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All rights reserved. Duncan Energy Partners L.P.
Initial Public Offering
Roadshow Presentation
January 2007
All rights reserved. Duncan Energy Partners L.P. 2
Securities Act Legend
The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling toll free at (888) 603-5847 or writing to [email protected].
All rights reserved. Duncan Energy Partners L.P. 3
Forward-Looking StatementsThis presentation contains forward-looking statements and information that are based on Duncan Energy Partners L.P.’s beliefs and those of its general partner, as well as assumptions made by them and information currently available to them. When used in this presentation, words such as “anticipate,”“project,” “expect,” “plan,” “goal,” “forecast,” “intend,” “could,” “should,” “believe,” “may,” and similar expressions and statements regarding the contemplated transactions and the plans and objectives of Duncan Energy Partners L.P. for future operations, are intended to identify forward-looking statements Although Duncan Energy Partners L.P. and its general partner believe that the expectations reflected in such forward-looking statements are reasonable, neither it nor its general partner can give assurances that such expectations will prove to be correct. Such statements are subject to a variety of risks, uncertainties and assumptions. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, actual results may vary materially from those Duncan Energy Partners L.P. anticipated, estimated, projected or expected. Among the key risk factors that may have a direct bearing on Duncan Energy Partners L.P.’s results of operations and financial condition are:
Fluctuations in oil, natural gas and NGL prices and production due to weather and other natural and economic forces;A reduction in demand for its products by the petrochemical, refining or heating industries;The effects of its debt level on its future financial and operating flexibility;A decline in the volumes of NGLs or natural gas delivered to its facilities or produced by its shippers;The failure of its credit risk management efforts to adequately protect it against customer non-payment;Its dependence on Enterprise Products Partners L.P. and certain other key customers;Terrorist attacks aimed at its facilities or its industry; andThe failure to successfully integrate any future acquisitions.
Duncan Energy Partners L.P. has no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise
All rights reserved. Duncan Energy Partners L.P. 4
Citigroup, Goldman Sachs, Morgan Stanley, Wachovia,A.G. Edwards, JP Morgan, Merrill Lynch, Raymond James, RBC, Sanders Morris Harris, Scotia, Natexis Bleichroeder and Bank of America
Co-Managers
January 30, 2007Expected Pricing
Lehman Brothers and UBS Investment BankJoint Bookrunners
Distribution to EPD as consideration related to the assets contributed to us and to fund planned capital expenditures
Use of Proceeds
>80% through December 31, 2009Tax Deferral
8.4% – 7.6% (8.0% midpoint)Anticipated Yield
$0.40 ($1.60 annualized)Anticipated Quarterly Distribution
$19.00 – $21.00 ($20.00 midpoint)Filing Price Range
64.0% (73.6% including 15% over-allotment)Units Offered as a % of Pro Forma Common Units Outstanding
13,000,000 (14,950,000 including 15% over-allotment)Common Units Offered
Common units representing limited partner interestsSecurity
DEPNYSE Symbol
Duncan Energy Partners L.P.Issuer
Offering Summary
All rights reserved. Duncan Energy Partners L.P. 5
DEP Management Team
Dan Duncan Chairman
Hank Bachmann President & CEO
Mike Creel Executive Vice President & CFO
Randy Burkhalter Director, Investor Relations
All rights reserved. Duncan Energy Partners L.P. 6
Transaction Overview
EPD contributes to DEP a 66% ownership interest in assets currently owned by EPD and integral to its midstream value chain in exchange for:
Approximately $212 million of net proceeds from this offering, subject to adjustments$199 million from a borrowing under DEP’s $300 million credit facility7.3 million DEP common units (valued at approximately $146 million based on a price of $20 per unit)
On a pro forma basis, these assets are expected to generate approximately $77 million of projected EBITDA in 2007After the IPO, EPD will own a 35.2% limited partner interest and a 2% general partner interest in DEP with no IDRs
100%Ownership
Interest
(a) Ownership percentages are pro forma this offering, not including over-allotment option
86.7% L.P.Interest
Dan L. Duncan, EPCO
and Other Affiliates
30.2% L.P.Interest
2%G.P.
Interest IDRs
35.2% L.P.
Interest (a)
62.8%L.P.
Interest
Public Unitholders
Enterprise GP Holdings L.P.(NYSE: EPE)
Enterprise Products
Partners L.P.(NYSE: EPD)
Duncan Energy Partners L.P.(NYSE: DEP)
DEP Holdings
LLC
2% G.P.Interest
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Attractive asset profileStrategically located in high demand areasMature assets that generate stable cash flowsAffiliated with EPD – one of the largest midstream energy companies in the United StatesPredominantly fee-based operations with little commodity price exposureOpportunity for organic projects and growth through acquisitions
Investor-friendly partnership structureNo incentive distribution rights (IDRs)Attractive yield at IPO and lower future cost of equity
Strong economic alignment with sponsorSponsor retains significant interest in DEP and subsidiaries contributed to DEP
Proven management team with a track record of executing growth strategy
Key Investment Considerations
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DEP’s Asset Base is Integral to EPD’s Energy Value Chain
ROCKIES
SAN JUAN
BARNETT SHALEPERMIAN
MID-CONTINENT
MT. BELVIEU
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DEP is Integral to EPD’s Midstream Energy Value Chain
Note: The sectors in EPD’s value chain in which DEP has businesses are highlighted in red
Storage &Distribution
ProductionPlatforms
Gas Processing(Removes Mixed NGLs)
Gas Pipelines
Normal Butane
NGL Fractionation
(or Separation)
NGL Products
IsobutanePropane
Natural Gasoline
EthaneNGL Storage
NGLPipelines
Marketing /Storage
Natural Gas& Crude Oil
Pipelines
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Gross Operating Margin by Segment
2007E
20%
49%
13%
18%
Diversified Business MixNGL & Petrochemical Storage Services (49%)
Mont Belvieu Caverns, LLCNGL Salt Dome Storage Facility
NGL Pipeline Services (20%)South Texas NGL Pipeline System
Natural Gas Pipelines & Services (18%)Acadian PipelineCypress PipelineEvangeline PipelineNatural Gas Salt Dome Storage Facility
Petrochemical Pipeline Services (13%)Lou-Tex Propylene PipelineSabine Propylene Pipeline
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43%
34%
28%28%
16%13%13%
4%2%2%0%
10%
20%
30%
40%
50%
DEP DPM WPZ EPD OKS TPP XTEX MMP ETP KMP
Current GP Share of Total Distributions
No GP IDRs Results in Lower Cost of Equity Capital
GP’s Share of Distribution Increases
2%
25% 25%
50% 50% 50% 50% 50% 50% 50%
0%
10%
20%
30%
40%
50%
DEP EPD TPP DPM WPZ ETP KMP MMP OKS XTEX
Peer Ultimate in Highest GP SplitsPeer CurrentDEP Current / Ultimate
Unlike most partnerships, DEP’s GP does not have any incentive distribution rights (IDRs)GP’s distribution is always capped at 2% of total distributionsResults in lower cost of equity capital than most partnerships and corporationsIncremental cash retained in the Partnership enhances DEP’s financial flexibility by providing for additional investment, debt reduction or increased cash distributions to LPsAssists DEP in pursuing acquisitions and organic projects under competitive conditions
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EPD is one of the largest publicly traded energy partnerships in the U.S. $18 billion enterprise value$13 billion market capitalization183rd on the 2006 Fortune500 listSenior unsecured debt ratings of Baa3 / BBB- / BBB- by Moody’s, S&P and Fitch, respectively2006 net income and distributable cash flow of approximately $600 million and $1 billion, respectively
Strong GP Profile with EPD
1.1
2.0 2.0
4.1 4.1 4.3
0.70.60.4
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
1998 1999 2000 2001 2002 2003 2004 2005 2006
MM
BPD
NGL, Propylene Fractionation & Butane IsomerizationNatural Gas TransportNGL, Petrochemical & Crude Oil Transport
EPD’s Volume Growth
$14.0$12.6
$0.7$1.5 $2.0 $2.4
$4.2$4.8
$11.3
$0
$2
$4
$6
$8
$10
$12
$14
1998 1999 2000 2001 2002 2003 2004 2005 2006
$Bill
ions
EPD’s Asset Growth *
* Unaudited
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SVP, Principal Accounting Officer and Controller
Director, SVP and Treasurer
Director, SVP and COO
Director, EVP and CFO
Director, President and CEO
Chairman
Position with Duncan Energy Partners
31
26
24
27
22
48
Years ofExperience
SVP, Principal Accounting Officer and Controller
Director, SVP and Treasurer
SVP
Director, EVP and CFO
Director, EVP, Chief Legal Officer and Secretary
Chairman and FounderPosition with Enterprise
Michael J. Knesek
W. Randall Fowler
Gil H. Radtke
Michael A. Creel
Richard H. Bachmann
Dan L. DuncanIndividual
Senior management actively participates throughout the Enterprise family of companies
Experienced Management Team
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Mont Belvieu Caverns, LLCPremier Storage Franchise
Diversified customer base
Consistent cash flowsProvides critical logistical services for customers
33 storage caverns; 100 MMBbls capacity
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290-mile pipeline transports NGLs to Mont Belvieu, Texas from two EPD facilities located in South TexasSystem modifications, extensions and interconnections were completed in January 2007 to allow NGL transportationBegan operations in January 2007Dedication fee of no less than $.02/gallon for 100% of production at EPD’s Shoup and Armstrong NGL fractionators irrespective of physical volumes shipped
South Texas NGL Pipeline
67 64 6866
010203040506070
2004 2005 2006 20073Q YTD Expectation
(MB
bls/
day)
Shoup & Armstrong Fractionation Volumes
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Intrastate Louisiana pipeline involved in the marketing and transportation of natural gasSalt dome gas storage with 3 Bcf of working capacity
Withdrawal capacity: 220 MMcf/dInjection capacity: 80 MMcf/d
Links natural gas supplies from onshore Louisiana and offshore Gulf of Mexico to industrial, electric and utility customers in LouisianaOver 150 physical end-user market connections; connected to Henry Hub and 16 third-party pipelines Diversified customer baseLong-term contracts servicing Entergy Louisiana and ExxonMobil
Natural Gas Pipelines & Services
700728640
0
200
400
600
800
2005 9/30/2006 2007LTM Expectation
(MB
tu/d
ay)
Natural Gas Throughput
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Long-term contracts with affiliates of Shell and ExxonMobil
Shell contracts based on ship-or-pay minimum volume requirements
Connects propylene fractionators in Baton Rouge and Sorrento, Louisiana with Mont Belvieu, Texas storage cavernsConnects BASF / Total Petrochemical Complex in Port Arthur, Texas to a pipeline in Louisiana that delivers polymer grade propylene to BasellTotal throughput: ~35 MBPD
Petrochemical Pipeline Services
36%
17% 47%Shell - Lou-Tex
ExxonMobil - Lou-Tex
Shell - Sabine
% of Revenues
Note: Pro Forma 9 Months Ended 9/30/06
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Facilitate growth objectives of the Enterprise family of partnerships
Enable EPD to contribute assets to DEP for cash and/or units, while maintaining control of assets and value chain benefits and redeploying proceeds into projects with higher returnsEnhance the Enterprise position in pursuing acquisitions and projects in competitive environments
Minimize the volatility of cash flow by managing the successful execution of Duncan Energy Partners’ business strategyInvest in organic growth and pursue acquisitions of assets and businesses from related and third parties to generate additionalcash flowManage capital to provide financial flexibility for the Partnership while providing our investors with an attractive total returnMaintain a strong balance sheet and conservative leverage ratios
Financial Objectives
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Stable Volumes & Cash Flow
700728640
0
200
400
600
800
Pro Forma2005
Pro FormaLTM 9/30/06
2007E
Natural Gas Pipeline Volumes (MMcf/d)
373533
68
0
30
60
90
120
Pro Forma2005
Pro Forma LTM9/30/06
2007E
NGLPetrochemical
NGL & Petrochemical Pipeline Volumes (MBPD)
(1) South Texas NGL Pipeline in-service beginning January 2007
(1)
(2) Represents Estimated Consolidated Adjusted EBITDA for the 4 quarters ended December 31, 2007
$77
$61$53
$0
$20
$40
$60
$80
Pro Forma 2005 Pro Forma LTM 9/30/06 2007E
Pro Forma & Projected Consolidated Adjusted EBITDA (in millions)
(2)
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Strong Financial Positionat September 30, 2006
Duncan EnergyDuncan Energy Duncan Energy Partners
Partners Partners Pro Form a($ in mi l l ions) Historical Pro Form a As Adjusted
Cash and cash equivalents $- $- $28.2Long-term debt, including current portion
Revolving Credit Facility - - 200.0Total Debt Obligations $- $- $200.0
Ow ner's Net Investm ent - Predecessor 662.1 716.5 - Parent's interest in Partnership - - 305.2Partnership equity - com m on units - public - - 240.5Total capitalization $662.1 $716.5 $745.8
Total debt / capitalization - - 26.8%Net debt / capitalization - - 23.9%
(a)
(a) Represents cash retained for DEP’s 66% share of estimated 2007 capital expenditures to complete planned expansions of its South Texas NGL pipeline and Mont Belvieu brine-related facilities.
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Attractive asset profileStrategically located in high demand areasMature assets that generate stable cash flowsAffiliated with EPD – one of the largest midstream energy companies in the United StatesPredominantly fee-based operations with little commodity price exposureOpportunity for organic projects and growth through acquisitions
Investor-friendly partnership structureNo incentive distribution rights (IDRs)Attractive yield at IPO and lower future cost of equity
Strong economic alignment with sponsorSponsor retains significant interest in DEP and subsidiaries contributed to DEP
Proven management team with a track record of executing growth strategy
Key Investment Considerations
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Pro Forma Pro FormaYear Ended Four Quarters Ended
December 31, 2005 September 30, 2006
Reconciliation of GAAP Cash Provided by Operating Activities toNon-GAAP "Consolidated Adjusted EBITDA"
Cash Provided by Operating Activities 40,568$ 65,643$
Adjustments to derive Consolidated Adjusted EBITDA:Interest expense 532 532 Equity income of unconsolidated affiliates 331 675 Net effect of changes in operating accounts 18,280 3,204 Changes in fair market value of financial instruments for Acadian Gas (52) (472) Non-cash gain (loss) on sale of assets (5) 14
Consolidated Adjusted EBITDA 59,654 69,596 Pro forma increase in storage revenues 11,610 12,902 Pro forma decrease in operating expense due to allocation of
measurement losses by parent 3,055 2,053 Pro forma decrease in transportation revenues (18,439) (21,238) Additional expense of being a public company (2,500) (2,500)
Pro Forma Consolidated Adjusted EBITDA 53,380$ 60,813$
NOTE: See pages 51 & 52 of the Preliminary Prospectus dated January 24, 2007 for further discussion and explanationof adjustments.
Non-GAAP Reconciliations
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Non-GAAP ReconciliationsSupplemental Forecast Data
Our forecast of total gross operating margin for the four quarters ending December 31, 2007 is approximately $83.6 million. A reconciliation of forecast GAAP operating income for 2007 to forecast non-GAAP gross operating margin in total is as follows:
For a description of non-GAAP gross operating margin, please read “Summary — Summary Historical and Pro Forma Financial and Operating Data — Non-GAAP Financial Measures” as disclosed in the Preliminary Prospectus dated January 24, 2007.
Revenues 849,692$
Costs and expenses:
Cash costs and expenses 772,620
Depreciation and amortization 26,877
Total costs and expenses 799,497
Operating income 50,195 Adjustment to derive non-GAAP forecast Consolidated Adjusted EBITDA:
Add non-cash depreciation and amortization 26,877
Projected EBITDA 77,072 Adjustments to derive non-GAAP forecast gross operating margin:
Add general and administrative costs, including pro forma incremental public company costs 6,569 Gross operating margin in total 83,641$