Energy Transfer LP is a Delaware limited partnership whose common units are publicly traded on the NYSE under the ticker symbol "ET."

The following discussion of our historical consolidated financial condition and results of operations should be read in conjunction with our historical consolidated financial statements and accompanying notes thereto included in "Item 8. Financial Statements and Supplementary Data" of this report. This discussion includes forward-looking statements that are subject to risk and uncertainties. Actual results may differ substantially from the statements we make in this section due to a number of factors that are discussed in "Item 1A. Risk Factors" of this report.


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Unless the context requires otherwise, references to "we," "us," "our," the "Partnership" and "Energy Transfer" mean Energy Transfer LP and its consolidated subsidiaries.

OVERVIEW

Energy Transfer directly and indirectly owns equity interests in Sunoco LP and USAC, which are limited partnerships engaged in diversified energy-related services. Sunoco LP and USAC have publicly traded common units.

Energy Transfer derives cash flows from distributions related to its investment in its subsidiaries, including Sunoco LP and USAC. The amount of cash that Sunoco LP and USAC distribute to their respective partners, including Energy Transfer, each quarter is based on earnings from their respective business activities and the amount of available cash, as discussed below.

The primary activities in which we are engaged, which are in the United States and Canada, and the operating subsidiaries through which we conduct those activities are as follows:

•natural gas operations, including the following:

•natural gas midstream and intrastate transportation and storage;

•interstate natural gas transportation and storage; and

•crude oil, NGL and refined products transportation, terminalling services and acquisition and marketing activities, as well as NGL storage and fractionation services.

In addition, we own investments in other businesses, including Sunoco LP and USAC, both of which are publicly traded master limited partnerships.

Energy Transfer derives cash flows from distributions related to its investment in its subsidiaries, including Sunoco LP and USAC. Energy Transfer's primary cash requirements are for distributions to its partners, general and administrative expenses and debt service requirements. Energy Transfer distributes its available cash remaining after satisfaction of the aforementioned cash requirements to its Unitholders on a quarterly basis.

We expect our subsidiaries to utilize their resources, along with cash from their operations, to fund their announced growth capital expenditures and working capital needs; however, Energy Transfer may issue debt or equity securities from time to time as we deem prudent to provide liquidity for new capital projects of our subsidiaries or for other partnership purposes.

General

Our primary objective is to increase the level of our distributable cash flow to our Unitholders over time by pursuing a business strategy that is currently focused on growing our subsidiaries' natural gas and liquids businesses through, among other things, pursuing certain construction and expansion opportunities relating to our subsidiaries' existing infrastructure and acquiring certain strategic operations and businesses or assets. The actual amounts of cash that we will have available for distribution will primarily depend on the amount of cash our subsidiaries generate from their operations.

Our reportable segments are as follows:

•intrastate transportation and storage;

•interstate transportation and storage;

•midstream;

•NGL and refined products transportation and services;

•crude oil transportation and services;



•investment in Sunoco LP;

•investment in USAC; and

•all other.
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Recent Developments

Energy Transfer and ETO Rollup Mergers

On April 1, 2021, Energy Transfer, ETO and certain of ETO's subsidiaries consummated several internal reorganization transactions (the "Rollup Mergers"). In connection with the Rollup Mergers, ETO merged with and into Energy Transfer, with Energy Transfer surviving. The impacts of the Rollup Mergers also included the following:

•All of ETO's long-term debt was assumed by Energy Transfer, as more fully described in Note 6 to the consolidated financial statements in "Item 8. Financial Statements and Supplementary Data.".

•Each issued and outstanding ETO preferred unit was converted into the right to receive one newly created Energy Transfer preferred unit. A description of the Energy Transfer Preferred Units is included in Note 8 to the consolidated financial statements in "Item 8. Financial Statements and Supplementary Data."

•Each of ETO's issued and outstanding Class K, Class L, Class M and Class N units were converted into an aggregate 675,625,000 newly created Class B Units representing limited partner interests in Energy Transfer. All of the Class B Units are held by ETP Holdco, a wholly-owned subsidiary of Energy Transfer.

Series H Preferred Units Issuance

On June 15, 2021, the Partnership issued 900,000 of its 6.500% Series H Preferred Units at a price of $1,000 per unit. The net proceeds were used to repay amounts outstanding under the Partnership's term loan and for general partnership purposes.

Winter Storm Impacts

Winter Storm Uri, which occurred in February 2021, resulted in one-time impacts to the Partnership's consolidated net income and Adjusted EBITDA and also affected the results of operations in certain segments, as discussed in "Results of Operations". The recognition of the impacts of Winter Storm Uri during the year ended December 31, 2021 required management to make certain estimates and assumptions, including estimates of expected credit losses and assumptions related to the resolution of disputes with counterparties with respect to certain purchases and sales of natural gas. The ultimate realization of credit losses and the resolution of disputed purchases and sales of natural gas could materially impact the Partnership's financial condition and results of operations in future periods.

Enable Acquisition

On December 2, 2021, the Partnership completed the previously announced merger with Enable (the "Enable Acquisition"). Under the terms of the merger agreement, Enable's common unitholders received 0.8595 of an Energy Transfer common unit in exchange for each Enable common unit. In addition, each outstanding Enable Series A preferred unit was exchanged for 0.0265 of an Energy Transfer Series G Preferred Unit. A total of 384,780 Series G Preferred Units were issued in connection with the Enable Acquisition. The total fair value of Energy Transfer common units and Series G Preferred Units issued was approximately $3.5 billion at the closing date. Energy Transfer also made a $10 million cash payment for Enable's general partner.

In connection with the Enable Acquisition on December 2, 2021, Energy Transfer repaid $800 million outstanding on the Enable 2019 Term Loan Agreement and $35 million outstanding on the Enable Five-Year Revolving Credit Facility, and both facilities were terminated. In addition, the Partnership assumed $3.18 billion aggregate principal amount of Enable senior notes.

Regulatory Update

Interstate Natural Gas Transportation Regulation

Rate Regulation

Effective January 2018, the 2017 Tax Cuts and Jobs Act (the "Tax Act") changed several provisions of the federal tax code, including a reduction in the maximum corporate tax rate. On March 15, 2018, in a set of related proposals, the FERC addressed treatment of federal income tax allowances in regulated entity rates. The FERC issued a Revised Policy Statement on Treatment of Income Taxes ("Revised Policy Statement") stating that it will no longer permit master limited partnerships to recover an income tax allowance in their cost-of-service rates. The FERC issued the Revised Policy Statement in response to a remand from the United States Court of Appeals for the District of Columbia Circuit in United Airlines v. FERC, in which the court determined that the FERC had not justified its conclusion that a pipeline organized as a master limited partnership would not "double recover" its taxes under the current policy by both including an income-tax allowance in its cost of service and earning a return on equity calculated using the discounted cash flow methodology. On July 18, 2018, the FERC clarified that a pipeline


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organized as a master limited partnership will not be precluded in a future proceeding from arguing and providing evidentiary support that it is entitled to an income tax allowance and demonstrating that its recovery of an income tax allowance does not result in a double-recovery of investors' income tax costs. On July 31, 2020, the United States Court of Appeals for the District of Columbia Circuit issued an opinion upholding the FERC's decision denying a separate master limited partnership recovery of an income tax allowance and its decision not to require the master limited partnership to refund accumulated deferred income tax balances. In light of the rehearing order's clarification regarding an individual entity's ability to argue in support of recovery of an income tax allowance and the court's subsequent opinion upholding denial of an income tax allowance to a master limited partnership, the impact of the FERC's policy on the treatment of income taxes on the rates we can charge for FERC-regulated transportation services is unknown at this time.

Even without application of the FERC's recent rate making-related policy statements and rulemakings, the FERC or our shippers may challenge the cost-of-service rates we charge. The FERC's establishment of a just and reasonable rate is based on many components, including ROE and tax-related components, but also other pipeline costs that will continue to affect FERC's determination of just and reasonable cost of service rates. Moreover, we receive revenues from our pipelines based on a variety of rate structures, including cost-of-service rates, negotiated rates, discounted rates and market-based rates. Many of our interstate pipelines, such as ETC Tiger, Midcontinent Express and Fayetteville Express, have negotiated market rates that were agreed to by customers in connection with long-term contracts entered into to support the construction of the pipelines. Other systems, such as FGT, Transwestern and Panhandle, have a mix of tariff rate, discount rate, and negotiated rate agreements. The revenues we receive from natural gas transportation services we provide pursuant to cost-of-service based rates may decrease in the future as a result of changes to FERC policies, combined with the reduced corporate federal income tax rate established in the Tax Act. The extent of any revenue reduction related to our cost-of-service rates, if any, will depend on a detailed review of all of our cost-of-service components and the outcomes of any challenges to our rates by the FERC or our shippers.

On July 18, 2018, the FERC issued a final rule establishing procedures to evaluate rates charged by the FERC-jurisdictional gas pipelines in light of the Tax Act and the FERC's Revised Policy Statement. By the Order issued January 16, 2019, the FERC initiated a review of Panhandle's existing rates pursuant to Section 5 of the NGA to determine whether the rates currently charged by Panhandle are just and reasonable and set the matter for hearing. On August 30, 2019, Panhandle filed a general rate proceeding under Section 4 of the NGA. The Natural Gas Act Section 5 and Section 4 proceedings were consolidated by order of the Chief Judge on October 1, 2019. A hearing in the combined proceedings commenced on August 25, 2020 and adjourned on September 15, 2020. The initial decision by the administrative law judge was issued on March 26, 2021. On April 26, 2021, Panhandle filed its brief on exceptions to the initial decision. On May 17, 2021, Panhandle filed its brief opposing exceptions in this proceeding. This matter remains pending before the FERC.

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