1136352--12/1/2008--INERGY_L

related topics

{tax, income, asset}

{gas, price, oil}

{debt, indebtedness, cash}

{operation, natural, condition}

{acquisition, growth, future}

{stock, price, operating}

{control, financial, internal}

{customer, product, revenue}

{cost, regulation, environmental}

{loss, insurance, financial}

{regulation, change, law}

{product, market, service}

Risks Inherent in Our Business Future acquisitions and completion of expansion projects will require significant amounts of debt and equity financing which may not be available to us on acceptable terms, or at all. If we do not continue to make acquisitions on economically acceptable terms, our future financial performance may be limited. Our growth strategy includes acquiring entities with lines of business that are distinct and separate from our existing operations which could subject us to additional business and operating risks. We may be unable to successfully integrate our recent acquisitions. Our indebtedness may limit our ability to borrow additional funds, make distributions to our unitholders, or capitalize on acquisition or other business opportunities, in addition to impairing our ability to fulfill our debt obligation under our senior notes. A change of control of our managing general partner could result in us facing substantial repayment obligations under our credit facility. Restrictive covenants in the agreements governing our indebtedness may reduce our operating flexibility. We are subject to operating and litigation risks that could adversely affect our operating results to the extent not covered by insurance. Our operations are subject to compliance with environmental laws and regulations that can adversely affect our results of operations and financial condition. Cost reimbursements due our managing general partner may be substantial and will reduce the cash available for principal and interest on our outstanding indebtedness. Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could cause us to incur additional expenditures of time and financial resources. Risks Related to Our Propane Operations Since weather conditions may adversely affect the demand for propane, our financial condition and results of operations are vulnerable to, and will be adversely affected by, warm winters. Sudden and sharp propane price increases that cannot be passed on to customers may adversely affect our profit margins. The highly competitive nature of the retail propane business could cause us to lose customers or affect our ability to acquire new customers, thereby reducing our revenues. If we are not able to purchase propane from our principal suppliers, our results of operations would be adversely affected. Competition from other energy sources may cause us to lose customers, thereby reducing our revenues. Our business would be adversely affected if service at our principal storage facilities or on the common carrier pipelines we use is interrupted. If we are not able to sell propane that we have purchased through wholesale supply agreements to either our own retail propane customers or to other retailers and wholesalers, the results of our operations would be adversely affected. Energy efficiency and new technology may reduce the demand for propane and adversely affect our operating results. Due to our limited asset diversification, adverse developments in our propane business could adversely affect our operating results and reduce our ability to make distributions to our unitholders. Risk Related to Our Midstream Operations Federal, state or local regulatory measures could adversely affect our business. Our storage business depends on neighboring pipelines to transport natural gas. We expect to derive a significant portion of our revenues from our natural gas and LPG storage operations from a limited number of customers , and the loss of one or more of these customers could result in a significant loss of revenues and cash flow. We compete with other natural gas storage companies and services that can substitute for storage services. Expanding our business by constructing new midstream assets subjects us to risks. We may not be able to retain existing customers or acquire new customers, which would reduce our revenues and limit our future profitability. The fees charged by us to third parties under transmission, transportation and storage agreements may not escalate sufficiently to cover increases in costs and the agreements may not be renewed or may be suspended in some circumstances. Our business would be adversely affected if operations at any of our facilities were interrupted. Risks Inherent in an Investment in Us Unitholders have less ability to elect or remove management than holders of common stock in a corporation. The control of our managing general partner may be transferred to a third party without unitholder consent. Cost reimbursements due our managing general partner may be substantial and reduce our ability to pay the minimum quarterly distribution. We may issue additional common units without unitholder approval, which would dilute our unitholders existing ownership interests. Our general partners have conflicts of interest and limited fiduciary responsibilities, which may permit our general partners to favor their own interests to the detriment of unitholders. The president and chief executive officer of our managing general partner effectively controls us through his control of the general partner of Inergy Holdings and our managing general partner. Our cash distribution policy limits our ability to grow. Tax Risks to Common Unitholders The tax treatment of publicly traded partnerships is subject to potential legislative, judicial or administrative changes. If we were treated as a corporation for federal income tax purposes, or if legislation is passed that may preclude us from qualifying for treatment as a partnership, or if we were to become subject to a material amount of entity level taxation for state tax purposes, then our cash available for distribution to our unitholders would be substantially reduced. Our unitholders may be required to pay taxes even if they do not receive cash distributions from us. Tax gain or loss on disposition of our common units could be more or less than expected. Tax-exempt entities, regulated investment companies and foreign persons face unique tax issues from owning common units that may result in adverse tax consequences to them. The sale or exchange of 50% or more of our capital and profits interests within a twelve-month period will result in the termination of our partnership for federal income tax purposes. Our unitholders will likely be subject to state and local taxes and return filing requirements in states where they do not live as a result of investing in our common units. If the IRS contests the federal income tax positions we take, the market for our common units may be adversely impacted and the cost of any IRS contest will reduce our cash available for distribution to you. We have adopted certain valuation methodologies and monthly conventions that may result in a shift of income, gain, loss and deduction between the general partner and the unitholders. The IRS may challenge this treatment, which could adversely affect the value of the common units. We treat each purchaser of common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could result in a unitholder owing more tax and may adversely affect the value of the common units. We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders.

Full 10-K form ▸

1136352--12/1/2008--INERGY_L_P