Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 31, 2010 | Apr. 30, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-31 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | SE | |
Entity Registrant Name | Spectra Energy Corp. | |
Entity Central Index Key | 0001373835 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 647,987,459 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Operating Revenues | ||
Transportation, storage and processing of natural gas | $710 | $608 |
Distribution of natural gas | 584 | 635 |
Sales of natural gas liquids | 146 | 109 |
Other | 40 | 32 |
Total operating revenues | 1,480 | 1,384 |
Operating Expenses | ||
Natural gas and petroleum products purchased | 452 | 505 |
Operating, maintenance and other | 302 | 264 |
Depreciation and amortization | 161 | 136 |
Property and other taxes | 73 | 64 |
Total operating expenses | 988 | 969 |
Gains on Sales of Other Assets and Other, net | 10 | |
Operating Income | 492 | 425 |
Other Income and Expenses | ||
Equity in earnings of unconsolidated affiliates | 122 | 167 |
Other income and expenses, net | 4 | 9 |
Total other income and expenses | 126 | 176 |
Interest Expense | 159 | 150 |
Earnings From Continuing Operations Before Income Taxes | 459 | 451 |
Income Tax Expense from Continuing Operations | 97 | 139 |
Income From Continuing Operations | 362 | 312 |
Income From Discontinued Operations, net of tax | 16 | 3 |
Net Income | 378 | 315 |
Net Income-Noncontrolling Interests | 20 | 17 |
Net Income-Controlling Interests | $358 | $298 |
Weighted-average shares outstanding | ||
Basic | 648 | 628 |
Diluted | 649 | 629 |
Earnings per share from continuing operations | ||
Basic and Diluted | 0.53 | 0.47 |
Earnings per share | ||
Basic and Diluted | 0.55 | 0.47 |
Dividends per share | 0.25 | 0.25 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Current Assets | ||
Cash and cash equivalents | $158 | $196 |
Receivables, net | 772 | 778 |
Inventory | 202 | 321 |
Other | 137 | 134 |
Total current assets | 1,269 | 1,429 |
Investments and Other Assets | ||
Investments in and loans to unconsolidated affiliates | 2,006 | 2,001 |
Goodwill | 4,062 | 3,948 |
Other | 416 | 407 |
Total investments and other assets | 6,484 | 6,356 |
Property, Plant and Equipment | ||
Cost | 20,539 | 19,960 |
Less accumulated depreciation and amortization | 4,833 | 4,613 |
Net property, plant and equipment | 15,706 | 15,347 |
Regulatory Assets and Deferred Debits | 988 | 947 |
Total Assets | 24,447 | 24,079 |
Current Liabilities | ||
Accounts payable | 416 | 333 |
Short-term borrowings and commercial paper | 185 | 162 |
Taxes accrued | 118 | 139 |
Interest accrued | 165 | 167 |
Current maturities of long-term debt | 679 | 809 |
Other | 640 | 885 |
Total current liabilities | 2,203 | 2,495 |
Long-term Debt | 9,088 | 8,947 |
Deferred Credits and Other Liabilities | ||
Deferred income taxes | 3,187 | 3,113 |
Regulatory and other | 1,657 | 1,634 |
Total deferred credits and other liabilities | 4,844 | 4,747 |
Commitments and Contingencies | ||
Preferred Stock of Subsidiaries | 258 | 225 |
Equity | ||
Preferred stock, $0.001 par, 22 million shares authorized, no shares outstanding | ||
Common stock, $0.001 par, 1 billion shares authorized, 648 million and 647 million shares outstanding at March 31, 2010 and December 31, 2009, respectively | 1 | 1 |
Additional paid-in capital | 4,684 | 4,700 |
Retained earnings | 1,293 | 1,096 |
Accumulated other comprehensive income | 1,519 | 1,328 |
Total controlling interests | 7,497 | 7,125 |
Noncontrolling interests | 557 | 540 |
Total equity | 8,054 | 7,665 |
Total Liabilities and Equity | $24,447 | $24,079 |
1_CONDENSED CONSOLIDATED BALANC
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | ||
Mar. 31, 2010
| Dec. 31, 2009
| |
Preferred stock, par | 0.001 | 0.001 |
Preferred stock, shares authorized | 22,000,000 | 22,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par | 0.001 | 0.001 |
Common stock, shares authorized | 1,000,000,000 | 1,000,000,000 |
Common stock, shares outstanding | 648,000,000 | 647,000,000 |
2_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $378 | $315 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 165 | 140 |
Deferred income tax expense | 22 | 104 |
Equity in earnings of unconsolidated affiliates | (122) | (167) |
Distributions received from unconsolidated affiliates | 108 | 16 |
Other | (81) | 148 |
Net cash provided by operating activities | 470 | 556 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Capital expenditures | (176) | (147) |
Investments in and loans to unconsolidated affiliates | (3) | (29) |
Proceeds from sales and maturities of available-for-sale securities | 32 | |
Distributions received from unconsolidated affiliates | 4 | |
Other | (27) | (2) |
Net cash used in investing activities | (206) | (142) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from the issuance of long-term debt | 720 | 693 |
Payments for the redemption of long-term debt | (864) | (852) |
Net increase (decrease) in short-term borrowings and commercial paper | 21 | (530) |
Distributions to noncontrolling interests | (21) | (9) |
Contributions from noncontrolling interests | 2 | 2 |
Proceeds from the issuance of Spectra Energy common stock | 448 | |
Dividends paid on common stock | (161) | (157) |
Other | 1 | |
Net cash used in financing activities | (302) | (405) |
Effect of exchange rate changes on cash | (2) | |
Net increase (decrease) in cash and cash equivalents | (38) | 7 |
Cash and cash equivalents at beginning of period | 196 | 214 |
Cash and cash equivalents at end of period | 158 | 221 |
Supplemental Disclosures | ||
Property, plant and equipment accruals | $35 | $28 |
3_CONDENSED CONSOLIDATED STATEM
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (USD $) | |||||||
In Millions | Common Stock
| Additional Paid-in Capital
| Retained Earnings
| Accumulated Other Comprehensive Income Foreign Currency Translation Adjustments
| Accumulated Other Comprehensive Income Other
| Noncontrolling Interests
| Total
|
Beginning Balance at Dec. 31, 2008 | $1 | $4,104 | $899 | $881 | ($345) | $470 | $6,010 |
Net income | 298 | 17 | 315 | ||||
Foreign currency translation adjustments | (203) | (2) | (205) | ||||
Unrealized mark-to-market net loss on hedges | (6) | (6) | |||||
Common stock issuance | 448 | 448 | |||||
Pension and benefits impact | 4 | 4 | |||||
Reclassification of deferred gain on sale of units of Spectra Energy Partners, LP | 59 | 59 | |||||
Dividends on common stock | (163) | (163) | |||||
Stock-based compensation | (1) | (1) | |||||
Distributions to noncontrolling interests | (12) | (12) | |||||
Contributions from noncontrolling interests | 2 | 2 | |||||
Other, net | 11 | 2 | 13 | ||||
Ending Balance at Mar. 31, 2009 | 1 | 4,621 | 1,034 | 678 | (347) | 477 | 6,464 |
Beginning Balance at Dec. 31, 2009 | 1 | 4,700 | 1,096 | 1,686 | (358) | 540 | 7,665 |
Net income | 358 | 20 | 378 | ||||
Foreign currency translation adjustments | 199 | 14 | 213 | ||||
Unrealized mark-to-market net loss on hedges | (14) | (14) | |||||
Pension and benefits impact | 6 | 6 | |||||
Dividends on common stock | (161) | (161) | |||||
Stock-based compensation | 6 | 6 | |||||
Distributions to noncontrolling interests | (21) | (21) | |||||
Contributions from noncontrolling interests | 2 | 2 | |||||
Other, net | (22) | 2 | (20) | ||||
Ending Balance at Mar. 31, 2010 | $1 | $4,684 | $1,293 | $1,885 | ($366) | $557 | $8,054 |
General
General | |
3 Months Ended
Mar. 31, 2010 | |
General | 1. General The terms we, our, us, and Spectra Energy as used in this report refer collectively to Spectra Energy Corp and its subsidiaries unless the context suggests otherwise. These terms are used for convenience only and are not intended as a precise description of any separate legal entity within Spectra Energy. Nature of Operations. Spectra Energy Corp, through its subsidiaries and equity affiliates, owns and operates a large and diversified portfolio of complementary natural gas-related energy assets, operating in three key areas of the natural gas industry: gathering and processing, transmission and storage, and distribution. We provide transportation and storage of natural gas to customers in various regions of the northeastern and southeastern United States, the Maritime Provinces in Canada and the Pacific Northwest in the United States and Canada, and in the province of Ontario, Canada. We also provide natural gas sales and distribution services to retail customers in Ontario, and natural gas gathering and processing services to customers in western Canada. In addition, we own a 50% interest in DCP Midstream, LLC (DCP Midstream), one of the largest natural gas gatherers and processors in the United States. Basis of Presentation. The accompanying Condensed Consolidated Financial Statements include our accounts, our majority-owned subsidiaries where we have control and those variable interest entities, if any, where we are the primary beneficiary. These interim financial statements should be read in conjunction with the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December31, 2009, and reflect all normal recurring adjustments that are, in our opinion, necessary to fairly present our results of operations and financial position. Amounts reported in the Condensed Consolidated Statements of Operations are not necessarily indicative of amounts expected for the respective annual periods due to the effects of seasonal temperature variations on energy consumption, primarily in our gas distribution operations, as well as changing commodity prices on certain of our processing operations and other factors. Use of Estimates. To conform with generally accepted accounting principles (GAAP) in the United States, we make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements. Although these estimates are based on our best available knowledge at the time, actual results could differ. |
Business Segments
Business Segments | |
3 Months Ended
Mar. 31, 2010 | |
Business Segments | 2. Business Segments We manage our business in four reportable segments: U.S. Transmission, Distribution, Western Canada Transmission Processing and Field Services. The remainder of our business operations is presented as Other, and consists of unallocated corporate costs, wholly owned captive insurance subsidiaries, employee benefit plan assets and liabilities, and other miscellaneous activities. Our chief operating decision maker regularly reviews financial information about each of these segments in deciding how to allocate resources and evaluate performance. There is no aggregation within our defined business segments. U.S. Transmission provides transportation and storage of natural gas for customers in various regions of the northeastern and southeastern United States and the Maritime Provinces in Canada. The natural gas transmission and storage operations in the U.S. are primarily subject to the Federal Energy Regulatory Commissions (FERCs) rules and regulations. Distribution provides retail natural gas distribution service in Ontario, Canada, as well as natural gas transportation and storage services to other utilities and energy market participants. These services are provided by Union Gas Limited (Union Gas), and are primarily subject to the rules and regulations of the Ontario Energy Board (OEB). Western Canada Transmission Processing provides transportation of natural gas, natural gas gathering and processing services, and natural gas liquids (NGLs) extraction, fractionation, transportation, storage and marketing to customers in western Canada and the northern tier of the United States. This segment conducts business primarily through BC Pipeline, BC Field Services, and the NGL marketing and Canadian Midstream businesses. BC Pipeline and BC Field Services operations are primarily subject to the rules and regulations of Canadas National Energy Board (NEB). Field Services gathers and processes natural gas and fractionates, markets and trades NGLs. It conducts operations through DCP Midstream, which is owned 50% by us and 50% by ConocoPhillips. DCP Midstream gathers raw natural gas through gathering systems located in nine major natural gas producing regions: Mid-Continent, Rocky Mountain, East Texas-North Louisiana, Barnett Shale, Gulf Coast, South Texas, Central Texas, Antrim Shale and Permian Basin. Our reportable segments offer different products and services and are managed separately as business units. Management evaluates segment performance based on earnings before interest and taxes (EBIT) from continuing operations less noncontrolling interests related to those earnings. On a segment basis, EBIT represents earnings from continuing operations (both operating and non-operating) before interest and taxes, net of noncontrolling interests related to those earnings. Cash, cash equivalents and short-term investments are managed centrally, so the associated realized and unrealized gains and losses from foreign currency transactions and interest and dividend income on those balances are excluded from the segments EBIT. Transactions between reportable segments are accounted for on the same basis as transacti |
Regulatory Matters
Regulatory Matters | |
3 Months Ended
Mar. 31, 2010 | |
Regulatory Matters | 3. Regulatory Matters Maritimes Northeast Pipeline, L.L.C. (MN LLC).During 2009, MN LLC filed a rate case with the FERC. The rate case included the impact of the Phase IV expansion facilities that went into service in January 2009 and resulted in lower recourse rates that went into effect in August 2009. On March4, 2010, MN LLC filed a settlement with FERC that resolves all issues in the case.On March18, 2010, the settlement was certified by the Presiding Administrative Law Judge and on April30, 2010 was approved by the FERC. Although the settlement will result in a reduction to MN LLCs recourse rates, the settlement will not have a material impact on consolidated results of operations. |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes | 4. Income Taxes Income tax expense from continuing operations for the three months ended March31, 2010 was $97 million, compared to $139 million reported in the same period in 2009. The effective tax rate for income from continuing operations for the three months ended March31, 2010 was 21.1% as compared to 30.8% for the same period in 2009. The lower income tax expense and lower effective tax rate were primarily due to favorable tax audit settlements and lower Canadian tax rates. The favorable tax audit settlements were related mainly to an administrative change by the Canadian federal government that resulted in cash tax refunds from historical tax years and a reduction to the deferred tax liability. We did not have any uncertain tax benefits associated with these settlements. We recognized no material changes in unrecognized tax benefits during the first quarter of 2010. Although uncertain, we believe it is reasonably possible that prior to March31, 2011 the total amount of unrecognized tax benefits could decrease by approximately $10 million, related to the expiration of statutes of limitation. |
Discontinued Operations
Discontinued Operations | |
3 Months Ended
Mar. 31, 2010 | |
Discontinued Operations | 5. Discontinued Operations Discontinued operations includes the net effects of a settlement arrangement related to prior liquefied natural gas transportation contracts and, during the first quarter of 2010, an immaterial income tax adjustment related to previously discontinued operations. The following table summarizes the results classified as Income From Discontinued Operations, Net of Tax, in the Condensed Consolidated Statements of Operations: Operating Revenues Pre-tax Earnings Income Tax Expense (Benefit) Income From Discontinued Operations, Net of Tax (in millions) Three Months Ended March31, 2010 Other $ 91 $ 5 $ (11 ) $ 16 Total consolidated $ 91 $ 5 $ (11 ) $ 16 Three Months Ended March31, 2009 Other $ 43 $ 4 $ 1 $ 3 Total consolidated $ 43 $ 4 $ 1 $ 3 |
Comprehensive Income
Comprehensive Income | |
3 Months Ended
Mar. 31, 2010 | |
Comprehensive Income | 6. Comprehensive Income Components of comprehensive income are as follows: ThreeMonths EndedMarch31, 2010 2009 (in millions) Net income $ 378 $ 315 Other comprehensive income Foreign currency translation adjustments 213 (205 ) Unrealized mark-to-market net loss on hedges (14 ) (6 ) Pension and benefits impact 6 4 Total comprehensive income, net of tax 583 108 Less: comprehensive incomenoncontrolling interests 34 15 Comprehensive incomecontrolling interests $ 549 $ 93 |
Earnings per Common Share
Earnings per Common Share | |
3 Months Ended
Mar. 31, 2010 | |
Earnings per Common Share | 7. Earnings per Common Share Basic earnings per common share (EPS) is computed by dividing net income from controlling interests by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income from controlling interests by the diluted weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other agreements to issue common stock, such as stock options, stock-based performance unit awards and phantom stock awards, were exercised, settled or converted into common stock. The following table presents our basic and diluted EPS calculations: Three Months EndedMarch31, 2010 2009 (inmillions,except per-shareamounts) Income from continuing operations, net of taxcontrolling interests $ 342 $ 295 Income from discontinued operations, net of taxcontrolling interests 16 3 Net incomecontrolling interests $ 358 $ 298 Weighted-average common shares outstanding Basic 648 628 Diluted 649 629 Basic and diluted earnings per common share Continuing operations $ 0.53 $ 0.47 Discontinued operations, net of tax 0.02 Total basic and diluted earnings per common share $ 0.55 $ 0.47 Weighted-average shares used to calculate diluted EPS includes the effect of certain options and restricted stock awards. Certain other options and stock awards related to approximately 10million shares for the three months ended March31, 2010 and 13million shares for the three months ended March31, 2009 were not included in the calculation of diluted EPS. These options and stock awards were not included because either the option exercise prices were greater than the average market price of the common shares during these periods or performance measures related to the awards had not yet been met. |
Inventory
Inventory | |
3 Months Ended
Mar. 31, 2010 | |
Inventory | 8. Inventory Inventory consists primarily of natural gas and NGLs held in storage for transmission and processing, and also includes materials and supplies. Natural gas inventories primarily relate to the Distribution segment in Canada and are valued at costs approved by the OEB. The difference between the approved price and the actual cost of gas purchased is recorded in either accounts receivable or other current liabilities, as appropriate, for future disposition with customers, subject to approval by the OEB. The remaining inventory is recorded at cost, primarily using average cost. The components of inventory are as follows: March31, 2010 December31, 2009 (in millions) Natural gas $ 107 $ 219 NGLs 24 21 Materials and supplies 71 81 Total inventory $ 202 $ 321 |
Investments in and Loans to Unc
Investments in and Loans to Unconsolidated Affiliates | |
3 Months Ended
Mar. 31, 2010 | |
Investments in and Loans to Unconsolidated Affiliates | 9. Investments in and Loans to Unconsolidated Affiliates Our most significant investment in unconsolidated affiliates is our 50% investment in DCP Midstream, which is accounted for under the equity method of accounting. The following represents summary financial information for DCP Midstream, presented at 100%: ThreeMonths EndedMarch31, 2010 2009 (in millions) Operating revenues $ 3,115 $ 1,927 Operating expenses 2,842 1,823 Operating income 273 104 Net income 196 43 Net income attributable to members interests 181 30 In January2009, DCP Midstream reclassified to equity certain deferred gains on sales of common units in DCP Midstream Partners, LP (DCP Partners). Our proportionate 50% share, totaling $135 million, was recorded in Equity in Earnings of Unconsolidated Affiliates in the Condensed Consolidated Statement of Operations in the first quarter of 2009. |
Debt and Credit Facilities
Debt and Credit Facilities | |
3 Months Ended
Mar. 31, 2010 | |
Debt and Credit Facilities | 10. Debt and Credit Facilities Available Credit Facilities and Restrictive Debt Covenants Expiration Date Credit Facilities Capacity Outstanding at March31, 2010 Commercial Paper Revolving Credit Lettersof Credit Total (in millions) Spectra Energy Capital, LLC (a) Multi-year syndicated 2012 $ 1,500 $ 59 $ $ 12 $ 71 Westcoast Energy Inc. (b) Multi-year syndicated 2011 197 91 91 364-day bilateral 2010 20 1 1 Union Gas (c) Multi-year syndicated 2012 492 35 35 364-day bilateral 2010 15 4 4 Spectra Energy Partners, LP Multi-year syndicated 2012 500 240 240 Total $ 2,724 $ 185 $ 240 $ 17 $ 442 (a) Credit facility contains a covenant requiring the debt-to-total capitalization ratio to not exceed 65%. (b) U.S. dollar equivalent at March31, 2010. Two credit facilities, totaling 220million Canadian dollars, each contain a covenant that requires the debt-to-total capitalization ratio to not exceed 75%. (c) U.S. dollar equivalent at March31, 2010. Two credit facilities, totaling 515million Canadian dollars, each contain a covenant that requires the debt-to-total capitalization ratio to not exceed 75%. The multi-year syndicated facility contains a provision which requires Union Gas to repay all borrowings under the facility for a period of two days during the second quarter of each year. The issuance of commercial paper, letters of credit and other borrowings reduces the amount available under the credit facilities. Our credit agreements contain various financial and other covenants, including the maintenance of certain financial ratios. Failure to meet those covenants beyond applicable grace periods could result in accelerated due dates and/or termination of the agreements. As of March31, 2010, we were in compliance with those covenants. In addition, our credit agreements allow for acceleration of payments or termination of the agreements due to nonpayment, or in some cases, due to the acceleration of other significant indebtedness of the borrower or some of its subsidiaries. Our debt and credit agreements do not contain provisions that trigger an acceleration of indebtedness based solely on the occurrence of a material adverse change in our financial condition or results of operations. |
Fair Value Measurements
Fair Value Measurements | |
3 Months Ended
Mar. 31, 2010 | |
Fair Value Measurements | 11. Fair Value Measurements The following table presents, for each of the fair value hierarchy levels, assets and liabilities that are measured and recorded at fair value on a recurring basis: March31, 2010 Description Condensed Consolidated Balance Sheet Caption Total Level1 Level2 Level3 (in millions) Corporate debt securities Cash and cash equivalents $ 52 $ $ 52 $ Corporate debt securities Short-term investments 12 12 Derivative assetsinterest rate swaps Investments and other assetsother 23 23 Money market funds Investments and other assetsother 19 19 Total Assets $ 106 $ 31 $ 75 $ Derivative liabilitiesinterest rate swaps Deferred credits and other liabilities regulatory and other $ 17 $ $ 17 $ Total Liabilities $ 17 $ $ 17 $ December31, 2009 Description Condensed Consolidated Balance Sheet Caption Total Level1 Level2 Level3 (in millions) Money market funds Cash and cash equivalents $ 14 $ 14 $ $ Corporate debt securities Cash and cash equivalents 50 50 Derivative assetsnatural gas purchase contract Investments and other assetsother 15 15 Derivative assetsinterest rate swaps Investments and other assetsother 18 18 Money market funds Investments and other assetsother 25 25 Total Assets $ 122 $ 39 $ 68 $ 15 Derivative liabilitiesinterest rate swaps Deferred credits and other liabilities regulatory and other $ 17 $ $ 17 $ Total Liabilities $ 17 $ $ 17 $ The following table presents changes in Level 3 assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs: Short-Term Derivative Assets Short-Term Derivative Liabilities Long-Term Derivative Assets Long-Term Derivative Liabilities (in millions) Fair value at December31, 2009 $ $ $ 15 $ Total gains or losses (realized/unrealized): Included in earnings Included in Investments and Other AssetsOther Included in other comprehensive income (15 ) Fair value at March31, 2010 $ $ $ $ Total gains (losses) for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains orlosses relating to assets held at March31, 2010 $ $ $ $ Short-Term Derivative Assets Short-Term Derivative Liabilities Long-Term Derivative Assets Long-Term Derivative Liabilit |
Commitments and Contingencies
Commitments and Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Commitments and Contingencies | 12. Commitments and Contingencies Environmental We are subject to various U.S. federal, state and local laws and regulations, as well as Canadian federal and provincial laws, regarding air and water quality, hazardous and solid waste disposal and other environmental matters. These laws and regulations can change from time to time, imposing new obligations on us. Like others in the energy industry, we and our affiliates are responsible for environmental remediation at various contaminated sites. These include some properties that are part of our ongoing operations, sites formerly owned or used by us, and sites owned by third parties. Remediation typically involves management of contaminated soils and may involve groundwater remediation. Managed in conjunction with relevant international, federal, state/provincial and local agencies, activities vary with site conditions and locations, remedial requirements, complexity and sharing of responsibility. If remediation activities involve statutory joint and several liability provisions, strict liability, or cost recovery or contribution actions, we or our affiliates could potentially be held responsible for contamination caused by other parties. In some instances, we may share liability associated with contamination with other potentially responsible parties, and may also benefit from insurance policies or contractual indemnities that cover some or all cleanup costs. All of these sites generally are managed in the normal course of business or affiliated operations. Included in Deferred Credits and Other LiabilitiesRegulatory and Other on the Condensed Consolidated Balance Sheets are accruals related to extended environmental-related activities totaling $16 million at both March31, 2010 and December31, 2009. These accruals represent provisions for costs associated with remediation activities at some of our current and former sites, as well as other environmental contingent liabilities. Litigation Duke Energy Retirement Cash Balance Plan. A class action lawsuit was filed in federal court in South Carolina in 2006 against Duke Energy Corporation (Duke Energy) and the Duke Energy Retirement Cash Balance Plan. Various causes of action were alleged in the class action lawsuit, including violations of the Employee Retirement Income Security Act of 1974 (ERISA) and the Age Discrimination in Employment Act. These allegations arise out of the conversion of the Duke Power Company Employees Retirement Plan into the Duke Power Company Retirement Cash Balance Plan. The plaintiffs seek to represent present and former participants in the Duke Energy Retirement Cash Balance Plan. This group is estimated to include approximately 36,000 persons. Duke Energy filed its answer in March 2006, and various motions were thereafter filed by the parties, including plaintiffs motion to certify a class, Duke Energys motion to dismiss, and cross motions for summary judgment filed by both the plaintiffs and Duke Energy. The Court issued a series of rulings in June 2008 denying the plaintiffs class certification motion, dismissing certain of the causes of action originally filed by plaintiffs and allowing other ca |
Guarantees and Indemnifications
Guarantees and Indemnifications | |
3 Months Ended
Mar. 31, 2010 | |
Guarantees and Indemnifications | 13. Guarantees and Indemnifications We have various financial guarantees and indemnifications which are issued in the normal course of business. As discussed below, these contracts include financial guarantees, stand-by letters of credit, debt guarantees, surety bonds and indemnifications. We enter into these arrangements to facilitate a commercial transaction with a third party by enhancing the value of the transaction to the third party. To varying degrees, these guarantees involve elements of performance and credit risk, which are not included on the Condensed Consolidated Balance Sheets. The possibility of having to honor our contingencies is largely dependent uponfuture operations of various subsidiaries, investees and other third parties, or the occurrence of certain future events. We have issued performance guarantees to customers and other third parties that guarantee the payment and performance of other parties, including certain non-wholly owned entities. In connection with our spin-off from Duke Energy, certain guarantees that were previously issued by us were assigned to, or replaced by, Duke Energy as guarantor in 2006. For any remaining guarantees of other Duke Energy obligations, Duke Energy has indemnified us against any losses incurred under these guarantee arrangements. The maximum potential amount of future payments we could have been required to make under these performance guarantees as of March31, 2010 was approximately $421 million, which has been indemnified by Duke Energy, as discussed above. Oneofour outstanding performance guarantees expires in 2028. The remaining guarantees have no contractual expiration. We have also issued joint and several guarantees to some of the Duke/Fluor Daniel (D/FD) project owners, guaranteeing the performance of D/FD under its engineering, procurement and construction contracts and other contractual commitments. D/FD is one of the entities transferred to Duke Energy in connection with our spin-off from Duke Energy. Substantially all of these guarantees have no contractual expiration and no stated maximum amount of future payments that we could be required to make. Fluor Enterprises Inc., as 50% owner in D/FD, has issued similar joint and several guarantees to the same D/FD project owners. Westcoast Energy Inc. (Westcoast), a wholly owned subsidiary, has issued performance guarantees to third parties guaranteeing the performance of unconsolidated entities, such as equity method investments, and of entities previously sold by Westcoast to third parties. Those guarantees require Westcoast to make payment to the guaranteed third party upon the failure of such unconsolidated or sold entity to make payment under some of its contractual obligations, such as debt, purchase contracts and leases. Certain guarantees that were previously issued by Westcoast for obligations of entities that remained a part of Duke Energy are considered guarantees of third party performance; however, Duke Energy has indemnified us against any losses incurred under these guarantee arrangements. The maximum potential amount of future payments Westcoast could have been required to make under those performan |
Risk Management and Hedging Act
Risk Management and Hedging Activities | |
3 Months Ended
Mar. 31, 2010 | |
Risk Management and Hedging Activities | 14. Risk Management and Hedging Activities We are exposed to the impact of market fluctuations in the prices of NGLs and natural gas purchased primarily as a result of Empress operations in Canada. Exposure to interest rate risk exists as a result of the issuance of variable and fixed-rate debt and commercial paper. We are exposed to foreign currency risk from our Canadian operations. We employ established policies and procedures to manage our risks associated with these market fluctuations, which may include the use of forward physical transactions as well as other derivatives, primarily around interest rate exposures. Our equity investment affiliate, DCP Midstream, also has risk exposures primarily associated with market prices of NGLs and natural gas. DCP Midstream manages these risks separate from Spectra Energy, and utilizes various risk management strategies, including the use of commodity derivatives. Other than interest rate hedges having a total notional amount of $940 million, we did not have any significant derivatives outstanding during the three months ended March31, 2010. |
Sale of Common Stock
Sale of Common Stock | |
3 Months Ended
Mar. 31, 2010 | |
Sale of Common Stock | 15. Sale of Common Stock In February 2009, we issued 32.2million shares of our common stock and received net proceeds of $448 million. We used the net proceeds to repay commercial paper as it matured. Borrowings from the commercial paper were used primarily for capital expenditures and for other general corporate purposes. |
Employee Benefit Plans
Employee Benefit Plans | |
3 Months Ended
Mar. 31, 2010 | |
Employee Benefit Plans | 16. Employee Benefit Plans Retirement Plans. We have a qualified non-contributory defined benefit (DB) retirement plan for U.S. employees and non-qualified plans for various executive retirement and savings plans. Our Westcoast subsidiary maintains qualified and non-qualified contributory DB and defined contribution (DC) retirement plans covering substantially all employees of our Canadian operations. Our policy is to fund amounts for our U.S. qualified retirement plans on an actuarial basis to provide assets sufficient to meet benefits to be paid to plan participants. We did not make contributions to our U.S. retirement plans in the three-month periods ended March31, 2010 or 2009. We are currently planning to make approximately $30 million of discretionary contributions to the U.S. plans during 2010. Our policy is to fund our DB retirement plans in Canada on an actuarial basis and in accordance with Canadian pension standards legislation in order to accumulate assets sufficient to meet benefit obligations. Contributions to the DC retirement plan are determined in accordance with the terms of the plan. We made total contributions to the Canadian DC and qualified DB plans of $17 million and $10 million during the three-month periods ended March31, 2010 and 2009, respectively. We anticipate that we will make total contributions of approximately $65 million to the Canadian plans in 2010. Qualified Pension PlansComponents of Net Periodic Pension Cost U.S. Canada ThreeMonthsEndedMarch31, 2010 2009 2010 2009 (in millions) Service cost benefit earned $ 3 $ 2 $ 4 $ 3 Interest cost on projected benefit obligation 6 7 11 9 Expected return on plan assets (8 ) (8 ) (11 ) (10 ) Amortization of loss 2 1 4 1 Amortization of prior service costs 1 Net periodic pension cost $ 3 $ 2 $ 9 $ 3 Non-Qualified Pension Benefits PlansComponents of Net Periodic Pension Cost U.S. Canada ThreeMonthsEndedMarch31, 2010 2009 2010 2009 (in millions) Interest cost on projected benefit obligation $ $ $ 2 $ 1 Net periodic pension cost $ $ $ 2 $ 1 Other Post-Retirement Benefit Plans. We provide certain health care and life insurance benefits for retired employees on a contributory and non-contributory basis. Employees are eligible for these benefits if they have met age and service requirements at retirement, as defined in the plans. Other Post-Retirement Benefit PlansComponents of Net Periodic Benefit Cost U.S. Canada Three Months Ended March31, 2010 2009 2010 2009 (in millions) Service cost benefit earned $ $ $ 1 $ 1 Interest cost on accumulated post-retirement benefit obligation 3 4 1 1 Expected return on plan assets (1 ) (1 ) Amortization of |
Consolidating Financial Informa
Consolidating Financial Information | |
3 Months Ended
Mar. 31, 2010 | |
Consolidating Financial Information | 17. Consolidating Financial Information Spectra Energy Corp has agreed to fully and unconditionally guarantee the payment of principal and interest under all series of notes outstanding under the Senior Indenture of Spectra Energy Capital, LLC (Spectra Capital), a wholly owned, consolidated subsidiary. In accordance with Securities and Exchange Commission (SEC) rules, the following condensed consolidating financial information is presented. The information shown for Spectra Energy Corp and Spectra Capital is presented utilizing the equity method of accounting for investments in subsidiaries, as required. The non-guarantor subsidiaries column represents all wholly owned subsidiaries of Spectra Capital. This information should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto. Spectra Energy Corp Condensed Consolidating Statement of Operations Three Months Ended March31, 2010 (In millions) Spectra Energy Corp Spectra Capital Non-Guarantor Subsidiaries Eliminations Consolidated Total operating revenues $ $ $ 1,480 $ $ 1,480 Total operating expenses 3 985 988 Operating income (loss) (3 ) 495 492 Equity in earnings of unconsolidated affiliates 122 122 Equity in earnings of subsidiaries 360 501 (861 ) Other income and expenses, net 2 2 4 Interest expense 50 109 159 Earnings from continuing operations before income taxes 357 453 510 (861 ) 459 Income tax expense (benefit) from continuing operations (1 ) 93 5 97 Income from continuing operations 358 360 505 (861 ) 362 Income from discontinued operations, net of tax 16 16 Net income 358 360 521 (861 ) 378 Net incomenoncontrolling interests 20 20 Net incomecontrolling interests $ 358 $ 360 $ 501 $ (861 ) $ 358 Spectra Energy Corp Condensed Consolidating Statement of Operations Three Months Ended March31, 2009 (In millions) Spectra Energy Corp Spectra Capital Non-Guarantor Subsidiaries Eliminations Consolidated Total operating revenues $ $ $ 1,384 $ $ 1,384 Total operating expenses 12 1 956 969 Gains on sales of other assets and other, net 10 10 Operating income (loss) (12 ) (1 ) 438 425 Equity in earnings of unconsolidated affiliates 167 167 Equity in earnings of subsidiaries 306 466 (772 ) Other income and expenses, net 7 2 9 |
New Accounting Pronouncements
New Accounting Pronouncements | |
3 Months Ended
Mar. 31, 2010 | |
New Accounting Pronouncements | 18. New Accounting Pronouncements The following new accounting pronouncement was adopted during the three months ended March31, 2010: In June 2009, the Financial Accounting Standards Board issued an accounting standard which is intended to address (1)the effects on certain consolidation provisions as a result of the elimination of the concept of qualifying special-purpose entities and (2)constituent concerns about the application of certain consolidation provisions including those in which the accounting and disclosures do not always provide timely and useful information about an enterprises involvement in a variable interest entity. The adoption of the provisions of this standard on January1, 2010 did not have any impact on our consolidated results of operations, financial position or cash flows. |