SOURCE: El Paso Pipeline Partners

El Paso Pipeline Partners

March 01, 2010 07:45 ET

El Paso Pipeline Partners Reports Significant Increases in Fourth Quarter and Full-Year Results

HOUSTON, TX--(Marketwire - March 1, 2010) - El Paso Pipeline Partners, L.P. (NYSE: EPB) is reporting today fourth quarter and full-year 2009 financial and operational results for the partnership.

Highlights:

--  $0.51 earnings per common unit for the fourth quarter of 2009, versus
    $0.37 per common unit for the fourth quarter of 2008.  Fourth quarter
    2009 results include a gain of approximately $8 million, or $0.04 per
    common unit, on the sale of CIG's Natural Buttes compressor station
    and gas processing plant
--  $241.2 million distributable cash flow for 2009, a 63 percent increase
    from 2008
--  Raised quarterly cash distributions to $0.36 per common and
    subordinated unit for the fourth quarter 2009, a 12.5 percent increase
    from the fourth quarter of 2008
--  Very strong 2009 distribution coverage ratio of 1.38 times

"We've had tremendous financial and operational success in 2009 as we continue to deliver both organic expansions and growth through acquisitions," said Jim Yardley, president and chief executive officer of El Paso Pipeline Partners. "Last year, we placed two pipeline projects into service, settled the Southern Natural Gas (SNG) rate case, and completed a significant acquisition that increased our ownership in existing pipeline assets. These are tangible results of our unique combination of stability and growth as we continue to deliver solid cash flows and strong distribution growth for our unitholders."

A summary of financial results for the quarters and 12 months ended December 31, 2009 and 2008 are as follows:

                                        Quarters Ended  Twelve Months Ended
Financial Results                         December 31,      December 31,
                                        ----------------  ----------------
($ in millions, except per-unit amount)   2009     2008     2009     2008
                                        -------  -------  -------  -------
Operating revenues                      $ 151.1  $ 125.5  $ 537.6  $ 457.2
Operating expenses
  Operation and maintenance                40.0     32.7    154.4    147.2
  Depreciation and amortization            17.2     14.9     67.0     58.6
  Taxes, other than income                  5.7      5.5     23.7     21.6
                                        -------  -------  -------  -------
Operating income                           88.2     72.4    292.5    229.8

Earnings from unconsolidated affiliates    16.4     12.9     53.4     32.9

Other income, net                           0.9      3.1      5.6      9.7
                                        -------  -------  -------  -------
  EBIT before noncontrolling interest     105.5     88.4    351.5    272.4
Net income attributable to
 noncontrolling interests                 (21.3)   (19.9)   (66.0)   (62.4)
                                        -------  -------  -------  -------
    EBIT                                   84.2     68.5    285.5    210.0
Interest and debt expense, net            (19.8)   (19.7)   (73.7)   (61.6)
Affiliated interest income, net             0.2      2.7      1.7     23.2
                                        -------  -------  -------  -------
Net income attributable to EPB          $  64.6  $  51.5  $ 213.5  $ 171.6
                                        =======  =======  =======  =======
Net income attributable to EPB per
 limited partner unit -- Basic and
 Diluted common units                   $  0.51  $  0.37  $  1.64  $  1.26
Net income attributable to EPB per
 limited partner unit -- Basic and
 Diluted subordinated units             $  0.47  $  0.37  $  1.56  $  1.12

Financial Results

For the quarter and 12 months ended December 31, 2009, El Paso Pipeline Partners reported net income attributable to EPB of $64.6 million and $213.5 million, respectively, compared with $51.5 million and $171.6 million, respectively, for the same periods in 2008. Earnings before interest and taxes (EBIT) for the quarter and 12 months ended December 31, 2009, were $84.2 million and $285.5 million, respectively, compared with $68.5 million and $210.0 million, respectively, for the same 2008 periods. Operating income for the quarter and 12 months ended December 31, 2009 was $88.2 million and $292.5 million, respectively, compared with $72.4 million and $229.8 million, respectively, for the same 2008 periods.

Distributable cash flow for the quarter and year ended December 31, 2009 was $ 70.4 million and $241.2 million respectively, compared with $40.1 million and $147.7 million for the same 2008 periods, respectively.

The significant increases in net income, EBIT, operating income and distributable cash flow for the quarter and the year were primarily due to the completion of several growth projects, including the Piceance Lateral expansion and Totem Storage facility in 2009, and the Medicine Bow and High Plains Pipeline expansions in 2008. In addition, the gain from the sale of CIG's Natural Buttes compressor station and gas processing plant contributed to higher net income and EBIT for both periods. The acquisition of an additional interest in SNG in September 2008 also contributed to higher net income, EBIT and distributable cash flow for the year ended December 31, 2009 relative to the same period in 2008.

Equity Investments

El Paso Pipeline Partners recognized equity in earnings of $16.8 million from its 25 percent ownership interest in SNG for the quarter, and $52.5 million for the 12 months ended December 31, 2009, compared with $10.7 million and $29.8 million, respectively, for the same 2008 periods. The partnership's share of SNG's distributable cash flow was $20.7 million and $54.8 million for the quarter and 12 months ended December 31, 2009, respectively, compared with $8.8 million and $32.9 million, respectively, for the same 2008 periods.

The increase in earnings and distributable cash flow from El Paso Pipeline Partners' equity investment in SNG for the 12 months ended December 31, 2009 is due to the acquisition of an additional interest in SNG in September 2008, increased service revenues related to SNG's recent rate case settlement; which was partially offset by proceeds received by SNG from the Calpine bankruptcy settlement in 2008 and lower allowance for funds used for construction (AFUDC) equity income due to the completion of pipeline projects in 2008.

Interest and Debt Expense

For the quarter and 12 months ended December 31, 2009, interest and debt expense was $19.8 million and $73.7 million, respectively, compared with $19.7 million and $61.6 million, respectively, for the same 2008 periods. The increase for the year is due to higher average debt balances, primarily related to the financing of the acquisition of additional interests in CIG and SNG in September 2008, and interest expense related to the WYCO financing obligation. These additional interest charges were partially offset by lower interest rates on the partnership's credit facility, under which the average rate for the 12 months ended December 31, 2009, was 0.8 percent compared with 3.3 percent for the same 2008 period.

Liquidity

El Paso Pipeline Partners maintains a $750 million revolving credit facility that is underwritten by a diverse group of 25 financial institutions and matures in November 2012. As of December 31, 2009, the partnership had approximately $215 million of available capacity on this facility. In addition to the amounts available under its credit facility, the partnership had a cash balance of approximately $17 million and $93 million in demand notes receivable from El Paso Corporation.

The partnership will utilize its revolving credit facility and demand notes receivable from El Paso Corporation to fund its on-going growth capital expenditures. The partnership has more than adequate liquidity to execute on its backlog of committed growth projects through 2010.

Capital Projects

During the 12 months ended December 31, 2009, El Paso Pipeline Partners invested $128 million, primarily for the Piceance Lateral, Raton 2010, and Totem Storage expansion projects. Maintenance capital expenditures for 2009 totaled $26 million.

Webcast Information

El Paso Pipeline Partners has scheduled a live webcast of a review of its 2009 results, on March 1, 2010, 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) 260-0861 (conference ID #55636714) ten minutes prior to the start of the webcast.

A replay of the webcast will be available online through the partnership's Web site in the Investors section. A telephone audio replay will be also available through March 12, 2010 by dialing (800) 642-1687 (conference ID # 55636714). If you have any questions regarding this procedure, please contact Margie Fox at (713) 420-2903.

The partnership's financial statements, including its December 31, 2009, Form 10-K, are available in the Investors section of the partnership's Web site at www.eppipelinepartners.com. Copies of the filed documents, including the partnership's 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 owns 60 percent of the limited partner units, and the 2 percent general partner interest. El Paso Pipeline Partners, L.P. owns Wyoming Interstate Company, an interstate pipeline system serving the Rocky Mountain region, and a 58 percent interest in Colorado Interstate Gas Company which operates in the Rocky Mountain region, and a 25 percent interest in Southern Natural Gas Company, which operates in 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 SEC's 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.

We use the non-GAAP financial measure Distributable Cash Flow as it provides important information relating our financial operating performance to 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, and other income and expenses, net, which primarily includes a non-cash allowance for equity funds used during construction and other non-cash items. We use 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 define the non-GAAP financial measure EBIT as net income adjusted for interest and debt expense, net of interest income, and net income attributable to non-controlling interests so that investors may evaluate our operating results without regard to our financing methods or capital structure. We believe EBIT is useful to our investors as it provides them with the same measure used by El Paso to evaluate our performance. Adjusted EBITDA, which is also a non-GAAP financial measure, is defined as net income adjusted for (i) interest and debt expense, net of interest income, (ii) affiliated interest income, net of affiliated interest expense, (iii) depreciation and amortization expense, (iv) the partnership's share of distributions declared by unconsolidated affiliates for the applicable period, (v) earnings from unconsolidated affiliates, and (vi) CIG's declared distributions to El Paso Corporation.

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 the operating and financial performance of the partnership with the performance of other publicly traded partnerships within the industry. Distributable Cash Flow, EBIT and Adjusted EBITDA should not be considered an alternative to net income, earnings per unit, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP.

These non-GAAP measures both exclude some, but not all, items that affect net income and operating income and these measures may vary among other companies. Therefore, Distributable Cash Flow, EBIT and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. 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 does it equate to available cash as defined in our partnership agreement.

                                        Quarters Ended  Twelve Months Ended
Non-GAAP Reconciliation Schedule          December 31,      December 31,
                                        ----------------  ----------------
($ millions)                              2009     2008     2009     2008
                                        -------  -------  -------  -------
Net income                              $  85.9  $  71.4  $ 279.5  $ 234.0
Net income attributable to
 noncontrolling interest                  (21.3)   (19.9)   (66.0)   (62.4)
                                        -------  -------  -------  -------
Net income attributable to EPB             64.6     51.5    213.5    171.6
Add:  Interest and debt expense, net       19.8     19.7     73.7     61.6
Less: Affiliated interest income, net      (0.2)    (2.7)    (1.7)   (23.2)
                                        -------  -------  -------  -------
EBIT                                       84.2     68.5    285.5    210.0
Add: Depreciation and amortization         17.2     14.9     67.0     58.6
  Distributions declared by
   unconsolidated affiliates               21.2      8.8     58.4     32.9
  Net Income attributable to
   noncontrolling interest                 21.3     19.9     66.0     62.4
Less:  Equity earnings from
 unconsolidated affiliates                (16.4)   (12.9)   (53.4)   (32.9)
CIG declared distributions to El Paso     (18.5)   (26.1)   (68.1)  (101.6)
                                        -------  -------  -------  -------
Adjusted EBITDA                         $ 109.0  $  73.1  $ 355.4  $ 229.4
Less: Cash interest expense, net          (19.3)   (20.1)   (71.3)   (41.2)
  Maintenance capital expenditures         (9.1)    (8.4)   (25.8)   (27.4)
  Other, net                              (10.2)    (4.5)   (17.1)   (13.1)
                                        -------  -------  -------  -------
Distributable cash flow                 $  70.4  $  40.1  $ 241.2  $ 147.7
                                        =======  =======  =======  =======

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 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.

Contact Information

  • Contacts:

    Investor & Media Relations
    Bruce Connery
    Vice President
    (713) 420-5855

    Media Relations
    Bill Baerg
    Manager
    (713) 420-2906