Energy Transfer (ET 0.64%) is coming off a record-breaking year. The master limited partnership (MLP) set volume records across several product categories last year. That helped fuel a 13% increase in its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), which hit a record $15.5 billion. The company also reported record distributable cash flow of $8.4 billion, up 10% from the prior year.
Acquisitions were the main fuel driving last year's record, notably its $7.1 billion merger with fellow MLP Crestwood Equity Partners in November 2023. While it will continue to get an acquisition-driven boost this year from its WTG Midstream deal, which closed last July, its EBITDA growth rate will moderate a bit next year to about 5%.
However, it expects to deliver another growth spurt starting in 2026, fueled by a surge in organic expansion projects. Here's a look at what the MLP has coming down the pipeline.
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Building toward the 2026 growth boom
Energy Transfer invested $3 billion into organic expansion projects last year. Those investments will help supply some incremental income this year as those capital projects enter commercial service. For example, the company recently completed two small expansions to its Orla East and Grey Wolf natural gas processing plants. Meanwhile, it is upgrading two more plants, which it expects to complete in the first quarter of this year. The MLP is also building the Badger processing plant, which should enter commercial service by the middle of this year.
"Given our wealth of opportunities," said co-CEO Tom Long on the fourth-quarter conference call, "we expect to spend approximately $5 billion in 2025." He noted, "Some of these projects are expected online later this year." However, "With the majority of these projects expected online in 2026... we expect the majority of earnings growth from these projects to significantly ramp up in 2026 and 2027."
The biggest single project is the Hugh Brinson Pipeline. The company approved the first phase of the natural gas pipeline project last December, and it expects to complete that phase by the end of next year. It's still working toward approving Phase 2, which would increase the project's total cost to $2.7 billion.
The MLP is also investing about $1.1 billion this year across several natural gas liquids (NGL) expansion projects, including the Nederland Flexport expansion, Frac IX, Marcus Hook optimization, Lone Star Express optimization, Sabina 2 NGL pipeline, and storage upgrades at Mont Belvieu and Spindletop. The company expects to finish the initial phases of Nederland by the middle of the year and the next phase in the fourth quarter. Meanwhile, Frac IX, Lonestar, and Sabina 2 all have in-service dates throughout 2026. The company is also investing $1.2 billion into Permian Basin processing plant expansions, which include those mentioned earlier and Red Lake IV and Mustang Draw, with respective in-service dates of the third quarter of 2025 and the first half of 2026.
More projects in the pipeline
Energy Transfer is in an excellent position to enhance its already robust growth prospects for 2026 and beyond. One factor fueling that view is the expected surge in natural gas demand to meet the growing power needs of AI data centers.
The MLP recently signed its first gas supply contract with a data center. That project would supply gas to a data center developed by CloudBurst in Texas, pending a final investment decision by CloudBurst's customer. It could be the first of many such projects. Co-CEO Tom Long noted on the call that the company has "now received requests for potential connections to approximately 62 power plants that we do not currently serve in 13 states and up to 15 plants that we already serve today." He added, "We have now received requests from over 70 prospective data centers in 12 states."
On top of that, Long commented that the company "continue[s] to make progress toward full commercialization" of its long-delayed Lake Charles LNG project, "which we believe and many of our customers believe is the most compelling LNG project on the Gulf Coast." It signed a 20-year deal with Chevron in December, putting it one more step closer to approval. That project is one of several potential expansion opportunities it currently has under development.
Securing these projects would enhance and extend Energy Transfer's growth outlook. They'd give the MLP even more fuel to continue increasing its high-yielding distribution, which currently sits at 6.5%. The midstream giant currently expects to grow that payout at a 3% to 5% annual rate. It could potentially accelerate its growth rate once it completes its current expansion wave.
Lots of fuel to continue growing
Energy Transfer enjoyed an acquisition-driven growth spurt last year. While its latest acquisition will help fuel more growth this year, it expects organic expansion projects to power its next growth spurt in 2026 and beyond. Because it has several projects already under construction and more in development, the MLP should have plenty of power to continue increasing its high-yielding distribution in the coming years. That combination of growth and income should enable it to produce robust total returns.
