Main Driver Of Growth For Energy Transfer Partners To Be Organic

Wunderlich Securities has published a research report on Energy Transfer Partners (NYSE: ETP) and has initiated coverage on the company with a Buy rating.

In the report, Wunderlich writes "Energy Transfer's growth should be driven by its organic projects, with spending on growth capital projects totaling between $1,285 million and $1,415 million during 2010. ETP plans to spend $305 million to $460 million on growth in 2011, although we would not be surprised to see this number move higher as the partnership pursues opportunities for growth. ETP's largest current project is the Tiger Pipeline with capacity of 2 Bcf/d that is fully contracted and has a final cost of $1.01 billion. Based on our distribution estimates of $3.674/unit for 2011 and
$3.860/unit for 2012, growth would be 2.8% and 5.1% for those years respectively. Based on our distributable cash flow estimates of $4.02/unit for 2011 and $4.43/unit for 2012, this equates to a coverage ratio of 1.1x for both years. We estimate ETP's five-year CAGR rate at 3.5%. The partnership should be able to increase its distribution over the next several years as its growth projects become operational."

Wunderlich has also issued a $60 price target on Energy Transfer Partners, which closed yesterday at $51.36.