Lower Cost of Capital Makes a Difference
Part of Enterprise's success in growing the partnership and consistently increasing cash distributions to partners is our lower cost of capital. This is largely attributable to the pioneering action of our general partner in 2002 to eliminate the 50 percent tier of its incentive distribution rights and capping these rights at 25 percent. This single action has saved Enterprise approximately $370 million in aggregate distributions that would have otherwise been paid to our general partner without any economic value in return. Based on our current annualized cash distribution rate of $2.12 per unit, Enterprise is saving $165 million per year in avoided distributions to the general partner, or approximately $0.37 per limited partner unit. This additional financial flexibility enables us to retain more distributable cash flow as we increase our cash distribution rate and allows us to generate more distributable cash flow accretion from investments in new assets and acquisitions. Some partnerships are now beginning to recognize the burden to growth that 50 percent incentive distribution rights can ultimately cause.
