We remind you that, because it is in the forepart, artwork must
comply with plain English. Accordingly, please revise to delete
all
defined terms such as "NGL." Revise similarly in your summary,
where
you additionally include defined terms such "IDRs." Please also
eliminate from the artwork complex and technical jargon and
information, such as may appear in the value chain flow chart. In
this regard, please delete the asset and distribution charts as
they
are not appropriate for artwork disclosure.
Summary, page 1
6. We remind you that the summary should provide a brief overview
of
the key aspects of you and the offering. As currently drafted,
your
22-page summary is too long and some disclosure is repeated in the
body of the prospectus. For example, pages one through three are
repeated word for word on pages 105-107. Please revise
accordingly
to eliminate redundancies and reduce detail provided in the
summary.
7. Please refer to prior comment 5 regarding defined terms in the
prospectus forepart. In this regard, the second italicized
paragraph
on page one regarding your subsidiaries is confusing. For example
you use "EPD" to refer to Enterprise Products Partners L.P. To
avoid
confusion, please use a more intuitive shorthand reference when
referring to the operating subsidiary.
8. Similarly with regard to prior comment 5, please avoid the use
of
industry jargon such as "midstream network," "hub platforms,"
"isomerization," "fractionation" and "value chain" in the summary.
Enterprise GP Holdings L.P., page 1
9. We note that your incentive distribution rights entitle you to
receive increasing percentages of the cash distribution by
Enterprise
Products Partners as Enterprise Products Partners` per unit
distribution increases. Please clarify that the incentive
distribution rights have been capped and disclose the distribution
thresholds here and elsewhere in your document where you reference
these rights.
10. Please refer to the chart on page 3 and tell us the reasons
and
basis for the hypothetical rates of distributions that exceed
Enterprise Product Partners` current rate of distribution.
Enterprise Products Partners L.P., page 10
11. Please provide us with support for your statement at the top
of
page ten that you are the only "integrated North America midstream
network."
12. You indicate that your revenues include the sale of numerous
products and services including the gathering and transmission of
natural gas and crude oil via your offshore pipeline systems, fees
charged for use of your offshore platforms, gathering and
transmission of natural gas from onshore developments, fees for
use
of your natural gas storage facilities, sale of NGL products, and
propylene fractionation activities. Please disclose the amount or
percentage of total revenue contributed by any class of similar
products that accounted for 10% or more of total revenues for all
periods presented. Refer to Item 101(c)(1)(i) of S-K.
Risk Factors, page 23
13. In general, descriptions of risks that describe circumstances
that could apply equally to other businesses that are similarly
situated are generic risks that should not be included in your
risk
factor section. Please either eliminate these generic risks, or
revise them to state specific material risks to your company or to
the purchasers in this offering. For example, we note that the
following risk factors appear to contain generic disclosures:
* An increase in interest rates..., page 26
* We will incur increased cost..., page 28
* Changes in the prices of hydrocarbon products..., page 31
* Enterprise Partners faces competition..., page 35
* A natural disaster,..., page 36
* Environmental cost and liabilities..., page 38
Please note these are examples only. Review your entire risk
factor
section and revise as necessary.
14. In general, descriptions of risk should only provide only
enough
detail to place the risk in context. Please review your risk
factors
and revise those that provide too much detail, such as the
following:
* The initial public offering price..., page 27
* Enterprise Partners` future debt level..., page 33
* Federal, state or local regulatory..., page 38
Enterprise Products Partners` growth strategy..., page 34
15. This risk factor appears to cover some of the same risk
discussed
on page 25, "Risk arising in connection with the execution of our
business strategy...." Please revise to eliminate any overlap
between these two risk factors.
Our Cash Distribution Policy, page 47
16. While we are aware of your operating subsidiary`s distribution
history, given that you are a new registrant and this offering
conveys to potential investors that your initial quarterly
distribution will be $0.25 per unit - an amount which appears to
represent substantially all your available cash - we believe that
you
should provide a more detailed discussion about the policy and
provide support for the stated distribution amount. Please
accordingly revise this section, the Cash Available for
Distribution
section, and Appendix B. The revisions should clearly and fully
convey:
* the background and effect of the cash distribution policy;
* the initial distribution rate and its basis;
* your estimated cash available to pay distributions over the next
four quarters;
* whether historically you had sufficient available cash to pay
the
stated distribution amount;
* any assumptions and considerations related to the preceding
disclosure.
Management`s Discussion and Analysis..., page 54
Results of Operations, page 58
17. Where you describe two or more business reasons that
contributed
to a material change in a financial statement line item between
periods, please quantify the extent to which each change
contributed
to the overall change in that line item, if practical. For
example,
where you describe the various factors that contributed to the
overall $3 billion increase in revenues from fiscal 2004 compared
to
fiscal 2003, quantification of individual impacts such as the
impact
of acquisitions, changes in volumes of products sold, and changes
in
selling prices should be provided, to the extent practical. See
Item
303(a) of Regulation S-K and Financial Reporting Codification
501.04.
Cash Flows from Operating, Investing and Financing Activities,
page
72
18. You have included a measure of cash flow from operations
before
changes in operating assets and liabilities. Since SFAS 95 does
not
provide for totals of cash flow from operating activities prior to
changes in operating assets, this appears to be a non-GAAP
measure.
Accordingly, please revise your discussion to explain why this
measure is included, what it is intended to show, any limitations
a
reader should be aware of in evaluating the measure and disclose
the
additional purposes, if any, you use this non-GAAP financial
measure.
Refer to item 10(e) of Regulation S-K and Release 33-8176.
19. Please explain to us how the gain on sale of assets of
approximately $15.1 million in 2004 contributed to the increase of
$174.3 million in your cash flows from operating activities before
changes in operation accounts in fiscal 2004 when compared to
fiscal
2003. If you have classified any of the proceeds received from
the
sale of such assets as a component of operating activities, tell
us
how you concluded that such classification is appropriate.
Contractual Obligations, page 88
20. Please include disclosure in footnote (2) of the assumptions
used
to calculate amounts included in the table where variable interest
rates as of the most recent balance sheet date are used to compute
the estimated contractual interest rates. In addition, consider
disclosing the amount of payments you will be obligated to make
under
interest rate swap agreements to the extent such payments can be
reasonably estimated. Expected cash receipts under interest rate
swaps should not be included.
Quantitative and Qualitative Disclosures about Market Risk, page
98
21. Please provide quantitative and qualitative information about
market risk associated with your variable-rate debt. One
possibility
is to provide a sensitivity analysis with respect to a
hypothetical
10% change in current variable interest rates.
Management, page 149
22. We note your statement that employees of EPCO under the
direction
of the board of directors and executive officers of EPE Holdings,
LLC, your general partner, will be responsible for the management
of
your business. We also note your disclosures starting on page 167
of
the amounts paid by Enterprise Products Partners to EPCO. In
this
regard, please state, if true, that your general partner and its
affiliates will receive substantial fees and profits in connection
with the offering. Please also provide a tabular summary, if
applicable, itemized by category and specifying dollar amounts
where
possible, of all compensation, fees, profits, and other benefits,
including reimbursement of out-of-pocket expenses, which your
general
partner and its affiliates may earn or receive in connection with
the
offering or the management of your business.
Underwriting, page 215
23. We note your disclosure on page 217 concerning the fact that
some
underwriters may make the prospectus available in an electronic
format and some underwriters may make sales to their online
brokerage
accounts. Please identify any members of the underwriting
syndicate
that will engage in any electronic offer, sale or distribution of
the
units. Please describe the procedures those members will use and
tell us how they will ensure that the distribution complies with
Section 5 of the Securities Act.
24. We note that you have reserved units for a directed unit
program
for directors, and officers as well as for contribution to an
employee partnership. Please tell us the mechanics of how and
when
these units will be offered and sold to persons in the directed
unit
program. For example, please explain for us how you will
determine
the prospective recipients of reserved units. Tell us when and
how
they will indicate their interest in purchasing units. Also,
please
tell us how and when you and the underwriters will contact the
directed unit investors, including the types of communications
used.
When will the units and money be exchanged? When do purchasers
become committed to purchase their units? Will the procedures for
the directed unit program differ from the procedures for the
general
offering to the public?
Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements, page F-8
General
25. We remind you to include Enterprise GP Holdings LP pro forma
and
actual financial statements for the quarter ended March 31, 2005
in
your amended registration statement.
Pro-Forma Adjustments, page F-3
26. Please revise your pro forma financial statements to remove
the
pro forma adjustment of $19.9 million for nonrecurring merger-
related
expenses recorded by GulfTerra during 2004. Pro forma adjustments
should be limited to events that are expected to have a continuing
impact. Refer to Rule 11-02(b)(6) of Regulation S-X.
Enterprise Products GP, LLC, page F-26
Statements of Consolidated Cash Flows, page F-28
27. The amount recorded as cumulative effect of changes in
accounting
principles on your statements of consolidated operations and
comprehensive income for the year ended December 31, 2004 does not
agree to the cumulative effect of changes in accounting principles
reflected in your statements of consolidated cash flows. Revise
or
advise.
28. We note that your distributions received from unconsolidated
affiliates have exceeded your equity in income of unconsolidated
affiliates for the three years ended December 31, 2004. Please
tell
us the nature of these distributions and indicate any preferential
rights the partners may have with respect to future distributions.
In addition, please tell us whether cumulative distributions from
any
of your affiliates have exceeded the cumulative equity in income.
In
doing so, please bifurcate the return on investment from the
return
of investments with respect to your distributions received from
affiliates for all periods presented.
Notes to Consolidated Financial Statements, page F-30
General
29. Please tell us whether you have any regulated operations and
whether you account for any of your operations in accordance with
SFAS 71. To the extent applicable, please tell us and disclose
your
regulatory assets and regulatory liabilities for all periods
presented. If any portion of your regulatory asset balance
includes
amounts on which you do not earn a current return, please tell us
and
disclose the nature and amounts of each of these assets and the
remaining recovery period associated with each of them.
Note 1. Organization and Summary of Significant Accounting
Policies,
page F-30
Financial Instruments, page F-34
30. You indicate that gains and losses on a cash flow hedge are
reclassified into earnings when the forecasted transaction occurs.
Please confirm that this is true in all instances. For example,
if
variable rate debt is financing a construction project for which
interest costs are capitalized and such debt has been designated
as
an underlying in a cash flow hedge, the gains or losses associated
with the interest rate swap are recorded in OCI and reclassified
to
earnings over the depreciable life of the constructed asset.
Refer
to EITF 99-9. Please revise or advise.
Note 7. Investments in and Advances to Unconsolidated Affiliates,
page F-49
31. We note that you have recognized revenue on transactions with
the
various joint venture companies in your financial statements.
Tell
us how you account for profits on these transactions. Tell us
whether some, all or none of the profit is eliminated in applying
the
equity method. Describe your consideration of AIN-APB 18 and
support
that your accounting complies with GAAP. Revise your filing to
disclose how profits on transactions with investees are accounted
for
in your financial statements and provide the disclosure required
by
Rule 4-08(k) of Regulation S-X.
Item 17. Undertakings, II-7
32. Please revise to include the following undertakings set forth
in
Securities Act Industry Guide 5:
"The registrant undertakes to send to each limited partner at
least
on an annual basis a detailed statement of any transactions with
the
General Partner or its affiliates, and of fees, commissions,
compensation and other benefits paid, or accrued to the General
Partner or its affiliates for the fiscal year completed, showing
the
amount paid or accrued to each recipient and the services
performed."
"The registrant undertakes to provide to the limited partners the
financial statements required by Form 10-K for the first full
fiscal
year of operations of the partnership."
Exhibits
33. Please file all required exhibits, such as the underwriting
agreement and the legal opinion in a timely manner so that we may
have time to review them before you request that your registration
statement become effective.
*****
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
? should the Commission or the staff, acting pursuant to
delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
? the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
? the company may not assert staff comments and the declaration
of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and the
Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact John Cannarella, Staff Accountant at (202)
551-
3337 or in his absence, William Choi, Accounting Branch Chief at
(202) 551- 3716 if you have questions regarding comments on the
financial statements and related matters. Please contact Scott
Anderegg, Staff Attorney at (202) 551-3342, David Mittelman, Legal
Branch Chief at (202) 551-3214 or me at (202) 551-3720 with any
other
questions.
Sincerely,
H. Christopher Owings
Assistant Director
cc: Michael P. Finch
Vinson & Elkins, LLP
VIA FAX (713) 615-5282
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Richard H. Bachman
Enterprise GP Holdings LP
May 26, 2005
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