1338613--3/31/2006--Regency_Energy_Partners

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Risks Related to Our Business We may not have sufficient cash from operations to enable us to pay the minimum quarterly distribution following the establishment of cash reserves and payment of fees and expenses, including reimbursement of fees and expenses of our general partner. If we do not receive the revenues we anticipate from the Regency Intrastate Enhancement Project, our cash flow and our ability to make cash distributions to you may be adversely affected. While substantial amounts of the incremental capacity resulting from the completion of the Regency Intrastate Enhancement Project has been contracted, if we are unable to utilize the remaining incremental transportation capacity, our business and our operating results could be adversely affected. Because of the natural decline in production from existing wells, our success depends on our ability to obtain new supplies of natural gas, which involves factors beyond our control. Any decrease in supplies of natural gas in our areas of operation could adversely affect our business and operating results. We depend on certain key producers and other customers for a significant portion of our supply of natural gas. The loss of, or reduction in volumes from, any of these key producers or customers could adversely affect our business and operating results. In accordance with industry practice, we do not obtain independent evaluations of natural gas reserves dedicated to our gathering systems. Accordingly, volumes of natural gas gathered on our gathering systems in the future could be less than we anticipate, which could adversely affect our cash flow and our ability to make cash distributions to you. Natural gas, NGLs and other commodity prices are volatile, and a reduction in these prices could adversely affect our cash flow and our ability to make distributions to you. In our gathering and processing operations, we purchase raw natural gas containing significant quantities of NGLs, process the raw natural gas and sell the processed gas and NGLs. If we are unsuccessful in balancing the purchase of raw natural gas with its component NGLs and our sales of pipeline quality gas and NGLs, our exposure to commodity price risks will increase. Our results of operations and cash flow may be adversely affected by risks associated with our hedging activities and our hedging activities may limit potential gains. To the extent that we intend to grow internally through construction of new, or modification of existing, facilities, we may not be able to manage that growth effectively which could decrease our cash flow and our cash available for distribution. If we do not make acquisitions on economically acceptable terms, our future growth may be limited. Because we distribute all of our available cash to our unitholders, our future growth may be limited. Our industry is highly competitive, and increased competitive pressure could adversely affect our business and operating results. Restrictions in our credit facility limit our ability to make distributions to you and our ability to capitalize on acquisitions and other business opportunities. We have a significant amount of debt that may limit our ability to grow. Increases in interest rates, which have recently experienced record lows, could adversely impact our unit price and our ability to issue additional equity, make acquisitions, reduce debt or for other purposes. If third-party pipelines interconnected to our processing plants become unavailable to transport NGLs, our cash flow and cash available for distribution could be adversely affected. We are exposed to the credit risks of our key customers, and any material nonpayment or nonperformance by our key customers could reduce our ability to make distributions to our unitholders. Our business involves many hazards and operational risks, some of which may not be fully covered by insurance. If a significant accident or event occurs that is not fully insured, our operations and financial results could be adversely affected. Due to our lack of asset diversification, adverse developments in our midstream operations would reduce our ability to make distributions to our unitholders. Failure of the gas that we ship on our Regency Intrastate Pipeline to meet the specifications of interconnecting interstate pipelines could result in curtailments by the interstate pipelines. Terrorist attacks, the threat of terrorist attacks, continued hostilities in the Middle East or other sustained military campaigns may adversely impact our results of operations. We do not own all of the land on which our pipelines and facilities have been constructed, and we are therefore subject to the possibility of increased costs or the inability to retain necessary land use. A successful challenge to the rates we charge on Regency Intrastate Pipeline may reduce the amount of cash we generate. A change in the characterization of some of our assets by federal, state or local regulatory agencies or a change in policy by those agencies may result in increased regulation of our assets, which may cause our revenues to decline and operating expenses to increase. We may incur significant costs and liabilities in the future resulting from a failure to comply with new or existing environmental regulations or an accidental release of hazardous substances into the environment. If we fail to develop or maintain an effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud. Risks Inherent in an Investment in Us The HM Capital Investors own a 60.3% limited partner interest in us and control our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner has conflicts of interest and limited fiduciary duties, which may permit it to favor its own interests to your detriment. The HM Capital Investors and their affiliates may compete directly with us. Our reimbursement of our general partner s expenses will reduce our cash available for distribution to you. Our partnership agreement limits our general partner s fiduciary duties to our unitholders and restricts the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty. Unitholders have limited voting rights and are not entitled to elect our general partner or its directors. Even if unitholders are dissatisfied, they cannot remove our general partner without its consent. Our partnership agreement restricts the voting rights of those unitholders owning 20% or more of our common units. Control of our general partner may be transferred to a third party without unitholder consent. We may issue an unlimited number of additional units without your approval, which would dilute your existing ownership interest. Our general partner has a limited call right that may require you to sell your units at an undesirable time or price. Your liability may not be limited if a court finds that unitholder action constitutes control of our business. Unitholders may have liability to repay distributions that were wrongfully distributed to them. We will incur increased costs as a result of being a public company. Tax Risks to Common Unitholders Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not being subject to entity-level taxation by individual states. If the Internal Revenue Service, or IRS, treats us as a corporation or we become subject to entity-level taxation for state tax purposes, it would substantially reduce the amount of cash available for distribution to you. A successful IRS contest of the federal income tax positions we take may adversely affect the market for our common units, and the cost of any IRS contest will reduce our cash available for distribution to you. You may be required to pay taxes on income from us even if you do not receive any cash distributions from us. Tax gain or loss on disposition of common units could be more or less than expected. Tax-exempt entities and foreign persons face unique tax issues from owning common units that may result in adverse tax consequences to them. We will treat each purchaser of our common units as having the same tax benefits without regard to the actual common units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units.

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1338613--3/31/2006--Regency_Energy_Partners_LP