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8-K - FORM 8-K - El Paso Pipeline Partners, L.P. | h79980e8vk.htm |
Exhibit 99.A
News For Immediate Release |
El Paso Pipeline Partners Reports Fourth Quarter and Full-Year Results; Distributable Cash
Flow Grows Significantly
HOUSTON, TEXAS, February 24, 2011El Paso Pipeline Partners, L.P. (NYSE:EPB) is reporting today
fourth quarter and full-year 2010 financial and operational results for the partnership.
Highlights:
| $0.53 earnings per common unit for fourth quarter 2010 | ||
| $118 million distributable cash flow for fourth quarter 2010, a 91 percent increase from fourth quarter 2009 $212 million adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) for fourth quarter 2010, compared with $143 million for fourth quarter 2009 | ||
| Raised quarterly cash distributions to $0.44 per common and subordinated unit for the fourth quarter 2010, a 22 percent increase from the fourth quarter of 2009 | ||
| Distribution coverage ratio of 1.4 times for the fourth quarter and full year 2010 |
The sharp improvement in our financial results highlights the success of our acquisition
growth strategy and efficient project execution said Jim Yardley, president and chief executive
officer of El Paso Pipeline Partners. During 2010, we acquired $2.4 billion of assets and placed
three organic growth projects in-service, collectively $100 million under budget. These efforts
resulted in a substantial expansion of our asset base, while maintaining a very predictable and
steady cash flow profile and a strong balance sheet. As we move forward, we plan to continue
executing on our strategy of delivering profitable expansion projects and accretive acquisitions to
provide consistent future growth for our unitholders.
A summary of financial results for the quarters and 12 months ended December 31, 2010 and 2009 are
as follows:
Twelve Months | ||||||||||||||||
Quarters Ended | Ended | |||||||||||||||
Financial Results | December 31, | December 31, | ||||||||||||||
($ in millions, except per unit amounts) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Operating revenues |
$ | 352.1 | $ | 309.2 | $ | 1,344.1 | $ | 1,119.3 | ||||||||
Operating expenses |
||||||||||||||||
Operation and maintenance |
96.4 | 89.7 | 385.2 | 352.7 | ||||||||||||
Depreciation and amortization |
40.0 | 33.1 | 152.7 | 129.2 | ||||||||||||
Taxes, other than income |
13.0 | 13.3 | 59.1 | 54.6 | ||||||||||||
Operating income |
202.7 | 173.1 | 747.1 | 582.8 | ||||||||||||
Earnings from unconsolidated affiliates |
3.5 | 3.0 | 15.7 | 12.4 | ||||||||||||
Other income, net |
4.7 | 13.3 | 29.2 | 47.8 | ||||||||||||
Interest and debt expense, net |
(53.7 | ) | (30.3 | ) | (186.6 | ) | (129.0 | ) | ||||||||
Affiliated interest income, net |
0.1 | 0.9 | 2.1 | 4.4 | ||||||||||||
Income before income taxes |
157.3 | 160.0 | 607.5 | 518.4 | ||||||||||||
Income tax expense |
| (5.5 | ) | (2.4 | ) | (21.2 | ) | |||||||||
Net income |
157.3 | 154.5 | 605.1 | 497.2 | ||||||||||||
Net income attributable to noncontrolling interests |
(54.6 | ) | (57.0 | ) | (226.6 | ) | (179.6 | ) | ||||||||
Net income attributable to EPB1 |
$ | 102.7 | $ | 97.5 | $ | 378.5 | $ | 317.6 | ||||||||
Net income attributable to EPB per common
unitbasic and diluted1 |
$ | 0.53 | $ | 0.51 | $ | 1.90 | $ | 1.64 | ||||||||
Net income attributable to EPB per subordinated
unitbasic and diluted2 |
$ | 0.50 | $ | 0.47 | $ | 1.78 | $ | 1.56 |
1 | Earnings for the full year 2010 include a $21 million, or $0.08 per unit, non-cash asset write down based on a Federal Energy Regulatory Commission order related to the 2009 sale of the Natural Buttes compressor station and gas processing plant. Fourth quarter 2009 includes an $8 million gain, or $0.04 per unit, related to the sale of the same Natural Buttes facilities. | |
2 | All subordinated units were converted into common units on a one-for-one basis effective January 3, 2011. |
Twelve Months Ended December 31, 2010
($ millions, except per unit amounts)
($ millions, except per unit amounts)
Amount | EPU | |||||||
Net income attributable to EPB common unit |
$ | 378.5 | $ | 1.90 | ||||
Impact of non-cash asset write down based on FERC order
related to sale of Natural Buttes facilities, net of non-
controlling interest |
$ | 12.1 | $ | 0.08 | ||||
Adjusted EPU per common unit |
$ | 1.98 | ||||||
Financial Results
In November 2010, El Paso Pipeline Partners completed its acquisition of the remaining 49-percent
member interest in both Southern LNG (SLNG) and Elba Express and an additional 15 percent general
partner interest in Southern Natural Gas (SNG) from El Paso Corporation in exchange for aggregate
consideration of $1,133 million. Following the acquisition of these interests the partnership
consolidates SNG for financial reporting purposes. Financial results for all periods presented
include retrospective adjustments to include 60 percent of SNG and to reflect El Paso Corporations
40 percent interest in SNG as non-controlling interests.
Revenues for the fourth quarter and full year 2010 increased 14 percent and 20 percent,
respectively, from same periods in 2009. Operating income for the fourth quarter and full year
2010 rose 17 percent and 28 percent, respectively, from the same periods in 2009, and net
income attributable to EPB for the fourth quarter and full year 2010 was up 5 percent and 19
percent, respectively, from the fourth quarter and full year 2009.
Full year 2010 results include a $21 million non-cash asset write down based on a Federal Energy
Regulatory Commission order related to the 2009 sale of the Natural Buttes compressor station and
gas processing plant. Excluding the impact of this non-cash item, net income attributable to EPB in
2010 was 23 percent higher than that of 2009.
The significant increase in revenues, operating income and net income attributable to EPB for the
fourth quarter and full year 2010 was primarily due to the completion of a number of organic growth
projects including the SLNG Elba Phase IIIA (Elba IIIA) expansion, the Elba Express Pipeline, the
WIC System Expansion, and the CIG Raton 2010 expansion. Additionally, net income attributable to
EPB increased as a result of the acquisition of an incremental 49 percent interest in SLNG and Elba
Express. Higher earnings at SNG related to its rate case settlement in September 2009 also
contributed to the improved full year financial performance.
Adjusted EBITDA for the fourth quarter 2010 was $212 million, up 49 percent from the fourth quarter
2009. For the full year 2010, Adjusted EBITDA was $695 million, representing an increase of 28
percent from 2009.
Distributable cash flow for the fourth quarter 2010 increased 91 percent from the fourth quarter
2009 to $118 million. For the full year 2010, distributable cash flow increased to $390 million,
or 65 percent from 2009. Distribution coverage for both the fourth quarter and full year 2010 was
1.4 times.
The primary drivers for the year-to-year increase in fourth quarter Adjusted EBITDA and
distributable cash flow were the acquisitions of SLNG, Elba Express, and additional interests in
SNG. The completion of organic growth projects in 2010 also contributed to the improved results
for the quarter. Additionally, full year 2010 Adjusted EBITDA and distributable cash flow were
positively impacted by not only the acquisitions and expansion projects in 2010, but also the
acquisition of additional interests in Colorado Interstate Gas (CIG) and the completion of the
Totem Storage facility and Piceance Lateral expansion in 2009.
Interest and Debt Expense
For the fourth quarter and full year 2010, interest and debt expense rose by $23 million and $58
million, respectively, from the same periods in 2009. This increase is primarily due to the
issuance of an aggregate $535 million of senior unsecured notes in March 2010 and June 2010 and
$750 million of senior unsecured notes in November 2010. These funds were principally used to
partially finance acquisitions of interests in SLNG, Elba Express and SNG, with the balance used to
retire debt associated with the construction of Elba Express and to reduce outstanding borrowings
on EPBs revolving credit facility. The interest expense increase was partially offset by a lower
average debt balance outstanding under the partnerships credit facility.
Capital Expenditures
During 2010, El Paso Pipeline Partners invested $318 million in growth projects, primarily for the
Elba IIIA expansion, Elba Express Pipeline, WIC System Expansion, CIG Raton 2010 and the
first phase of SNGs South System III expansion project. These projects were completed on time
and, on a consolidated basis, were approximately $100 million under budget. Maintenance capital
expenditures for 2010 totaled $94 million.
Webcast Information
El Paso Pipeline Partners has scheduled a live webcast of a review of its 2010 results, on February
24, 2011, beginning at 11:30 a.m. Eastern Time, 10:30 a.m. Central Time, which may
be accessed
online through El Paso Pipeline Partners Web site at www.eppipelinepartners.com in the Investors
section. During the webcast, management will refer to slides that will be posted on the Web site.
The slides will be available one hour before the webcast and can be accessed in the Investors
section. A limited number of telephone lines will also be available to participants by dialing
(877) 2221-9108 (conference ID #45638884) ten minutes prior to the start of the webcast.
A replay of the webcast will be available online through the partnerships Web site in the
Investors section. A telephone audio replay will be also available through March 4, 2011 by
dialing (800) 642-1687 (conference ID # 45638884). If you have any questions regarding this
procedure, please contact Margie Fox at (713) 420-2903.
The partnerships financial statements are available in the Investors section of its Web site at
www.eppipelinepartners.com. The partnerships December 31, 2010, Form 10-K will be
available online once it is filed. Copies of all filed documents, including the partnerships
Quarterly Reports on Form 10-Q are also available, free of charge, by calling (877) 357-2766.
El Paso Pipeline Partners, L.P. is a Delaware limited partnership formed by El Paso
Corporation to own and operate natural gas transportation pipelines and storage assets. El Paso
Corporation currently owns a 49 percent limited partner interest and 2 percent general partner
interest in the partnership. El Paso Pipeline Partners, L.P. owns Wyoming Interstate Company (WIC),
Southern LNG Company, L.L.C. (SLNG), El Paso Elba Express Company, L.L.C. (Elba Express), a 60
percent interest in Southern Natural Gas Company (SNG), and a 58 percent interest in Colorado
Interstate Gas Company (CIG). WIC and CIG are interstate pipeline systems serving the Rocky
Mountain region; SLNG owns the Elba Island LNG storage and regasification terminal near Savannah,
Georgia; and both Elba Express and SNG are interstate pipeline systems serving the southeastern
region of the United States. For more information about El Paso Pipeline Partners, visit
www.eppipelinepartners.com.
Disclosure of Non-GAAP Financial Measures
The SECs Regulation G applies to any public disclosure or release of material information that
includes a non-GAAP financial measure. In the event of such a disclosure or release, Regulation G
requires (i) the presentation of the most directly comparable
financial measure calculated and
presented in accordance with GAAP and (ii) a reconciliation of the differences between the non-GAAP
financial measure presented and the most directly comparable financial
measure calculated and
presented in accordance with GAAP. The required presentations and reconciliations are attached, or
included in the body of this release. Additional detail regarding non-GAAP financial measures can
be reviewed in El Paso Pipeline Partners Financial and Operational Reporting Package,
which will be posted at www.eppipelinepartners.com in the Investors
section.
We use the non-GAAP financial measure Distributable Cash Flow as it provides important
information relating to the relationship between our financial operating performance and our cash
distribution capability. Additionally, we use Distributable Cash Flow in setting forward
expectations and in communications with our board of directors of our general partner. We define
Distributable Cash Flow as Adjusted EBITDA less cash interest expense, maintenance capital
expenditures, pre-acquisition undistributed earnings from consolidated subsidiaries and other
income and expenses, net, which primarily includes deferred revenue, a non-cash allowance for
equity funds used during construction and other non-cash items.
We use Adjusted Earnings Per Common Unit (Adjusted EPU) which is defined as diluted earnings per
common unit adjusted for certain items that we consider to be significant to understanding our
underlying performance for a given period. Adjusted EPU is useful in analyzing the companys
on-going earnings potential and understanding certain significant items impacting the comparability
of our results. For 2010, Adjusted EPU is earnings per unit attributable to El Paso Pipeline
Partners common unitholders adjusted for the impact of the non-cash asset write down resulting from
a Federal Energy Regulatory Commission order related to the 2009 sale of a compressor station and
gas processing plant.
We use earnings before interest and taxes, or EBIT, as a measure to assess the operating results
and effectiveness of our business, which consists of consolidated operations as well as investments
in unconsolidated affiliates. We believe EBIT is useful to investors as it provides them with the
same measure used by El Paso to evaluate our performance and it enables them to evaluate our
operating results without regard to our financing methods or capital structure. We define the
non-GAAP financial measure EBIT as net income adjusted for interest and debt expense, net of
interest income, income taxes, and net income attributable to non-controlling interests.
Adjusted EBITDA is defined as net income adjusted for (i) income taxes (ii) interest and debt
expense, net of interest income, (iii) affiliated interest income, net of affiliated interest
expense, (iv) depreciation and amortization expense, (v) the partnerships share of distributions
declared by unconsolidated affiliates for the applicable period, (vi) earnings from unconsolidated
affiliates, and (vii) distributions declared by majority-owned subsidiaries to El Paso Corporation
for the applicable period.
We believe that the non-GAAP financial measures described above are also useful to investors
because these measurements are used by many companies in the industry as a measurement of operating
and financial performance and are commonly employed by financial analysts and others to evaluate
the operating and financial performance of the partnership and to compare it with the performance
of other publicly traded partnerships within the industry. These non-GAAP financial measures may
not be comparable to similarly titled measures used by other companies and should not be used as a
substitute for net income, earnings per unit, operating income, cash flow from operating activities
or other measures of financial performance presented in accordance with GAAP. Furthermore, these
non-GAAP measures should not be viewed as indicative of the actual amount of cash that we have
available for distributions or that
we plan to distribute for a given period, nor should they be equated to available cash as defined in our partnership agreement. |
Twelve Months | ||||||||||||||||||||
Quarters Ended | Ended | |||||||||||||||||||
Non-GAAP Reconciliation Schedule | December 31, | December 31, | ||||||||||||||||||
($ millions) | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
Net income | $ | 157.3 | $ | 154.5 | $ | 605.1 | $ | 492.7 | ||||||||||||
Net income attributable to noncontrolling interest | (54.6 | ) | (57.0 | ) | (226.6 | ) | (179.6 | ) | ||||||||||||
Net income attributable to EPB | 102.7 | 97.5 | 378.5 | 317.6 | ||||||||||||||||
Add: |
Income tax expense | | 5.5 | 2.4 | 21.2 | |||||||||||||||
Add: |
Interest and debt expense, net | 53.7 | 30.3 | 186.6 | 129.0 | |||||||||||||||
Less: |
Affiliated interest income, net | (0.1 | ) | (0.9 | ) | (2.1 | ) | (4.4 | ) | |||||||||||
Earnings before interest expense and income taxes (EBIT) | 156.3 | 132.4 | 565.4 | 463.4 | ||||||||||||||||
Add: |
Depreciation and amortization | 40.0 | 33.1 | 152.7 | 129.2 | |||||||||||||||
Distributions declared by unconsolidated affiliates | 1.4 | 3.8 | 13.4 | 16.7 | ||||||||||||||||
Net Income attributable to noncontrolling interest | 54.6 | 57.0 | 226.6 | 179.6 | ||||||||||||||||
Less: |
Earnings from unconsolidated affiliates | (3.5 | ) | (3.0 | ) | (15.7 | ) | (12.4 | ) | |||||||||||
Distributions declared by majority-owned subsidiaries | ||||||||||||||||||||
to El Paso Corporation1 | (37.0 | ) | (80.7 | ) | (247.6 | ) | (232.5 | ) | ||||||||||||
Adjusted EBITDA | 211.8 | 142.6 | 694.8 | 544.0 | ||||||||||||||||
Less: |
Cash interest expense, net | (52.7 | ) | (37.4 | ) | (184.9 | ) | (141.3 | ) | |||||||||||
Maintenance capital expenditures | (46.0 | ) | (21.1 | ) | (94.0 | ) | (81.0 | ) | ||||||||||||
Pre-acquisition undistributed
earnings from consolidated subsidiaries2 |
| (6.8 | ) | (19.7 | ) | (30.8 | ) | |||||||||||||
Other, net3 | 5.3 | (15.3 | ) | (6.2 | ) | (54.2 | ) | |||||||||||||
Distributable cash flow | $ | 118.4 | $ | 62.0 | $ | 390.0 | $ | 236.7 | ||||||||||||
1 | In 4Q 2010, declared distributions include $18.3 million from CIG and $18.7 million from SNG. In the twelve months of 2010, declared distributions include $71.5 million from CIG, $128.1 million from SNG, $35.9 million from SLNG and $12.1 million from Elba Express. In 4Q 2009 and twelve months of 2009, declared distributions include $18.5 million and $68.1 million from CIG, respectively, and $62.2 million and $164.4 million from SNG, respectively, for each period. | |
2 | The 2010 amount represents SNGs undistributed earnings prior to the November 2010 acquisition by EPB. The 2009 amount represents the undistributed earnings of SLNG as it was a wholly-owned subsidiary of El Paso prior to EPBs March 2010 acquisition. | |
3 | Includes certain non-cash items such as deferred revenue, AFUDC equity, an asset write down based on a FERC order relating to the 2009 sale of the Natural Buttes facilities and other items. |
Cautionary Statement Regarding Forward-Looking Statements
This release includes forward-looking statements and projections, made in reliance on the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. El Paso Pipeline
Partners has made every reasonable effort to ensure that the information and assumptions on which
these statements and projections are based are current, reasonable, and complete. However, a
variety of factors could cause actual results to differ materially from the projections,
anticipated results or other expectations expressed in this release, including, without limitation,
the ability to meet our 2011 projections and guidance; our ability to complete planned asset
purchases from El Paso Corporation; volatility in, and access to capital markets, the ability to
obtain necessary governmental approvals for proposed pipeline projects and to successfully
construct such projects on a timely basis and within estimated costs; operating hazards, natural
disasters, weather-related delays, casualty losses and other matters beyond our control; the risks
associated with contracting and recontracting of transportation commitments; regulatory
uncertainties associated with pipeline rate cases; actions taken by customers, third-party
operators, processors and transporters; conditions in geographic regions or markets served by El
Paso Pipeline Partners and its affiliates and equity investees or where its operations and
affiliates are located; the effects of existing and future laws and governmental regulations;
competitive conditions in our industry; changes in the availability and cost of capital; and other
factors described in El Paso Pipeline Partners (and its affiliates) Securities and Exchange
Commission filings. While these statements and projections are made in good faith, El Paso Pipeline
Partners and its management cannot guarantee that anticipated future results will be achieved.
Reference must be made to those filings for additional important factors that may affect actual
results. El Paso Pipeline Partners assumes no obligation to publicly update or revise any
forward-looking statements made herein or any other forward-looking statements made, whether as a
result of new information, future events, or otherwise.
Contacts:
Investor & Media Relations
Bruce Connery, Vice President
(713) 420-5855
Bruce Connery, Vice President
(713) 420-5855
Media
Relations
Bill Baerg, Manager
(713) 420-2906
Bill Baerg, Manager
(713) 420-2906