Midstream firms must be careful to watch for several traps that can cause problems for an MLP structure when drafting a joint venture agreement.
Joint ventures (JVs) are commercial collaborations in which two or more unrelated parties pool, exchange or integrate some of their resources with a view to mutual gain, while at the same time remaining independent.
MLPs and would-be MLPs use JVs for many different reasons. These JVs can be with private-equity sponsors, customers, private or public companies or other MLPs. For midstream MLPs, JVs are used for multiple purposes, including funding asset development costs, locking in customers or building scale.