UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

ENTERPRISE GP HOLDINGS L.P.

(Exact name of Registrant as Specified in Its Charter)

Delaware		13-4297064
(State or Other Jurisdiction of		(I.R.S. Employer Identification No.)
Incorporation or Organization)

1100 Louisiana, 10th Floor
Houston, Texas 77002
(Address of Principal Executive Offices, Including Zip Code)

(713) 381-6500
(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ       No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o       Accelerated filer þ       Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o       No þ

At August 1, 2007, the registrant had the following units outstanding: (i) 88,884,116 registered units that trade on the New York Stock Exchange under the ticker symbol “EPE,” (ii) 34,307,524 unregistered units, including 20,134,220 units issued in July 2007 in a private placement offering, and (iii) 16,000,000 Class C units.

 

 

ENTERPRISE GP HOLDINGS L.P.
TABLE OF CONTENTS

				Page No.
		PART I. FINANCIAL INFORMATION.
Item 1.		Financial Statements.
		Unaudited Condensed Consolidated Balance Sheets			2
		Unaudited Condensed Statements of Consolidated Operations			3
		Unaudited Condensed Statements of Consolidated Comprehensive Income			4
		Unaudited Condensed Statements of Consolidated Cash Flows			5
		Unaudited Condensed Statements of Consolidated Partners’ Equity			6
		Notes to Unaudited Condensed Consolidated Financial Statements:
		1. Partnership Organization and Basis of Financial Statement Presentation			7
		2. Parent Company Financial Information			10
		3. General Accounting Policies and Related Matters			15
		4. Business Segments			19
		5. Accounting for Unit-Based Awards			25
		6. Financial Instruments			31
		7. Inventories			33
		8. Property, Plant and Equipment			35
		9. Investments in and Advances to Unconsolidated Affiliates			36
		10. Intangible Assets and Goodwill			39
		11. Debt Obligations			41
		12. Partners’ Equity and Distributions			47
		13. Related Party Transactions			49
		14. Earnings Per Unit			51
		15. Commitments and Contingencies			53
		16. Significant Risks and Uncertainties – Weather-Related Risks			57
		17. Supplemental Cash Flow Information			57
		18. Subsequent Event			58
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations.			60
Item 3.		Quantitative and Qualitative Disclosures about Market Risk.			82
Item 4.		Controls and Procedures.			85
		PART II. OTHER INFORMATION.
Item 1.		Legal Proceedings.			85
Item 1A.		Risk Factors.			85
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds.			109
Item 3.		Defaults upon Senior Securities.			109
Item 4.		Submission of Matters to a Vote of Security Holders.			109
Item 5.		Other Information.			109
Item 6.		Exhibits.			109
Signatures					112
Certification Pursuant to Section 302
Certification Pursuant to Section 302
Certification Pursuant to Section 1350
Certification Pursuant to Section 1350

PART I. FINANCIAL INFORMATION.

Item 1. Financial Statements.

ENTERPRISE GP HOLDINGS L.P.

		June 30,				December 31,
		2007				2006 *
ASSETS
Current assets:
Cash and cash equivalents		$	69,208			$	23,290
Restricted cash			23,359				23,667
Accounts and notes receivable – trade (net of allowance for doubtful accounts of $22,978 at June 30, 2007 and $23,506 at December 31, 2006)			2,456,857				2,202,507
Accounts receivable - related parties			3,048				2,008
Inventories			428,242				497,356
Prepaid and other current assets			210,658				154,409
Total current assets			3,191,372				2,903,237
Property, plant and equipment at cost, net			13,228,737				12,112,973
Investments in and advances to unconsolidated affiliates			2,559,902				784,756
Intangible assets (net of accumulated amortization of $482,888 at June 30, 2007 and $420,800 at December 31, 2006)			1,870,795				1,938,953
Goodwill			807,251				806,971
Deferred tax asset			2,369				1,855
Other assets			174,402				151,146
Total assets		$	21,834,828			$	18,699,891
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities:
Current maturities of long-term debt (see Note 11)		$	1,079,194			$	—
Accounts payable – trade			340,589				300,967
Accounts payable – related parties			12,373				18,598
Accrued gas payables			2,459,563				1,377,420
Accrued expenses			53,489				870,769
Accrued interest			142,059				126,904
Other current liabilities			233,544				270,235
Total current liabilities			4,320,811				2,964,893
Long-term debt (See Note 11)			8,601,696				7,053,877
Deferred tax liabilities			17,307				14,375
Other long-term liabilities			144,886				107,678
Minority interest			7,286,111				7,118,819
Commitments and contingencies
Partners’ equity:
Limited partners:
Units (88,884,116 units outstanding at June 30, 2007 and December 31, 2006)			659,204				680,919
Class B units (14,173,304 units outstanding at June 30, 2007 and December 31, 2006)			360,746				357,083
Class C units (16,000,000 units outstanding at June 30, 2007 and December 31, 2006)			380,665				380,665
General partner			16				15
Accumulated other comprehensive income			63,386				21,567
Total partners’ equity			1,464,017				1,440,249
Total liabilities and partners’ equity		$	21,834,828			$	18,699,891

* Restated as described in Note 1.
See Notes to Unaudited Condensed Consolidated Financial Statements.

ENTERPRISE GP HOLDINGS L.P.

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2007				2006*				2007				2006*
Revenues:
Third parties		$	6,179,514			$	5,823,210			$	11,464,053			$	11,521,298
Related parties			114,756				101,954				170,492				186,631
Total			6,294,270				5,925,164				11,634,545				11,707,929
Costs and expenses:
Operating costs and expenses:
Third parties			5,857,216				5,559,383				10,794,288				10,940,575
Related parties			113,920				104,292				220,200				229,209
Total operating costs and expenses			5,971,136				5,663,675				11,014,488				11,169,784
General and administrative costs:
Third parties			4,129				9,137				5,069				16,468
Related parties			25,992				18,081				45,643				34,275
Total general and administrative costs			30,121				27,218				50,712				50,743
Total costs and expenses			6,001,257				5,690,893				11,065,200				11,220,527
Equity in income (loss) of unconsolidated affiliates			(6,966	)			10,687				(1,443	)			15,705
Operating income			286,047				244,958				567,902				503,107
Other income (expense):
Interest expense			(116,222	)			(77,844	)			(204,347	)			(159,128	)
Interest income			3,206				1,653				5,761				3,801
Other, net			673				2,210				60,535				2,943
Other expense			(112,343	)			(73,981	)			(138,051	)			(152,384	)
Income before provision for taxes and minority interest			173,704				170,977				429,851				350,723
Provision for income taxes			1,651				(6,785	)			(7,152	)			(9,677	)
Minority interest			(153,852	)			(133,253	)			(347,742	)			(279,540	)
Income before the cumulative effect of change in accounting principle			21,503				30,939				74,957				61,506
Cumulative effect of change in accounting principle (see Note 3)			—				—				—				96
Net income		$	21,503			$	30,939			$	74,957			$	61,602
Net income allocation: (see Note 14)
Limited partners		$	21,501			$	30,936			$	74,950			$	61,596
General partner		$	2			$	3			$	7			$	6
Earning per unit: (see Note 14)
Basic and diluted income per unit before change in accounting principle		$	0.21			$	0.30			$	0.73			$	0.60
Basic and diluted income per unit		$	0.21			$	0.30			$	0.73			$	0.60

*Restated as described in Note 1.
See Notes to Unaudited Condensed Consolidated Financial Statements.

ENTERPRISE GP HOLDINGS L.P.

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2007				2006*				2007				2006*
Net income		$	21,503			$	30,939			$	74,957			$	61,602
Other comprehensive income:
Cash flow hedges:
Net commodity financial instrument gains (losses) during period			27,432				(6,313	)			42,454				(6,062	)
Less: Amortization of cash flow financing hedges			(1,198	)			(1,052	)			(2,287	)			(2,093	)
Total cash flow hedges			26,234				(7,365	)			40,167				(8,155	)
Foreign currency translation adjustment			148				—				549				—
Total other comprehensive income			26,382				(7,365	)			40,716				(8,155	)
Comprehensive income		$	47,885			$	23,574			$	115,673			$	53,447

* Restated as described in Note 1.
See Notes to Unaudited Condensed Consolidated Financial Statements.

ENTERPRISE GP HOLDINGS L.P.

		For the Six Months
		Ended June 30,
		2007				2006*
Operating activities:
Net income		$	74,957			$	61,602
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation, amortization and accretion in operating costs and expenses			303,711				270,278
Depreciation and amortization in general and administrative costs			4,928				3,820
Amortization in interest expense			777				1,825
Equity in income (loss) of unconsolidated affiliates			1,443				(15,705	)
Distributions received from unconsolidated affiliates			51,370				36,645
Cumulative effect of change in accounting principle			—				(96	)
Operating lease expense paid by EPCO, Inc.			1,053				1,056
Minority interest			347,742				279,540
Gain on sale of assets			(67,158	)			(1,594	)
Loan fee write off			566				—
Deferred income tax expense			3,433				9,676
Changes in fair market value of financial instruments			(302	)			—
Net effect of changes in operating accounts (see Note 18)			11,738				67,785
Net cash flows provided by operating activities			734,258				714,832
Investing activities:
Capital expenditures			(1,404,604	)			(755,636	)
Contributions in aid of construction costs			48,570				34,940
Proceeds from sale of assets			165,159				2,005
Decrease (increase) in restricted cash			308				(6,703	)
Cash used for business combinations			(3,285	)			(108	)
Investments in unconsolidated affiliates			(1,885,530	)			(20,921	)
Advances (to) from unconsolidated affiliates			(11,251	)			10,878
Net cash used in investing activities			(3,090,633	)			(735,545	)
Financing activities:
Borrowings under debt agreements			5,575,295				1,764,050
Repayments of debt			(2,918,224	)			(1,692,393	)
Debt issuance costs			(18,328	)			(1,399	)
Distributions paid to partners			(63,558	)			(51,113	)
Contribution from partners			100				—
Repurchase of unit-based awards from former officer			(1,568	)			—
Settlement of cash flow hedging financial instruments			43,858				—
Distributions paid to minority interests			(523,497	)			(451,361	)
Cash distribution paid to former owners of TEPPCO interests			(29,760	)			(27,836	)
Contributions from minority interests			338,365				463,423
Net cash provided by financing activities			2,402,683				3,371
Effect of exchange rate changes on cash			(390	)			—
Net change in cash and cash equivalents			46,308				(17,342	)
Cash and cash equivalents, January 1			23,290				42,768
Cash and cash equivalents, June 30		$	69,208			$	25,426

*Restated as described in Note 1.
See Notes to Unaudited Condensed Consolidated Financial Statements.

ENTERPRISE GP HOLDINGS L.P.

		Limited				General
		Partners				Partner				AOCI				Total
Balance, December 31, 2006 *		$	1,418,667			$	15			$	21,567			$	1,440,249
Net income			74,950				7				—				74,957
Operating leases paid by EPCO, Inc.			54				—				—				54
Cash distributions to partners			(63,552	)			(6	)			—				(63,558	)
Cash distributions to former owners of TEPPCO interests			(29,760	)			—				—				(29,760	)
Contribution from partners			100				—				—				100
Change in funded status of pension and postretirement plans, net of tax			—				—				1,103				1,103
Amortization of equity awards			156				—				—				156
Foreign currency translation adjustment			—				—				549				549
Cash flow hedges			—				—				40,167				40,167
Balance, June 30, 2007		$	1,400,615			$	16			$	63,386			$	1,464,017

* Restated as described in Note 1.
See Notes to Unaudited Condensed Consolidated Financial Statements.

ENTERPRISE GP HOLDINGS L.P.

Note 1. Partnership Organization and Basis of Financial Statement Presentation

     Partnership Organization

          Enterprise GP Holdings L.P. is a publicly traded Delaware limited partnership, the units of which are listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “EPE.” The current business of Enterprise GP Holdings L.P. is to own general and limited partner interests of publicly traded partnerships engaged in the midstream energy industry and related businesses. Unless the context requires otherwise, references to “we,” “us,” “our,” or “the Company” are intended to mean the business and operations of Enterprise GP Holdings L.P. and its consolidated subsidiaries.

          References to “the parent company” mean Enterprise GP Holdings L.P., individually as the parent company, and not on a consolidated basis. The parent company was formed in April 2005 and completed its initial public offering of 14,216,784 units in August 2005. The parent company is owned 99.99% by its limited partners and 0.01% by its general partner, EPE Holdings, LLC (“EPE Holdings”). EPE Holdings is a wholly owned subsidiary of Dan Duncan, LLC, the membership interests of which are owned by Dan L. Duncan.

          References to “Enterprise Products Partners” mean the business and operations of Enterprise Products Partners L.P. and its consolidated subsidiaries. References to “EPGP” mean Enterprise Products GP, LLC, which is the general partner of Enterprise Products Partners. Enterprise Products Partners has no business activities outside those conducted by its operating subsidiary, Enterprise Products Operating LLC (“EPO”), as successor in interest by merger to Enterprise Products Operating L.P.

          References to “Duncan Energy Partners” mean Duncan Energy Partners L.P., which is a consolidated subsidiary of EPO. References to “DEPGP” mean DEP Holdings, LLC, which is the general partner of Duncan Energy Partners and a wholly owned subsidiary of EPO.

          References to “TEPPCO” mean the business and operations of TEPPCO Partners, L.P. and its consolidated subsidiaries. References to “TEPPCO GP” mean Texas Eastern Products Pipeline Company, LLC, which is the general partner of TEPPCO.

          References to “Energy Transfer Equity” mean the business and operations of Energy Transfer Equity, L.P. and its consolidated subsidiaries, which include Energy Transfer Partners, L.P. (“ETP”). The general partner of Energy Transfer Equity is LE GP, LLC (“ETEGP”).

          References to “Employee Partnerships” mean EPE Unit L.P. (“EPE Unit I”), EPE Unit II, L.P. (“EPE Unit II”) and EPE Unit III, L.P. (“EPE Unit III”), collectively, which are private company affiliates of EPCO, Inc.

          References to “EPCO” mean EPCO, Inc., which is a related party affiliate to all of the foregoing named entities. Mr. Duncan is the Chairman and controlling shareholder of EPCO.

          The parent company, Enterprise Products Partners, EPGP, TEPPCO, TEPPCO GP, the Employee Partnerships and EPCO are affiliates under common control of Mr. Duncan. Enterprise Products Partners and TEPPCO and their respective general partners have been under Mr. Duncan’s indirect control for all periods presented in this quarterly report on Form 10-Q. We do not control Energy Transfer Equity or ETEGP.

     Basis of Financial Statement Presentation

          Effective with the second quarter 2007, our consolidated and parent-only financial statements and related Notes have been restated to reflect the acquisition of partnership interests in TEPPCO GP and TEPPCO in May 2007 and the resulting reorganization of our business segments.

          Generally accepted accounting principles in the United States (“GAAP”) require, in most circumstances, a general partner to consolidate the financial statements of its respective limited partnership due to the general partner’s ability to control the actions of the limited partnership. As a result, our general purpose financial statements reflect the consolidated results of EPGP with those of Enterprise Products Partners and TEPPCO GP with those of TEPPCO. We control both EPGP and TEPPCO GP through our ownership of 100% of the member interests of each.

          The acquisition of ownership interests in EPGP, Enterprise Products Partners, TEPPCO and TEPPCO GP were accounted for at historical costs as a reorganization of entities under common control in a manner similar to a pooling of interests. We acquired our ownership interests in EPGP and Enterprise Products Partners in August 2005 from private company affiliates of EPCO. Likewise, we acquired our ownership interests in TEPPCO and TEPPCO GP in May 2007 from private company affiliates of EPCO. The inclusion of TEPPCO and TEPPCO GP in our financial statements was effective January 1, 2005 since affiliates of EPCO under common control with the parent company originally acquired ownership interests in TEPPCO and TEPPCO GP in February 2005.

          All earnings derived from incentive distribution rights (“IDRs”) and TEPPCO common units in excess of those allocated to the parent company are presented as a component of minority interest in our consolidated financial statements. In addition, the former owners of the TEPPCO and TEPPCO GP interests and rights were allocated all cash receipts from these investments during the periods they owned such interests prior to May 7, 2007. This method of presentation is intended to show how the combination of investments would have affected our business.

          Our restated Unaudited Condensed Consolidated Financial Statements and Notes continue to reflect the parent company’s share of earnings, cash flows and net assets in Enterprise Products Partners and EPGP as before. With respect to TEPPCO and TEPPCO GP, our restated Unaudited Condensed Consolidated Financial Statements and Notes also reflect the parent company’s deemed investments in TEPPCO and TEPPCO GP as follows:

	§		Ownership of 100% of the membership interests in TEPPCO GP (i.e., the 2% general partner interest in TEPPCO) and deemed amounts of IDRs for all periods presented. See Note 2 for information regarding TEPPCO’s IDRs. The economic benefit of the IDRs to the parent company for periods prior to December 2006 is equal to: (i) the benefit that would have been received by the parent company at the current 25% threshold using historical distribution rates plus (ii) an incremental amount of benefit that would have been received in connection with the IDRs associated with 4,400,000 of the 14,091,275 common units issued by TEPPCO in December 2006 as a result of the conversion of IDRs above the 25% threshold. Affiliates of EPCO (e.g. Duncan Family Interests, Inc. (“DFI”) and DFI GP Holdings, L.P. (“DFIGP”)) have been deemed to retain the economic benefit of IDRs associated with the remaining 9,691,275 common units issued by TEPPCO in December 2006. After December 2006, net income reflects current IDRs (i.e., capped at the 25% threshold).
	§		Ownership of 4,400,000 common units of TEPPCO since the date of issuance to affiliates of EPCO in December 2006.

          The parent company’s share of earnings from investments in TEPPCO and TEPPCO GP (including IDRs in TEPPCO’s cash distributions) can be graphically depicted as follows:

Earnings Recognition from Investments in TEPPCO
January 1, 2005 to June 30, 2007

          The supplemental financial information we provide for the parent company under Note 2 was prepared using the assumptions outlined above for our general purpose consolidated financial statements.

          We revised our business segment disclosures to reflect the fundamental change in the parent company’s investment portfolio resulting from its acquisition of interests in TEPPCO, TEPPCO GP, Energy Transfer Equity and ETEGP on May 7, 2007. Our reorganized business segments reflect the manner in which these investments are managed and reviewed by our chief operating decision maker. The new reportable segments are (i) Investment in Enterprise Products Partners, (ii) Investment in TEPPCO and (iii) Investment in Energy Transfer Equity.

          Our Investment in Enterprise Products Partners segment reflects the consolidated operations of Enterprise Products Partners and its general partner, EPGP. Our Investment in TEPPCO segment reflects the consolidated operations of TEPPCO and its general partner, TEPPCO GP. As discussed previously, the Investment in TEPPCO segment represents the historical operations of TEPPCO and TEPPCO GP that were under common control with us prior to our acquisition of such interests in May 2007. The Investment in Energy Transfer Equity segment reflects our equity method investment in Energy Transfer Equity and ETEGP from the date of acquisition.

          In our opinion, the accompanying interim Unaudited Condensed Consolidated Financial Statements include all adjustments consisting of normal recurring accruals necessary for fair presentation. Although we believe the disclosures in these financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).

          The accompanying interim Unaudited Condensed Consolidated Financial Statements and Notes should be read in conjunction with the Audited Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K for the year ended December 31, 2006 (the “2006 Form 10-

K”). In addition, our interim financial statements should be read in conjunction with our Current Report on Form 8-K/A dated July 18, 2007, which contains information regarding our acquisition of ownership interests in TEPPCO and TEPPCO GP on May 7, 2007 not reflected in the 2006 Form 10-K. We intend to file a Form 8-K (the “Recast Form 8-K”) subsequent to this quarterly report on Form 10-K to restate portions of our 2006 Form 10-K and quarterly report on Form 10-Q for the three months ended March 31, 2007. The Recast Form 8-K will reflect our new business segments and the acquisition of interests in TEPPCO and TEPPCO GP. No attempt has been made in this Form 10-Q to modify or update other disclosures presented in other filings.

          Our results of operations for the three and six months ended June 30, 2007 are not necessarily indicative of results expected for the full year.

          Except per unit amounts, or as noted within the context of each footnote disclosure, the dollar amounts presented in the tabular data within these footnote disclosures are stated in thousands of dollars.

Note 2. Parent Company Financial Information

          The parent company is a holding company investing in general and limited partner interests of publicly traded partnerships engaged in the midstream energy industry and related businesses. The parent company has no business activities apart from such investing. In order to fully understand the financial condition and results of operations of the parent company, we are providing the standalone financial information of Enterprise GP Holdings apart from that of our consolidated partnership financial information.

          The principal sources of cash flow for the parent company are its investments in the limited partner or membership interests of its investees. The parent company’s primary cash requirements are for general and administrative costs, debt service requirements and distributions to its partners. The parent company’s assets and liabilities are not available to satisfy the debts and other obligations of its investees. Conversely, the assets and liabilities of the parent company’s investees are not available to satisfy the debts and obligations of the parent company. At June 30, 2007, the parent company had investments in Enterprise Products Partners, TEPPCO, Energy Transfer Equity and their respective general partners.

     Investment in Enterprise Products Partners

          The parent company acquired an investment in Enterprise Products Partners and EPGP in August 2005 from private company affiliates of EPCO under the common control of Mr. Duncan. The parent company owns 13,454,498 common units of Enterprise Products Partners and 100% of the membership interests of EPGP, which is entitled to 2% of the cash distributions paid by Enterprise Products Partners and holds the associated IDRs of Enterprise Products Partners. EPGP is the sole general partner of, and thereby controls, Enterprise Products Partners. EPGP’s percentage interest in Enterprise Products Partners’ quarterly cash distributions is increased after certain specified target levels of distribution rates are met by Enterprise Products Partners. EPGP’s quarterly incentive distribution thresholds are as follows:

	§		2% of quarterly cash distributions up to $0.253 per unit paid by Enterprise Products Partners;
	§		15% of quarterly cash distributions from $0.253 per unit up to $0.3085 per unit paid by Enterprise Products Partners; and
	§		25% of quarterly cash distributions that exceed $0.3085 per unit paid by Enterprise Products Partners.

          EPGP received total cash distributions of $30.5 million from Enterprise Products Partners during the three months ended June 30, 2007 including $26.3 million attributable to IDRs. For the six months ended June 30, 2007, EPGP received total cash distributions of $59.9 million including $51.6 million from IDRs.

          For additional information regarding the Investment in Enterprise Products Partners segment, see Note 4.

     Investment in TEPPCO

          The parent company acquired 4,400,000 common units of TEPPCO and 100% of the membership interests of TEPPCO GP (including related IDRs) on May 7, 2007 from private company affiliates of EPCO under the common control of Mr. Duncan. The parent company financed these acquisitions through its issuance of 14,173,304 Class B units and 16,000,000 Class C units to these private company affiliates of EPCO. See Note 12 for information regarding the Class B and Class C units.

          Since the parent company, DFI and DFIGP are under the common control of Mr. Duncan, the parent company’s acquisition of ownership interests in TEPPCO and TEPPCO GP was accounted for at historical costs as a reorganization of entities under common control in a manner similar to a pooling of interests. The values recorded by the parent company in connection with these contributions reflect DFI’s and DFIGP’s historical carrying basis in the investees. The following table presents the values recorded by the parent company at the date of purchase:

Investment in TEPPCO (4,400,000 common units)		$	148,098
Investment in TEPPCO GP (100% membership interest)			591,636
Investment in TEPPCO		$	739,734

          TEPPCO GP is entitled to 2% of the cash distributions paid by TEPPCO and holds the associated IDRs of TEPPCO. TEPPCO GP is the sole general partner of, and thereby controls, TEPPCO. TEPPCO GP’s percentage interest in TEPPCO’s quarterly cash distributions is increased after certain specified target levels of distribution rates are met by TEPPCO. Currently, TEPPCO GP’s quarterly incentive distribution thresholds are as follows:

	§		2% of quarterly cash distributions up to $0.275 per unit paid by TEPPCO;
	§		15% of quarterly cash distributions from $0.276 per unit up to $0.325 per unit paid by TEPPCO; and
	§		25% of quarterly cash distributions that exceed $0.325 per unit paid by TEPPCO.

          Prior to December 2006, TEPPCO GP was entitled to 50% of any quarterly cash distributions paid by TEPPCO that exceeded $0.45 per unit. This distribution tier was eliminated by TEPPCO as part of an amendment to its partnership agreement in December 2006 in exchange for the issuance of 14,091,275 units to TEPPCO GP, which were subsequently distributed to affiliates of EPCO.

          TEPPCO GP received total cash distributions of $12.1 million from TEPPCO during the three months ended June 30, 2007, including $11.6 million attributable to IDRs. For the six months ended June 30, 2007, TEPPCO GP received total cash distributions of $23.8 million, including $22.8 million from IDRs.

          For additional information regarding the Investment in TEPPCO segment, see Note 4.

     Investment in Energy Transfer Equity

          The parent company acquired its non-controlling limited partner interests and membership interest in Energy Transfer Equity and ETEGP, respectively, on May 7, 2007 from third parties. On May 7, 2007, the parent company entered into a securities purchase agreement pursuant to which the parent company acquired 38,976,090 common units of Energy Transfer Equity and approximately 34.9% of the membership interests in ETEGP for $1.65 billion in cash. ETEGP currently owns an approximate 0.3%

general partner interest in Energy Transfer Equity and has no IDRs in the quarterly cash distributions of Energy Transfer Equity.

     The following table presents the values recorded by the parent company in connection with these investments, which are accounted for using the equity method. See Note 9 for additional information regarding these equity method investments by the Company.

Investment in Energy Transfer Equity (38,976,090 common units)		$	1,636,996
Investment in ETEGP (approx. 34.9% membership interest)			12,338
Total Investment in Energy Transfer Equity & ETEGP		$	1,649,334

     Energy Transfer Equity is a publicly traded Delaware limited partnership formed in 2002 that completed its initial public offering in February 2006. Energy Transfer Equity’s only cash generating assets are its direct and indirect investments in limited partner interests of ETP and membership interests in ETP’s general partner. Energy Transfer Equity owns common units and all of the equity interests in an entity which owns the 2% general partner interest of ETP (including 100% of the incentive distribution rights held by the general partner of ETP). Currently, ETP’s quarterly incentive distribution thresholds are as follows:

	§		2% of quarterly cash distributions up to $0.275 per unit paid by ETP;
	§		15% of quarterly cash distributions from $0.275 per unit up to $0.3175 per unit paid by ETP;
	§		25% of quarterly cash distributions from $0.3175 per unit up $0.4125 per unit paid by ETP; and
	§		50% of quarterly cash distributions that exceed $0.4125 per unit paid by ETP.

          As disclosed in the Form 10-Q of Energy Transfer Equity for the nine months ended May 31, 2007, the unaudited total amount of distributions Energy Transfer Equity received from ETP was $260.0 million, which consisted of $124.6 million from limited partner interests; $9.2 million from general partner interests and $126.2 million from incentive distribution rights. Energy Transfer Partners paid $193.7 million in distributions to its partners during the nine months ended May 31, 2007.

          Since we do not control Energy Transfer Equity or ETEGP, our equity earnings are based on estimates derived from the public SEC filings of Energy Transfer Equity. The fiscal year of Energy Transfer Equity ends August 31; therefore, their quarterly financial reporting timeframes do not coincide with ours. As a result, we estimate our share of equity earnings based on their published data. Our estimates may differ from those that Energy Transfer Equity might publish if their fiscal periods matched ours.

          For additional information regarding our equity-method investments in Energy Transfer Equity and ETEGP, see Notes 4 and 9.

     Parent Company Statements of Cash Flows

          The following table presents the parent company’s unaudited statements of cash flows for the periods indicated:

		For the Six Months
		Ended June 30,
		2007				2006
Operating activities:
Net income		$	74,957			$	61,602
Adjustments to reconcile net income to net cash flows provided by operating activities:
Amortization of debt issue costs			988				170
Amortization of equity awards			29				16
Cumulative effect of change in accounting principle			—				(18	)
Equity in income of unconsolidated affiliates			(101,151	)			(67,064	)
Cash distributions received from unconsolidated affiliates			102,334				87,014
Net effect of changes in operating accounts			8,841				(5,008	)
Net cash flows provided by operating activities			85,998				76,712
Investing activities:
Investments in unconsolidated affiliates			(1,650,010	)			(8,890	)
Cash used in investing activities			(1,650,010	)			(8,890	)
Financing activities:
Net borrowings under parent company credit facility			1,662,194				12,000
Debt issuance costs			(5,250	)			(1,018	)
Contribution from partners			100				—
Cash distribution paid by former owners of TEPPCO interests			(29,760	)			(27,836	)
Distributions paid to partners			(63,559	)			(51,113	)
Cash provided by (used in) financing activities			1,563,725				(67,967	)
Net change in cash and cash equivalents			(287	)			(145	)
Cash and cash equivalents, January 1			783				509
Cash and cash equivalents, June 30		$	496			$	364

          The parent company made initial borrowings of $1.8 billion on May 7, 2007 under its amended and restated credit facility to fund the $1.65 billion purchase price for interests in Energy Transfer Equity and to repay $155 million in borrowings outstanding under its original credit facility. See Note 11 for additional information regarding the parent company’s amended and restated credit facility.

          The following table presents supplemental cash flow information for the periods indicated:

		For the Six Months
		Ended June 30,
		2007				2006
Cash distributions from investees:
Investment in Enterprise Products Partners (“EPD”):
From 13,454,498 common units of EPD		$	12,681			$	11,874
From 2% general partner interest in EPD			6,362				7,193
From general partner incentive distribution rights in distributions of EPD			53,531				40,111
Investment in TEPPCO:
From 4,400,000 common units of TEPPCO			5,984				5,220
From 2% general partner interest in TEPPCO			2,492				1,928
From general partner incentive distribution rights in distributions of TEPPCO			21,284				20,688
Total cash distributions from unconsolidated affiliates		$	102,334			$	87,014
Distributions by the parent company:
EPCO and affiliates		$	55,129			$	44,334
Public			8,424				6,774
General partner interest			6				5
Total distributions by the parent company		$	63,559			$	51,113

     Parent Company Balance Sheet

          The following table presents the parent company’s unaudited balance sheet data at the dates indicated:

		June 30,				December 31,
		2007				2006
ASSETS
Current assets		$	5,553			$	2,928
Investments:
Investment in Enterprise Products Partners			832,487				840,933
Investment in TEPPCO			746,138				730,823
Investment in Energy Transfer Equity			1,652,275				—
Total investments			3,230,900				1,571,756
Other assets			68				340
Total assets		$	3,236,521			$	1,575,024
LIABILITIES AND PARTNERS’ EQUITY
Current liabilities:
Accounts payable – trade		$	92			$	—
Accounts payable – affiliates			152				—
Accrued interest payable			10,058				573
Current maturities of long term debt			1,079,194				—
Other current liabilities			82				450
Total current liabilities			1,089,578				1,023
Long term debt (see Note 11)			738,000				155,000
Partners’ equity			1,408,943				1,419,001
Total liabilities and partners’ equity		$	3,236,521			$	1,575,024

          To the extent that the parent company’s investments in Enterprise Products Partners, EPGP, TEPPCO and TEPPCO GP are equal to the underlying capital accounts of the parent company in each investee, the investment amounts are eliminated in the process of preparing our general purpose consolidated financial statements.

          At December 31, 2006, the parent company’s aggregate investment in TEPPCO and TEPPCO GP included $810.2 million of excess cost amounts consisting of $606.9 million attributed to IDRs (an indefinite-life intangible asset), $198.1 million of goodwill and $5.1 million attributed to fixed assets. The amount attributed to IDRs represents the historical carrying value and characterization of such asset by DFIGP, an affiliate of EPCO under common control with the parent company. This intangible asset is not subject to amortization, but is subject to periodic testing for recoverability.

          The $198.1 million of goodwill and $5.1 million of additional property, plant and equipment value is associated with the 4,400,000 TEPPCO common units contributed by DFI and the entity owning the 2% general partner interest contributed by DFIGP. These amounts represent DFI’s and DFIGP’s historical carrying values and characterization of such assets. Goodwill is not subject to amortization, but is subject to annual testing for recoverability. The $5.1 million of additional property, plant and equipment value represents the pro rata excess of fair value of TEPPCO’s fixed assets over their historical carrying values in February 2005.

          Debt principal outstanding at June 30, 2007 includes $1.8 billion borrowed in connection with the acquisition of ownership interests in Energy Transfer Equity and its general partner (collectively, $1.65 billion in cash payments) and refinancing of the parent company revolving credit facility ($155.0 million). In July 2007, the parent company used $738.0 million of net proceeds from its private placement of 20,134,220 units to reduce debt outstanding. See Note 18 for information regarding this subsequent event.

     Parent Company Income Statements

          The following table presents the parent company’s unaudited income statements for the periods indicated:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2007				2006				2007				2006
Equity in income of unconsolidated affiliates:
Investment in Enterprise Products Partners, including EPGP		$	31,934			$	25,342			$	61,596			$	50,450
Investment in TEPPCO, including TEPPCO GP			9,554				8,305				36,781				16,614
Investment in Energy Transfer Equity, including ETEGP			2,774				—				2,774				—
Total equity in income of unconsolidated affiliates			44,262				33,647				101,151				67,064
General and administrative costs			630				411				1,529				1,129
Operating income			43,632				33,236				99,622				65,935
Other income (expense):
Interest expense			(22,162	)			(2,310	)			(24,718	)			(4,377	)
Interest income			33				13				53				26
Income before cumulative effect of change in accounting principle			21,503				30,939				74,957				61,584
Cumulative effect of change in accounting principle			—				—								18
Net income		$	21,503			$	30,939			$	74,957			$	61,602

          Equity earnings represent our share of the net income of each investee. The amounts we record as equity earnings differs from the cash distributions we receive since net income includes non-cash depreciation and amortization expense and similar non-cash income and expense amounts. In addition, cash distributions may also be impacted by the maintenance of cash reserves by each investee and other provisions.

Note 3. General Accounting Policies and Related Matters

     Consolidation Policy

          We evaluate our financial interests in business enterprises to determine if they represent variable interest entities where we are the primary beneficiary. If such criteria are met, we consolidate the financial statements of such businesses with those of our own. Our consolidated financial statements include our accounts and those of our majority-owned subsidiaries in which we have a controlling interest, after the elimination of all material intercompany accounts and transactions. We also consolidate other entities and ventures in which we possess a controlling financial interest as well as partnership interests where we are the sole general partner of the partnership.

          If the investee is organized as a limited partnership or limited liability company and maintains separate ownership accounts, we account for our investment using the equity method if our ownership interest is between 3% and 50% and we exercise significant influence over the investee’s operating and financial policies. For all other types of investments, we apply the equity method of accounting if our ownership interest is between 20% and 50% and we exercise significant influence over the investee’s operating and financial policies. Our proportionate share of profits and losses from transactions with equity method unconsolidated affiliates are eliminated in consolidation to the extent such amounts are material and remain on our balance sheet (or those of our equity method investees) in inventory or similar accounts.

          If our ownership interest in an investee does not provide us with either control or significant influence over the investee, we account for the investment using the cost method.

     Cumulative Effect of Change in Accounting Principle

          In January 2006, we adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) 123(R), “Share-Based Payment.” Upon adoption of this accounting standard, Enterprise Products Partners recognized, as a benefit, the cumulative effect of a change in accounting principle of $1.5 million, of which $1.4 million was allocated to minority interest in the Company’s consolidated financial statements.

     Employee Benefit Plans

          TEPPCO maintained a non-contributory, trustee-administered pension plan through April 2006, at which time TEPPCO received a determination letter from the Internal Revenue Service providing its approval to terminate the plan. At June 30, 2007, $0.3 million of the plan assets had not been distributed to plan participants.

          Dixie Pipeline Company (“Dixie”), a consolidated subsidiary of EPO, employs the personnel that operate its pipeline system and certain of these employees are eligible to participate in a defined contribution plan and pension and postretirement benefit plans. Due to the immaterial nature of Dixie’s employee benefit plans to our consolidated financial position, results of operations and cash flows, our discussion is limited to the following:

          Defined Contribution Plan. Dixie contributed $0.1 million to its company-sponsored defined contribution plan for three month periods ended June 30, 2007 and 2006. During the six months ended June 30, 2007 and 2006, Dixie contributed $0.2 million to its company-sponsored defined contribution plan.

          Pension and Postretirement Benefit Plans. Dixie’s net pension benefit costs were $0.1 million and $0.2 million for the three months ended June 30, 2007 and 2006, respectively. For the six months ended June 30, 2007 and 2006, Dixie’s net pension benefit costs were $0.3 million, respectively. Dixie’s net postretirement benefit costs were $0.1 million for the three month periods ended June 30, 2007 and 2006. For the six months ended June 30, 2007 and 2006, Dixie’s net postretirement benefit costs were $0.2 million and $0.1 million, respectively. During the remainder of 2007, Dixie expects to contribute approximately $1.2 million to its postretirement benefit plan and approximately $0.2 million to its pension plan.

     Environmental Costs

          Environmental costs for remediation are accrued based on estimates of known remediation requirements. Such accruals are based on management’s best estimate of the ultimate cost to remediate a site and are adjusted as further information and circumstances develop. Those estimates may change substantially depending on information about the nature and extent of contamination, appropriate remediation technologies, and regulatory approvals. Ongoing environmental compliance costs are charged to expense as incurred. In accruing for environmental remediation liabilities, costs of future expenditures for environmental remediation are not discounted to their present value, unless the amount and timing of the expenditures are fixed or reliably determinable. Expenditures to mitigate or prevent future environmental contamination are capitalized.

          At June 30, 2007 and December 31, 2006, our accrued liabilities for environmental remediation projects totaled $30.6 million and $26.0 million, respectively. These amounts were derived from a range of reasonable estimates based upon studies and site surveys. Unanticipated changes in circumstances and/or legal requirements could result in expenses being incurred in future periods in addition to an increase in actual cash required to remediate contamination for which we are responsible.

          In February 2007, Enterprise Products Partners reserved $6.5 million in cash received from a third party to fund anticipated future environmental remediation costs associated with certain acquired assets.

Previously, the third party had been obligated to indemnify Enterprise Products Partners for such costs. As a result of the settlement, this indemnification arrangement was terminated.

     Estimates

          Preparing our Unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Our actual results could differ from these estimates. On an ongoing basis, management reviews its estimates based on currently available information. Changes in facts and circumstances may result in revised estimates.

     Income Taxes

          We are organized as a pass-through entity for income tax purposes. As a result, our partners are responsible for federal and state, where applicable, income taxes on their share of our taxable income. Our provision for income taxes is applicable to state tax obligations under the Texas Margin Tax and certain federal and state tax obligations of Seminole Pipeline Company (“Seminole”) and Dixie.

          In accordance with Financial Accounting Standards Board Interpretation (“FIN”) 48, “Accounting for Uncertainty in Income Taxes,” we must recognize the tax effects of any uncertain tax positions we may adopt, if the position taken by us is more likely than not sustainable. If a tax position meets such criteria, the tax effect to be recognized by us would be the largest amount of benefit with more than a 50% chance of being realized upon settlement. This guidance was effective January 1, 2007, and our adoption of this guidance had no material impact on our financial position, results of operations or cash flows.

     Minority Interest

          As presented in our Unaudited Condensed Consolidated Balance Sheets, minority interest represents third-party ownership interests in the net assets of our consolidated subsidiaries. For financial reporting purposes, the assets and liabilities of our majority owned subsidiaries are consolidated with those of the parent company, with any third-party ownership in such amounts presented as minority interest.

          The following table presents the components of minority interest as presented on our Unaudited Condensed Consolidated Balance Sheets at the dates indicated:

		June 30,				December 31,
		2007				2006
Limited partners of Enterprise Products Partners:
Third-party owners of Enterprise Products Partners(1)		$	5,112,829			$	5,219,349
Related party owners of Enterprise Products Partners(2)			336,009				395,591
Limited partners of Duncan Energy Partners:
Third-party owners of Duncan Energy Partners(3)			293,510				—
Related party former owners of TEPPCO GP (4)			—				(13,098	)
Limited partners of TEPPCO:
Third-party owners of TEPPCO (1)			1,408,502				1,384,557
Related party owners of TEPPCO (2)			(5,894	)			3,290
Joint venture partners(5)			141,155				129,130
Total minority interest on consolidated balance sheet		$	7,286,111			$	7,118,819

          The following table presents the components of minority interest expense as presented on our Unaudited Condensed Statements of Consolidated Operations for the periods indicated:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2007				2006				2007				2006
Limited partners of Enterprise Products Partners		$	110,004			$	99,802			$	192,408			$	206,972
Limited partners of Duncan Energy Partners			3,283				—				6,114				—
Related party former owners of TEPPCO GP			—				3,631				—				8,788
Limited partners of TEPPCO			38,108				29,282				143,933				61,044
Joint venture partners			2,457				538				5,287				2,736
Total		$	153,852			$	133,253			$	347,742			$	279,540

          Minority interest expense amounts attributable to the limited partners of Enterprise Products Partners, Duncan Energy Partners and TEPPCO primarily represent allocations of earnings by these entities to their unitholders, excluding those earnings allocated to the parent company in connection with its ownership of common units of Enterprise Products Partners and TEPPCO.

          The following table presents distributions paid to and contributions from minority interests as presented on our Unaudited Condensed Statements of Consolidated Cash Flows for the periods indicated:

		For the Six Months
		Ended June 30,
		2007				2006
Distributions paid to minority interests:
Limited partners of Enterprise Products Partners		$	397,930			$	341,282
Limited partners of Duncan Energy Partners			3,648				—
Related party former owners of TEPPCO GP			—				11,497
Limited partners of TEPPCO			116,151				94,451
Joint venture partners			5,768				4,131
Total distributions paid to minority interests		$	523,497			$	451,361
Contributions from minority interests:
Limited partners of Enterprise Products Partners		$	34,816			$	444,406
Limited partners of Duncan Energy Partners			291,044				—
Joint venture partners			12,505				19,017
Total contributions from minority interests		$	338,365			$	463,423

          Distributions paid to the limited partners of Enterprise Products Partners, Duncan Energy Partners and TEPPCO primarily represent the quarterly cash distributions paid by these entities to their unitholders, excluding those paid to the parent company in connection with its ownership of common units of Enterprise Products Partners and TEPPCO.

          Contributions from the limited partners of Enterprise Products Partners, Duncan Energy Partners and TEPPCO primarily represent proceeds each entity received from common unit offerings, excluding those received from the parent company. Contributions from the limited partners of Duncan Energy Partners represent the net proceeds received by Duncan Energy Partners in connection with its initial public offering in February 2007.

     Recent Accounting Developments

          SFAS 157, “Fair Value Measurements,” defines fair value, establishes a framework for measuring fair value in compliance with GAAP, and expands disclosures about fair value measurements. SFAS 157 is effective for fiscal years beginning after November 15, 2007 and we will be required to adopt SFAS 157 on January 1, 2008. We do not believe SFAS 157 will have a material impact on our financial position, results of operations, and cash flows since we already apply its basic concepts in measuring fair values used to record various transactions such as those involving business acquisitions.

          SFAS 159, “Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115,” permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected would be reported in net income. SFAS 159 also establishes presentation and disclosure requirements designed to draw comparisons between the different measurement attributes the company elects for similar types of assets and liabilities. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We do not believe SFAS 159 will have a material impact on our financial position, results of operations, and cash flows.

Note 4. Business Segments

          Effective with the period ending June 30, 2007, the Company has three principal operating segments: (i) Investment in Enterprise Products Partners, (ii) Investment in TEPPCO and (iii) Investment in Energy Transfer Equity. Our investing activities are organized into business segments that reflect how our chief operating decision maker (i.e. our chief executive officer) routinely monitors the financial

performance of these investments. We evaluate segment performance based on operating income. Each investee has separate operating management and Boards of Directors with independent directors.

          Our Investment in Enterprise Products Partners business segment reflects the consolidated operations of Enterprise Products and its general partner, EPGP. Our Investment in TEPPCO reflects the consolidated operations of TEPPCO and its general partner, TEPPCO GP. As discussed previously, the Investment in TEPPCO segment represents the historical operations of TEPPCO and TEPPCO GP that were under common control with us prior to our acquisition of these interests in May 2007. TEPPCO and Enterprise Products Partners are joint venture partners in the Jonah Gathering System (“Jonah”), which is a natural gas pipeline located in southwest Wyoming. Within their respective financial statements, Enterprise Products Partners and TEPPCO account for their joint venture in Jonah using the equity method of accounting. As a result of common control at the parent company-level, we classify the assets and results of operations from Jonah within our Investment in TEPPCO segment. We control Enterprise Products Partners and TEPPCO through our ownership of their respective general partners. Our Investment in Energy Transfer Equity business segment reflects our non-controlling equity method investment in Energy Transfer Partner and its general partner, ETEGP.

          Segment revenues and expenses include intersegment transactions, which are generally based on transactions made at market-related rates. Our consolidated totals reflect the elimination of all material intersegment transactions. We classify equity earnings from unconsolidated affiliates as a component of operating income. Our equity investments in Energy Transfer Equity and ETEGP are a vital component of our business strategy to increase cash distributions to unitholders through accretive acquisitions. Such investments are also a component of the business strategy of Enterprise Products Partners and TEPPCO. They are a means by which Enterprise Products Partners and TEPPCO align their commercial interests with those of customers and/or suppliers who are joint owners in such entities. This method of operation enables Enterprise Products Partners and TEPPCO to achieve favorable economies of scale relative to the level of investment and business risk assumed versus what they could accomplish on a stand-alone basis. Given the interrelated nature of such investees to the operations of Enterprise Products Partners and TEPPCO, we believe the presentation of equity earnings from such unconsolidated affiliates as a component of operating income is meaningful and appropriate.

          Segment financial information presented for our Investment in Enterprise Products Partners and TEPPCO was derived from the underlying consolidated financial statements of EPGP and TEPPCO GP, respectively. Segment financial information presented for our Investment in Energy Transfer Equity represents amounts we record in connection with these equity method investments based primarily on publicly available information of Energy Transfer Equity.

          The following table presents the Company’s business segment information related to its Unaudited Condensed Statements of Consolidated Operations and Unaudited Condensed Consolidated Balance Sheets.

		Reportable Segment
		Investment								Investment
		in								in
		Enterprise				Investment				Energy
		Products				in				Transfer								Consolidated
		Partners				TEPPCO				Equity				Other				Totals
Revenues from external customers:
Three months ended June 30, 2007		$	4,076,573			$	2,102,941			$	—			$	—			$	6,179,514
Three months ended June 30, 2006			3,404,419				2,418,791				—				—				5,823,210
Six months ended June 30, 2007			7,335,185				4,128,868				—				—				11,464,053
Six months ended June 30, 2006			6,564,418				4,956,880				—				—				11,521,298
Revenues from related parties:
Three months ended June 30, 2007			136,233				(6,942	)			—				(14,535	)			114,756
Three months ended June 30, 2006			113,434				5,498				—				(16,978	)			101,954
Six months ended June 30, 2007			200,475				2,283				—				(32,266	)			170,492
Six months ended June 30, 2006			203,509				9,248				—				(26,126	)			186,631
Total revenues:
Three months ended June 30, 2007			4,212,806				2,095,999				—				(14,535	)			6,294,270
Three months ended June 30, 2006			3,517,853				2,424,289				—				(16,978	)			5,925,164
Six months ended June 30, 2007			7,535,660				4,131,151				—				(32,266	)			11,634,545
Six months ended June 30, 2006			6,767,927				4,966,128				—				(26,126	)			11,707,929
Equity income (loss):
Three months ended June 30, 2007			(7,311	)			(2,429	)			2,774				—				(6,966	)
Three months ended June 30, 2006			8,012				2,675				—				—				10,687
Six months ended June 30, 2007			(2,087	)			(2,130	)			2,774				—				(1,443	)
Six months ended June 30, 2006			12,041				3,664				—				—				15,705
Operating income:
Three months ended June 30, 2007			213,349				71,971				2,774				(2,047	)			286,047
Three months ended June 30, 2006			183,329				60,474				—				1,155				244,958
Six months ended June 30, 2007			400,232				175,817				2,774				(10,921	)			567,902
Six months ended June 30, 2006			378,289				125,942				—				(1,124	)			503,107
Segment assets:
At June 30, 2007			15,169,131				5,121,077				1,652,275				(107,655	)			21,834,828
At December 31, 2006			13,867,278				4,870,662				—				(38,049	)			18,699,891
Investments in and advances to unconsolidated affiliates (see Note 9):
At June 30, 2007			635,442				273,303				1,656,740				(5,583	)			2,559,902
At December 31, 2006			444,189				343,901				—				(3,334	)			784,756
Intangible Assets (see Note 10):
At June 30, 2007			950,260				938,187				—				(17,652	)			1,870,795
At December 31, 2006			1,003,955				952,650				—				(17,652	)			1,938,953
Goodwill (see Note 10):
At June 30, 2007			590,647				216,430				—				174				807,251
At December 31, 2006			590,541				216,430				—				—				806,971

          The following information provides an overview of the underlying businesses of Enterprise Products Partners, TEPPCO and Energy Transfer Equity.

     Enterprise Products Partners

          Enterprise Products Partners is a publicly traded (NYSE: EPD) North American midstream energy company providing a wide range of services to producers and consumers of natural gas, natural gas liquids (“NGLs”), crude oil, and certain petrochemicals. In addition, Enterprise Products Partners is an industry leader in the development of pipeline and other midstream energy infrastructure in the continental United States and Gulf of Mexico. Its midstream energy asset network links producers of natural gas, NGLs and crude oil from some of the largest supply basins in the United States, Canada and the Gulf of Mexico with domestic consumers and international markets.

          Enterprise Products Partners transports natural gas, NGLs, crude oil and petrochemical products through more than 35,000 miles of onshore and offshore pipelines. Services include natural gas gathering, processing, transportation and storage; NGL fractionation (or separation), transportation, storage and import and export terminaling; crude oil transportation; offshore production platform services; and petrochemical pipeline and services.

          The business purpose of EPGP is to manage the affairs and operations of Enterprise Products Partners. EPGP has no separate business activities outside of those conducted by Enterprise Products Partners and its consolidated subsidiaries, including Duncan Energy Partners. The commercial management of EPGP does not overlap with that of TEPPCO or Energy Transfer Equity.

          Enterprise Products Partners operates in four primary business lines: (i) NGL Pipelines & Services; (ii) Onshore Natural Gas Pipelines & Services; (iii) Offshore Pipelines & Services; and (iv) Petrochemical Services.

          The NGL Pipelines & Services business line consists of (i) 23 natural gas processing plants located in Texas, Louisiana, Mississippi, New Mexico and Wyoming; (ii) 13,295 miles of NGL pipelines; (iii) 162.1 million barrels of underground NGL and related product storage working capacity; (iv) two import/export facilities; and (v) six NGL fractionation facilities located in Texas and Louisiana. Enterprise Products Partners’ most significant NGL pipeline is the 7,378-mile Mid-America Pipeline System. The Mid-America Pipeline System connects at the Hobbs hub with the 1,326-mile Seminole Pipeline, which is 90% owned by Enterprise Products Partners. Enterprise Products Partners also owns a 74.2% interest in the 1,370-mile Dixie Pipeline, which is a regulated propane pipeline extending from southeast Texas and Louisiana to markets in the southeastern United States. Enterprise Product Partners’ most significant NGL and related product storage facility is located in Mont Belvieu, Texas, which is a key hub of the domestic and international NGL industry. This facility consists of 33 underground caverns with an aggregate storage capacity of approximately 100 MMBbls, a brine system with approximately 20 MMBbls of above-ground storage pit capacity and two brine production wells. Enterprise Products Partners’ most significant NGL fractionation facility is located in Mont Belvieu, Texas and has a total plant fractionation capacity of 230 MBPD (178 MBPD net to Enterprise Products Partners’ interest).

          The Onshore Natural Gas Pipelines & Services business line includes (i) 18,889 miles of onshore natural gas pipeline systems that provide for the gathering and transmission of natural gas in Alabama, Colorado, Louisiana, Mississippi, New Mexico, Texas and Wyoming and (ii) underground natural gas storage caverns located in Mississippi, Louisiana and Texas. Enterprise Products Partners’ most significant onshore natural gas pipeline systems are its 8,140-mile Texas Intrastate System and 6,065-mile San Juan Gathering System. Enterprise Products Partners owns two underground natural gas storage caverns located in southern Mississippi that are capable of delivering in excess of 1.4 Bcf/d of natural gas (on a combined basis) into five interstate pipelines. Enterprise Products Partners also leases underground natural gas storage caverns in Texas and Louisiana. The total gross capacity of Enterprise Products Partners owned and leased natural gas storage facilities is 25.3 Bcf of gas.

          The Offshore Pipelines & Services business line consists of (i) 1,586 miles of offshore natural gas pipelines, (ii) 863 miles of offshore crude oil pipeline systems and (iii) six offshore hub platforms with crude oil or natural gas processing capabilities. Enterprise Products Partners’ most significant offshore natural gas pipeline systems are its 164-mile Viosca Knoll Gathering System and 134-mile Independence Trail pipeline. The Independence Trail pipeline went into service in July 2007 in conjunction with start-up of the Independence Hub platform. Enterprise Products Partners’ most significant offshore crude oil pipeline systems are its 373-mile Cameron Highway Oil Pipeline, 322-mile Poseidon Oil Pipeline System and 67-mile Constitution Oil Pipeline. Enterprise Products Partners most significant offshore platform is the Independence Hub located in Mississippi Canyon Block 920. This deepwater platform processes natural gas gathered from production fields in the Atwater Valley, DeSoto Canyon, Lloyd Ridge and Mississippi Canyon areas of the Gulf of Mexico. Mechanical completion of the platform was achieved in May 2007 and received first production in July 2007.

          The Petrochemical Services’ business line includes four propylene fractionation facilities, an isomerization complex, an octane additive production facility and 679 miles of petrochemical pipelines. Enterprise Products Partners’ propylene fractionation facilities include (i) three polymer-grade fractionation facilities located in Mont Belvieu, Texas having a combined plant capacity of 72 MBPD (58 MBPD net to Enterprise Products Partners’ interest) and (ii) a chemical-grade fractionation plant located in Louisiana with a total plant capacity of 23 MPBD (7 MBPD net to Enterprise Products Partners’ interest). These operations also include 609 miles of propylene pipeline systems, an export terminal facility located on the Houston Ship Channel and a petrochemical marketing group.

          Enterprise Products Partners’ isomerization business includes three butamer reactor units and eight associated deisobutanizer units located in Mont Belvieu, Texas, which comprise the largest commercial isomerization complex in the United States. This complex has a production capacity of 116 MBPD. This business also includes a 70-mile pipeline system used to transport high-purity isobutane from Mont Belvieu, Texas to Port Neches, Texas. Enterprise Products Partners also owns and operate an octane additive production facility located in Mont Belvieu, Texas designed to produce 12 MBPD of isooctane, which is an additive used in reformulated motor gasoline blends to increase octane, and isobutylene.

     TEPPCO

          TEPPCO is a publicly-traded (NYSE: TPP) North American midstream energy company that owns and operates refined products and liquefied petroleum gas (“LPG”) pipelines; owns and operates petrochemical and NGL pipelines; is engaged in transportation, storage, gathering and marketing of crude oil; owns and operates natural gas gathering systems; and has ownership interests in various joint venture projects including the Seaway and Centennial pipelines.

          The business purpose of TEPPCO GP is to manage the affairs and operations of TEPPCO. TEPPCO GP has no separate business activities outside of those conducted by TEPPCO. The commercial management of TEPPCO does not overlap with that of Enterprise Products Partners or Energy Transfer Equity.

          TEPPCO’s primary refined products and LPG assets include an approximately 4,700-mile pipeline system (together with receiving, storage and terminalling facilities) extending from southeast Texas through the central and midwestern United States to the northeastern United States. This pipeline network includes 35 storage facilities with an aggregate storage capacity of 21 million barrels of refined products and six million barrels of LPGs, including storage capacity leased to outside parties. The system’s 62 delivery locations (20 of which are owned by TEPPCO) include facilities that provide customers with access to truck racks, rail cars and marine vessels. TEPPCO’s assets include three approximately 70-mile pipelines that extend from Mont Belvieu, Texas to Port Arthur, Texas, which serve the petrochemicals industry.

          Additionally, TEPPCO has a 50% ownership interest in the approximately 800-mile Centennial pipeline, which receives and delivers products from connecting TEPPCO pipeline segments. TEPPCO also gathers, transports, markets and stores crude oil and distributes lubrication oils and specialty chemicals

through approximately 4,300 miles of pipelines, approximately 13 million barrels of storage capacity and terminals in Cushing, Oklahoma, and Midland, Texas. TEPPCO provides services through a combination of gathering systems, common carrier pipelines, equity-owned pipelines, trucking operations and third party pipelines, across the mid-continent, West Texas, Gulf Cost and Rocky Mountain regions. TEPPCO has a 50% ownership interest in Seaway, which consists of an approximate 500-mile pipeline that originates in Freeport, Texas, and connects to the Cushing terminal, a major distribution hub for the central United States and a delivery point for the New York Mercantile Exchange.

          TEPPCO also provides midstream services, including natural gas gathering and transportation and fractionation of NGLs. TEPPCO and Enterprise Products Partners entered into a joint venture involving Jonah Gas Gathering Company in August 2006. Jonah is comprised of approximately 600 miles of natural gas gathering pipelines, serving approximately 1,130 producing wells in the Greater Green River Basin of southwest Wyoming. TEPPCO is also active in the San Juan Basin in northern New Mexico and southern Colorado through its Val Verde gathering system. Val Verde consists of more than 400 miles of pipelines and a large amine treating facility to remove carbon dioxide. TEPPCO also provides transportation and fractionation services for NGLs, through approximately 1,400 miles of NGL pipelines in Texas and New Mexico and two fractionation facilities in northeast Colorado.

          TEPPCO and Enterprise Products Partners account for their respective ownership interests in the Jonah joint venture using the equity method of accounting. When we combine the financial statements of TEPPCO and Enterprise Products Partners in preparing our consolidated financial statements, we eliminate the Jonah equity income amounts recognized by TEPPCO and Enterprise Products Partners and consolidate the full financial statements of Jonah as a component of our Investment in TEPPCO segment. Jonah was a consolidated subsidiary of TEPPCO prior to August 2006.

          The following table presents selected income statement data (unaudited) for Jonah as reflected in our Investment in TEPPCO totals for the periods:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2007				2006				2007				2006
Revenues from external customers		$	44,387			$	39,004			$	96,830			$	60,009
Revenues from related parties			2,177				1,250				6,457				6,692
Total revenues			46,564				40,254				103,287				66,701
Operating income			23,704				16,859				43,922				34,585

          The following table presents selected balance sheet data (unaudited) for Jonah as reflected in our Investment in TEPPCO totals at the dates indicated:

		June 30,				December 31,
		2007				2006
Segment assets		$	203,090			$	138,357
Intangible assets			155,171				160,313
Goodwill			2,776				2,776

     Energy Transfer Equity

          Energy Transfer Equity is a publicly traded Delaware limited partnership formed in 2002 that completed its initial public offering in February 2006. Energy Transfer Equity’s only cash generating assets are its direct and indirect investments in limited and general partner interests of ETP. Energy Transfer Equity owns common units and the 2% general partner interest of ETP (including 100% of the incentive distribution rights held by the general partner of ETP).

          The business purpose of ETEGP is to manage the affairs and operations of Energy Transfer Equity. ETEGP has no separate business activities outside of those conducted by Energy Transfer Equity. The commercial management of Energy Transfer Equity does not overlap with that of Enterprise Products Partners or TEPPCO.

          ETP is a publicly traded partnership owning and operating a diversified portfolio of midstream energy assets. ETP’s natural gas operations include natural gas gathering and transportation pipelines, interstate transmission pipelines, natural gas treating and processing assets located in Texas and Louisiana, and three natural gas storage facilities located in Texas. These assets include approximately 12,200 miles of intrastate pipelines in service, with an additional 500 miles of intrastate pipelines under construction, and 2,400 miles of interstate pipelines. ETP is also one of the three largest retail marketers of propane in the U. S., serving more than one million customers across the country.

Note 5. Accounting for Unit-Based Awards

          We account for unit-based awards in accordance with SFAS 123(R). SFAS 123(R) requires us to recognize compensation expense related to equity awards based on the fair value of the award at grant date. The fair value of restricted unit awards is based on the market price of the underlying common units on the date of grant. The fair value of other unit-based awards is estimated using the Black-Scholes option pricing model. Under SFAS 123(R), the fair value of an equity-classified award is amortized to earnings on a straight-line basis over the requisite service or vesting period for equity-classified awards. Compensation for liability-classified awards is recognized over the requisite service or vesting period of an award based on the fair value of the award remeasured at each reporting period. Liability awards will be cash settled upon vesting.

          The following table summarizes compensation amounts by plan recognized by the parent company and its consolidated subsidiaries during each of the periods indicated:

		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2007				2006				2007				2006
Parent Company:
EPGP Unit Appreciation Rights		$	30			$	—			$	64			$	—
Employee Partnerships			24				8				31				15
EPCO 1998 Long-term Incentive Plan (“1998 Plan”)			12				12				33				74
Total parent company			66				20				128				89
Enterprise Products Partners:
Employee Partnerships			676				550				1,178				1,129
1998 Plan (1)			6,300				1,979				7,767				3,043
DEPGP Unit Appreciation Rights			26				—				36				—
Total Enterprise Products Partners			7,002				2,529				8,981				4,172
TEPPCO:
Employee Partnerships (2)			126				—				126				—
1998 Plan (2)			90				30				227				66
1999 Phantom Unit Retention Plan (“1999 Plan”)			341				181				782				181
2000 Long-Term Incentive Plan (“2000 LTIP”)			122				107				302				319
2005 Phantom Unit Plan (“2005 Phantom Unit Plan”)			328				147				541				503
EPCO 2006 TPP Long-Term Incentive Plan (“2006 LTIP”)			104				—				104				—
Total TEPPCO			1,111				465				2,082				1,069
Total consolidated expense		$	8,179			$	3,014			$	11,191			$	5,330

     EPGP Unit Appreciation Rights

          The non-employee directors of EPGP have been granted unit appreciation rights (“UARs”) in the form of letter agreements. These liability awards are not part of any established long-term incentive plan of EPCO, the parent company or Enterprise Products Partners.

          As of June 30, 2007, a total of 90,000 UARs had been granted to non-employee directors of EPGP. All of these awards were issued during the third and fourth quarters of 2006 and cliff vest in five years. EPGP recognized $30 thousand and $64 thousand of compensation expense associated with these liability awards during the three and six months ended June 30, 2007.

     EPCO Employee Partnerships

          EPCO formed the employee partnerships to serve as an incentive arrangement for certain employees of EPCO through a “profits interest.” The employee partnerships were formed by a contribution of the parent company’s units from a private company affiliate of EPCO. In consideration for the capital contributions, the private company affiliate of EPCO was admitted to the employee partnerships as the Class A limited partner. Certain EPCO employees who work on behalf of the parent company, Enterprise Products Partners, TEPPCO or EPCO were issued Class B limited partner interests and admitted as Class B limited partners without any capital contribution. The profits interest awards (i.e., the Class B limited partner interests) in the employee partnerships entitles each holder to participate in the appreciation in value of the parent company’s units and are subject to forfeiture.

          Currently there are three employee partnerships. EPE Unit I was formed in August 2005 in connection with our initial public offering and EPE Unit II was formed in December 2005. EPE Unit III was formed in May 2007 (see discussion below). A portion of the fair value of these equity-based awards is allocated to the parent company, Enterprise Products Partners, Duncan Energy Partners and TEPPCO under the EPCO administrative services agreement as a non-cash expense. The allocation is based on an estimate of time spent by each employee on the registrant’s business activities. Neither the parent company nor any of its consolidated subsidiaries will reimburse EPCO, the employee partnerships or any of their affiliates or partners, through the EPCO administrative services agreement or otherwise, for any expenses related to the employee partnerships, including the contributions of any parent company units to the employee partnerships by private company affiliates of EPCO.

          As of June 30, 2007, there was $30.5 million of total unrecognized compensation cost related to the employee partnership awards, of which we will recognize our share in accordance with the EPCO administrative services agreement.

          EPE Unit III. EPE Unit III was formed on May 7, 2007 and owns 4,421,326 parent company units contributed to it by a private company affiliate of EPCO, which, in turn, was made the Class A limited partner of EPE Unit III. On the date of contribution, the fair market value of the units contributed by the Class A limited partner was $170.0 million (the “Class A limited partner capital base”). Certain EPCO employees were issued Class B limited partner interests and admitted as Class B limited partners of EPE Unit III without any capital contribution. The profits interest awards (i.e., Class B limited partner interests) in EPE Unit III entitle the holder to participate in the appreciation in value of the parent company units owned by EPE Unit III.

          Unless otherwise agreed to by EPCO, the Class A limited partner and a majority in interest of the Class B limited partners of EPE Unit III, EPE Unit III will be liquidated upon the earlier of: (i) May 7, 2012 or (ii) a change in control of the parent company or its general partner. EPE Unit III has the following material terms regarding its quarterly cash distribution to partners:

§

Distributions of Cashflow – Each quarter, 100% of the cash distributions received by EPE Unit III from the parent company will be distributed to the Class A limited partner until it has received an amount equal to the Class A preferred return (as defined below), and any remaining distributions received by EPE Unit III will be distributed to the Class B limited partners. The Class A preferred return equals 3.797% of the Class A limited partner’s capital base. The Class A limited partner’s capital base equals approximately $170.0 million plus any unpaid Class A preferred return from prior periods, less any distributions made by EPE Unit III of proceeds from the sale of the parent company’s units owned by EPE Unit III (as described below).

	§		Liquidating Distributions – Upon liquidation of EPE Unit III, units having a fair market value equal to the Class A limited partner capital base will be distributed to a private company affiliate of EPCO, plus any accrued Class A preferred return for the quarter in which liquidation occurs. Any remaining units will be distributed to the Class B limited partners.
	§		Sale Proceeds – If EPE Unit III sells any of the 4,421,326 of the parent company’s units that it owns, the sale proceeds will be distributed to the Class A limited partner and the Class B limited partners in the same manner as liquidating distributions described above.

          The Class B limited partner interests in EPE Unit III that are owned by EPCO employees are subject to forfeiture if the participating employee’s employment with EPCO and its affiliates is terminated prior to May 7, 2012, with customary exceptions for death, disability and certain retirements. The risk of forfeiture associated with the Class B limited partner interests in EPE Unit III will also lapse upon certain change of control events.

     1998 Plan

          The 1998 Plan provides for the issuance of up to 7,000,000 common units of Enterprise Products Partners. As of June 30, 2007, 1,689,500 common units of Enterprise Products Partners had been issued in connection with the exercise of unit options. After giving effect to outstanding unit options at June 30, 2007 and the issuance and forfeiture of restricted common units through June 30, 2007, a total of 3,606,303 additional common units of Enterprise Products Partners could be issued under the 1998 Plan in the future.

          Unit options. Under the 1998 Plan, non-qualified incentive options to purchase a fixed number of Enterprise Products Partners’ common units may be granted to EPCO’s key employees who perform management, administrative or operational functions for the parent company, EPGP and Enterprise Products Partners. The following table presents total unit option activity under the 1998 Plan for the periods indicated:

										Weighted-
						Weighted-				average
						average				remaining				Aggregate
		Number of				strike price				contractual				Intrinsic
		Units				(dollars/unit)				term (in years)				Value (1)
Outstanding at December 31, 2006			2,416,000			$	23.32
Granted (2)			795,000				30.96
Exercised			(230,500	)			18.89
Settled (3)			(710,000	)			24.35
Outstanding at June 30, 2007			2,270,500			$	26.12				8.14			$	3,502
Options exercisable at:
June 30, 2007			360,500			$	22.10				4.52			$	3,502

          The total intrinsic value of Enterprise Products Partners’ unit options exercised during the three and six months ended June 30, 2007 was $1.2 million and $2.8 million, respectively.

          As of June 30, 2007, there was an estimated $3.2 million of total unrecognized compensation cost related to nonvested unit options granted under the 1998 Plan, of which we will recognize our share in accordance with the EPCO administrative services agreement. We expect to recognize our share of this

cost over a weighted-average period of 3.25 years in accordance with the EPCO administrative services agreement.

          During the six months ended June 30, 2007 and 2006, Enterprise Products Partners received cash of $7.3 million and $1.6 million, respectively, from the exercise of unit options, and its option-related reimbursements to EPCO were $2.8 million and $0.7 million, respectively.

          Restricted units. Under the 1998 Plan, Enterprise Products Partners may also issue restricted common units to key employees of EPCO and directors of Enterprise Products GP. The following table summarizes information regarding Enterprise Products Partners’ restricted common units for the periods indicated:

						Weighted-
						Average Grant
		Number of				Date Fair Value
		Units				per Unit			(1)
Restricted units at December 31, 2006			1,105,237
Granted (2)			620,140			$	25.74
Forfeited			(16,000	)		$	23.56
Settled (3)			(113,053	)		$	23.24
Restricted units at June 30, 2007			1,596,324

          As of June 30, 2007, there was $27.8 million of total unrecognized compensation cost related to restricted common units. We will recognize our share of such costs in accordance with the EPCO administrative services agreement. At June 30, 2007, these costs are expected to be recognized over a weighted-average period of 2.8 years.

     DEPGP Unit Appreciation Rights

          The non-employee directors of DEPGP have been granted UARs in the form of letter agreements. These liability awards are in the form of letter agreements with each of the directors and are not part of any established long-term incentive plan of the parent company, EPCO, Enterprise Products Partners or Duncan Energy Partners. These awards vest the earlier of February 2012 or the date of certain qualifying events (as set forth in the form of grant). The UARs entitle each non-employee director to receive a cash payment on the vesting date equal to the excess, if any, of the fair market value of the parent company’s units (determined as of the vesting date) over the grant date fair value. If the director resigns prior to vesting, his UAR awards are forfeited. As of June 30, 2007, a total of 90,000 of these UARs were outstanding.

     1999 Plan

          The 1999 Plan provides for the issuance of phantom unit awards as incentives to key employees working on behalf of TEPPCO. These liability awards are automatically redeemed for cash based on the vested portion of the fair market value of the phantom units at redemption dates in each award. The fair market value of the phantom units is equal to the closing price of TEPPCO’s common units on the NYSE on the redemption date. Each participant is required to redeem their phantom units as they vest. Each participant is also entitled to cash distributions equal to the product of the number of phantom units outstanding for the participant and the cash distribution per unit paid by TEPPCO on its common units.

          A total of 31,600 phantom units were outstanding under the 1999 Plan at June 30, 2007. These awards vest as follows: 13,000 in April 2008; 13,000 in April 2009; and 5,600 in January 2010. At June 30, 2007 and December 31, 2006, TEPPCO had accrued liability balances of $1.0 million and $0.8 million, respectively, for compensation related to the 1999 Plan.

     2000 LTIP

          The 2000 LTIP provides key employees working on behalf of TEPPCO incentives to achieve improvements in TEPPCO’s financial performance. Generally, upon the close of a three-year performance period, if the participant is still an employee of EPCO, the participant will receive a cash payment in an amount equal to (i) the applicable “performance percentage” as specified in the award multiplied by (ii) the number of phantom units granted under the award multiplied by (iii) the average of the closing prices of TEPPCO common units over the ten consecutive days immediately preceding the last day of the performance period. In addition, during the performance period, each participant is also entitled to cash distributions equal to the product of the number of phantom units outstanding for the participant and the cash distribution per unit paid by TEPPCO on its common units. Grants under the 2000 LTIP are accounted for liability awards.

          A participant’s “performance percentage” is based upon an improvement in Economic Value Added for TEPPCO during a given three-year performance period over the Economic Value Added for the three-year period immediately preceding the performance period. The term Economic Value Added means TEPPCO’s average annual EBITDA for the performance period minus the product of TEPPCO’s average asset base and its cost of capital for the performance period. In this context, EBITDA means TEPPCO’s earnings before net interest expense, other income – net, depreciation and amortization and TEPPCO’s proportional interest in the EBITDA of its joint ventures, except that at his discretion the chief executive officer of TEPPCO may exclude gains or losses from extraordinary, unusual or non-recurring items. Average asset base means the quarterly average, during the performance period, of TEPPCO’s gross value of property, plant and equipment, plus long-term inventory, and the gross value of intangibles and equity investments. TEPPCO’s cost of capital is determined at the date of award grant.

          At June 30, 2007, a total of 19,700 awards were outstanding under the 2000 LTIP, of which 8,400 vest in 2008 and 11,300 vest in 2009. At June 30, 2007 and December 31, 2006, TEPPCO had accrued liability balances of $0.9 million and $0.6 million, respectively, for compensation related to the 2000 LTIP.

     2005 Phantom Unit Plan

          The 2005 Phantom Unit Plan provides key employees working on behalf of TEPPCO incentives to achieve improvements in TEPPCO’s financial performance. The terms of the 2005 Phantom Unit Plan are similar to TEPPCO’s 2000 LTIP (see preceding section) except that the performance percentage referenced in each award is based upon an improvement in EBITDA during a given three-year performance period over EBITDA for the three-year period preceding the performance period. In this context, EBITDA means TEPPCO’s earnings before minority interest, net interest expense, other income – net, income taxes, depreciation and amortization and TEPPCO’s proportional interest in EBITDA of its joint ventures, except that at his discretion, the chief executive officer of TEPPCO may exclude gains or losses from extraordinary, unusual or non-recurring items. Grants under the 2005 Phantom Unit Plan are accounted for liability awards.

          At June 30, 2007, a total of 77,200 awards were outstanding under the 2005 Phantom Unit Plan, of which 39,000 vest in 2008 and 38,200 vest in 2009. At June 30, 2007 and December 31, 2006, TEPPCO had accrued liability balances of $2.2 million and $1.6 million, respectively, for compensation related to the 2005 Phantom Unit Plan.

     2006 LTIP

          The 2006 LTIP provides for awards of TEPPCO units and other rights to its non-employee directors and to employees of EPCO and its affiliates providing services to TEPPCO. Awards granted under the 2006 LTIP may be in the form of restricted units, phantom units, unit options, unit appreciation rights and distribution equivalent rights. The 2006 LTIP provides for the issuance of up to 5,000,000 common units of TEPPCO in connection with these awards.

          As of December 31, 2006, no awards had been granted under the 2006 LTIP. In May 2007, 155,000 unit options, 62,900 restricted units and 338,479 unit appreciation rights were granted to EPCO employees working on behalf of TEPPCO. After giving effect to the unit options and restricted units outstanding at June 30, 2007, an additional 4,782,100 additional common units could be issued under the 2006 LTIP. Unit options and restricted units granted under the 2006 LTIP vest in May 2011. The UARs vest in May 2012.

          Unit options. The information in the following table presents unit option activity under the 2006 Plan for the periods indicated. No options were exercisable at June 30, 2007.

Weighted-

Weighted-

average

average

remaining

Number of

strike price

contractual

Units

(dollars/unit)

term (in years)

Granted in May 2007(1)

155,000

$

45.35

Outstanding at June 30, 2007

155,000

$

45.35

9.9

          As of June 30, 2007, there was an estimated $0.4 million of total unrecognized compensation cost related to unit options granted under the 2006 LTIP. TEPPCO expects to recognize this cost over a weighted-average period of 3.9 years.

          Restricted units. The following table summarizes information regarding TEPPCO’s restricted common units for the periods indicated:

						Weighted-
						Average Grant
		Number of				Date Fair Value
		Units				per Unit (1)
Restricted unit activity during May 2007:
Granted (2)			62,900			$	37.64
Forfeited			(500	)		$	37.64
Restricted units at June 30, 2007			62,400			$	37.64

          As of June 30, 2007, there was $2.3 million of total unrecognized compensation cost related to restricted common units under the 2006 LTIP. TEPPCO expects to recognize this cost over a weighted-average period of 3.9 years.

          Unit appreciation rights. As of June 30, 2007, a total of 66,225 UARs had been granted to non-employee directors of TEPPCO GP and 338,479 UARs to employees of EPCO who work on behalf of TEPPCO. The unit appreciation rights are subject to five year cliff vesting and subject to forfeiture. When the unit appreciation rights become payable, the awards will be redeemed in cash (or, in the sole discretion of the Audit, Conflicts and Governance Committee of TEPPCO GP, TEPPCO common units or a combination of cash and TEPPCO common units) equal to the fair market value of the UARs on the payment date over the fair market value of the UARs on the date of grant. UARs awarded to employees are accounted for as liability awards since the current intent is to cash-settle the awards. UARs awarded to non-employee directors are accounted for similar to liability awards.

          Phantom units. As of June 30, 2007, a total of 1,647 phantom unit awards had been granted to non-employee directors of TEPPCO GP. Each phantom unit will be redeemed in cash the earlier of (i) April 2011 or (ii) when the director is no longer serving on the board of TEPPCO GP. In addition, during the vesting period, each participant is entitled to cash distributions equal to the product of the number of phantom units outstanding for the participant and the cash distribution per unit paid by TEPPCO on its common units. Phantom units awarded to non-employee directors are accounted for similar to liability awards.

Note 6. Financial Instruments

          We are exposed to financial market risks, including changes in commodity prices and interest rates. In addition, we are exposed to fluctuations in exchange rates between the U.S. dollar and Canadian dollar. We may use financial instruments (i.e., futures, forwards, swaps, options and other financial instruments with similar characteristics) to mitigate the risks of certain identifiable and anticipated transactions. In general, the type of risks we attempt to hedge are those related to (i) variability of future earnings, (ii) fair values of certain debt instruments and (iii) cash flows resulting from changes in applicable interest rates, commodity prices or exchange rates. As a matter of policy, we do not use financial instruments for speculative (or “trading”) purposes.

     Interest Rate Risk Hedging Program

          Enterprise Products Partners. Enterprise Products Partners interest rate exposure results from variable and fixed interest rate borrowings under various debt agreements, primarily those of EPO. A portion of its interest rate exposure is managed by utilizing interest rate swaps and similar arrangements, which allows the conversion of a portion of fixed rate debt into variable rate debt or a portion of variable rate debt into fixed rate debt. See Note 12 for information regarding the debt obligations of EPO.

          Enterprise Products Partners had interest rate swaps outstanding at June 30, 2007 that were accounted for as fair value hedges. These agreements had a combined notional value of $1.05 billion and match the maturity dates of the underlying fixed rate debt being hedged. The aggregate fair value of these interest rate swaps at June 30, 2007 and December 31, 2006 was a liability of $49.7 million and $29.1 million, respectively.

          Enterprise Products Partners routinely enters into treasury lock transactions to hedge the underlying U.S. treasury rate related to the anticipated issuance of debt. A treasury lock is a specialized agreement that fixes the price (or yield) on a specific treasury security for an established period of time. A treasury lock purchaser is protected from a rise in the yield of the underlying treasury security during the lock period.

          During the second quarter of 2007, Enterprise Products Partners terminated treasury locks having an aggregate $875.0 million in notional value in connection with the anticipated issuance of debt. The

termination of the treasury locks resulted in cash gains of $42.3 million, which will be amortized into earnings over the term of the underlying debt. At June 30, 2007, Enterprise Products Partners had one treasury lock outstanding, which has a notional value of $125.0 million and a fair value of $9.3 million (an asset). The remaining treasury lock extends through October 15, 2007. Enterprise Products Partners accounted for these treasury lock transactions as cash flow hedges.

          TEPPCO. TEPPCO also utilizes interest rate swap agreements to manage its cost of borrowing. TEPPCO had one interest rate swap outstanding at June 30, 2007 that was accounted for as a fair value hedge. This swap agreement has a notional value of $210 million and matches the maturity date of the underlying fixed rate debt being hedged. The fair value of this interest rate swap at June 30, 2007 and December 31, 2006 was a liability of $9.3 million and $2.6 million, respectively.

          TEPPCO also has interest rate swap agreements outstanding at June 30, 2007 that were accounted for using mark-to-market accounting. These swap agreements have an aggregate notional amount of $200 million and mature in January 2008. The aggregate fair value of these interest rate swaps at June 30, 2007 and December 31, 2006 was an asset of $1.0 million and $1.4 million, respectively.

          TEPPCO also utilizes treasury locks to hedge the underlying U.S. treasury rate related to its anticipated issuances of debt. In May 2007, TEPPCO terminated treasury locks having an aggregate $300.0 million in notional value in connection with the anticipated issuance of debt. The termination of the treasury locks resulted in a cash gain of $1.4 million, which will be amortized to earnings over the term of the underlying debt. In June and July 2007, TEPPCO executed treasury locks having a notional amount of $100.0 million that extend through January 2008. TEPPCO accounts for these financial instruments as cash flow hedges. At June 30, 2007, the fair value of treasury locks outstanding was a liability of $0.2 million.

     Commodity Risk Hedging Program

          Enterprise Products Partners. The prices of natural gas, NGLs and certain petrochemical products are subject to fluctuations in response to changes in supply, market uncertainty and a variety of additional factors that are beyond the control of Enterprise Products Partners. In order to manage the price risks associated with such products, Enterprise Products Partners may enter into commodity financial instruments.

          The primary purpose of Enterprise Products Partners’ commodity risk management activities is to hedge its exposure to price risks associated with (i) natural gas purchases and gas injected into storage, (ii) the value of NGL production and inventories, (iii) related firm commitments, (iv) fluctuations in transportation revenues where the underlying fees are based on natural gas index prices and (v) certain anticipated transactions involving either natural gas, NGLs or certain petrochemical products. The commodity financial instruments utilized by Enterprise Products Partner may be settled in cash or with another financial instrument.

          At June 30, 2007 and December 31, 2006, Enterprise Products Partners had a limited number of commodity financial instruments in its portfolio, which primarily consisted of cash flow hedges. The fair value of its commodity financial instrument portfolio at June 30, 2007 and December 31, 2006 was a liability of $1.0 million and $3.2 million, respectively.

          TEPPCO. TEPPCO seeks to maintain a position that is substantially balanced between crude oil purchases and related sales and future delivery obligations. As part of its crude oil marketing business, TEPPCO enters into financial instruments such as swaps and other hedging instruments. The purpose of such hedging activity is to either balance TEPPCO’s inventory position or to lock in a profit margin and, as such, the financial instruments do not expose TEPPCO to significant market risk.

          At June 30, 2007, TEPPCO had a limited number of commodity financial instruments in its portfolio. The fair value of the open positions at June 30, 2007 was $1.3 million.

     Foreign Currency Hedging Program – Enterprise Products Partners

          Enterprise Products Partners owns an NGL marketing business located in Canada and has entered into construction agreements where payments are indexed to the Canadian dollar. As a result, Enterprise Products Partners could be adversely affected by fluctuations in the foreign currency exchange rate between the U.S. dollar and the Canadian dollar. Enterprise Products Partners attempts to hedge this risk by using foreign exchange purchase contracts to fix the exchange rate. Due to the limited duration of these contracts, Enterprise Products Partners utilizes mark-to-market accounting for these transactions, the effect of which has had a minimal impact on earnings. Enterprise Products Partners had $3.1 million of such contracts outstanding at June 30, 2007 that settled in July 2007.

Note 7. Inventories

     Our aggregate inventory amounts by business segment were as follows at the dates indicated:

		June 30,				December 31,
		2007				2006
Investment in Enterprise Products Partners		$	335,622			$	423,844
Investment in TEPPCO			94,733				73,512
Eliminations			(2,113	)			—
Total inventory		$	428,242			$	497,356