Columbia Pipeline Partners LP
NYSE : CPPL

Columbia Pipeline Partners LP

November 01, 2016 16:19 ET

Columbia Pipeline Partners LP Reports Third Quarter Results

HOUSTON, TEXAS--(Marketwired - Nov. 1, 2016) - Columbia Pipeline Partners LP (NYSE:CPPL) ("CPPL" or the "Partnership") today reported financial and operating results for the third quarter 2016.

CPPL reported net income attributable to limited partners of $2.9 million, or $0.05 per common unit compared with net income attributable to limited partners of $22.0 million, or $0.22 per common unit in the prior-year period. CPPL reported net cash flows from operating activities of $82.3 million compared with $114.0 million in the prior-year period. Additionally, CPPL reported net cash flows used for investing activities and net cash flows from (used for) financing activities of $473.0 million and $344.1 million, respectively, compared to $41.7 million and $(151.5) million, respectively, in the prior-year period. CPPL reported Adjusted EBITDA attributable to the Partnership (a non-GAAP measure) of $28.0 million for the third quarter compared with $27.5 million in the prior-year period. CPPL generated Distributable Cash Flow (a non-GAAP measure) of $19.8 million for the third quarter compared with $20.8 million in the prior-year period and declared a distribution of $0.1975 per unit on November 1, 2016. Please see the definitions of such non-GAAP measures in the "Non-GAAP Financial Measures" section of this press release and a reconciliation to their most comparable measure calculated in accordance with GAAP on Schedule 1 of the financial tables below.

As previously announced, on March 17, 2016, Columbia Pipeline Group, Inc. ("CPG"), formerly the ultimate parent of CPPL's general partner, entered into an agreement and plan of merger to be acquired by a subsidiary of TransCanada Corporation (NYSE:TRP) ("TransCanada"). Effective July 1, 2016, CPG became an indirect, wholly owned subsidiary of TransCanada. With the completion of the transaction, TransCanada now owns the general partner of the Partnership, all of the Partnership's incentive distribution rights and all of the Partnership's subordinated units, which represent a 46.5% limited partnership interest in the Partnership.

Presentation of Financial Statements

CPPL's consolidated financial statements include the accounts of CPPL and its consolidated subsidiary, CPG OpCo LP ("Columbia OpCo"). CPPL holds a 15.7% limited partner interest and a non-economic general partner interest in Columbia OpCo. CPPL controls Columbia OpCo through the ownership of its general partner and, accordingly, CPPL consolidates Columbia OpCo in its consolidated financial statements. Columbia Energy Group (a wholly owned subsidiary of CPG), CPPL's sponsor, owns the remaining 84.3% limited partner interest in Columbia OpCo, which is reflected as a non-controlling interest in CPPL's financial statements.

Three Months Ended September 30, 2016 Operating Results

A comparison of operating results for the three months ended September 30, 2016 to the three months ended September 30, 2015 is summarized below.

Operating revenues increased by $6.5 million. The increase was primarily due to higher demand margin revenue from growth projects placed into service, increased mineral rights royalty revenue and higher shorter term transportation services. These increases were partially offset by a decrease in trackers, which are offset in expense.

Operating expenses increased by $134.7 million. The increase was primarily due to increased costs related to the July 1, 2016 merger into the TransCanada group of companies, decreased gains on the conveyances of mineral interests, higher impairment charges, increased depreciation and amortization, higher employee and administrative expenses, and increased outside service costs. These changes were partially offset by a decrease in trackers, which are offset in revenue.

Equity earnings increased by $0.7 million, primarily due to earnings generated by Millennium Pipeline Company, L.L.C.

Other income (deductions) for the three months ended September 30, 2016 increased income by $5.6 million compared with an increase in income of $1.8 million in the same period in 2015. The variance was primarily due to an increase in Allowance for Funds Used During Construction ("AFUDC"), partially offset by higher interest expense related to increased short-term borrowings.

Nine Months Ended September 30, 2016 Operating Results

A comparison of operating results for the nine months ended September 30, 2016 to the nine months ended September 30, 2015 is summarized below. Earnings for the periods prior to the date of CPPL's initial public offering are derived from the financial statements and accounting records of CPPL's predecessor.

Operating revenues increased by $28.4 million. The increase was primarily due to higher demand margin revenue from growth projects placed into service and increased shorter term transportation services. These increases were partially offset by a decrease in trackers, which are offset in expense, and lower mineral rights royalty revenue.

Operating expenses increased by $119.7 million. The increase was primarily due to increased costs related to the July 1, 2016 merger into the TransCanada group of companies, decreased gains on the conveyances of mineral interests, higher depreciation and amortization, increased impairment charges, higher employee and administrative expenses, increased outside service costs and higher property and other taxes. These changes were partially offset by a decrease in trackers, which are offset in revenues, and lower maintenance expenses.

Equity earnings increased by $3.9 million, primarily due to earnings generated by Pennant Midstream, LLC and Millennium Pipeline Company, L.L.C.

Other income (deductions) for the nine months ended September 30, 2016 increased income by $4.9 million compared with a reduction in income of $6.7 million in the same period in 2015. The variance was primarily due to an increase in AFUDC and a decrease in interest expense resulting from the repayment of long-term debt, partially offset by lower interest income and higher interest expense related to increased short-term borrowings.

Non-GAAP Financial Measures

Adjusted EBITDA and Distributable Cash Flow

We define Adjusted EBITDA as net income before interest expense, income taxes, and depreciation and amortization, plus distributions of earnings received from equity investees, less equity earnings in unconsolidated affiliates and other, net. In addition, to the extent transactions occur that are considered unusual, infrequent or not representative of underlying trends, we will remove the effect of these items from Adjusted EBITDA. Examples of these transactions include impairments and expenses related to the merger. We define Distributable Cash Flow as Adjusted EBITDA less interest expense, maintenance capital expenditures, gain on sale of assets and distributable cash flow attributable to noncontrolling interest, plus proceeds from sale of assets, interest income, capital (received) costs related to the separation and any other known differences between cash and income.

Adjusted EBITDA and Distributable Cash Flow are non-GAAP supplemental financial measures that management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

Management believes that the presentations of Adjusted EBITDA and Distributable Cash Flow will provide useful information to investors in assessing our financial condition and results of operations. The GAAP measures most directly comparable to Adjusted EBITDA and Distributable Cash Flow are Net Income and Net Cash Flows from Operating Activities. Our non-GAAP financial measures of Adjusted EBITDA and Distributable Cash Flow should not be considered as an alternative to GAAP Net Income or Net Cash Flows from Operating Activities. Adjusted EBITDA and Distributable Cash Flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash flows from operating activities. You should not consider Adjusted EBITDA or Distributable Cash Flow in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA or Distributable Cash Flow may be defined differently by other companies in our industry, our definitions may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

About Columbia Pipeline Partners LP

Columbia Pipeline Partners LP is a Delaware master limited partnership with interests in three regulated U.S. natural gas pipelines which serve markets extending from New York to the Gulf of Mexico, as well as storage and related midstream assets. The Partnership's general partner became an indirect, wholly-owned subsidiary of TransCanada Corporation (NYSE:TRP) on July 1, 2016, and as a result, the Partnership is effectively managed by TransCanada. For more information about Columbia Pipeline Partners LP, visit the Partnership's website at www.columbiapipelinepartners.com. Additional information can be found at www.transcanada.com.

Forward-Looking Statements

Certain statements in this release may constitute "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements are statements other than historical facts and that frequently use words such as "anticipate," "believe," "continue," "could," "estimate," "expect," "forecast," "intend," "may," "plan," "position," "should," "strategy," "target," "will" and similar words. All such forward-looking statements speak only as of the date of this release. Although CPPL believes that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved and such statements are subject to various risks and uncertainties. Therefore, actual outcomes and results could materially differ from what is expressed, implied or forecasted in such statements and readers are cautioned not to place undue reliance on such statements. CPPL's business may be influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond CPPL's control.
These factors include, but are not limited to, the occurrence of any event, change or other circumstance in connection with entry into an agreement and plan of merger with CPG to acquire all of our outstanding units, the recent merger between CPG and TransCanada; risks related to disruption of management's attention from CPPL's ongoing business operations due to the recent merger; and risks associated with the loss and ongoing replacement of key personnel; risks relating to unanticipated costs of integration in connection with the merger, including operating costs, customer loss or business disruption being greater than expected; changes in general economic conditions; competitive conditions in our industry; actions taken by third-party operators, processors and transporters; the demand for natural gas storage and transportation services; our ability to successfully implement our business plan; our ability to complete internal growth projects on time and on budget; the price and availability of debt and equity financing; the availability and price of natural gas to the consumer compared with the price of alternative and competing fuels; competition from the same and alternative energy sources; energy efficiency and technology trends; operating hazards and other risks incidental to transporting, storing and gathering natural gas; natural disasters, weather-related delays, casualty losses, acts of war and terrorism and other matters beyond our control; interest rates; labor relations; large customer defaults; changes in the availability and cost of capital; changes in tax status; the effects of existing and future laws and governmental regulations; and the effects of future litigation, including litigation relating to CPG's merger with TransCanada. We caution that the foregoing list of factors is not exhaustive. Additional information about these and other factors can be found in CPPL's Annual Report on Form 10-K filed with the SEC for the fiscal year ended December 31, 2015, as amended, and CPPL's Quarterly Reports on Form 10-Q filed with the SEC for the quarters ended March 31, 2016 and June 30, 2016 and CPPL's other filings with the SEC, which are available at www.sec.gov. All forward-looking statements included in this press release are expressly qualified in their entirety by such cautionary statements. CPPL expressly disclaims any obligation to update, amend or clarify any forward-looking statement to reflect events, new information or circumstances occurring after the date of this release except as required by applicable law.

Columbia Pipeline Partners LP
Statements of Consolidated and Combined Operations (GAAP)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions, except per unit amounts) 2016 2015 2016 2015
Operating Revenues
Transportation revenues $ 269.8 $ 265.8 $ 836.4 $ 751.0
Transportation revenues-affiliated - - - 47.1
Storage revenues 48.9 49.5 147.7 122.3
Storage revenues-affiliated - - - 26.2
Other revenues 7.8 4.7 19.1 28.2
Total Operating Revenues 326.5 320.0 1,003.2 974.8
Operating Expenses
Operation and maintenance 152.2 144.9 357.5 392.9
Operation and maintenance-affiliated 116.2 37.4 198.1 112.1
Depreciation and amortization 38.8 33.4 114.1 98.7
Gain on sale of assets (9.8 ) (39.0 ) (15.8 ) (52.6 )
Impairment of long-lived assets 11.9 0.6 11.9 0.6
Property and other taxes 17.9 15.2 58.9 53.3
Total Operating Expenses 327.2 192.5 724.7 605.0
Equity Earnings in Unconsolidated Affiliates 16.0 15.3 48.1 44.2
Operating Income 15.3 142.8 326.6 414.0
Other Income (Deductions)
Interest expense (0.3 ) (1.2 ) (2.8 ) (1.2 )
Interest expense-affiliated (8.4 ) (6.4 ) (22.6 ) (24.1 )
Other, net 14.3 9.4 30.3 18.6
Total Other Income (Deductions), net 5.6 1.8 4.9 (6.7 )
Income before Income Taxes 20.9 144.6 331.5 407.3
Income Taxes - - 0.1 23.7
Net Income 20.9 144.6 331.4 383.6
Less: Predecessor net income prior to IPO on February 11, 2015 - - - 42.7
Net income subsequent to IPO 20.9 144.6 331.4 340.9
Less: Net income attributable to noncontrolling interest in Columbia OpCo subsequent to IPO 18.0 122.6 283.1 289.3
Net income attributable to limited partners subsequent to IPO $ 2.9 $ 22.0 $ 48.3 $ 51.6
Net income attributable to partners' ownership interest subsequent to IPO per limited partner unit (basic and diluted)
Common units $ 0.05 $ 0.22 $ 0.48 $ 0.52
Subordinated units - 0.22 0.43 0.51
Weighted average limited partner units outstanding (basic and diluted)
Common units 53.8 53.8 53.8 53.8
Subordinated units 46.8 46.8 46.8 46.8
Throughput (MMDth)
Columbia Gas Transmission 378.4 284.3 1,298.7 1,096.7
Columbia Gulf 138.9 137.5 408.0 420.5
Total 517.3 421.8 1,706.7 1,517.2
Columbia Pipeline Partners LP
Schedule 1 – Non-GAAP Reconciliation of Adjusted EBITDA and Distributable Cash Flow
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in millions) 2016 2015 2016 2015
Net Income $ 20.9 $ 144.6 $ 331.4 $ 383.6
Add:
Interest expense 0.3 1.2 2.8 1.2
Interest expense-affiliated 8.4 6.4 22.6 24.1
Income taxes - - 0.1 23.7
Depreciation and amortization 38.8 33.4 114.1 98.7
Impairment of long-lived assets 11.9 0.6 11.9 0.6
Merger costs 110.4 - 110.4 -
Distributions of earnings received from equity investees 20.0 16.2 51.0 44.1
Less:
Equity earnings in unconsolidated affiliates 16.0 15.3 48.1 44.2
Other, net 14.3 9.4 30.3 18.6
Adjusted EBITDA $ 180.4 $ 177.7 $ 565.9 $ 513.2
Less:
Adjusted EBITDA attributable to Predecessor prior to IPO - - - 79.4
Adjusted EBITDA attributable to noncontrolling interest in Columbia OpCo subsequent to IPO 152.4 150.2 478.9 366.8
Adjusted EBITDA attributable to Partnership subsequent to IPO $ 28.0 $ 27.5 $ 87.0 $ 67.0
Net Cash Flows from Operating Activities $ 82.3 $ 114.0 $ 391.4 $ 438.9
Interest expense 0.3 1.2 2.8 1.2
Interest expense-affiliated 8.4 6.4 22.6 24.1
Current taxes - - 0.1 13.2
Gain on sale of assets 9.8 38.4 15.8 52.0
Merger costs 110.4 - 110.4 -
Other adjustments to operating cash flows 0.4 (3.7 ) (0.7 ) (8.2 )
Changes in assets and liabilities (31.2 ) 21.4 23.5 (8.0 )
Adjusted EBITDA $ 180.4 $ 177.7 $ 565.9 $ 513.2
Less:
Adjusted EBITDA attributable to Predecessor prior to IPO - - - 79.4
Adjusted EBITDA attributable to noncontrolling interest in Columbia OpCo subsequent to IPO 152.4 150.2 478.9 366.8
Adjusted EBITDA attributable to Partnership subsequent to IPO $ 28.0 $ 27.5 $ 87.0 $ 67.0
Adjusted EBITDA $ 180.4 $ 177.7 $ 565.9 $ 513.2
Less:
Interest expense 8.7 7.6 25.4 25.3
Maintenance capital expenditures 43.4 25.1 96.0 98.5
Separation maintenance capital expenditures - 4.1 - 1.4
Gain on sale of assets 9.8 39.0 15.8 52.6
Distributable cash flow attributable to Predecessor prior to IPO - - - 67.8
Distributable cash flow attributable to noncontrolling interest subsequent to IPO 108.9 117.2 374.0 276.2
Add:
Proceeds from sales of assets 9.8 36.0 9.9 55.0
Interest income 0.4 4.2 0.7 4.2
Capital (received) costs related to Separation - (4.1 ) - (1.4 )
Distributable Cash Flow $ 19.8 $ 20.8 $ 65.3 $ 49.2
Columbia Pipeline Partners LP
Consolidated Balance Sheets (GAAP)
(unaudited)
(in millions) September 30,
2016
December 31,
2015
ASSETS
Current Assets
Cash and cash equivalents $ 8.4 $ 78.9
Accounts receivable (less reserve of $0.3 and $0.3, respectively) 157.3 145.9
Accounts receivable-affiliated 161.2 149.4
Materials and supplies, at average cost 26.4 32.8
Exchange gas receivable 13.9 18.8
Deferred property taxes 17.7 52.0
Prepayments and other 36.9 33.8
Total Current Assets 421.8 511.6
Investments
Unconsolidated affiliates 440.2 437.1
Other investments 1.8 1.8
Total Investments 442.0 438.9
Property, Plant and Equipment
Property, plant and equipment 10,071.0 8,930.9
Accumulated depreciation and amortization (3,053.7 ) (2,960.1 )
Net Property, Plant and Equipment 7,017.3 5,970.8
Other Noncurrent Assets
Regulatory assets 135.8 134.1
Goodwill 1,975.5 1,975.5
Postretirement and postemployment benefits assets 117.3 120.5
Deferred charges and other 9.9 10.6
Total Other Noncurrent Assets 2,238.5 2,240.7
Total Assets $ 10,119.6 $ 9,162.0
LIABILITIES AND EQUITY
Current Liabilities
Short-term borrowings $ - $ 15.0
Short-term borrowings-affiliated 1,121.5 42.1
Accounts payable 74.6 49.9
Accounts payable-affiliated 31.4 86.3
Customer deposits 16.5 17.8
Taxes accrued 73.9 108.2
Exchange gas payable 13.7 18.2
Deferred revenue 5.6 15.0
Accrued capital expenditures 171.0 95.9
Accrued compensation and related costs 33.7 26.6
Other accruals 73.5 43.8
Total Current Liabilities 1,615.4 518.8
Noncurrent Liabilities
Long-term debt-affiliated 630.9 630.9
Deferred income taxes 1.0 1.0
Accrued liability for postretirement and postemployment benefits 35.2 36.1
Regulatory liabilities 272.9 309.7
Asset retirement obligations 22.5 25.3
Other noncurrent liabilities 62.7 63.5
Total Noncurrent Liabilities 1,025.2 1,066.5
Total Liabilities 2,640.6 1,585.3
Commitments and Contingencies
Equity and Partners' Capital
Common unitholders-public (53,843,466 and 53,834,784 units issued and outstanding at September 30, 2016 and December 31, 2015, respectively) 955.3 958.5
Subordinated unitholders-CEG (46,811,398 units issued and outstanding) 298.6 304.0
Accumulated other comprehensive loss (3.7 ) (4.0 )
Total Columbia Pipeline Partners LP partners' equity and capital 1,250.2 1,258.5
Noncontrolling Interest in Columbia OpCo 6,228.8 6,318.2
Total Equity and Partners' Capital 7,479.0 7,576.7
Total Liabilities and Equity and Partners' Capital $ 10,119.6 $ 9,162.0
Columbia Pipeline Partners LP
Statements of Consolidated and Combined Cash Flows (GAAP)
(unaudited)
Nine Months Ended September 30, (in millions) 2016 2015
Operating Activities
Net Income $ 331.4 $ 383.6
Adjustments to Reconcile Net Income to Net Cash from Operating Activities:
Depreciation and amortization 114.1 98.7
Deferred income taxes and investment tax credits - 10.5
Deferred revenue (2.7 ) 0.4
Equity-based compensation expense and profit sharing contribution 1.2 4.5
Gain on sale of assets (15.8 ) (52.6 )
Impairment of long-lived assets 11.9 0.6
Equity earnings in unconsolidated affiliates (48.1 ) (44.2 )
Amortization of debt related costs 1.6 0.3
AFUDC equity (29.7 ) (15.0 )
Distributions of earnings received from equity investees 51.0 44.1
Changes in Assets and Liabilities:
Accounts receivable (3.5 ) 3.2
Accounts receivable-affiliated 7.2 27.9
Accounts payable 16.7 18.1
Accounts payable-affiliated (55.0 ) (20.3 )
Customer deposits (1.2 ) (23.8 )
Taxes accrued (34.8 ) (25.6 )
Exchange gas receivable/payable 0.4 0.4
Other accruals 10.6 (1.7 )
Prepayments and other current assets 37.7 20.1
Regulatory assets/liabilities (10.9 ) 43.7
Postretirement and postemployment benefits (0.7 ) (26.9 )
Deferred charges and other noncurrent assets 2.4 (3.5 )
Other noncurrent liabilities 7.6 (3.6 )
Net Cash Flows from Operating Activities 391.4 438.9
Investing Activities
Capital expenditures (1,073.0 ) (775.9 )
Insurance recoveries - 2.1
Change in short-term lendings-affiliated (19.1 ) (265.3 )
Proceeds from disposition of assets 9.9 55.0
Contributions to equity investees (6.2 ) (1.4 )
Distributions from equity investees 1.6 15.1
Other investing activities (6.7 ) (19.1 )
Net Cash Flows used for Investing Activities (1,093.5 ) (989.5 )
Financing Activities
Change in short-term borrowings (15.0 ) 20.0
Change in short-term borrowings-affiliated 1,079.3 (245.0 )
Payments of long-term debt-affiliated, including current portion - (957.8 )
Payments of capital lease obligations and other debt related costs (1.9 ) -
Proceeds from the issuance of common units, net of offering costs - 1,168.4
Distribution of IPO proceeds to parent - (500.0 )
Contribution of capital from parent - 1,217.3
Quarterly distributions to unitholders (56.9 ) (26.0 )
Distribution to noncontrolling interest in Columbia OpCo (373.9 ) (69.9 )
Net Cash Flows from Financing Activities 631.6 607.0
Change in cash and cash equivalents (70.5 ) 56.4
Cash and cash equivalents at beginning of period 78.9 0.5
Cash and Cash Equivalents at End of Period $ 8.4 $ 56.9

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