Fitch Rates Energy Transfer Notes 'BBB-; Outlook Positive.

NEW YORK -- Fitch rates Energy Transfer Partners, L.P.'s (ETP) $400 million 6.125% senior notes due 2017 and $400 million 6.625% senior notes due 2036 'BBB-'. The Rating Outlook for ETP is Positive.

Fitch most recently affirmed ETP's unsecured debt and Issuer Default Ratings (IDRs) at 'BBB-' on September 15, 2006 following the announcement that ETP had entered into agreements to purchase Transwestern Pipeline Co., LLC (TWP) from GE Energy Financial Services and Southern Union Gas Company in a series of transactions valued at $1.465 billion. To support funding for the TWP purchase and ongoing internal growth projects ETP intends to issue approximately $1.2 billion of equity to be issued prior to or simultaneous with the closing of step one of the TWP purchase which could occur as early as November 1, 2006. A currently undetermined amount of TWP debt is expected to be included in the purchase price.

The senior notes are guaranteed by ETP operating partnerships, La Grange Acquisition, L.P. (La Grange) and Titan Energy Partners, L.P. (Titan) and their subsidiaries. A master limited partnership (MLP), ETP is engaged in the natural gas pipeline, storage, and midstream business through La Grange and retail propane business through Heritage Operating L.P. (Heritage) and Titan.

ETP's Positive Rating Outlook reflects the improving operating performance of its integrated Texas natural gas assets, the increasing scale, scope, and diversity of its operations, strong quantitative credit measures, a conservative distribution policy, a favorable near-term regional natural gas supply situation from expanding Barnett Shale and Bossier Sands development, and the expected benefits of ongoing pipeline expansions. In addition, on October 3, 2006, ETP announced it had entered into an agreement with CenterPoint Energy Resources Corp to convert its legacy merchant gas supply contracts for service into Houston to more predictable, long-term fixed-fee transportation and storage contracts. As a result, effective March 1, 2007, ETP's obligation to finance seasonal natural gas storage inventory will be eliminated. Given its current funding plans for the TWP purchase, Fitch also expects ETP's consolidated credit measures to remain consistent with its long-term targets throughout the TWP purchase and integration. However, ETP's Rating Outlook could change to Stable or Negative should the company unexpectedly deviate materially from its current equity funding strategy.

In addition to the execution risk associated with the TWP transaction, of moderate concern is the ongoing event and integration risks inherent in its active growth strategy and the structurally subordinated position of the ETP notes to approximately $306 million of secured notes and bank debt at Heritage and an undetermined amount of debt anticipated for TWP. In its analysis of ETP Fitch also considers the long-term exposure to changes in commodity price and supply conditions across all operations and the structural relationships between affiliated companies, including approximately $616 million of debt at Energy Transfer Equity, L.P. (ETE), owner of ETP's general partner and a steadily improving credit profile at Heritage as its outstanding debt is retired with free cash flow.

ETP's distribution coverage and credit ratios are among the strongest for its peer group of investment grade pipeline MLPs. For fiscal year ended Aug. 31, 2006, Fitch expects total debt, including temporary inventory borrowings, to EBITDA and EBITDA to interest to approximate 3.5 times (x) and 6.5x, respectively. Debt to EBITDA could drop below 3.0x as seasonal natural gas and propane borrowings are repaid and the financial benefits of the TWP and May 2006 Titan acquisitions and ongoing pipeline expansions are recognized. Fitch expects ETP's distribution coverage ratio (distributable cash flow to partnership distributions) for fiscal 2006 to approximate 1.4x, resulting in retained cash in excess of $150 million.

ETP's largest ongoing expansion project involves the construction of a series of wide-diameter pipeline extensions from the Fort Worth Basin and other regional producing basins running east and southeast to the Carthage Texas, hub and interconnections with several interstate systems. Total estimated cost for the project is approximately $1.3 billion with the final phase targeted for completion in November 2007. ETP has recently announced the completion of phase one of the project and it remains on schedule. Approximately $420 million had been incurred on the project through May 31, 2006. Reports indicate that ETP has contracted with several shippers representing 1.7 billion cubic feet per day of capacity. At this level of shipper participation, the expansion should provide ETP a profitable return on its investment even if throughput levels are below expectations.

Fitch believes that the long-term credit ratios targeted by ETP in its financial policy are generally consistent with a 'BBB' rating given the company's blended business risk and scale of operations. They include: debt to EBITDA of 3.25x or less, interest coverage of greater than 5x, and a distribution coverage of 1.2x. Specific factors that Fitch would consider that could lead to a rating upgrade to 'BBB' include: the successful completion of its ongoing pipeline expansion projects; the completion of the purchase and permanent funding of TWP; and a continuation of ETP's conservative financial policy and strong operating results.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.derivativefitch.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.