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Delaware | 4922 | 51-0658510 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
David P. Oelman Vinson & Elkins L.L.P. 1001 Fannin Street, Suite 2500 Houston, Texas 77002 (713) 758-2222 | Joshua Davidson Christopher Arntzen Baker Botts L.L.P. 910 Louisiana Street Houston, Texas 77002 (713) 229-1234 |
Proposed Maximum | Amount of | |||||
Title of Each Class of | Aggregate Offering | Registration | ||||
Securities to be Registered | Price(1)(2) | Fee | ||||
Common units representing limited partner interests | $301,875,000 | $9,268 | ||||
(1) | Includes common units issuable upon exercise of the underwriters’ option to purchase additional common units. | |
(2) | Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o). |
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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
• | We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner, to enable us to make cash distributions to holders of our common units and subordinated units at the initial distribution rate under our cash distribution policy. |
• | Our natural gas transportation operations are subject to regulation by federal agencies, including the Federal Energy Regulatory Commission, which could have an adverse impact on our ability to establish transportation rates that would allow us to recover the full cost of operating our pipelines, including a reasonable return, and our ability to make distributions to you. |
• | NiSource Inc. controls our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner and its affiliates, including NiSource Inc., have conflicts of interest with us and limited fiduciary duties, and they may favor their own interests to your detriment. |
• | Affiliates of NiSource Inc. are not limited in their ability to compete with us and are not obligated to offer us the opportunity to pursue additional assets or businesses, which could limit our commercial activities or our ability to acquire additional assets or businesses. |
• | You will not be entitled to receive distributions or allocations of income or loss on your common units and your common units will be subject to redemption at a price that may be below the current market price, unless you are (1) an individual or entity subject to U.S. federal income taxation on the income generated by us or (2) an entity not subject to U.S. federal taxation on the income generated by us, but all of whose owners are subject to such taxation. |
• | Holders of our common units have limited voting rights and are not entitled to elect our general partner or its directors. |
• | You will experience immediate and substantial dilution of $16.41 in tangible net book value per common unit. |
• | You may be required to pay taxes on your share of our income even if you do not receive any cash distributions from us. |
Per Common Unit | Total | |||
Initial public offering price | $ | $ | ||
Underwriting discount(1) | $ | $ | ||
Proceeds to NiSource Energy Partners, L.P. (before expenses) |
(1) | Excludes an aggregate structuring fee equal to 0.375% of the gross proceeds of this offering, or approximately $ , payable to Lehman Brothers Inc. |
Lehman Brothers | Citi |
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F-1 | ||||||||
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Certificate of Limited Partnership | ||||||||
Certificate of Formation | ||||||||
Consent of Deloitte & Touche LLP |
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• | The Mainline System. Columbia Gulf’s Mainline System extends from southern Louisiana to a pipeline interconnection with Columbia Gas Transmission Corporation (Columbia Gas Transmission), a subsidiary of NiSource, in northeastern Kentucky. The Mainline System consists of approximately 2,550 miles of pipelines with peak-design throughput capacity of 2.2 Bcf/d; and | |
• | The Louisiana Laterals. The Louisiana Laterals consist of the West Lateral and the East Lateral. The West Lateral extends from an interconnection with the Mainline System along the southern tier of Louisiana westward to Hackberry, Louisiana, while the East Lateral extends eastward to New Orleans and Venice, Louisiana. The Louisiana Laterals consist of approximately 850 miles of pipelines with maximum peak-design capacity in excess of 1.0 Bcf/d on each lateral. |
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• | Pursue economically attractive organic expansion opportunities and greenfield development projects; | |
• | Optimize our asset base and increase profitability by expanding our points of supply and market access; and | |
• | Grow through joint ventures, partnerships and accretive acquisitions of energy infrastructure assets from both NiSource and third parties. |
• | Our strategic location allows us to transport natural gas from diverse supply sources to high-demand markets at competitive transportation rates; | |
• | Our firm contracts and capacity reservation fees provide cash flow stability; | |
• | Our pipeline assets have been prudently operated and well maintained; | |
• | Our affiliation with NiSource; and | |
• | Our experienced management team has a proven track record of operating large and complex interstate natural gas transportation, storage and marketing assets. |
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• | We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses, including cost reimbursements to our general partner, to enable us to make cash distributions to holders of our common units and subordinated units at the initial distribution rate under our cash distribution policy. | |
• | On a pro forma basis we would not have had sufficient cash available for distribution to pay the full minimum quarterly distribution on all units for the year ended December 31, 2006 and the twelve months ended September 30, 2007, respectively. Please read “Our Cash Distribution Policy and Restrictions on Distributions.” | |
• | The assumptions underlying our minimum estimated cash available for distribution we include in “Our Cash Distribution Policy and Restrictions on Distributions” are inherently uncertain and are subject to significant business, economic, financial, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those estimated. | |
• | Our natural gas transportation operations are subject to regulation by the FERC, which could have an adverse impact on our ability to establish transportation rates that would allow us to recover the full cost of operating our pipelines, including a reasonable return, and our ability to make distributions to you. | |
• | We may not be able to maintain or replace expiring gas transportation contracts at favorable rates. | |
• | Any significant decrease in supplies of natural gas in our areas of operation could adversely affect our business and operating results and reduce our cash available for distribution to unitholders. |
• | NiSource controls our general partner, which has sole responsibility for conducting our business and managing our operations. Our general partner and its affiliates, including NiSource, have conflicts of interest with us and limited fiduciary duties, and may favor their own interests to your detriment. | |
• | Affiliates of NiSource are not limited in their ability to compete with us and are not obligated to offer us the opportunity to pursue additional assets or businesses, which could limit our commercial activities or our ability to acquire additional assets or businesses. | |
• | You will not be entitled to receive distributions or allocations of income or loss on your common units, and your common units will be subject to redemption at a price that may be below the current market price, unless you are (1) an individual or entity subject to U.S. federal income taxation on the income generated by us or (2) an entity not subject to U.S. federal taxation on the income generated by us, but all of whose owners are subject to such taxation. |
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• | Cost reimbursements to our general partner and its affiliates for services provided, which will be determined by our general partner, will be substantial and will reduce our cash available for distribution to you. | |
• | Our partnership agreement limits our general partner’s fiduciary duties to holders of our common units and subordinated units and restricts the remedies available to holders of our common units and subordinated units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty. |
• | Our tax treatment depends on our status as a partnership for federal income tax purposes, as well as our not being subject to a material amount of entity-level taxation by individual states. If the Internal Revenue Service (IRS) were to treat us as a corporation for federal income tax purposes or we were to become subject to additional amounts of entity-level taxation for state tax purposes, then our cash available for distribution to you could be substantially reduced. | |
• | We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of on the basis of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders. | |
• | If the IRS contests the federal income tax positions we take, the market for our common units may be adversely impacted, and the costs of any IRS contest will reduce our cash available for distribution to you. | |
• | You may be required to pay taxes on your share of our income even if you do not receive any cash distributions from us. | |
• | Tax gain or loss on disposition of our common units could be more or less than expected. | |
• | Tax-exempt entities and non-U.S. persons face unique tax issues from owning our common units that may result in adverse tax consequences to them. |
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• | NiSource will contribute Columbia Gulf to us; | |
• | we will issue to a subsidiary of NiSource 8,584,349 common units and 10,222,715 subordinated units, representing an aggregate 58.9% limited partner interest in us; | |
• | we will issue to NiSource GP, LLC, a subsidiary of NiSource, a 2% general partner interest in us and all of our incentive distribution rights, which will entitle our general partner to increasing percentages of the cash we distribute in excess of $0.345 per unit per quarter (115% of the minimum quarterly distribution); | |
• | we will issue 12,500,000 common units to the public in this offering, representing a 39.1% limited partner interest in us, and will use the proceeds as described in “Use of Proceeds”; | |
• | we will borrow approximately $37.0 million of term debt and $163.0 million of revolving debt under our $250.0 million credit facility and distribute the aggregate amount of such borrowings to subsidiaries of NiSource; and | |
• | we will enter into an omnibus agreement with NiSource, our general partner and certain of their affiliates pursuant to which: |
- | we will reimburse NiSource for the payment of certain operating expenses and for providing various general and administrative services; and | |
- | NiSource will indemnify us for certain environmental and tax liabilities, title and right-of-way defects and certain government-mandated pipeline capital expenditures. |
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Public Common Units | 12,500,000 | 39.1% | ||||||
NiSource Common Units | 8,584,349 | 26.9% | ||||||
NiSource Subordinated Units | 10,222,715 | 32.0% | ||||||
General Partner Units | 638,920 | 2.0% | ||||||
Total | 31,945,984 | 100.0% | ||||||
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Common units offered to the public | 12,500,000 common units; 14,375,000 common units if the underwriters’ option to purchase additional common units is exercised in full. | |
Units outstanding after this offering | 21,084,349 common units and 10,222,715 subordinated units, representing 66.0% and 32.0%, respectively, limited partner interests in us. The general partner will own 638,920 general partner units. | |
Use of proceeds | We intend to use the net proceeds of approximately $235.0 million from this offering, after deducting $15.0 million of underwriting discounts, but before paying offering expenses, to: | |
• pay approximately $3.9 million of fees and expenses associated with the offering and related formation transactions, including a structuring fee payable to Lehman Brothers Inc. for evaluation, analysis and structuring of our partnership; | ||
• distribute $71.7 million in cash to subsidiaries of NiSource as reimbursement for capital expenditures related to the Columbia Gulf assets incurred by subsidiaries of NiSource prior to the closing of this offering; | ||
• retire approximately $31.1 million of indebtedness owed to a subsidiary of NiSource; | ||
• purchase approximately $37.0 million of qualifying investment grade securities, which will be assigned as collateral to secure the term loan portion of our credit facility; | ||
• use approximately $64.0 million to fund working capital; and | ||
• use the remaining amount of $27.3 million to offset identified maintenance capital expenditures, including an amount to offset costs we expect to incur in connection withgovernment-mandated pipeline improvements through 2010. | ||
We also anticipate that we will borrow approximately $37.0 million in term debt and $163.0 million in revolving debt upon the closing of this offering, and we will distribute the net proceeds of such borrowings (or approximately $198.0 million, net of debt issuance costs) to subsidiaries of NiSource, which distribution will be made in partial consideration of the assets contributed to us upon the closing of this offering. | ||
If the underwriters’ option to purchase an additional 1,875,000 common units is exercised in full, we will (1) use the net proceeds of approximately $35.1 million to purchase an equivalent amount of qualifying investment grade securities and (2) borrow an additional amount under the term loan portion of our credit facility equal to the net proceeds to be received from the exercise of the underwriters’ option. The qualifying securities purchased will be assigned as collateral to secure such additional term loan borrowings. The proceeds of the additional term loan borrowings will be used to redeem from a subsidiary of NiSource a number of common units equal to the number of common units issued upon |
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exercise of the underwriters’ option, at a price per common unit equal to the proceeds per common unit before expenses but after underwriting discounts and a structuring fee. | ||
Cash distributions | We will make an initial quarterly distribution of $0.30 per common unit ($1.20 per common unit on an annualized basis) to the extent we have sufficient cash from operations after establishment of cash reserves and payment of fees and expenses, including payments to our general partner and its affiliates. Our ability to pay cash distributions at this initial distribution rate is subject to various restrictions and other factors described in more detail under the caption “Our Cash Distribution Policy and Restrictions on Distributions.” | |
We will pay investors in this offering a prorated distribution for the first quarter during which we are a publicly traded partnership. Such distribution will cover the period from the closing date of this offering to and including March 31, 2008. We expect to pay this cash distribution on or about May 15, 2008. | ||
Our partnership agreement requires us to distribute all of our cash on hand at the end of each quarter, less reserves established by our general partner. We refer to this cash as “available cash,” and we define its meaning in our partnership agreement and in the glossary of terms attached as Appendix D. Our partnership agreement also requires that we distribute all of our available cash from operating surplus each quarter in the following manner: | ||
• first, 98% to the holders of common units and 2% to our general partner, until each common unit has received a minimum quarterly distribution of $0.30 plus any arrearages from prior quarters; | ||
• second, 98% to the holders of subordinated units and 2% to our general partner, until each subordinated unit has received a minimum quarterly distribution of $0.30; and | ||
• third, 98% to all unitholders, pro rata, and 2% to our general partner, until each unit has received a distribution of $0.345. | ||
If cash distributions to our unitholders exceed $0.345 per common unit in any quarter, our general partner will receive, in addition to distributions on its 2% general partner interest, increasing percentages, up to 50%, of the cash we distribute in excess of that amount. We refer to these distributions as “incentive distributions.” Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions.” | ||
The amount of pro forma available cash generated during the year ended December 31, 2006 would have been sufficient to allow us to pay approximately 55% of the minimum quarterly distribution on our common units, but no quarterly distributions on our subordinated units during that period. The amount of pro forma available cash generated during the twelve months ended September 30, 2007 would have been sufficient to allow us to pay approximately 81% of the minimum quarterly distribution on our our common units, but no quarterly distributions on our |
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subordinated units during that period. For a calculation of our ability to make distributions to unitholders based on our pro forma results for 2006 and the twelve months ended September 30, 2007, please read “Our Cash Distribution Policy and Restrictions on Distributions — Unaudited Pro Forma Cash Available for Distribution for the Year Ended December 31, 2006 and the Twelve Months Ended September 30, 2007.” | ||
We believe that, based on the estimates contained and the assumptions listed under the caption “Our Cash Distribution Policy and Restrictions on Distributions — Minimum Estimated Cash Available for Distribution for the Twelve-Month Period Ending March 31, 2009,” we will have sufficient cash available for distribution to make cash distributions for the four quarters ending March 31, 2009 at the initial distribution rate of $0.30 per common unit per quarter ($1.20 per common unit on an annualized basis) on all common units and subordinated units. | ||
Subordinated units | Subsidiaries of NiSource will initially own all of our subordinated units. The principal difference between our common units and subordinated units is that in any quarter during the subordination period, holders of the subordinated units are entitled to receive the minimum quarterly distribution of $0.30 per unit only after the common units have received the minimum quarterly distribution plus any arrearages in the payment of the minimum quarterly distribution from prior quarters. Subordinated units will not accrue arrearages. The subordination period will end on the first business day after we have earned and paid at least $0.30 on each outstanding limited partner unit and general partner unit for any three consecutive, non-overlapping four quarter periods ending on or after March 31, 2011. The subordination period also will end upon the removal of our general partner other than for cause if the units held by our general partner and its affiliates are not voted in favor of such removal. | |
When the subordination period ends, all remaining subordinated units will convert into common units on a one-for-one basis, and the common units will no longer be entitled to arrearages. Please read “Provisions of Our Partnership Agreement Related to Cash Distributions — Subordination Period.” | ||
Early conversion of subordinated units | Alternatively, the subordination period will end on the first business day after we have earned and paid at least $1.80 (150% of the annualized minimum quarterly distribution) on each outstanding limited partner unit and general partner unit for any four quarter period ending on or after March 31, 2009. Please read “Provisions of Our Partnership Agreement Related to Cash Distributions — Subordination Period.” | |
General Partner’s right to reset the target distribution levels | Our general partner has the right, at a time when there are no subordinated units outstanding and it has received incentive distributions at the highest level to which it is entitled (48%) for each of the prior four consecutive fiscal quarters, to reset the initial cash target distribution levels at higher levels based on the |
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distribution at the time of the exercise of the reset election. Following a reset election by our general partner, the minimum quarterly distribution amount will be reset to an amount equal to the average cash distribution amount per common unit for the two fiscal quarters immediately preceding the reset election (such amount is referred to as the “reset minimum quarterly distribution”) and the target distribution levels will be reset to correspondingly higher levels based on the same percentage increases above the reset minimum quarterly distribution amount as in our current target distribution levels. | ||
In connection with resetting these target distribution levels, our general partner will be entitled to receive Class B units. The Class B units will be entitled to the same cash distributions per unit as our common units and will be convertible into an equal number of common units. The number of Class B units to be issued will be equal to that number of common units whose aggregate quarterly cash distributions equaled the average of the distributions to our general partner on the incentive distribution rights in the prior two quarters. For a more detailed description of our general partner’s right to reset the target distribution levels upon which the incentive distribution payments are based and the concurrent right of our general partner to receive Class B units in connection with this reset, please read “Provisions of Our Partnership Agreement Related to Cash Distributions — General Partner’s Right to Reset Incentive Distribution Levels.” | ||
Issuance of additional units | We can issue an unlimited number of units without the consent of our unitholders. Please read “Units Eligible for Future Sale” and “The Partnership Agreement — Issuance of Additional Securities.” | |
Limited voting rights | Our general partner will manage and operate us. Unlike the holders of common stock in a corporation, you will have only limited voting rights on matters affecting our business. You will have no right to elect our general partner or its directors on an annual or other continuing basis. Our general partner may not be removed except by a vote of the holders of at least 662/3% of the outstanding units, including any units owned by our general partner and its affiliates, voting together as a single class. Upon consummation of this offering, our general partner and its affiliates will own an aggregate of approximately 60.0% of our common and subordinated units. This will give NiSource the ability to prevent our general partner’s involuntary removal. Please read “The Partnership Agreement — Voting Rights.” | |
Limited call right | If at any time our general partner and its affiliates own more than 80% of the outstanding common units, our general partner has the right, but not the obligation, to purchase all of the remaining common units at a price not less than the then-current market price of the common units. | |
Eligible Holders and redemptions | Only Eligible Holders will be entitled to receive distributions or be allocated income or loss from us. Eligible Holders are: | |
• individuals or entities subject to United States federal income taxation on the income generated by us; or |
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• entities not subject to United States federal taxation on the income generated by us, so long as all of the entity’s owners are subject to such taxation. | ||
We have the right, which we may assign to any of our affiliates, but not the obligation, to redeem all of the common and subordinated units of any holder that is not an Eligible Holder or that has failed to certify or has falsely certified that such holder is an Eligible Holder. The purchase price for such redemption would be equal to the lower of the holder’s purchase price and the then-current market price of the units. The redemption price will be paid in cash or by delivery of a promissory note, as determined by our general partner. | ||
Please read “Description of the Common Units — Transfer of Common Units” and “The Partnership Agreement — Non-Citizen Assignees; Redemption.” | ||
Estimated ratio of taxable income to distributions | We estimate that if you own the common units you purchase in this offering through the record date for distributions for the period ending December 31, 2010, you will be allocated, on a cumulative basis, an amount of federal taxable income for that period that will be % or less of the cash distributed to you with respect to that period. For example, if you receive an annual distribution of $1.20 per unit, we estimate that your average allocable federal taxable income per year will be no more than $ per unit. Please read “Material Tax Consequences — Tax Consequences of Unit Ownership — Ratio of Taxable Income to Distributions.” | |
Material tax consequences | For a discussion of other material federal income tax consequences that may be relevant to prospective unitholders who are individual citizens or residents of the United States, please read “Material Tax Consequences.” | |
Exchange listing | We intend to apply to list our common units on the New York Stock Exchange under the symbol “NIA.” |
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• | Columbia Gulf’s distribution of accounts receivable of $62.4 million to NiSource; | |
• | Our receipt of $250.0 million in gross proceeds from the issuance and sale of 12,500,000 common units to the public; | |
• | Our borrowing approximately $37.0 million in term debt and $163.0 million in revolving debt under our new $250.0 million credit facility; | |
• | Our use of proceeds from this offering and related borrowings to pay transaction fees and expenses and underwriting commissions, retire assumed indebtedness, reimburse subsidiaries of NiSource for certain capital expenditures, make distributions to subsidiaries of NiSource, fund working capital and anticipated capital expenditures, and purchase qualifying investment grade securities; and | |
• | The disposition of certain offshore assets currently owned by Columbia Gulf. |
NiSource Energy | ||||||||||||||||||||||||||||
Partners, L.P. Pro Forma | ||||||||||||||||||||||||||||
Columbia Gulf | Nine Months | |||||||||||||||||||||||||||
Nine Months Ended | Year Ended | Ended | ||||||||||||||||||||||||||
Year Ended December 31, | September 30, | December 31, | September 30, | |||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||||||||
(In millions, except per unit and operating data) | ||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||
Total operating revenues | $ | 127.0 | $ | 116.1 | $ | 123.3 | $ | 90.8 | $ | 99.6 | $ | 117.3 | $ | 94.5 | ||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||
Operation and maintenance | 55.7 | 51.3 | 61.2 | 41.2 | 44.4 | 55.1 | 38.4 | |||||||||||||||||||||
Depreciation and amortization | 23.2 | 22.2 | 22.0 | 16.5 | 16.4 | 19.1 | 14.8 | |||||||||||||||||||||
Other taxes | 7.8 | 8.5 | 8.1 | 6.0 | 6.2 | 8.1 | 6.2 | |||||||||||||||||||||
Total operating expenses | 86.7 | 82.0 | 91.3 | 63.7 | 67.0 | 82.3 | 59.4 | |||||||||||||||||||||
Operating income | 40.3 | 34.1 | 32.0 | 27.1 | 32.6 | 35.0 | 35.1 | |||||||||||||||||||||
Other income (deductions): | ||||||||||||||||||||||||||||
Interest expense (net of AFUDC) | (5.4 | ) | (5.0 | ) | (2.7 | ) | (2.2 | ) | (1.8 | ) | (15.2 | ) | (10.7 | ) | ||||||||||||||
Interest income | 0.4 | 0.6 | 0.5 | 0.5 | — | 1.5 | 0.8 | |||||||||||||||||||||
Other, net | — | 0.5 | 0.7 | 0.7 | — | 0.7 | — | |||||||||||||||||||||
Income taxes | (13.1 | ) | (11.7 | ) | (12.2 | ) | (9.2 | ) | (10.7 | ) | (0.1 | ) | (0.1 | ) | ||||||||||||||
Net income | $ | 22.2 | $ | 18.5 | $ | 18.3 | $ | 16.9 | $ | 20.1 | $ | 21.9 | $ | 25.1 | ||||||||||||||
Net income per limited partners’ unit | ||||||||||||||||||||||||||||
Common unit | $ | 1.02 | $ | 0.90 | ||||||||||||||||||||||||
Subordinated unit | — | 0.55 |
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NiSource Energy | ||||||||||||||||||||||||||||
Partners, L.P. Pro Forma | ||||||||||||||||||||||||||||
Columbia Gulf | Nine Months | |||||||||||||||||||||||||||
Nine Months Ended | Year Ended | Ended | ||||||||||||||||||||||||||
Year Ended December 31, | September 30, | December 31, | September 30, | |||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||||||||
(In millions, except per unit and operating data) | ||||||||||||||||||||||||||||
Balance Sheet Data (at period end): | ||||||||||||||||||||||||||||
Total Assets | $ | 716.0 | $ | 763.1 | $ | 783.3 | $ | 841.2 | ||||||||||||||||||||
Net property plant and equipment | 305.5 | 310.6 | 321.5 | 321.5 | ||||||||||||||||||||||||
Long-term debt-affiliated, excluding amounts due within one year | 67.9 | 67.9 | 67.9 | 265.9 | ||||||||||||||||||||||||
Total capitalization | 552.6 | 556.1 | 576.2 | 701.8 | ||||||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||||||
Net cash provided by operating activities | $ | 45.3 | $ | 51.0 | $ | 40.1 | $ | 26.7 | $ | 20.0 | $ | 43.7 | $ | 25.0 | ||||||||||||||
EBITDA | 63.5 | 56.3 | 54.0 | 43.6 | 49.0 | 54.1 | 49.9 | |||||||||||||||||||||
Maintenance capital expenditures(1) | 7.0 | 31.4 | 22.2 | 13.2 | 11.6 | 22.2 | 11.6 | |||||||||||||||||||||
Expansion capital expenditures(1) | — | 0.1 | 2.9 | 1.1 | 10.5 | 2.9 | 10.5 | |||||||||||||||||||||
Columbia Gulf Operating Data: | ||||||||||||||||||||||||||||
Mainline: | ||||||||||||||||||||||||||||
Transportation capacity (Bcf/d)(2) | 2.156 | 2.156 | 2.156 | 2.156 | 2.156 | |||||||||||||||||||||||
Contracted firm capacity (Bcf/d)(3) | 2.453 | 2.177 | 2.266 | 2.245 | 2.471 | |||||||||||||||||||||||
Transported volumes (Bcf) | 523.6 | 506.7 | 519.7 | 392.3 | 477.4 | |||||||||||||||||||||||
Laterals (East and West): | ||||||||||||||||||||||||||||
Transportation capacity (Bcf/d)(4) | 2.157 | 2.157 | 2.157 | 2.157 | 2.157 | |||||||||||||||||||||||
Contracted firm capacity (Bcf/d) | 0.616 | 0.589 | 0.680 | 0.634 | 0.870 | |||||||||||||||||||||||
Transported volumes (Bcf) | 428.9 | 422.1 | 379.7 | 291.3 | 247.6 |
(1) | Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets, to maintain the existing operating capacity of our assets and to extend their useful lives, or other capital expenditures that are incurred in maintaining existing system volumes and related cash flows. Expansion capital expenditures are made to acquire additional assets to grow our business, to expand and upgrade our systems and facilities, and to construct or acquire similar systems or facilities. This includes projects designed to reduce costs or enhance revenues. | |
(2) | Represents one-way peak-design capacity from Rayne, Louisiana to Leach, Kentucky. | |
(3) | Our contracted firm capacity exceeds our one-way peak-design capacity during the indicated periods as a result of our ability to transport natural gas in multiple directions on our pipeline system. | |
(4) | Represents the maximum combined peak-design capacity of the two laterals — East (1.054 Bcf/d) and West(1.103 Bcf/d). |
• | the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; | |
• | the ability of our assets to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and | |
• | our operating performance and return on invested capital as compared to those of other publicly traded limited partnerships that own energy infrastructure assets, without regard to their financing methods and capital structure. |
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NiSource Energy Partners, L.P. | ||||||||||||||||||||||||||||
Pro Forma | ||||||||||||||||||||||||||||
Columbia Gulf | Nine Months | |||||||||||||||||||||||||||
Nine Months Ended | Year Ended | Ended | ||||||||||||||||||||||||||
Year Ended December 31, | September 30, | December 31, | September 30, | |||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Reconciliation of Non-GAAP | ||||||||||||||||||||||||||||
“EBITDA” to GAAP “Net income” | ||||||||||||||||||||||||||||
Net income | $ | 22.2 | $ | 18.5 | $ | 18.3 | $ | 16.9 | $ | 20.1 | $ | 21.9 | $ | 25.1 | ||||||||||||||
Add: | ||||||||||||||||||||||||||||
Interest expense (net of AFUDC) | 5.4 | 5.0 | 2.7 | 2.2 | 1.8 | 15.2 | 10.7 | |||||||||||||||||||||
Income taxes | 13.1 | 11.7 | 12.2 | 9.2 | 10.7 | 0.1 | 0.1 | |||||||||||||||||||||
Depreciation and amortization | 23.2 | 22.2 | 22.0 | 16.5 | 16.4 | 19.1 | 14.8 | |||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||
Interest income | 0.4 | 0.6 | 0.5 | 0.5 | — | 1.5 | 0.8 | |||||||||||||||||||||
Other, net | — | 0.5 | 0.7 | 0.7 | — | 0.7 | — | |||||||||||||||||||||
EBITDA | $ | 63.5 | $ | 56.3 | $ | 54.0 | $ | 43.6 | $ | 49.0 | $ | 54.1 | $ | 49.9 | ||||||||||||||
Reconciliation of Non-GAAP | ||||||||||||||||||||||||||||
“EBITDA” to GAAP “Net cash provided by operating activities” | ||||||||||||||||||||||||||||
Net cash provided by operating activities | $ | 45.3 | $ | 51.0 | $ | 40.1 | $ | 26.7 | $ | 20.0 | $ | 43.7 | $ | 25.0 | ||||||||||||||
Less: | ||||||||||||||||||||||||||||
Interest income | 0.4 | 0.6 | 0.5 | 0.5 | — | 1.5 | 0.8 | |||||||||||||||||||||
Add: | ||||||||||||||||||||||||||||
Interest expense (net of AFUDC) | 5.4 | 5.0 | 2.7 | 2.2 | 1.8 | 15.2 | 10.7 | |||||||||||||||||||||
Income taxes paid | 10.3 | 10.7 | 9.4 | 9.2 | 10.0 | 0.1 | 0.1 | |||||||||||||||||||||
Other | 1.0 | 1.1 | (4.3 | ) | (5.1 | ) | (2.8 | ) | (10.0 | ) | (5.1 | ) | ||||||||||||||||
Changes in operating working capital | 1.9 | (10.9 | ) | 6.6 | 11.1 | 20.0 | 6.6 | 20.0 | ||||||||||||||||||||
EBITDA | $ | 63.5 | $ | 56.3 | $ | 54.0 | $ | 43.6 | $ | 49.0 | $ | 54.1 | $ | 49.9 | ||||||||||||||
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• | the rates we charge for our transportation services, the volume of capacity under contract and the volumes of natural gas our customers transport; | |
• | the demand for natural gas in the markets served by our system and the quantities of natural gas available for transport on our system; | |
• | legislative or regulatory action affecting the demand for natural gas, the supply of natural gas, the rates we can charge, how we contract for services, our existing contracts, our operating costs and our operating flexibility; | |
• | the imposition of requirements by state agencies that materially reduce the demand of our customers, such as local distribution companies and power generators, for our pipeline services; | |
• | the commodity price of natural gas, which could reduce the quantities of natural gas available for transport if prolonged low natural gas prices cause diminished natural gas exploration and production activity in specific regions of the United States, particularly on the Gulf Coast and in the Gulf of Mexico; | |
• | the creditworthiness of our customers — if a customer files for bankruptcy protection, there is no assurance we will be kept whole for the revenue that would have been realized had the contract been honored for its entire term; | |
• | the level of our operating and maintenance and general and administrative costs; | |
• | the level of capital expenditures we incur to maintain our assets; | |
• | regulatory and economic limitations on the development of LNG import terminals in the Gulf Coast region; and | |
• | successful development of LNG import terminals in the eastern or northeastern United States, which could reduce the need for natural gas to be transported on the Columbia Gulf pipeline system. |
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• | unanticipated required capital expenditures; | |
• | our debt service requirements and other liabilities; | |
• | fluctuations in our working capital needs; | |
• | our ability to borrow funds and access capital markets; | |
• | restrictions on distributions contained in our debt agreements; and | |
• | the amount of cash reserves established by our general partner. |
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• | transportation of natural gas; | |
• | rates, operating terms and conditions of service; | |
• | the types of services we may offer to our customers; | |
• | construction of new facilities; | |
• | acquisition, extension or abandonment of services or facilities; | |
• | accounts and records; | |
• | commercial relationships and communications with affiliated companies involved in certain aspects of the natural gas business; and | |
• | the initiation and discontinuation of services. |
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• | the level of existing and new competition to deliver natural gas to our markets; | |
• | changes in demand for natural gas in our markets; | |
• | whether the market will continue to support long-term contracts; and | |
• | the effects of state regulation on customer contracting practices. |
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• | NiSource and its affiliates have no obligation to offer us the opportunity to purchase from them assets they currently own or acquire in the future; | |
• | NiSource and its affiliates may face legal or business hurdles in contributing or selling assets to us. For example, the tax efficiency of selling suitable assets to us may influence NiSource’s willingness or the timing of its decision to transfer those assets to us; | |
• | We will rely on NiSource and its affiliates to identify and evaluate for us prospective assets or businesses for acquisition. NiSource and its affiliates are not obligated to present us with acquisition opportunities and are permitted under our partnership agreement to take these opportunities for themselves. Because NiSource controls our general partner, we will not be able to pursue or consummate any acquisition opportunity unless NiSource causes us to do so; | |
• | NiSource and its affiliates will not be restricted under our partnership agreement or the omnibus agreement or any other agreement from owning assets or engaging in business that compete directly or indirectly with us. NiSource is a large, established participant in the energy business, and has significantly greater resources and experience than we have, which may make it difficult for us to compete with them; | |
• | Even if NiSource and its affiliates offer us an opportunity to buy assets from them or from third parties, we may not be able to consummate any such acquisition for several reasons, including an inability to agree on acceptable purchase terms, an inability to obtain financing for the purchase on acceptable terms, the lack of required regulatory approvals, and applicable restrictions in credit facilities, indentures or other contracts; and | |
• | We may be outbid by competitors for third party assets. |
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• | a decrease in our liquidity as a result of our using a significant portion of our available cash or borrowing capacity to finance the project or acquisition; | |
• | an inability to complete expansion projects on schedule or within the budgeted cost due to the unavailability of required construction personnel or materials, accidents, weather conditions or an inability to obtain necessary permits; | |
• | the assumption of unknown liabilities when making acquisitions for which we are not indemnified or for which our indemnity is inadequate; | |
• | the diversion of our management’s attention from other business concerns; | |
• | mistaken assumptions about the overall costs of equity or debt, demand for our services, supply volumes, reserves, revenues and costs, including synergies and potential growth; | |
• | an inability to integrate successfully the businesses we build or acquire; | |
• | limitations on rights to indemnity from the seller of an acquired business; | |
• | an inability to receive cash flows from a newly built or acquired asset until it is operational; | |
• | unforeseen difficulties operating in new product areas or new geographic areas; and | |
• | customer or key employee losses at the acquired business. |
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• | perform ongoing assessments of pipeline integrity; | |
• | identify and characterize applicable threats to pipeline segments that could impact a high consequence area; | |
• | improve data collection, integration and analysis; | |
• | repair and remediate the pipeline as necessary; and | |
• | implement preventive and mitigating actions. |
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• | damage to pipelines, facilities and related equipment caused by hurricanes, tornadoes, floods, fires and other natural disasters, explosions and acts of terrorism; | |
• | inadvertent damage from third parties, including from construction, farm and utility equipment; | |
• | leaks of natural gas and other hydrocarbons or losses of natural gas as a result of the malfunction of equipment or facilities; | |
• | operator error; | |
• | environmental pollution; and | |
• | explosions and blowouts. |
• | our ability to obtain additional financing, if necessary, for working capital, capital expenditures, acquisitions or other purposes may be impaired or such financing may not be available on favorable terms; | |
• | we will need a substantial portion of our cash flow to make principal and interest payments on our indebtedness, reducing the funds that would otherwise be available for operations, future business opportunities and distributions to unitholders; and | |
• | our debt level could make us more vulnerable than our competitors with less debt to competitive pressures or a downturn in our business or the economy generally. |
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• | make distributions if any default or event of default occurs; | |
• | make other restricted distributions or dividends on account of the purchase, redemption, retirement, acquisition, cancellation or termination of partnership interests; | |
• | incur additional indebtedness or guarantee other indebtedness; | |
• | grant liens or make certain negative pledges; | |
• | make certain loans or investments; | |
• | engage in transactions with affiliates; | |
• | make any material change to the nature of our business from the midstream energy business; | |
• | make a disposition of assets; or | |
• | enter into a merger, consolidate, liquidate, wind up or dissolve. |
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• | new projects may fail to be developed; | |
• | new projects may not be developed at their announced capacity; | |
• | development of new projects may be significantly delayed; | |
• | new projects may be built in locations that are not connected to our system; or | |
• | new projects may not influence sources of supply on our system. |
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• | neither our partnership agreement nor any other agreement requires NiSource to pursue a business strategy that favors us. NiSource’s directors and officers have a fiduciary duty to make these decisions in the best interests of the owners of NiSource, which may be contrary to our interests; | |
• | our general partner is allowed to take into account the interests of parties other than us, such as NiSource and its affiliates, in resolving conflicts of interest; | |
• | NiSource will own a 2% general partner interest, the incentive distribution rights and common and subordinated units representing a combined 58.9% limited partner interest in us, and if a vote of limited partners is required, NiSource will be entitled to vote its units in accordance with its own interests, which may be contrary to our interests; | |
• | NiSource and its affiliates are not limited in their ability to compete with us and are not obligated to offer us business opportunities or to offer to contribute or sell additional assets or operations to us. Please read “— Affiliates of NiSource are not limited in their ability to compete with us, which could limit our commercial activities or our ability to acquire additional assets or businesses”; | |
• | our general partner may make a determination to receive a quantity of our Class B units in exchange for resetting the target distribution levels related to its incentive distribution rights without the approval of the conflicts committee of our general partner or our unitholders. Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions — General Partner’s Right to Reset Incentive Distribution Levels”; | |
• | all of the executive officers and certain of the directors of our general partner are also officers and/or directors of NiSource, and these persons will also owe fiduciary duties to NiSource; | |
• | the officers of NiSource who provide services to us also will devote significant time to the business of NiSource, and will be compensated by NiSource for the services rendered to it; | |
• | our general partner has limited its liability and reduced its fiduciary duties, and has also restricted the remedies available to our unitholders for actions that, without the limitations, might constitute breaches of fiduciary duty. By purchasing common units, unitholders will be deemed to have consented to some actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable law; | |
• | our general partner determines the amount and timing of asset purchases and sales, borrowings, issuance of additional partnership securities and reserves, each of which can affect the amount of cash that is distributed to unitholders; | |
• | our general partner determines the amount and timing of any capital expenditures and, based on the applicable facts and circumstances, whether a capital expenditure is classified as a maintenance capital expenditure, which reduces operating surplus, or an expansion capital expenditure, which does not |
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reduce operating surplus. This determination can affect the amount of cash that is distributed to our unitholders and the ability of the subordinated units to convert to common units; |
• | our general partner determines which costs incurred by it and its affiliates are reimbursable by us; | |
• | in some instances, our general partner may cause us to borrow funds in order to permit the payment of cash distributions, even if the purpose or effect of the borrowing is to make a distribution on the subordinated units, to make incentive distributions or to accelerate the expiration of the subordination period; | |
• | our partnership agreement does not restrict our general partner from causing us to pay it or its affiliates for any services rendered to us or entering into additional contractual arrangements with any of these entities on our behalf; | |
• | our partnership agreement permits us to classify up to $ as operating surplus, even if it is generated from assets sales, non-working capital borrowings or other sources, the distribution of which would otherwise constitute capital surplus. This cash may be used to fund distributions on our subordinated units or to our general partner in respect of the general partner interest or the incentive distribution rights; | |
• | our general partner intends to limit its liability regarding our contractual and other obligations and, in some circumstances, is entitled to be indemnified by us; | |
• | our general partner may exercise its limited right to call and purchase common units if it and its affiliates own more than 80% of the common units; | |
• | our general partner controls the enforcement of obligations owed to us by our general partner and its affiliates; and | |
• | our general partner decides whether to retain separate counsel, accountants or others to perform services for us. |
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• | permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or any limited partner. Examples include the exercise of its right to make a determination to receive Class B units in exchange for resetting the target distribution levels related to its incentive distribution rights, the exercise of its limited call right, the exercise of its rights to transfer or vote the units it owns, the exercise of its registration rights and its determination whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement; | |
• | provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as it acted in good faith, meaning it believed the decision was in the best interests of our partnership; | |
• | generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of directors of our general partner acting in good faith and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or must be “fair and reasonable” to us, as determined by our general partner in good faith and that, in determining whether a transaction or resolution is “fair and reasonable,” our general partner may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to us; |
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• | provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the general partner or those other persons acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and | |
• | provides that in resolving conflicts of interest, it will be presumed that in making its decision the general partner or its conflicts committee acted in good faith, and in any proceeding brought by or on behalf of any limited partner or us, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. |
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• | each unitholder’s proportionate ownership interest in us will decrease; | |
• | the amount of cash available for distribution on each unit may decrease; | |
• | because a lower percentage of total outstanding units will be subordinated units, the risk that a shortfall in the payment of the minimum quarterly distribution will be borne by our common unitholders will increase; | |
• | the ratio of taxable income to distributions may increase; | |
• | the relative voting strength of each previously outstanding unit may be diminished; and | |
• | the market price of the common units may decline. |
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• | we were conducting business in a state but had not complied with that particular state’s partnership statute; or | |
• | your right to act with other unitholders to remove or replace the general partner, to approve some amendments to our partnership agreement or to take other actions under our partnership agreement constitute “control” of our business. |
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• | pay approximately $3.9 million of fees and expenses associated with the offering and related formation transactions, including a structuring fee payable to Lehman Brothers Inc. for evaluation, analysis and structuring of our partnership; | |
• | distribute $71.7 million in cash to subsidiaries of NiSource as reimbursement for capital expenditures related to the Columbia Gulf assets incurred by subsidiaries of NiSource prior to the closing of this offering, which distribution will be made in partial consideration of the assets contributed to us upon the closing of this offering; | |
• | retire approximately $31.1 million of indebtedness owed to a subsidiary of NiSource; | |
• | purchase approximately $37.0 million of qualifying investment grade securities, which will be assigned as collateral to secure the term loan portion of our credit facility; | |
• | use approximately $64.0 million to fund working capital; and | |
• | use the remaining amount of $27.3 million to offset identified maintenance capital expenditures expected to be incurred through 2010, including an amount to offset costs we expect to incur in connection with government-mandated pipeline improvements. |
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• | our capitalization as of September 30, 2007; and | |
• | our pro forma capitalization as of September 30, 2007, as adjusted to reflect this offering, the other transactions described under “Summary — Formation Transactions and Partnership Structure” and the application of the net proceeds from this offering and our borrowings as described under “Use of Proceeds.” |
As of September 30, 2007 | ||||||||
Historical | Pro Forma | |||||||
(In millions) | ||||||||
Long-term debt: | ||||||||
Revolving borrowings | $ | — | $ | 163.0 | ||||
Long-term debt-affiliated | 67.9 | 67.9 | ||||||
Term borrowings(a) | — | 37.0 | ||||||
Unamortized debt issuance costs | (2.0 | ) | ||||||
Total long-term debt | $ | 67.9 | $ | 265.9 | ||||
Partners’ capital/parent net equity: | ||||||||
Parent net equity | $ | 508.3 | $ | — | ||||
Common units — public | — | 231.1 | ||||||
Common units — sponsor | — | 90.4 | ||||||
Subordinated units — sponsor | — | 107.7 | ||||||
General partner interest | — | 6.7 | ||||||
Total partners’ capital/parent net equity | 508.3 | 435.9 | ||||||
Total capitalization | $ | 576.2 | $ | 701.8 | ||||
(a) | Our initial $37.0 million in term borrowings will be collateralized by an equal $37.0 million in qualifying investment grade securities not reflected in the capitalization table shown above. Please read “Use of Proceeds.” |
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Initial public offering price per common unit | $ | 20.00 | ||||||
Net tangible book value per common unit before the offering(a) | $ | 9.62 | ||||||
Decrease in net tangible book value per common unit attributable to purchasers in the offering | (6.03 | ) | ||||||
Less: Pro forma net tangible book value per common unit after the offering(b) | 3.59 | |||||||
Immediate dilution in tangible net book value per common unit to purchasers in the offering | $ | 16.41 | ||||||
(a) | Determined by dividing the number of units and general partner units (8,584,349 common units, 10,222,715 subordinated units and 638,920 general partner units) to be issued to a subsidiary of NiSource for its contribution of assets and liabilities to NiSource Energy Partners, L.P. into the net tangible book value of the contributed assets and liabilities. | |
(b) | Determined by dividing the total number of units and general partner units to be outstanding after the offering (21,084,349 common units, 10,222,715 subordinated units and 638,920 general partner units) and the application of the related net proceeds into our pro forma net tangible book value, after giving effect to the application of the expected net proceeds of the offering. |
Total Consideration | ||||||||||||||||
Units Acquired | (In millions) | |||||||||||||||
Number | Percent | Amount | Percent | |||||||||||||
General partner and affiliates(a)(b) | 19,445,984 | 60.9 | % | $ | 204.8 | 45.0 | % | |||||||||
New investors | 12,500,000 | 39.1 | % | 250.0 | 55.0 | % | ||||||||||
Total | 31,945,984 | 100.0 | % | $ | 454.8 | 100.0 | % | |||||||||
(a) | The common and subordinated units and general partner units acquired by our general partner and its affiliates consist of 8,584,349 common units and 10,222,715 subordinated units and 638,920 general partner units. | |
(b) | The assets contributed by our general partner and its affiliates were recorded at historical cost in accordance with GAAP. Book value of the consideration provided by our general partner and its affiliates, as of September 30, 2007, after giving effect to the application of the net proceeds of this offering is as follows: |
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Parent net equity prior to unit offering | $ | 508.3 | ||
Less: | ||||
Distribution to NiSource from the net proceeds of the offering and borrowings under the credit facility | 275.7 | |||
Retention by NiSource of accounts receivable, tax related accounts, and certain offshore assets | 27.8 | |||
Total consideration | $ | 204.8 | ||
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• | Our cash distribution policy is subject to restrictions on distributions under our new credit facility. Specifically, the agreement related to our credit facility contains material financial tests and covenants that we must satisfy. These financial tests and covenants are described in this prospectus under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Description of Credit Agreement.” Should we be unable to satisfy these restrictions under our credit facility or if we are otherwise in default under our credit facility, we would be prohibited from making cash distributions to you notwithstanding our stated cash distribution policy; | |
• | Our board of directors will have the authority to establish reserves for the prudent conduct of our business and for future cash distributions to our unitholders, and the establishment of those reserves could result in a reduction in cash distributions to you from the levels we currently anticipate pursuant to our stated distribution policy; | |
• | While our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including provisions requiring us to make cash distributions contained therein, may be amended. Although during the subordination period, with certain exceptions, our partnership agreement may not be amended without the approval of the public common unitholders, our partnership agreement can be amended with the approval of a majority of the outstanding common units and any Class B units issued upon the reset of incentive distribution rights, if any, voting as a class (including common units held by affiliates of NiSource) after the subordination period has ended. At the closing of this offering, a subsidiary of NiSource will own our general partner and approximately 60.0% of our outstanding common units and subordinated units; | |
• | Even if our cash distribution policy is not modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our partnership agreement; |
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• | UnderSection 17-607 of the Delaware Revised Uniform Limited Partnership Act, we may not make a distribution to you if the distribution would cause our liabilities to exceed the fair value of our assets; and | |
• | We may lack sufficient cash to pay distributions to our unitholders due to increases in our operating or general and administrative expenses, principal and interest payments on our outstanding debt, tax expenses, working capital requirements and anticipated cash needs. Our cash available for distribution to unitholders is directly impacted by our cash expenses necessary to run our business and will be reduced dollar-for-dollar to the extent that such uses of cash increase. Please read “Provisions of Our Partnership Agreement Relating to Cash Distributions — Distributions of Available Cash.” |
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Distributions | ||||||||||||
Number of Units | One Quarter | Four Quarters | ||||||||||
Publicly held common units | 12,500,000 | $ | 3,750,000 | $ | 15,000,000 | |||||||
Common units held by NiSource | 8,584,349 | 2,575,305 | 10,301,219 | |||||||||
Subordinated units held by NiSource | 10,222,715 | 3,066,815 | 12,267,258 | |||||||||
General partner units held by NiSource | 638,920 | 191,676 | 766,704 | |||||||||
Total | 31,945,984 | $ | 9,583,796 | $ | 38,335,181 | |||||||
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• | “Unaudited Pro Forma Cash Available for Distribution,” in which we present the amount of cash we would have had available for distribution for our fiscal year ended December 31, 2006 and for the twelve months ended September 30, 2007 derived from our unaudited pro forma financial statements that are included in this prospectus, which unaudited pro forma financial statements are based on the historical financial statements of Columbia Gulf for the year ended December 31, 2006 and for the twelve months ended September 30, 2007, as adjusted to give pro forma effect to: |
• | the transactions to be completed as of the closing of this offering, including our incurrence of approximately $37.0 million in term debt and $163.0 million in revolving debt under our new $250.0 million credit facility; | |
• | this offering and the application of the net proceeds as described under “Use of Proceeds”; and | |
• | the disposition of certain offshore assets currently owned by Columbia Gulf. |
• | “Statement of Minimum Estimated Cash Available for Distribution,” in which we demonstrate our anticipated ability to generate the minimum estimated cash available for distribution necessary for us to pay distributions at the initial distribution rate on all units for the twelve months ending March 31, 2009. |
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Twelve Months | ||||||||
Year Ended | Ended | |||||||
December 31, | September 30, | |||||||
2006(a) | 2007(a) | |||||||
($ Millions, except per unit data) | ||||||||
Pro forma operating revenues | $ | 117.3 | $ | 125.7 | ||||
Pro forma operating expenses: | ||||||||
Operation and maintenance | 55.1 | 57.4 | ||||||
Depreciation and amortization | 19.1 | 19.0 | ||||||
Other taxes | 8.1 | 8.3 | ||||||
Total operating expenses | 82.3 | 84.7 | ||||||
Pro forma operating income | 35.0 | 41.0 | ||||||
Add: | ||||||||
Interest income | 1.5 | 1.0 | ||||||
Other, net | 0.7 | — | ||||||
Less: | ||||||||
Interest expense (net of AFUDC) | 15.2 | 14.2 | ||||||
Income taxes | 0.1 | 0.1 | ||||||
Pro forma net income(b) | $ | 21.9 | $ | 27.7 | ||||
Add: | ||||||||
Interest expense (net of AFUDC) | 15.2 | 14.2 | ||||||
Income taxes | 0.1 | 0.1 | ||||||
Depreciation and amortization | 19.1 | 19.0 | ||||||
Less: | ||||||||
Interest income | 1.5 | 1.0 | ||||||
Other, net | 0.7 | — | ||||||
Pro forma EBITDA(c) | $ | 54.1 | $ | 60.0 | ||||
Less: | ||||||||
Incremental general and administrative expense of being a public company(d) | 3.2 | 3.2 | ||||||
Pro forma net cash paid for interest expense(e) | 14.3 | 14.8 | ||||||
Income taxes paid | 0.1 | 0.1 | ||||||
Maintenance capital expenditures(f) | 22.2 | 20.9 | ||||||
Pro forma cash available for distribution | $ | 14.3 | $ | 21.0 | ||||
Pro forma cash distributions | ||||||||
Distributions per unit(g) | $ | 1.20 | $ | 1.20 | ||||
Distributions to public common unitholders(g) | 15.0 | 15.0 | ||||||
Distributions to NiSource(g) | 23.3 | 23.3 | ||||||
Total distributions(g) | $ | 38.3 | $ | 38.3 | ||||
Excess (shortfall) | $ | (24.0 | ) | $ | (17.3 | ) | ||
(a) | Unaudited pro forma cash available for distribution for the year ended December 31, 2006 was derived from the unaudited pro forma financial statements included elsewhere in this prospectus. Unaudited pro forma cash available for distribution for the twelve months ended September 30, 2007 was derived by combining pro forma amounts for the three months ended December 31, 2006 (not included in thisprospectus) and the nine months ended September 30, 2007 (included in this prospectus). |
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(b) | Reflects net income of Columbia Gulf derived from its historical financial statements for the periods indicated giving pro forma effect to this offering and the related transactions. | |
(c) | Our EBITDA is defined as net income plus interest expense (net of AFUDC), income taxes, depreciation and amortization, less our interest income and other, net. We have provided EBITDA in this prospectus because we believe it provides investors with additional information to measure our financial performance and liquidity. EBITDA is not a presentation made in accordance with GAAP. Because EBITDA excludes some, but not all, items that affect net income and is defined differently by different companies in our industry, our definition of EBITDA may not be comparable to similarly titled measures presented by other companies. EBITDA has important limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Please read “Summary — Summary Historical and Pro Forma Financial and Operating Data — Non-GAAP Financial Measures.” | |
(d) | Reflects an adjustment to our EBITDA for an estimated incremental cash expense associated with being a publicly traded limited partnership, including costs associated with annual and quarterly reports to unitholders, tax return andSchedule K-1 preparation and distribution, independent registered public accounting firm fees, investor relations activities, registrar and transfer agent fees, incremental director and officer liability insurance costs and director compensation. | |
(e) | Reflects on a net basis the interest expense related to borrowings under our credit facility made in connection with this offering and the interest income related to the investment grade securities we intend to purchase with a portion of the proceeds from this offering. | |
(f) | Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets, to maintain the existing operating capacity of our assets and to extend their useful lives, or other capital expenditures that are incurred in maintaining existing system volumes and related cash flows. |
• | $6.0 million for compressor station upgrades for compliance with new environmental regulations; | |
• | $3.8 million for the replacement of disbonded protective coatings on pipelines downstream of compressors at certain compressor stations; | |
• | $2.3 million, net of insurance proceeds, for the replacement of a turbine at our Delhi compressor station as a result of a turbine failure; | |
• | $2.0 million for development of a new customer activity software system to replace a15-year old system; | |
• | $1.8 million for upgrades to enable our pipeline integrity management program in order to comply with pipeline safety regulations; and | |
• | $1.7 million for pipeline retirements, hurricane related damages to offshore assets to be disposed of by Columbia Gulf, pipeline upgrades due to class changes as required by DOT regulations, and forced relocations due to highway construction. |
• | $5.1 million for compressor station upgrades for compliance with new environmental regulations; | |
• | $2.4 million, net of insurance proceeds, for the replacement of a turbine at our Delhi compressor station as a result of a turbine failure; | |
• | $2.3 million for development of a new customer activity software system to replace a15-year old system; |
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• | $2.1 million for pipeline retirements, and hurricane related damages to offshore assets to be disposed of by Columbia Gulf; | |
• | $1.8 million for the replacement of disbonded protective coatings on pipelines downstream of compressors at certain compressor stations; | |
• | $1.4 million for relocation and build-out of new office space in Houston; and | |
• | $1.0 million for forced relocations due to highway construction, upgrades to enable our pipeline integrity management program as required by DOT regulations, and upgrades to ancillary compressor systems. |
In addition, we made expansion capital expenditures of $2.9 million for the year ended December 31, 2006 and $12.3 million for the twelve months ended September 30, 2007. Expansion capital expenditures are made to acquire additional assets to grow our business, to expand and upgrade our systems and facilities and to construct or acquire similar systems or facilities. The expansion projects included the Shadyside, Terrebonne and Evangeline interconnects, which were placed in service during the latter half of 2007. For more information regarding our expansion projects, please read “Business — Columbia Gulf Pipeline System — Expansion Projects.” For purposes of this presentation, these expenditures were assumed to be funded by cash contributions from our parent, NiSource, and are not included in our pro forma cash available for distribution calculation. | ||
(g) | The table below sets forth the number of outstanding common units, subordinated units and general partner units upon the closing of this offering and the per unit and aggregate distribution amounts payable on our common units, subordinated units and general partner units for four quarters at our initial distribution rate of $0.30 per common unit per quarter ($1.20 per common unit on an annualized basis). |
Distributions for Four Quarters | ||||||||||||
Number of Units | Per Unit | Aggregate | ||||||||||
Pro forma distributions on publicly held common units | 12,500,000 | $ | 1.20 | $ | 15,000,000 | |||||||
Pro forma distributions on common units held by NiSource | 8,584,349 | 1.20 | 10,301,219 | |||||||||
Pro forma distributions on subordinated units held by NiSource | 10,222,715 | 1.20 | 12,267,258 | |||||||||
Pro forma distributions on general partner units | 638,920 | 1.20 | 766,704 | |||||||||
Total | 31,945,984 | $ | 1.20 | $ | 38,335,181 | |||||||
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Twelve Months | ||||
Ending | ||||
March 31, 2009 | ||||
(In millions, | ||||
except per units | ||||
data) | ||||
Operating revenues | $ | 131.1 | ||
Operating expenses: | ||||
Operation and maintenance | 52.7 | |||
Depreciation and amortization | 19.7 | |||
Other taxes | 9.7 | |||
Incremental public company expense | 3.2 | |||
Total operating expenses | 85.3 | |||
Operating income | 45.8 | |||
Add: | ||||
Interest income(a) | 1.0 | |||
Less: | ||||
Interest expense (net of AFUDC)(b) | 13.5 | |||
Income taxes | 0.1 | |||
Net income | 33.2 | |||
Adjustments to reconcile net income to EBITDA: | ||||
Add: | ||||
Depreciation and amortization | 19.7 | |||
Interest expense (net of AFUDC)(b) | 13.5 | |||
Income taxes | 0.1 | |||
Less: | ||||
Interest income(a) | 1.0 | |||
EBITDA | 65.5 | |||
Add: | ||||
Interest income | 1.0 | |||
Proceeds from IPO reserved for non-recurring maintenance capital expenditure(c) | 15.6 | |||
Less: | ||||
Cash interest expense | 15.8 | |||
Income taxes paid | 0.1 | |||
Maintenance capital expenditures(c) | 24.1 | |||
Cash reserve(d) | 3.8 | |||
Minimum estimated cash available for distribution before expansion capital expenditures | 38.3 | |||
Add: | ||||
Liquidation of marketable securities held to fund expansion capital expenditures | 37.0 | |||
Borrowings under revolving credit facility to fund expansion capital expenditures | 25.0 | |||
Less: | ||||
Expansion capital expenditures(e) | 62.0 | |||
Minimum estimated cash available for distribution | 38.3 | |||
Minimum annual distribution per unit | $ | 1.20 | ||
Annual distributions to: | ||||
Public common unitholders | $ | 15.0 | ||
NiSource: | ||||
Common Units | $ | 10.3 | ||
Subordinated Units | 12.3 | |||
General Partner Units | 0.7 | |||
Total distributions to NiSource | $ | 23.3 | ||
Total distributions to our unitholders and general partner at the initial distribution rate | $ | 38.3 | ||
Interest coverage ratio(f) | 4.4 | x | ||
Leverage ratio(f) | 4.5 | x |
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(a) | Reflects the interest income related to the long-term investments we intend to purchase with a portion of the proceeds from this offering. | |
(b) | Reflects $15.8 million in interest expense related to borrowings under our credit facility made in connection with this offering, our long-term debt, and amortization of $0.4 million of debt issuance costs, and net of $2.7 million of AFUDC income. | |
(c) | Estimated maintenance capital expenditures for the twelve months ending March 31, 2009 of $24.1 million includes $15.6 million in capital expenditures we consider to be non-recurring in nature. We are retaining $15.6 million of the proceeds from this offering to offset these identified capital expenditures. The non-recurring expenditures include: |
• | $7.0 million for pipeline retirements of offshore assets to be disposed of by Columbia Gulf; | |
• | $3.8 million of pipeline relocations cost as a result of highway and Mississippi levee construction; | |
• | $3.7 million to make improvements to our East Lateral to reduce the costs of in-line pipeline integrity inspections; and | |
• | $1.1 million for upgrades to ancillary compressor systems, and measurement equipment primarily for modifications to meet gas quality requirements. |
(d) | Represents a discretionary reserve that can be used for reinvestment and other general partnership purposes and constitutes a reserve of cash in excess of the amount required to pay the minimum quarterly distribution. | |
(e) | Please read the accompanying summary of the assumptions and considerations underlying these estimates. | |
(f) | In connection with the closing of this offering we expect to enter into a $250.0 million credit facility. We expect to borrow approximately $37.0 million in term debt and $163.0 million in revolving debt upon the closing of this offering. The credit facility is expected to contain covenants limiting our ability to make distributions if any default or event of default occurs; make other restricted distributions or dividends on account of the purchase, redemption, retirement, acquisition, cancellation or termination of partnership interests; incur additional indebtedness; grant liens or make certain negative pledges; make certain loans or investments; engage in transactions with affiliates; make any material change to the nature of our business from the midstream energy business; make a disposition of assets; or enter into a merger, consolidate, liquidate, wind up or dissolve. These covenants may be modified or eliminated upon our receipt of an investment grade rating. |
• | an interest coverage ratio (the ratio of our EBITDA to our consolidated interest expense (net of interest income), in each case as defined in the credit agreement) of not less than to 1.0, determined as of the last day of each quarter for the four-quarter period ending on the date of determination; and | |
• | a leverage ratio (the ratio of our consolidated indebtedness to our EBITDA, in each case as defined in the credit agreement) of not more than to 1.0(or, on a temporary basis for not more than three consecutive quarters following the consummation of certain acquisitions, not more than to 1.0). |
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• | We estimate that we will generate $131.1 million in revenues for the twelve months ending March 31, 2009. The majority of these revenues, approximately 92%, will be generated from services provided under firm transportation agreements. We estimate 8% of revenues will be generated based on actual utilization of interruptible transportation services. We generated $125.7 million in revenues for the twelve months ended September 30, 2007. | |
• | The expected $5.4 million increase in our revenues for the twelve months ending March 31, 2009 compared to the twelve months ended September 30, 2007 is primarily due to $9.5 million of incremental firm transportation revenues. This incremental revenue is associated with several expansion projects, including the Shadyside, Terrebonne and Evangeline interconnects, which were placed in service during the latter half of 2007, as well as the expansion of our existing Florida Gas Transmission interconnect, which is projected to be placed into service in June 2008. For more information regarding these expansion projects, please read “Business — Columbia Gulf Pipeline System — Expansion Projects.” These estimated increased revenues for the twelve months ending March 31, 2009 will be partially offset by the fact that revenues for the twelve months ended September 30, 2007 were favorably impacted by non-recurring business interruption insurance proceeds of $4.3 million. In addition, we have assumed that any contracts expiring before March 31, 2009 will be renewed or recontracted at rates substantially the same as those currently in effect. |
• | We estimate operating and maintenance expenses (before any incremental public-company related expenses) will be approximately $52.7 million for the twelve months ending March 31, 2009 as compared to $57.4 million for the twelve months ended September 30, 2007. The expected $4.7 million reduction from the twelve months ended September 30, 2007 is expected to result from $1.5 million of lower employee and administrative expenses due to lower allocations from Columbia Gas Transmission and $1.2 million of lower maintenance costs due to unplanned maintenance during the twelve months ended September 30, 2007. In addition, expenses for the twelve months ended September 30, 2007 were increased by a $2.0 million legal reserve, net of settlement. | |
• | We estimate that we will also incur approximately $3.2 million of incremental general and administrative expenses relating to being a publicly-traded partnership during the twelve months ending March 31, 2009 that were not incurred as a subsidiary of NiSource during the twelve months ended September 30, 2007. | |
• | We estimate depreciation and amortization expense for the twelve months ending March 31, 2009 will be $19.7 million as compared to $19.0 million for the twelve months ended September 30, 2007. Estimated depreciation and amortization expense reflects management’s estimates, which are based on consistent average depreciable asset lives and depreciation methodologies, taking into account estimated capital expenditures and new assets placed into service. | |
• | We estimate other taxes for the twelve months ending March 31, 2009 will be $9.7 million as compared to $8.3 million for the twelve months ended September 30, 2007, primarily due to increased property taxes resulting from new capital expansion projects. |
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• | We estimate our maintenance capital expenditures will be approximately $24.1 million for the twelve months ending March 31, 2009 as compared to $20.9 million for the twelve months ended September 30, 2007. Of the $24.1 million, approximately $15.6 million relates to expenditures that we consider to be non-recurring in nature. For more information, please read footnote (c) to our Statement of Minimum Estimated Cash Available for Distribution for the twelve months ending March 31, 2009. Of the $20.9 million of maintenance capital expenditures during the twelve months ended September 30, 2007, approximately $16.1 million relates to expenditures that we consider to be non-recurring in nature. For more information, please read footnote (f) to our Unaudited Pro Forma Cash Available for Distribution. We assume that there are no capital expenditures during the twelve months ending March 31, 2009 related to DOT-mandated pipeline upgrades along our system; | |
• | We will retain $15.6 million of the proceeds from this offering to offset future identified maintenance capital expenditures, including the non-recurring expenditures included in our forecast period for the twelve months ending March 31, 2009; | |
• | The balance of our total maintenance capital expenditures for the twelve months ending March 31, 2009 includes $8.5 million of capital expenditures which we expect to be recurring in nature and necessary to maintain the operating capacity of our systems; and | |
• | We estimate that our expansion capital expenditures will be approximately $62.0 million for the twelve months ending March 31, 2009 compared to approximately $12.3 million for the twelve months ended September 30, 2007. This increase relates to proposed interconnects and compression expansions to deliver gas to Florida Gas Transmission, which are expected to be placed into service in June 2008, and other proposed interconnects served by the East Lateral that are not expected to be placed into service prior to March 31, 2009. |
• | We estimate that at closing of this offering we will borrow approximately $37.0 million in term debt and $163.0 million in revolving debt under our new $250 million credit facility. We estimate that the revolving borrowings will bear a variable average interest rate of 6.25%. | |
• | We estimate that our term debt borrowings, net of interest earned on the approximately $37.0 million in qualifying investment grade securities pledged to secure the loan, will incur interest at a net effective rate of 0.25%. | |
• | We estimate that Columbia Gulf’s $67.9 million promissory notes will remain outstanding and continue to bear a weighted average interest rate of 5.52%. | |
• | We believe that we will remain in compliance with the financial covenants in our existing and future debt agreements during the twelve months ending March 31, 2009. |
• | We assume there will not be any new federal, state or local regulations of portions of the energy industry in which we operate, or any new interpretations of existing regulations, that will be materially adverse to our business during the twelve months ending March 31, 2009. | |
• | We assume there will not be any major adverse changes in the portions of the energy industry in which we operate or in general economic conditions during the twelve months ending March 31, 2009. | |
• | We assume that industry, insurance and overall economic conditions will not change substantially during the twelve months ending March 31, 2009. |
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• | less the amount of cash reserves established by our general partner to: |
• | provide for the proper conduct of our business; | |
• | comply with applicable law, any of our debt instruments or other agreements; or | |
• | provide funds for distributions to our unitholders and to our general partner for any one or more of the next four quarters; |
• | plus, if our general partner so determines, all additional cash and cash equivalents on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter. Working capital borrowings are generally borrowings that are made under a credit facility, commercial paper facility or similar financing arrangement, and in all cases are used solely for working capital purposes or to pay distributions to partners and with the intent of the borrower to repay such borrowings within 12 months from sources other than additional working capital borrowings. |
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• | an operating surplus “basket” equal to ; plus | |
• | all of our cash receipts after the closing of this offering, excluding cash from interim capital transactions, as defined below under “— Capital Surplus”; plus | |
• | working capital borrowings made after the end of a quarter but on or before the date of determination of operating surplus for the quarter; less | |
• | all of our operating expenditures after the closing of this offering (but not the repayment of borrowings) and maintenance capital expenditures; less | |
• | the amount of cash reserves established by our general partner to provide funds for future operating expenditures; less | |
• | all working capital borrowings not repaid within twelve months after having been incurred or repaid within such twelve-month period with the proceeds of additional working capital borrowings. |
• | repayment of working capital borrowings deducted from operating surplus pursuant to the last bullet point of the definition of operating surplus above when such repayment actually occurs; | |
• | payments of principal of and premium on indebtedness; | |
• | expansion capital expenditures; | |
• | payment of transaction expenses (including taxes) related to interim capital transactions; | |
• | distributions to our partners; and | |
• | non-pro rata purchases of units of any class made with the proceeds of an interim capital transaction. |
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• | borrowings; | |
• | sales of our equity and debt securities; | |
• | sales or other dispositions of assets for cash, other than inventory, accounts receivable and other current assets sold in the ordinary course of business or as part of normal retirement or replacement of assets; | |
• | the termination of interest rate hedge contracts or commodity hedge contracts prior to the termination date specified therein; | |
• | capital contributions received; and | |
• | corporate reorganizations or restructurings. |
• | distributions of available cash from operating surplus on each of the outstanding common units, subordinated units and general partner units equaled or exceeded the minimum quarterly distribution for each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date; | |
• | the “adjusted operating surplus” (as defined below) generated during each of the three consecutive, non-overlapping four-quarter periods immediately preceding that date equaled or exceeded the sum of the minimum quarterly distributions on all of the outstanding common units, subordinated units and general partner units during those periods on a fully diluted basis; and |
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• | there are no arrearages in payment of the minimum quarterly distribution on the common units. |
• | the subordination period will end and each subordinated unit will immediately convert into one common unit; | |
• | any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and | |
• | the general partner will have the right to convert its general partner units and its incentive distribution rights into common units or to receive cash in exchange for those interests. |
• | distributions of available cash from operating surplus on each outstanding common unit, subordinated unit and general partner unit equaled or exceeded $1.80 (150% of the annualized minimum quarterly distribution) for the four-quarter period immediately preceding the date; | |
• | the “adjusted operating surplus” (as defined below) generated during the four-quarter period immediately preceding the date equaled or exceeded the sum of the distribution of $1.80 (150% of the annualized minimum quarterly distribution) on all of the outstanding common units, subordinated units and general partner units during that period on a fully diluted basis; and | |
• | there are no arrearages in payment of the minimum quarterly distribution on the common units. |
• | operating surplus generated with respect to that period; plus | |
• | any net decrease made in subsequent periods in cash reserves for operating expenditures initially established with respect to that period to the extent such decrease results in a reduction in adjusted operating surplus in subsequent periods pursuant to the following bullet point; less | |
• | any net decrease in cash reserves for operating expenditures with respect to that period not relating to an operating expenditure made with respect to that period; plus | |
• | any net increase in cash reserves for operating expenditures with respect to that period required by any debt instrument for the repayment of principal, interest or premium. |
• | first, 98% to the common unitholders, pro rata, and 2% to the general partner, until we distribute for each outstanding common unit an amount equal to the minimum quarterly distribution for that quarter; | |
• | second, 98% to the common unitholders, pro rata, and 2% to the general partner, until we distribute for each outstanding common unit an amount equal to any arrearages in payment of the minimum quarterly distribution on the common units for any prior quarters during the subordination period; |
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• | third, 98% to the subordinated unitholders, pro rata, and 2% to the general partner, until we distribute for each subordinated unit an amount equal to the minimum quarterly distribution for that quarter; and | |
• | thereafter, in the manner described in “ — General Partner Interest and Incentive Distribution Rights” below. |
• | first, 98% to all unitholders, pro rata, and 2% to the general partner, until we distribute for each outstanding unit an amount equal to the minimum quarterly distribution for that quarter; and | |
• | thereafter, in the manner described in “ — General Partner Interest and Incentive Distribution Rights” below. |
• | we have distributed available cash from operating surplus to the common and subordinated unitholders in an amount equal to the minimum quarterly distribution; and | |
• | we have distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in payment of the minimum quarterly distribution; |
• | first, 98% to all unitholders, pro rata, and 2% to the general partner, until each unitholder receives a total of $0.345 per unit for that quarter (the “first target distribution”); | |
• | second, 85% to all unitholders, pro rata, and 15% to the general partner, until each unitholder receives a total of $0.375 per unit for that quarter (the “second target distribution”); |
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• | third, 75% to all unitholders, pro rata, and 25% to the general partner, until each unitholder receives a total of $0.45 per unit for that quarter (the “third target distribution”); and | |
• | thereafter, 50% to all unitholders, pro rata, and 50% to the general partner. |
Marginal Percentage Interest | ||||||||||
Total Quarterly Distribution | in Distributions | |||||||||
per Unit Target Amount | Unitholders | General Partner | ||||||||
Minimum Quarterly Distribution | $0.30 | 98 | % | 2 | % | |||||
First Target Distribution | up to $0.345 | 98 | % | 2 | % | |||||
Second Target Distribution | above $0.345 up to $0.375 | 85 | % | 15 | % | |||||
Third Target Distribution | above $0.375 up to $0.45 | 75 | % | 25 | % | |||||
Thereafter | above $0.45 | 50 | % | 50 | % |
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• | first, 98% to all unitholders, pro rata, and 2% to the general partner, until each unitholder receives an amount equal to 115% of the reset minimum quarter distribution for that quarter; | |
• | second, 85% to all unitholders, pro rata, and 15% to the general partner, until each unitholder receives an amount per unit equal to 125% of the reset minimum quarterly distribution for that quarter; | |
• | third, 75% to all unitholders, pro rata, and 25% to the general partner, until each unitholder receives an amount per unit equal to 150% of the reset minimum quarterly distribution for that quarter; and | |
• | thereafter, 50% to all unitholders, pro rata, and 50% to the general partner. |
Marginal Percentage Interest in | ||||||||||||
Distribution | Quarterly Distribution | |||||||||||
Quarterly Distribution | General | per Unit Following | ||||||||||
per Unit Prior to Reset | Unitholders | Partner | Hypothetical Reset | |||||||||
Minimum Quarterly Distribution | $0.30 | 98 | % | 2 | % | $0.60 | ||||||
First Target Distribution | up to $0.345 | 98 | % | 2 | % | up to $0.69(1) | ||||||
Second Target Distribution | above $0.345 up to $0.375 | 85 | % | 15 | % | above $0.69 up to $0.75(2) | ||||||
Third Target Distribution | above $0.375 up to $0.45 | 75 | % | 25 | % | above $0.75 up to $0.90(3) | ||||||
Thereafter | above $0.45 | 50 | % | 50 | % | above $0.90(3) |
(1) | This amount is 115% of the hypothetical reset minimum quarterly distribution. | |
(2) | This amount is 125% of the hypothetical reset minimum quarterly distribution. | |
(3) | This amount is 150% of the hypothetical reset minimum quarterly distribution. |
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Quarterly | Common | General Partner Cash Distributions Prior to Reset | ||||||||||||||||||||||||||
Distribution | Unitholders | 2% | ||||||||||||||||||||||||||
per Unit | Cash | General | ||||||||||||||||||||||||||
Prior to | Distributions | Class B | Partner | Total | ||||||||||||||||||||||||
Reset | Prior to Reset | Units | Interest | IDRs | Total | Distributions | ||||||||||||||||||||||
Minimum Quarterly Distribution | $ | 0.30 | $ | 9,392,120 | — | $ | 191,676 | — | $ | 191,676 | $ | 9,583,796 | ||||||||||||||||
First Target Distribution | $ | 0.345 | 1,408,818 | — | 28,752 | — | 28,752 | 1,437,570 | ||||||||||||||||||||
Second Target Distribution | $ | 0.375 | 939,212 | — | 22,100 | 143,643 | 165,743 | 1,104,955 | ||||||||||||||||||||
Third Target Distribution | $ | 0.45 | 2,348,030 | — | 62,614 | 720,063 | 782,677 | 3,130,707 | ||||||||||||||||||||
Thereafter | $ | 0.45 | 4,696,060 | — | 187,842 | 4,508,218 | 4,696,060 | 9,392,120 | ||||||||||||||||||||
Total | $ | 18,784,240 | — | $ | 492,984 | 5,371,924 | $ | 5,864,908 | $ | 24,649,148 | ||||||||||||||||||
Common | ||||||||||||||||||||||||||||
Quarterly | Unitholders | General Partner Cash Distributions After Reset | ||||||||||||||||||||||||||
Distribution | Cash | 2% General | ||||||||||||||||||||||||||
per Unit | Distributions | Partner | Total | |||||||||||||||||||||||||
After Reset | After Reset | Class B Units | Interest | IDRs | Total | Distributions | ||||||||||||||||||||||
Minimum Quarterly Distribution | $ | 0.60 | $ | 18,784,240 | $ | 5,371,924 | $ | 492,984 | — | $ | 5,864,908 | $ | 24,649,148 | |||||||||||||||
First Target Distribution | $ | 0.69 | — | — | — | — | — | — | ||||||||||||||||||||
Second Target Distribution | $ | 0.75 | — | — | — | — | — | — | ||||||||||||||||||||
Third Target Distribution | $ | 0.90 | — | — | — | — | — | — | ||||||||||||||||||||
Thereafter | $ | 0.90 | — | — | — | — | — | — | ||||||||||||||||||||
Total | $ | 18,784,240 | $ | 5,371,924 | $ | 492,984 | $ | — | $ | 5,864,908 | $ | 24,649,148 | ||||||||||||||||
• | first, 98% to all unitholders, pro rata, and 2% to the general partner, until we distribute for each common unit that was issued in this offering an amount of available cash from capital surplus equal to the initial public offering price; |
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• | second, 98% to the common unitholders, pro rata, and 2% to the general partner, until we distribute for each common unit an amount of available cash from capital surplus equal to any unpaid arrearages in payment of the minimum quarterly distribution on the common units; and | |
• | thereafter, we will make all distributions of available cash from capital surplus as if they were from operating surplus. |
• | the minimum quarterly distribution; | |
• | target distribution levels; | |
• | the unrecovered initial unit price; and | |
• | the number of common units into which a subordinated unit is convertible. |
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• | first, to the general partner and the holders of units who have negative balances in their capital accounts to the extent of and in proportion to those negative balances; | |
• | second, 98% to the common unitholders, pro rata, and 2% to the general partner, until the capital account for each common unit is equal to the sum of: (1) the unrecovered initial unit price; (2) the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs; and (3) any unpaid arrearages in payment of the minimum quarterly distribution; | |
• | third, 98% to the subordinated unitholders, pro rata, and 2% to the general partner until the capital account for each subordinated unit is equal to the sum of: (1) the unrecovered initial unit price; and (2) the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs; | |
• | fourth, 98% to all unitholders, pro rata, and 2% to the general partner, until we allocate under this paragraph an amount per unit equal to: (1) the sum of the excess of the first target distribution per unit over the minimum quarterly distribution per unit for each quarter of our existence; less (2) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the minimum quarterly distribution per unit that we distributed 98% to the unitholders, pro rata, and 2% to the general partner, for each quarter of our existence; | |
• | fifth, 85% to all unitholders, pro rata, and 15% to the general partner, until we allocate under this paragraph an amount per unit equal to: (1) the sum of the excess of the second target distribution per unit over the first target distribution per unit for each quarter of our existence; less (2) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit that we distributed 85% to the unitholders, pro rata, and 15% to the general partner for each quarter of our existence; | |
• | sixth, 75% to all unitholders, pro rata, and 25% to the general partner, until we allocate under this paragraph an amount per unit equal to: (1) the sum of the excess of the third target distribution per unit over the second target distribution per unit for each quarter of our existence; less (2) the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the second target distribution per unit that we distributed 75% to the unitholders, pro rata, and 25% to the general partner for each quarter of our existence; and | |
• | thereafter, 50% to all unitholders, pro rata, and 50% to the general partner. |
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• | first, 98% to holders of subordinated units in proportion to the positive balances in their capital accounts and 2% to the general partner, until the capital accounts of the subordinated unitholders have been reduced to zero; | |
• | second, 98% to the holders of common units in proportion to the positive balances in their capital accounts and 2% to the general partner, until the capital accounts of the common unitholders have been reduced to zero; and | |
• | thereafter, 100% to the general partner. |
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• | Columbia Gulf’s distribution of accounts receivable of $62.4 million to NiSource; | |
• | Our receipt of $250.0 million in gross proceeds from the issuance and sale of 12,500,000 common units to the public; | |
• | Our borrowing approximately $37.0 million in term debt and $163.0 million in revolving debt under our new $250.0 million credit facility; | |
• | Our use of proceeds from this offering and related borrowings to pay transaction fees and expenses and underwriting commissions, retire assumed indebtedness, reimburse subsidiaries of NiSource for certain capital expenditures, make distributions to subsidiaries of NiSource, fund working capital and anticipated capital expenditures and purchase qualifying investment grade securities; and | |
• | The disposition of certain offshore assets currently owned by Columbia Gulf. |
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NiSource Energy Partners, | ||||||||||||||||||||||||||||||||||||
L.P. Pro Forma | ||||||||||||||||||||||||||||||||||||
Columbia Gulf | Nine Months | |||||||||||||||||||||||||||||||||||
Nine Months | Year Ended | Ended | ||||||||||||||||||||||||||||||||||
Year Ended December 31, | Ended September 30, | December 31, | September 30, | |||||||||||||||||||||||||||||||||
2002 | 2003 | 2004 | 2005 | 2006 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||||||||||||||
(In millions, except per unit and operating data) | ||||||||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||||||||
Total operating revenues | $ | 142.8 | $ | 135.4 | $ | 127.0 | $ | 116.1 | $ | 123.3 | $ | 90.8 | $ | 99.6 | $ | 117.3 | $ | 94.5 | ||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||
Operation and maintenance | 69.7 | 55.5 | 55.7 | 51.3 | 61.2 | 41.2 | 44.4 | 55.1 | 38.4 | |||||||||||||||||||||||||||
Loss (gain) on sale or impairment of assets | (0.2 | ) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
Depreciation and amortization | 23.2 | 23.2 | 23.2 | 22.2 | 22.0 | 16.5 | 16.4 | 19.1 | 14.8 | |||||||||||||||||||||||||||
Other taxes | 8.3 | 8.7 | 7.8 | 8.5 | 8.1 | 6.0 | 6.2 | 8.1 | 6.2 | |||||||||||||||||||||||||||
Total operating expenses | 101.0 | 87.4 | 86.7 | 82.0 | 91.3 | 63.7 | 67.0 | 82.3 | 59.4 | |||||||||||||||||||||||||||
Operating income | 41.8 | 48.0 | 40.3 | 34.1 | 32.0 | 27.1 | 32.6 | 35.0 | 35.1 | |||||||||||||||||||||||||||
Other income (deductions) | ||||||||||||||||||||||||||||||||||||
Interest expense (net of AFUDC) | (6.4 | ) | (6.1 | ) | (5.4 | ) | (5.0 | ) | (2.7 | ) | (2.2 | ) | (1.8 | ) | (15.2 | ) | (10.7 | ) | ||||||||||||||||||
Interest income | — | — | 0.4 | 0.6 | 0.5 | 0.5 | — | 1.5 | 0.8 | |||||||||||||||||||||||||||
Other, net | (0.1 | ) | — | — | 0.5 | 0.7 | 0.7 | — | 0.7 | — | ||||||||||||||||||||||||||
Income taxes | (13.5 | ) | (16.2 | ) | (13.1 | ) | (11.7 | ) | (12.2 | ) | (9.2 | ) | (10.7 | ) | (0.1 | ) | (0.1 | ) | ||||||||||||||||||
Net income | $ | 21.8 | $ | 25.7 | $ | 22.2 | $ | 18.5 | $ | 18.3 | $ | 16.9 | $ | 20.1 | $ | 21.9 | $ | 25.1 | ||||||||||||||||||
Net income per limited partners’ unit | ||||||||||||||||||||||||||||||||||||
Common unit | $ | 1.02 | $ | 0.90 | ||||||||||||||||||||||||||||||||
Subordinated unit | — | 0.55 | ||||||||||||||||||||||||||||||||||
Balance Sheet Data (at period end): | ||||||||||||||||||||||||||||||||||||
Total assets | $ | 676.0 | $ | 671.2 | $ | 700.6 | $ | 716.0 | $ | 763.1 | $ | 783.3 | $ | 841.2 | ||||||||||||||||||||||
Net property plant and equipment | 308.6 | 303.0 | 292.5 | 305.5 | 310.6 | 321.5 | 321.5 | |||||||||||||||||||||||||||||
Long-term debt-affiliated, excluding amounts due within one year | 67.9 | 67.9 | 58.3 | 67.9 | 67.9 | 67.9 | 265.9 | |||||||||||||||||||||||||||||
Total capitalization | 515.4 | 540.8 | 555.1 | 552.6 | 556.1 | 576.2 | 701.8 | |||||||||||||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||||||||||||||
Net cash provided by operating activities | 45.3 | 51.0 | 40.1 | 26.7 | 20.0 | 43.7 | 25.0 | |||||||||||||||||||||||||||||
EBITDA | 63.5 | 56.3 | 54.0 | 43.6 | 49.0 | 54.1 | 49.9 | |||||||||||||||||||||||||||||
Maintenance capital expenditures(1) | 7.0 | 31.4 | 22.2 | 13.2 | 11.6 | 22.2 | 11.6 | |||||||||||||||||||||||||||||
Expansion capital expenditures(1) | — | 0.1 | 2.9 | 1.1 | 10.5 | 2.9 | 10.5 | |||||||||||||||||||||||||||||
Columbia Gulf Operating Data: | ||||||||||||||||||||||||||||||||||||
Mainline: | ||||||||||||||||||||||||||||||||||||
Transportation capacity (Bcf/d)(2) | 2.156 | 2.156 | 2.156 | 2.156 | 2.156 | |||||||||||||||||||||||||||||||
Contracted firm capacity (Bcf/d)(3) | 2.453 | 2.177 | 2.266 | 2.245 | 2.471 | |||||||||||||||||||||||||||||||
Transported volumes (Bcf) | 523.6 | 506.7 | 519.7 | 392.3 | 477.4 | |||||||||||||||||||||||||||||||
Laterals (East and West): | ||||||||||||||||||||||||||||||||||||
Transportation capacity (Bcf/d)(4) | 2.157 | 2.157 | 2.157 | 2.157 | 2.157 | |||||||||||||||||||||||||||||||
Contracted firm capacity (Bcf/d) | 0.616 | 0.589 | 0.680 | 0.634 | 0.870 | |||||||||||||||||||||||||||||||
Transported volumes (Bcf) | 428.9 | 422.1 | 379.7 | 291.3 | 247.6 |
(1) | Maintenance capital expenditures are capital expenditures made to replace partially or fully depreciated assets, to maintain the existing operating capacity of our assets and to extend their useful lives, or other capital expenditures that are incurred in maintaining existing system volumes and related cash flows. Expansion capital expenditures are made to acquire additional assets to grow our business, to expand and |
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upgrade our systems and facilities, and to construct or acquire similar systems or facilities. This includes projects designed to reduce costs or enhance revenues. | ||
(2) | Represents one-way peak-design capacity from Rayne, Louisiana to Leach, Kentucky. | |
(3) | Our contracted firm capacity exceeds our one-way peak-design capacity during the indicated periods as a result of our ability to transport natural gas in multiple directions on our pipeline system. | |
(4) | Represents the maximum combined peak-design capacity of the two laterals — East (1.054 Bcf/d) and West(1.103 Bcf/d). |
• | the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; | |
• | the ability of our assets to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and | |
• | our operating performance and return on invested capital as compared to those of other publicly traded limited partnerships that own energy infrastructure assets, without regard to their financing methods and capital structure. |
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NiSource Energy | ||||||||||||||||||||||||||||
Columbia Gulf | Partners, L.P. Pro Forma | |||||||||||||||||||||||||||
Nine | ||||||||||||||||||||||||||||
Year | Months | |||||||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||||||
Nine Months Ended | December | September | ||||||||||||||||||||||||||
Year Ended December 31, | September 30, | 31, | 30, | |||||||||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | 2006 | 2007 | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Reconciliation of Non-GAAP “EBITDA” to GAAP “Net Income” | ||||||||||||||||||||||||||||
Net income | $ | 22.2 | $ | 18.5 | $ | 18.3 | $ | 16.9 | $ | 20.1 | $ | 21.9 | $ | 25.1 | ||||||||||||||
Add: | ||||||||||||||||||||||||||||
Interest expense (net of AFUDC) | 5.4 | 5.0 | 2.7 | 2.2 | 1.8 | 15.2 | 10.7 | |||||||||||||||||||||
Income taxes | 13.1 | 11.7 | 12.2 | 9.2 | 10.7 | 0.1 | 0.1 | |||||||||||||||||||||
Depreciation and amortization | 23.2 | 22.2 | 22.0 | 16.5 | 16.4 | 19.1 | 14.8 | |||||||||||||||||||||
Less: | ||||||||||||||||||||||||||||
Interest income | 0.4 | 0.6 | 0.5 | 0.5 | — | 1.5 | 0.8 | |||||||||||||||||||||
Other, net | — | 0.5 | 0.7 | 0.7 | — | 0.7 | — | |||||||||||||||||||||
EBITDA | $ | 63.5 | $ | 56.3 | $ | 54.0 | $ | 43.6 | $ | 49.0 | $ | 54.1 | $ | 49.9 | ||||||||||||||
Reconciliation of Non-GAAP “EBITDA” to GAAP “Net cash provided by operating activities” | ||||||||||||||||||||||||||||
Net cash provided by operating activities | $ | 45.3 | $ | 51.0 | $ | 40.1 | $ | 26.7 | $ | 20.0 | $ | 43.7 | $ | 25.0 | ||||||||||||||
Less: | ||||||||||||||||||||||||||||
Interest income | 0.4 | 0.6 | 0.5 | 0.5 | — | 1.5 | 0.8 | |||||||||||||||||||||
Add: | ||||||||||||||||||||||||||||
Interest expense (net of AFUDC) | 5.4 | 5.0 | 2.7 | 2.2 | 1.8 | 15.2 | 10.7 | |||||||||||||||||||||
Income taxes paid | 10.3 | 10.7 | 9.4 | 9.2 | 10.0 | 0.1 | 0.1 | |||||||||||||||||||||
Other | 1.0 | 1.1 | (4.3 | ) | (5.1 | ) | (2.8 | ) | (10.0 | ) | (5.1 | ) | ||||||||||||||||
Changes in operating working capital | 1.9 | (10.9 | ) | 6.6 | 11.1 | 20.0 | 6.6 | 20.0 | ||||||||||||||||||||
EBITDA | $ | 63.5 | $ | 56.3 | $ | 54.0 | $ | 43.6 | $ | 49.0 | $ | 54.1 | $ | 49.9 | ||||||||||||||
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• | LDCs and electric power generators typically require a secure and reliable supply of natural gas over a sustained period of time to meet the needs of their customers. Our LDC customers will typically enter |
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into long-term firm transportation contracts to ensure both a ready supply of natural gas and sufficient transportation capacity over the life of the contract; |
• | Producers of natural gas require the ability to deliver their product to market typically enter into firm transportation contracts to ensure that they will have sufficient capacity available to deliver their product to delivery points with greater market liquidity; and | |
• | Marketers use our transportation services to capitalize on natural gas price volatility over time or between markets. |
• | Sales and percentage of physical capacity sold, including the contract mix of firm service revenues compared to interruptible service revenues; | |
• | Operating expenses; and | |
• | EBITDA. |
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• | the financial performance of our assets without regard to financing methods, capital structure or historical cost basis; | |
• | the ability of our assets to generate cash sufficient to pay interest on our indebtedness and to make distributions to our partners; and | |
• | our operating performance and return on invested capital as compared to those of other publicly traded limited partnerships that own energy infrastructure assets, without regard to their financing methods and capital structure. |
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Year Ended December 31, | Nine Months Ended September 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Operating Revenues | ||||||||||||||||||||
Transportation revenues | $ | 124.6 | $ | 114.3 | $ | 121.8 | $ | 89.7 | $ | 98.4 | ||||||||||
Other revenues | 2.4 | 1.8 | 1.5 | 1.1 | 1.2 | |||||||||||||||
Total Operating Revenues | 127.0 | 116.1 | 123.3 | 90.8 | 99.6 | |||||||||||||||
Operating Expenses | ||||||||||||||||||||
Operation and maintenance | 55.7 | 51.3 | 61.2 | 41.2 | 44.4 | |||||||||||||||
Depreciation and amortization | 23.2 | 22.2 | 22.0 | 16.5 | 16.4 | |||||||||||||||
Other taxes | 7.8 | 8.5 | 8.1 | 6.0 | 6.2 | |||||||||||||||
Total Operating Expenses | 86.7 | 82.0 | 91.3 | 63.7 | 67.0 | |||||||||||||||
Operating Income | 40.3 | 34.1 | 32.0 | 27.1 | 32.6 | |||||||||||||||
Other Income (Deductions) | ||||||||||||||||||||
Interest expense (net of AFUDC) | (5.4 | ) | (5.0 | ) | (2.7 | ) | (2.2 | ) | (1.8 | ) | ||||||||||
Interest income | 0.4 | 0.6 | 0.5 | 0.5 | — | |||||||||||||||
Other, net | — | 0.5 | 0.7 | 0.7 | — | |||||||||||||||
Total Other Income (Deductions) | (5.0 | ) | (3.9 | ) | (1.5 | ) | (1.0 | ) | (1.8 | ) | ||||||||||
Income Before Income Taxes | 35.3 | 30.2 | 30.5 | 26.1 | 30.8 | |||||||||||||||
Income Taxes | 13.1 | 11.7 | 12.2 | 9.2 | 10.7 | |||||||||||||||
Net Income | $ | 22.2 | $ | 18.5 | $ | 18.3 | $ | 16.9 | $ | 20.1 | ||||||||||
EBITDA(a) | 63.5 | 56.3 | 54.0 | 43.6 | 49.0 |
(a) | We define EBITDA as net income plus interest expense (net of AFUDC), income taxes and depreciation and amortization, less interest income and other, net. For a reconciliation of our EBITDA to the most directly comparable financial measures calculated and presented in accordance with GAAP, please read “Selected Historical and Pro Forma Financial and Operating Data — Non-GAAP Financial Measures.” |
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• | the retention of a portion of the proceeds from our initial public offering, as described below; | |
• | cash generated from operations; | |
• | borrowings under our $250.0 million credit facility; | |
• | cash realized from the liquidation of qualifying investment grade securities that will be pledged under our credit facility; | |
• | issuances of additional partnership units; and | |
• | debt offerings. |
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For the Nine Months Ended | ||||||||||||||||||||
For the Years Ended December 31, | September 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
(In millions) | ||||||||||||||||||||
Net cash provided by operating activities | $ | 45.3 | $ | 51.0 | $ | 40.1 | $ | 26.7 | $ | 20.0 | ||||||||||
Net cash (used in) provided by investing activities | $ | (34.6 | ) | $ | (20.3 | ) | $ | (38.8 | ) | $ | (22.9 | ) | $ | (33.0 | ) | |||||
Net cash provided by (used in) financing activities | $ | (10.7 | ) | $ | (30.7 | ) | $ | (1.3 | ) | $ | (3.8 | ) | $ | 13.0 |
Nine Months Ended | ||||||||||||||||||||
Year Ended December 31, | September 30, | |||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
Capital Expenditures | ||||||||||||||||||||
Maintenance | $ | 7.0 | $ | 31.4 | $ | 22.2 | $ | 13.2 | $ | 11.6 | ||||||||||
Expansion | — | 0.1 | 2.9 | 1.1 | 10.5 | |||||||||||||||
Total Capital Expenditures | $ | 7.0 | $ | 31.5 | $ | 25.1 | $ | 14.3 | $ | 22.1 | ||||||||||
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• | pay approximately $3.9 million of expenses associated with the offering and related formation transactions, including a structuring fee payable to Lehman Brothers Inc. for evaluation, analysis and structuring of our partnership; | |
• | distribute $71.7 million in cash to subsidiaries of NiSource as reimbursement for capital expenditures related to the Columbia Gulf assets incurred by subsidiaries of NiSource prior to this offering related to the assets to be contributed to us upon the closing of this offering; | |
• | retire approximately $31.1 million of indebtedness owed to a subsidiary of NiSource; | |
• | purchase approximately $37.0 million of qualifying investment grade securities, which will be assigned as collateral to secure the term loan portion of our credit facility; | |
• | use approximately $64.0 million to fund working capital; and | |
• | use the remaining amount of $27.3 million to offset identified maintenance capital expenditures expected to be incurred through 2010, including an amount to offset costs we expect to incur in connection with government-mandated pipeline improvements. |
Total | 2007 | 2008 | 2009 | 2010 | 2011 | After | ||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||
Long-term debt | $ | 67.9 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 67.9 | ||||||||||||||
Interest payments on long-term debt | 41.8 | 3.8 | 3.8 | 3.7 | 3.7 | 3.7 | 23.1 | |||||||||||||||||||||
Operating leases | 4.6 | 0.4 | 0.2 | 0.1 | 0.1 | 0.1 | 3.7 | |||||||||||||||||||||
Total contractual obligations | $ | 114.3 | $ | 4.2 | $ | 4.0 | $ | 3.8 | $ | 3.8 | $ | 3.8 | $ | 94.7 | ||||||||||||||
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• | More than 210 natural gas pipeline systems; | |
• | 300,000 miles of interstate and intrastate transmission pipelines; | |
• | 181 Bcf/d of natural gas transportation capacity; | |
• | More than 1,400 compressor stations that maintain pressure on the natural gas pipeline network; and assure continuous forward movement of supplies; | |
• | More than 11,000 delivery points, 5,000 receipt points, and 1,400 interconnection points that provide for the transfer of natural gas throughout the United States; | |
• | 29 hubs or market centers that provide additional interconnections; | |
• | 394 underground natural gas storage facilities; | |
• | 55 locations where natural gas can be imported/exported via pipelines; and | |
• | 5 LNG (liquefied natural gas) import facilities and 100 LNG peaking facilities. |
Source: | Energy Information Administration, Office of Oil & Gas, Natural Gas Division, Gas Transportation Information System, June 2007. |
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Source: | Energy Information Administration, Annual Energy Outlook. Gulf Coast includes on and offshore production, February 2007. |
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• | The Mainline System. Columbia Gulf’s Mainline System extends from southern Louisiana to a pipeline interconnection with Columbia Gas Transmission Corporation (Columbia Gas Transmission), a subsidiary of NiSource, in northeastern Kentucky. The Mainline System consists of approximately 2,550 miles of pipelines with peak-design throughput capacity of 2.2 Bcf/d; and | |
• | The Louisiana Laterals. The Louisiana Laterals consist of the West Lateral and the East Lateral. The West Lateral extends from an interconnection with the Mainline System along the southern tier of Louisiana westward to Hackberry, Louisiana, while the East Lateral extends eastward to New Orleans and Venice, Louisiana. The Louisiana Laterals consist of approximately 850 miles of pipelines with maximum peak-design capacity in excess of 1.0 Bcf/d on each lateral. |
• | Pursue economically attractive organic expansion opportunities and greenfield development projects.We continually evaluate opportunities in both existing and new markets to increase the volume of natural gas transportation capacity reserved and the volume of natural gas transported on our system. We focus on expansion and development opportunities that generate value for our customers and acceptable returns for us. We intend to implement this strategy by doing the following: |
• | Expanding the physical capacity of our system to serve existing and new markets; | |
• | Creating operational flexibility which allows customers to move volumes of natural gas usingnon-traditional paths; and | |
• | Creating market flexibility to provide incremental opportunities to customers. |
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To execute this strategy, we are pursuing expansions and extensions to further increase our market access in the New Orleans-Baton Rouge industrial corridor and the growing Southeastern and Florida residential, commercial, industrial and electric generation markets. | ||
• | Optimize our asset base and increase profitability by expanding our points of supply and market access.While we traditionally operated the Columbia Gulf pipeline system as a point-to-point delivery system, we now pursue a “connectivity” strategy which seeks to increase the flexibility and diversity of our system by leveraging its strong geographic position to attract new interconnects that broaden our access to multiple supply sources and markets. New interconnect opportunities will allow us to market our services to new customers and develop new services for existing customers. For example, a new interconnection with Midwestern Gas Transmission near Nashville, Tennessee currently under construction is expected to provide us with access to the Chicago hub, and to add access to additional sources of natural gas supply from the Rocky Mountain region. | |
• | Grow through joint ventures, partnerships and accretive acquisitions of energy infrastructure assets from both NiSource and third parties.We intend to expand our current business by pursuing joint ventures, partnerships and acquisitions that are accretive to distributable cash flow. We will seek acquisitions that provide the opportunity for operational efficiencies or higher capacity utilization of our existing assets, as well as acquisitions in new business lines and geographic areas of operation. We will consider certain factors in deciding whether to pursue an acquisition, including, but not limited to: |
• | economic characteristics of the acquisition such as return on capital and cash flow stability; | |
• | the region in which the assets are located (both contiguous and non-contiguous to our existing assets); and | |
• | the availability and sources of capital required to finance the acquisition. |
• | Our strategic location allows us to transport natural gas from diverse supply sources to high-demand markets at competitive transportation rates.Our customers benefit from our numerous interstate and intrastate pipeline interconnections, which reduce the risk of supply interruptions, increase price transparency and transactional liquidity, and provide a variety of downstream market opportunities. Our ability to transport gas from diverse supply sources to multiple end-use markets on a competitive cost basis provides us with a significant advantage because our customers value the flexibility and reliability this provides. |
• | Access to diverse and growing supply sources. Our pipeline assets have direct access to the Gulf of Mexico and onshore Louisiana supply sources and, through major pipeline interconnects, access to numerous natural gas producing regions, including the South Texas and Louisiana Gulf Coast, North Louisiana, East Texas, North Texas (Barnett Shale) and Appalachian regions. A newbi-directional interconnect with Midwestern Gas Transmission near Nashville, Tennessee is currently under construction and is expected to provide us with access to the Chicago hub and to add Rocky Mountain gas supplies. In addition, we are well positioned to provide access to other non-traditional sources of supply such as the developing Fayette Shale in Arkansas and LNG imported on the Gulf Coast. | |
• | Access to multiple attractive and liquid end-use markets. Our system provides customers with direct access to the Henry Hub and TCO Pool, two of the most actively traded markets in North |
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America. Through 29 interstate and 13 intrastate pipeline interconnections, our system provides upstream supply to serve growing markets in the Mid-Atlantic, Midwest, Florida and Southeast. Based on published FERC tariff rates, we believe we are in a position to provide competitively-priced transportation services along our system. |
• | Our firm contracts and capacity reservation fees provide cash flow stability. Our FERC-approved rate structure reduces the risk that weather or changing market conditions will create revenue volatility. This rate structure provides us with more stable and predictable cash flows than other contractual forms. For the twelve months ended September 30, 2007 we generated approximately 80.1% of our transportation revenues from capacity reservation fees paid under firm contracts. As of September 30, 2007, our firm mainline system contracts had a weighted contract term of 5.7 years and a weighted average remaining contract life of approximately 3.8 years, and our firm contracts for the Louisiana Laterals had a weighted average contract term of 4.4 years and a weighted average remaining contract life of 2.5 years, in each case based on contracted volumes. In addition, because we do not own the gas we transport and we retain a portion of the gas transported in our system to use as fuel for our compressors to transport our customers’ gas, we have no direct commodity price exposure. | |
• | Our pipeline assets have been prudently operated and well maintained. Our prudently operated and well maintained assets enable us to provide reliable customer service while minimizing the cost of ongoing maintenance and operation. We have completed mandated internal inspections of nearly half of our pipeline system, including 67% of the high consequence areas along our system and have found them to be in good condition and in compliance with all federal pipeline safety regulations. Our affiliation with NiSource provides access to state-of-the-art in-line inspection tools that enhance our ability to maintain system integrity with greater scheduling flexibility and cost certainty. In addition, we operate our pipelines to provide safe and reliable service and have been recognized for our outstanding employee safety record by the American Gas Association. | |
• | Our affiliation with NiSource. We will have an ongoing affiliation with NiSource. As the owner of the 2% general partner interest, all of our incentive distribution rights, and a 58.9% limited partner interest in us, we believe that NiSource has an incentive to promote and support the successful execution of our business plan, and to pursue projects that directly or indirectly enhance our value. Through our relationship with NiSource, we will have access to a significant pool of management talent, strong commercial relationships throughout the energy industry and access to NiSource’s broad operational, commercial, technical, risk management and administrative infrastructure. NiSource also has a long history of successfully executing pipeline and storage expansion projects through a disciplined approach of evaluating, marketing, permitting and constructing both organic and greenfield expansions. We also believe that our relationship with NiSource offers the opportunity for increased access to strategic acquisitions of complementary energy infrastructure assets from affiliates and third parties. | |
• | Our experienced management team has a proven track record of operating large and complex interstate natural gas transportation, storage and marketing assets. The management team employed by our general partner has a proven track record of successfully managing, operating, developing, building, acquiring and integrating energy infrastructure assets. The operating executives of our general partner’s management team have experience in various aspects of the energy industry, including significant commercial, marketing, operational, engineering, legal, regulatory, financial, acquisition and business development expertise. |
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Columbia Gulf Throughput (Bcf) | ||||||||||||||||||||
Nine Months Ended | Nine Months Ended | |||||||||||||||||||
Year Ended December 31, | September 30, | September 30, | ||||||||||||||||||
2004 | 2005 | 2006 | 2006 | 2007 | ||||||||||||||||
Mainline: | ||||||||||||||||||||
Transportation capacity (Bcf/d)(1) | 2.156 | 2.156 | 2.156 | 2.156 | 2.156 | |||||||||||||||
Contracted firm capacity (Bcf/d)(2) | 2.453 | 2.177 | 2.266 | 2.245 | 2.471 | |||||||||||||||
Transported volumes (Bcf) | 523.6 | 506.7 | 519.7 | 392.3 | 477.4 | |||||||||||||||
Laterals (East and West): | ||||||||||||||||||||
Transportation capacity (Bcf/d)(3) | 2.157 | 2.157 | 2.157 | 2.157 | 2.157 | |||||||||||||||
Contracted firm capacity (Bcf/d) | 0.616 | 0.589 | 0.680 | 0.634 | 0.870 | |||||||||||||||
Transported volumes (Bcf) | 428.9 | 422.1 | 379.7 | 291.3 | 247.6 |
(1) | Represents one-way peak design capacity from Rayne, Louisiana to Leach, Kentucky. | |
(2) | Our contracted firm capacity exceeds our one-way peak-design capacity during the indicated periods as a result of our ability to transport natural gas in multiple directions on our pipeline system. | |
(3) | Represents the maximum combined peak-design capacity of the two laterals — East (1.054 Bcf/d) and West (1.103 Bcf/d). |
• | Firm contracts. Under firm contracts our customers are obligated to pay monthly capacity reservation fees over the term of the contract. These monthly capacity reservation fees are payable to us regardless of the actual pipeline capacity utilized. An incremental usage fee based on the actual volume of natural gas transported is applied when a customer utilizes the capacity it has reserved under these firm contracts. Though they are typically a small percentage of the total revenue we receive under our firm contracts, usage fees enable us to recover our variable costs incurred for the transportation of natural |
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gas on our pipeline system. For the twelve months ended September 30, 2007 approximately 80.1% of our transportation revenues were derived from capacity reservations fees paid under firm contracts, and approximately 8.7% of our transportation revenues were derived from usage fees under firm contracts including revenues under negotiated rate contracts. |
• | Interruptible contracts. Under interruptible contracts we market the physical capacity that is contracted for firm service contracts but that is not fully utilized by those firm customers. We derive a smaller portion of our revenues through these interruptible contracts under which customers pay fees based on their actual utilization of our assets for transportation and other related services. Customers who have executed interruptible contracts are not assured capacity in our pipeline facilities. For the twelve months ended September 30, 2007 approximately 11.2% of our transportation revenues were derived from interruptible contracts. | |
• | Negotiated rate contracts. Negotiated rate contracts are firm contracts under which our customers may agree to pay rates that are above or below the “recourse rate” set by our FERC tariffs, provided the customers agree to such rates and the FERC has approved the negotiated rate. As of September 30, 2007 we had four negotiated rate contracts on file with the FERC, and for the nine months ended September 30, 2007 approximately 4.7% of our transportation revenues were derived from negotiated rate contracts. |
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• | Adair Expansion Project. In October 2006, we completed a new interconnection with Texas Eastern Transmission Company in Adair County, Kentucky. This interconnection enables us to deliver up to200 MMcf/d to downstream markets in the Northeast and Mid-Atlantic. We have secured firm contracts for the full delivery volume. Market interest in this delivery remains strong, and we are currently exploring opportunities to further increase the size of this interconnection. | |
• | Rayne Compressor Station Modifications. In July 2007, we completed piping modifications at our Rayne compressor station in southern Louisiana to enable the station to compress natural gas bi-directionally. The Rayne station retains its ability to compress up to 2.2 Bcf/d north to serve mainline markets in the Midwest and Mid-Atlantic, but now also possesses the ability to compress up to1.0 Bcf/d south to link expanding supply at Delhi, Louisiana (Perryville area) with growing markets in the Southeast via our Louisiana Laterals. The project also provides us greater operational flexibility, increases our ability to deliver to the Henry Hub by30 MMcf/d and positions us for further expansion of our Louisiana Lateral markets. | |
• | Shadyside Expansion Project. In August 2007, we completed the expansion of our existing interconnection with Southern Natural Gas in St. Mary Parish, Louisiana. This expanded interconnection enables us to deliver an additional85 MMcf/d to downstream markets in Mississippi, Alabama and Georgia. We have secured firm contracts for the full capacity with a weighted average contract life of 4.4 years as of its in-service date. | |
• | Evangeline Expansion Project. In November 2007, we completed a new interconnection with Transcontinental Gas Pipeline in Evangeline Parish, Louisiana. This new interconnection will enable us to deliver up to180 MMcf/d to downstream markets in the Northeast and Mid-Atlantic. We have secured firm contracts for the full capacity with a weighted average contract life of 1.8 years as of its in-service date. | |
• | Terrebonne Expansion Project. In October 2007, we completed a new interconnection with Transcontinental Gas Pipeline in Terrebonne Parish, Louisiana. This new interconnection will enable us to deliver up to200 MMcf/d to downstream markets in the Northeast and Mid-Atlantic. We have secured firm contracts for the full delivery volume with a weighted average contract life of 2.1 years as of its in-service date. | |
• | FGT — Lafayette Expansion Project. We are pursuing an expansion of our existing interconnection with Florida Gas Transmission near Lafayette, Louisiana. This expansion would enable us to deliver an additional180 MMcf/d to serve downstream markets in Florida. The projected capital cost for the expansion is $18.1 million, and it is scheduled to be in service in June 2008. We conducted an “open season” in October 2007 and received a high level of customer interest. We are in the process of negotiating definitive agreements for firm service. |
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• | transportation of natural gas; |
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• | rates and charges for natural gas transportation; | |
• | certification and construction of new facilities; | |
• | initiation, extension or abandonment of services; | |
• | maintenance of accounts and records; | |
• | commercial relationships and communications between pipelines and certain affiliates; | |
• | terms and conditions of service and service contracts with customers; | |
• | depreciation and amortization policies; and | |
• | acquisition, extension and abandonment of facilities. |
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Name | Age | Position | ||||
Robert C. Skaggs, Jr. | 53 | Chairman of the Board | ||||
Christopher A. Helms | 53 | President, Chief Executive Officer and Director | ||||
Michael W. O’Donnell | 63 | Executive Vice President, Chief Financial Officer and Director | ||||
James F. Thomas | 47 | Executive Vice President, Chief Commercial Officer and Director | ||||
Carrie J. Hightman | 50 | Executive Vice President and Chief Legal Officer |
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AGL Resources Inc | Nicor Inc. | |
Allegheny Energy, Inc. | Pepco Holdings, Inc. | |
Ameren Corporation | PG&E Corporation | |
American Electric Power Company, Inc. | PNM Resources, Inc. | |
Aquila, Inc. | PPL Corporation | |
CenterPoint Energy, Inc. | Public Service Enterprise Group | |
Cinergy Corp. | SCANA Corporation | |
CMS Energy Corporation | Sempra Energy | |
Dominion Resources, Inc. | Southern Company | |
DTE Energy Company | TXU Corp. | |
Duke Energy Corporation | WGL Holdings, Inc. | |
FirstEnergy Corp |
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3M Company | Illinois Tool Works Inc. | |
ALLTEL Company | ITT Industries, Inc. | |
American Standard Companies Inc. | Kellogg Company | |
Automatic Data Processing, Inc. | Kennemetal Inc. | |
Avon Products, Inc. | Kimberly-Clark Corporation | |
Baxter International Inc. | Masco Corporation | |
The Black & Decker Corporation | Newell Rubbermaid Inc. | |
Boise Cascade Corporation | Rockwell Automation, Inc. | |
Briggs & Stratton Corporation | The Scotts Company | |
Campbell Soup Company | The Sherwin-Williams Company | |
The Clorox Company | Tribune Company | |
FMC Corporation | W.W. Grainger, Inc. | |
General Mills, Inc. | Whirlpool Corporation | |
The Goodyear Tire & Rubber Company |
• | The competitiveness of NiSource’s programs, based upon competitive market data (described more fully below); | |
• | The attainment of established NiSource business and financial goals; and | |
• | An executive’s position, level of responsibility, and performance, as measured by his or her individual contribution to NiSource’s achievement of its business objectives. |
• | base pay; | |
• | NiSource annual incentive plan; | |
• | performance awards under NiSource’s and possibly our long-term incentive plan; | |
• | NiSource’s contributions under its 401(k) and profit sharing plan; and | |
• | NiSource’s other benefit plans on the same basis as all other NiSource employees. |
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• | Aligning executives’ compensation with NiSource’s long-term strategic plan; | |
• | Aligning the interests of the executives with the interests of NiSource’s long-term stockholders in increasing the value of NiSource’s stock; and | |
• | Providing competitive compensation so that NiSource can recruit and retain executive talent. |
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• | each person who then will beneficially own 5% or more of the then outstanding common and subordinated units; | |
• | all of the directors of NiSource GP, LLC; | |
• | each named executive officer of NiSource GP, LLC; and | |
• | all directors and officers of NiSource GP, LLC as a group. |
Percentage of | ||||||||||||||||||||
Total | ||||||||||||||||||||
Percentage of | Percentage of | Common and | ||||||||||||||||||
Common | Common | Subordinated | Subordinated | Subordinated | ||||||||||||||||
Units to be | Units to be | Units to be | Units to be | Units to be | ||||||||||||||||
Beneficially | Beneficially | Beneficially | Beneficially | Beneficially | ||||||||||||||||
Name of Beneficial Owner(1) | Owned | Owned | Owned | Owned | Owned | |||||||||||||||
NiSource Inc.(2) | 8,584,349 | 40.7 | % | 10,222,715 | 100 | % | 60.0 | % | ||||||||||||
Columbia Energy Holdings Corporation | 8,584,349 | 40.7 | % | 10,222,715 | 100 | % | 60.0 | % | ||||||||||||
Robert C. Skaggs, Jr.(3) | — | — | % | — | — | % | — | % | ||||||||||||
Christopher A. Helms(3)(4) | — | — | % | — | — | % | — | % | ||||||||||||
Michael W. O’Donnell(3) | — | — | % | — | — | % | — | % | ||||||||||||
James F. Thomas(3)(4) | — | — | % | — | — | % | — | % | ||||||||||||
Carrie J. Hightman(3) | — | — | % | — | — | % | — | % | ||||||||||||
All directors and executive officers as a group ( persons) | — | — | % | — | — | % | — | % |
(1) | Unless otherwise indicated, the address for all beneficial owners in this table is 801 East 86th Avenue, Merrillville, Indiana 46410. | |
(2) | NiSource Inc. is the ultimate parent company of Columbia Energy Holdings Corporation and may be deemed to beneficially own the units held by Columbia Energy Holdings Corporation. | |
(3) | Does not include common units that may be purchased in the directed unit program. | |
(4) | The address for Mr. Helms and Mr. Thomas is 5151 San Felipe, Suite 2500, Houston, Texas 77056. |
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The consideration received by NiSource and its subsidiaries for the contribution of the assets and liabilities to us | • 8,584,349 common units; | |
• 10,222,715 subordinated units; | ||
• 638,920 general partner units; | ||
• the incentive distribution rights; and | ||
• $269.7 million cash payment from the proceeds of this offering and related borrowings under our credit facility. |
Distributions of available cash to our general partner and its affiliates | We will generally make cash distributions 98% to our unitholders pro rata, including our general partner and its affiliates, as the holders of an aggregate 8,584,349 common units 10,222,715 subordinated units, and 2% to our general partner. In addition, if distributions exceed the minimum quarterly distribution and other higher target distribution levels, our general partner will be entitled to increasing percentages of the distributions, up to 50% of the distributions above the highest target distribution level. | |
Assuming we have sufficient available cash to pay the full minimum quarterly distribution on all of our outstanding units for four quarters, our general partner and its affiliates would receive an annual distribution of approximately $0.8 million on their general partner units and $22.6 million on their common and subordinated units. | ||
Payments to our general partner and its affiliates | We will reimburse NiSource and its affiliates for the payment of certain operating expenses and for the provision of various general and administrative services for our benefit. For further information regarding the administrative fee, please read “— Omnibus Agreement — Reimbursement of Operating and General and Administrative Expense.” |
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Withdrawal or removal of our general partner | If our general partner withdraws or is removed, its general partner interest and its incentive distribution rights will either be sold to the new general partner for cash or converted into common units, in each case for an amount equal to the fair market value of those interests. Please read “The Partnership Agreement — Withdrawal or Removal of the General Partner.” |
Liquidation | Upon our liquidation, the partners, including our general partner, will be entitled to receive liquidating distributions according to their respective capital account balances. |
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• | approved by the conflicts committee in good faith, although our general partner is not obligated to seek such approval; | |
• | approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner or any of its affiliates; | |
• | on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or | |
• | fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us. |
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• | permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any consideration to any interest of, or factors affecting, us, our affiliates or any limited partner. Examples include the exercise of its right to make a determination to receive Class B units in exchange for resetting the target distribution levels related to its incentive distribution rights, the exercise of its limited call right, the exercise of its rights to transfer or vote the units it owns, the exercise of its registration rights and its determination whether or not to consent to any merger or consolidation of the partnership or amendment to the partnership agreement; | |
• | provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as it acted in good faith, meaning it believed the decision was in the best interests of our partnership; |
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• | generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the conflicts committee of the board of directors of our general partner acting in good faith and not involving a vote of unitholders must be on terms no less favorable to us than those generally being provided to or available from unrelated third parties or must be “fair and reasonable” to us, as determined by our general partner in good faith and that, in determining whether a transaction or resolution is “fair and reasonable,” our general partner may consider the totality of the relationships between the parties involved, including other transactions that may be particularly advantageous or beneficial to us; | |
• | provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining that the general partner or those other persons acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal; and | |
• | provides that in resolving conflicts of interest, it will be presumed that in making its decision the general partner or its conflicts committee acted in good faith, and in any proceeding brought by or on behalf of any limited partner or us, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. |
• | the making of any expenditures, the lending or borrowing of money, the assumption or guarantee of or other contracting for, indebtedness and other liabilities, the issuance of evidences of indebtedness, including indebtedness that is convertible into our securities, and the incurring of any other obligations; | |
• | the purchase, sale or other acquisition or disposition of our securities, or the issuance of additional options, rights, warrants and appreciation rights relating to our securities; | |
• | the mortgage, pledge, encumbrance, hypothecation or exchange of any or all of our assets; | |
• | the negotiation, execution and performance of any contracts, conveyances or other instruments; | |
• | the distribution of our cash; | |
• | the selection and dismissal of employees and agents, outside attorneys, accountants, consultants and contractors and the determination of their compensation and other terms of employment or hiring; | |
• | the maintenance of insurance for our benefit and the benefit of our partners; | |
• | the formation of, or acquisition of an interest in, the contribution of property to, and the making of loans to, any limited or general partnerships, joint ventures, corporations, limited liability companies or other relationships; | |
• | the control of any matters affecting our rights and obligations, including the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation, arbitration or mediation and the incurring of legal expense and the settlement of claims and litigation; | |
• | the indemnification of any person against liabilities and contingencies to the extent permitted by law; |
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• | the making of tax, regulatory and other filings, or rendering of periodic or other reports to governmental or other agencies having jurisdiction over our business or assets; and | |
• | the entering into of agreements with any of its affiliates to render services to us or to itself in the discharge of its duties as our general partner. |
• | amount and timing of asset purchases and sales; | |
• | cash expenditures; | |
• | borrowings; | |
• | the issuance of additional units; and | |
• | the creation, reduction or increase of reserves in any quarter. |
• | enabling our general partner or its affiliates to receive distributions on any subordinated units held by them or the incentive distribution rights; or | |
• | hastening the expiration of the subordination period. |
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State-law fiduciary duty standards | Fiduciary duties are generally considered to include an obligation to act in good faith and with due care and loyalty. The duty of care, in the absence of a provision in a partnership agreement providing otherwise, would generally require a general partner to act for the partnership in the same manner as a prudent person would act on his own behalf. The duty of loyalty, in the absence of a provision in a partnership agreement providing otherwise, would generally prohibit a general partner of a Delaware limited partnership from taking any action or engaging in any transaction where a conflict of interest is present. | |
The Delaware Act generally provides that a limited partner may institute legal action on behalf of the partnership to recover damages from a third party where a general partner has refused to institute the action or where an effort to cause a general partner to do so is not likely to succeed. In addition, the statutory or case law of some jurisdictions may permit a limited partner to institute legal action on behalf of himself and all other similarly situated limited partners to recover damages from a general partner for violations of its fiduciary duties to the limited partners. | ||
Partnership agreement modified standards | Our partnership agreement contains provisions that waive or consent to conduct by our general partner and its affiliates that might otherwise raise issues about compliance with fiduciary duties or applicable law. For example, our partnership agreement provides that when our general partner is acting in its capacity as our general partner, as opposed to in its individual capacity, it must act in “good faith” and will not be subject to any other standard under applicable law. In addition, when our general partner is acting in its individual capacity, as opposed to in its capacity as our general partner, it may act without any fiduciary obligation to us or the unitholders whatsoever. These standards reduce the obligations to which our general partner would otherwise be held. | |
In addition to the other more specific provisions limiting the obligations of our general partner, our partnership agreement further provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that the general partner or its officers and directors acted in bad faith or engaged in fraud or willful misconduct or in the case of a criminal matter, acted with knowledge that the indemnitee’s conduct was criminal. | ||
Special provisions regarding affiliated transactions. Our partnership agreement generally provides that affiliated transactions and resolutions of conflicts of interest not involving a vote of unitholders and that are not approved by the conflicts committee of the board of directors of our general partner must be: |
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• on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or | ||
• “fair and reasonable” to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us). | ||
If our general partner does not seek approval from the conflicts committee and its board of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the bullet points above, then it will be presumed that, in making its decision, the board of directors, which may include board members affected by the conflict of interest, acted in good faith and in any proceeding brought by or on behalf of any limited partner or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. These standards reduce the obligations to which our general partner would otherwise be held. |
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• | surety bond premiums to replace lost or stolen certificates, taxes and other governmental charges; | |
• | special charges for services requested by a common unitholder; and | |
• | other similar fees or charges. |
• | becomes the record holder of the common units and is an assignee until admitted into our partnership as a substituted limited partner; | |
• | automatically requests admission as a substituted limited partner in our partnership; | |
• | executes and agrees to be bound by the terms and conditions of our partnership agreement; | |
• | represents that the transferee has the capacity, power and authority to enter into our partnership agreement; | |
• | grants powers of attorney to the officers of our general partner and any liquidator of us as specified in our partnership agreement; | |
• | gives the consents, covenants, representations and approvals contained in our partnership agreement, such as the approval of all transactions and agreements we are entering into in connection with our formation and this offering; and |
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• | certifies: |
• | that the transferee is an individual or is an entity subject to United States federal income taxation on the income generated by us; or | |
• | that, if the transferee is an entity not subject to United States federal income taxation on the income generated by us, as in the case, for example, of a mutual fund taxed as a regulated investment company or a partnership, all the entity’s owners are subject to United States federal income taxation on the income generated by us. |
• | the right to assign the common unit to a purchaser or other transferee; and | |
• | the right to transfer the right to seek admission as a substituted limited partner in our partnership for the transferred common units. |
• | will not receive cash distributions; | |
• | will not be allocated any of our income, gain, deduction, losses or credits for federal income tax or other tax purposes; | |
• | may not receive some federal income tax information or reports furnished to record holders of common units; and | |
• | will have no voting rights; |
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• | with regard to distributions of available cash, please read “Provisions of Our Partnership Agreement Relating to Cash Distributions”; | |
• | with regard to the fiduciary duties of our general partner, please read “Conflicts of Interest and Fiduciary Duties”; | |
• | with regard to the transfer of common units, please read “Description of the Common Units — Transfer of Common Units”; and | |
• | with regard to allocations of taxable income and taxable loss, please read “Material Tax Consequences.” |
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• | during the subordination period, the approval of a majority of the common units, excluding those common units held by our general partner and its affiliates, and a majority of the subordinated units, voting as separate classes; and | |
• | after the subordination period, the approval of a majority of the common units and Class B units, if any, voting as a single class. |
Issuance of additional units | No approval right. | |
Amendment of the partnership agreement | Certain amendments may be made by the general partner without the approval of the unitholders. Other amendments generally require the approval of a unit majority. Please read “— Amendment of the Partnership Agreement.” | |
Merger of our partnership or the sale of all or substantially all of our assets | Unit majority in certain circumstances. Please read “— Merger, Consolidation, Conversion, Sale or Other Disposition of Assets.” | |
Dissolution of our partnership | Unit majority. Please read “— Termination and Dissolution.” | |
Continuation of our business upon dissolution | Unit majority. Please read “— Termination and Dissolution.” | |
Withdrawal of the general partner | Under most circumstances, the approval of a majority of the common units, excluding common units held by our general partner and its affiliates, is required for the withdrawal of our general partner prior to March 31, 2018 in a manner that would cause a dissolution of our partnership. Please read “— Withdrawal or Removal of the General Partner.” | |
Removal of the general partner | Not less than 66 2/3% of the outstanding units, voting as a single class, including units held by our general partner and its affiliates. Please read “— Withdrawal or Removal of the General Partner.” | |
Transfer of the general partner interest | Our general partner may transfer all, but not less than all, of its general partner interest in us without a vote of our unitholders to an affiliate or another person in connection with its merger or consolidation with or into, or sale of all or substantially all of its assets to, such person. The approval of a majority of the common units, excluding common units held by the general partner and its affiliates, is required in other circumstances for a transfer of the general partner interest to a third party prior to March 31, 2018. See ‘‘— Transfer of General Partner Units.” |
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Transfer of incentive distribution rights | Our general partner may transfer any or all of the incentive distribution rights without a vote of our unitholders to an affiliate or another person as part of our general partner’s merger or consolidation with or into, or sale of all or substantially all of its assets or the sale of all of the ownership interests in such holder to, such person. The approval of a majority of the common units, excluding common units held by the general partner and its affiliates, is required in other circumstances for a transfer of the incentive distribution rights to a third party prior to March 31, 2018. Please read ‘‘— Transfer of Incentive Distribution Rights.” | |
Transfer of ownership interests in our general partner | No approval required at any time. Please read ‘‘— Transfer of Ownership Interests in the General Partner.” |
• | to remove or replace the general partner; | |
• | to approve some amendments to the partnership agreement; or | |
• | to take other action under the partnership agreement; |
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• | enlarge the obligations of any limited partner without its consent, unless approved by at least a majority of the type or class of limited partner interests so affected; or | |
• | enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by us to our general partner or any of its affiliates without the consent of our general partner, which consent may be given or withheld at its option. |
• | a change in our name, the location of our principal place of our business, our registered agent or our registered office; | |
• | the admission, substitution, withdrawal or removal of partners in accordance with our partnership agreement; | |
• | a change that our general partner determines to be necessary or appropriate to qualify or continue our qualification as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state or to ensure that neither we nor the operating partnership nor any of its subsidiaries will be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes; | |
• | an amendment that is necessary, in the opinion of our counsel, to prevent us or our general partner or its directors, officers, agents or trustees from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment Advisors Act of 1940, or “plan asset” regulations adopted under the Employee Retirement Income Security Act of 1974, or ERISA, whether or not substantially similar to plan asset regulations currently applied or proposed; | |
• | an amendment that our general partner determines to be necessary or appropriate for the authorization of additional partnership securities or rights to acquire partnership securities, including any amendment that our general partner determines is necessary or appropriate in connection with: |
• | the adjustments of the minimum quarterly distribution, first target distribution, second target distribution and third target distribution in connection with the reset of our general partner’s incentive distribution rights as described under “Provisions of Our Partnership Agreement Relating to Cash Distributions — General Partner’s Right to Reset Incentive Distribution Levels”; or | |
• | the implementation of the provisions relating to our general partner’s right to reset its incentive distribution rights in exchange for Class B units; and | |
• | any modification of the incentive distribution rights made in connection with the issuance of additional partnership securities or rights to acquire partnership securities, provided that, any such modifications and related issuance of partnership securities have received approval by a majority of the members of the conflicts committee of our general partner; |
• | any amendment expressly permitted in our partnership agreement to be made by our general partner acting alone; | |
• | an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of our partnership agreement; |
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• | any amendment that our general partner determines to be necessary or appropriate for the formation by us of, or our investment in, any corporation, partnership or other entity, as otherwise permitted by our partnership agreement; | |
• | a change in our fiscal year or taxable year and related changes; | |
• | conversions into, mergers with or conveyances to another limited liability entity that is newly formed and has no assets, liabilities or operations at the time of the conversion, merger or conveyance other than those it receives by way of the conversion, merger or conveyance; or | |
• | any other amendments substantially similar to any of the matters described in the clauses above. |
• | do not adversely affect in any material respect the limited partners considered as a whole or any particular class of limited partners as compared to other classes of limited partners; | |
• | are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute; | |
• | are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed for trading; | |
• | are necessary or appropriate for any action taken by our general partner relating to splits or combinations of units under the provisions of our partnership agreement; or | |
• | are required to effect the intent expressed in this prospectus or the intent of the provisions of our partnership agreement or are otherwise contemplated by our partnership agreement. |
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• | the election of our general partner to dissolve us, if approved by the holders of units representing a unit majority; | |
• | there being no limited partners, unless we are continued without dissolution in accordance with applicable Delaware law; | |
• | the entry of a decree of judicial dissolution of our partnership; or | |
• | the withdrawal or removal of our general partner or any other event that results in its ceasing to be our general partner other than by reason of a transfer of its general partner interest in accordance with our partnership agreement or withdrawal or removal following approval and admission of a successor. |
• | the action would not result in the loss of limited liability of any limited partner; and | |
• | neither our partnership, our operating partnership nor any of our other subsidiaries would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of that right to continue. |
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• | the subordination period will end, and all outstanding subordinated units will immediately convert into common units on a one-for-one basis; | |
• | any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and | |
• | our general partner will have the right to convert its general partner interest and its incentive distribution rights into common units or to receive cash in exchange for those interests based on the fair market value of those interests at that time. |
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• | an affiliate of our general partner (other than an individual); or | |
• | another entity as part of the merger or consolidation of our general partner with or into another entity or the transfer by our general partner of all or substantially all of its assets to another entity, |
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• | the subordination period will end and all outstanding subordinated units will immediately convert into common units on a one-for-one basis; | |
• | any existing arrearages in payment of the minimum quarterly distribution on the common units will be extinguished; and | |
• | our general partner will have the right to convert its general partner units and its incentive distribution rights into common units or to receive cash in exchange for those interests based on the fair market value of those interests at that time. |
• | the highest cash price paid by either of our general partner or any of its affiliates for any limited partner interests of the class purchased within the 90 days preceding the date on which our general partner first mails notice of its election to purchase those limited partner interests; and | |
• | the current market price as of the date three days before the date the notice is mailed. |
• | that the transferee or unitholder is an individual or an entity subject to United States federal income taxation on the income generated by us; or | |
• | that, if the transferee unitholder is an entity not subject to United States federal income taxation on the income generated by us, as in the case, for example, of a mutual fund taxed as a regulated investment company or a partnership, all the entity’s owners are subject to United States federal income taxation on the income generated by us. |
• | a transfer application containing the required certification; |
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• | a re-certification containing the required certification within 30 days after request; or | |
• | provides a false certification; then |
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• | our general partner; | |
• | any departing general partner; | |
• | any person who is or was an affiliate of a general partner or any departing general partner; | |
• | any person who is or was a director, officer, member, partner, fiduciary or trustee of any entity set forth in the preceding three bullet points; | |
• | any person who is or was serving as director, officer, member, partner, fiduciary or trustee of another person at the request of our general partner or any departing general partner; and | |
• | any person designated by our general partner. |
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• | a current list of the name and last known address of each partner; | |
• | a copy of our tax returns; | |
• | information as to the amount of cash, and a description and statement of the agreed value of any other property or services, contributed or to be contributed by each partner and the date on which each partner became a partner; | |
• | copies of our partnership agreement, our certificate of limited partnership, related amendments and powers of attorney under which they have been executed; | |
• | information regarding the status of our business and financial condition; and | |
• | any other information regarding our affairs as is just and reasonable. |
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• | 1% of the total number of the securities outstanding; or | |
• | the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale. |
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• | gross income from operations exceeds the amount required to make minimum quarterly distributions on all units, yet we only distribute the minimum quarterly distributions on all units; or | |
• | we make a future offering of common units and use the proceeds of the offering in a manner that does not produce substantial additional deductions during the period described above, such as to repay indebtedness outstanding at the time of this offering or to acquire property that is not eligible for depreciation or amortization for federal income tax purposes or that is depreciable or amortizable at a rate significantly slower than the rate applicable to our assets at the time of this offering. |
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• | interest on indebtedness properly allocable to property held for investment; | |
• | our interest expense attributed to portfolio income; and | |
• | the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income. |
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• | his relative contributions to us; | |
• | the interests of all the partners in profits and losses; | |
• | the interest of all the partners in cash flow; and | |
• | the rights of all the partners to distributions of capital upon liquidation. |
• | any of our income, gain, loss or deduction with respect to those units would not be reportable by the unitholder; | |
• | any cash distributions received by the unitholder as to those units would be fully taxable; and | |
• | all of these distributions would appear to be ordinary income. |
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• | a short sale; |
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• | an offsetting notional principal contract; or | |
• | a futures or forward contract with respect to the partnership interest or substantially identical property. |
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• | the name, address and taxpayer identification number of the beneficial owner and the nominee; | |
• | whether the beneficial owner is: |
• | a person that is not a United States person; | |
• | a foreign government, an international organization or any wholly owned agency or instrumentality of either of the foregoing; or | |
• | a tax-exempt entity; |
• | the amount and description of units held, acquired or transferred for the beneficial owner; and | |
• | specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales. |
• | for which there is, or was, “substantial authority”; or | |
• | as to which there is a reasonable basis and the pertinent facts of that position are disclosed on the return. |
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• | accuracy-related penalties with a broader scope, significantly narrower exceptions, and potentially greater amounts than described above at “— Accuracy-Related Penalties”; | |
• | for those persons otherwise entitled to deduct interest on federal tax deficiencies, nondeductibility of interest on any resulting tax liability; and | |
• | in the case of a listed transaction, an extended statute of limitations. |
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• | the underwriters’ option to purchase additional units is not exercised; and | |
• | the underwriters exercise their option to purchase additional units in full. |
Common Units Owned Immediately | ||||||||||||||||
Common Units Owned Immediately | After Exercise of Underwriters’ | |||||||||||||||
After This Offering | Option and Related Unit Redemption | |||||||||||||||
Assuming | Assuming | |||||||||||||||
Underwriters’ | Underwriters’ | |||||||||||||||
Option is not | Option is | |||||||||||||||
Name of Selling Unitholder | Exercised | Percent(1) | Exercised in Full | Percent(1) | ||||||||||||
Columbia Energy Holdings Corporation | 8,584,349 | 26.9 | % | 6,709,349 | 21.0 | % |
(1) | Percentage of total units outstanding, including common units, subordinated units and general partner units. |
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• | whether the investment is prudent under Section 404(a)(1)(B) of ERISA; | |
• | whether in making the investment, that plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA; and | |
• | whether the investment will result in recognition of unrelated business taxable income by the plan and, if so, the potential after-tax investment return. Please read “Material Tax Consequences — Tax-Exempt Organizations and Other Investors”. |
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Number of | ||||
Underwriters | Common Units | |||
Lehman Brothers Inc. | ||||
Citigroup Global Markets Inc. | ||||
Total | 12,500,000 | |||
• | the obligation to purchase all of the common units offered hereby (other than those common units covered by their option to purchase additional common units as described below) if any of the common units are purchased; | |
• | the representations and warranties made by us to the underwriters are true; | |
• | there has been no material change in the business or the financial markets; and | |
• | we deliver customary closing documents to the underwriters. |
No Exercise | Full Exercise | |||||||
Paid by us per unit | $ | $ | ||||||
Total | $ | $ |
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• | during the last 17 days of the180-day restricted period we issue an earnings release or announce material news or a material event; or | |
• | prior to the expiration of the180-day restricted period, we announce that we will release earnings results during the16-day period beginning on the last day of the180-day period, |
• | the history and prospects for the industry in which we compete; | |
• | our financial information and our assets; | |
• | the ability of our management and our business potential and earning prospects; | |
• | the prevailing securities markets at the time of this offering; and | |
• | the recent market prices of, and the demand for, publicly traded common units of generally comparable master limited partnerships. |
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• | Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum. | |
• | A short position involves a sale by the underwriters of the common units in excess of the number of common units the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of common units involved in the sales made by the underwriters in excess of the number of common units they are obligated to purchase is not greater than the number of common units that they may purchase by exercising their option to purchase additional common units. In a naked short position, the number of common units involved is greater than the number of common units in their option to purchase additional common units. The underwriters may close out any short position by either exercising their option to purchase additional common unitsand/or purchasing common units in the open market. In determining the source of common units to close out the short position, the underwriters will consider, among other things, the price of common units available for purchase in the open market as compared to the price at which they may purchase common units through their option to purchase additional common units. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the common units in the open market after pricing that could adversely affect investors who purchase in the offering. | |
• | Syndicate covering transactions involve purchases of the common units in the open market after the distribution has been completed in order to cover syndicate short positions. | |
• | Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common units originally sold by the syndicate member are purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions. |
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F-2 | ||||
F-3 | ||||
F-4 | ||||
F-5 | ||||
F-7 | ||||
COLUMBIA GULF TRANSMISSION COMPANY FINANCIAL STATEMENTS: | ||||
F-10 | ||||
F-11 | ||||
F-12 | ||||
F-14 | ||||
F-15 | ||||
F-16 | ||||
F-32 | ||||
F-33 | ||||
F-35 | ||||
F-36 | ||||
F-37 | ||||
NISOURCE ENERGY PARTNERS, L.P. FINANCIAL STATEMENTS: | ||||
F-43 | ||||
F-44 | ||||
F-45 | ||||
NISOURCE GP, LLC FINANCIAL STATEMENTS: | ||||
F-46 | ||||
F-47 | ||||
F-48 |
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• | NiSource or its subsidiaries will contribute Columbia Gulf to the partnership; | |
• | we will issue to subsidiaries of NiSource 8,584,349 common units and 10,222,715 subordinated units, representing an aggregate 58.9% limited partner interest in us; | |
• | we will issue to NiSource GP, LLC, a subsidiary of NiSource, a 2% general partner interest in us and all of our incentive distribution rights, which will entitle our general partner to increasing percentages of the cash we distribute in excess of $0.345 per unit per quarter (115% of the minimum quarterly distribution); | |
• | we will issue 12,500,000 common units to the public in this offering, representing a 39.1% limited partner interest in us, and will use the proceeds as described in “Use of Proceeds”; | |
• | we expect to borrow approximately $37.0 million in term debt and $163.0 million in revolving debt under our $250.0 million credit facility and distribute the aggregate net proceeds of such borrowings (approximately $198.0 million net of debt issuance costs) to subsidiaries of NiSource; and | |
• | we will enter into an omnibus agreement with NiSource, our general partner and certain of their affiliates pursuant to which NiSource will indemnify us for certain environmental and tax liabilities, title and right-of-way defects and potentialgovernment-mandated pipeline capital expenditures. |
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Predecessor | Pro Forma | Partnership | ||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
(In millions, except unit amounts) | ||||||||||||
Operating Revenues | ||||||||||||
Transportation revenues | $ | 108.4 | $ | (4.6 | )(a) | $ | 103.8 | |||||
Transportation revenues — affiliated | 13.4 | — | 13.4 | |||||||||
Other revenues | 1.4 | (1.4 | )(a) | — | ||||||||
Other revenues — affiliated | 0.1 | — | 0.1 | |||||||||
Total Operating Revenues | 123.3 | (6.0 | ) | 117.3 | ||||||||
Operating Expenses | ||||||||||||
Operation and maintenance | 43.5 | (6.1 | )(a) | 37.4 | ||||||||
Operation and maintenance — affiliated | 17.7 | — | 17.7 | |||||||||
Depreciation and amortization | 22.0 | (2.9 | )(a) | 19.1 | ||||||||
Other taxes | 8.1 | — | 8.1 | |||||||||
Total Operating Expenses | 91.3 | (9.0 | ) | 82.3 | ||||||||
Operating Income | 32.0 | 3.0 | 35.0 | |||||||||
Other Income (Deductions) | ||||||||||||
Interest expense — affiliated | (4.0 | ) | 0.3 | (b) | (3.7 | ) | ||||||
Other interest expense | — | (12.1 | )(c) | (12.5 | ) | |||||||
(0.4 | )(d) | |||||||||||
Allowance for borrowed funds used during construction | 1.3 | (0.3 | )(a) | 1.0 | ||||||||
Interest income | 0.1 | 1.0 | (e) | 1.1 | ||||||||
Interest income — affiliated | 0.4 | — | 0.4 | |||||||||
Other, net | 0.7 | — | 0.7 | |||||||||
Total Other Income (Deductions) | (1.5 | ) | (11.5 | ) | (13.0 | ) | ||||||
Income Before Income Taxes | 30.5 | (8.5 | ) | 22.0 | ||||||||
Income Taxes | 12.2 | (12.1 | )(f) | 0.1 | ||||||||
Net Income | $ | 18.3 | $ | 3.6 | $ | 21.9 | ||||||
General partner’s interest in net income | $ | 0.4 | ||||||||||
Limited partners’ interest in net income | $ | 21.5 | ||||||||||
Net income per limited partners’ unit | ||||||||||||
Common units | $ | 1.02 | ||||||||||
Subordinated units | $ | — | ||||||||||
Weighted average number of limited partners’ units outstanding | ||||||||||||
Common units | 21,084,349 | |||||||||||
Subordinated units | 10,222,715 | |||||||||||
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Predecessor | Pro Forma | Partnership | ||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
(In millions, except unit amounts) | ||||||||||||
Operating Revenues | ||||||||||||
Transportation revenues | $ | 89.1 | $ | (4.0 | )(a) | $ | 85.1 | |||||
Transportation revenues — affiliated | 9.3 | — | 9.3 | |||||||||
Other revenues | 1.2 | (1.1 | )(a) | 0.1 | ||||||||
Total Operating Revenues | 99.6 | (5.1 | ) | 94.5 | ||||||||
Operating Expenses | ||||||||||||
Operation and maintenance | 31.3 | (6.0 | )(a) | 25.3 | ||||||||
Operation and maintenance — affiliated | 13.1 | — | 13.1 | |||||||||
Depreciation and amortization | 16.4 | (1.6 | )(a) | 14.8 | ||||||||
Other taxes | 6.2 | — | 6.2 | |||||||||
Total Operating Expenses | 67.0 | (7.6 | ) | 59.4 | ||||||||
Operating Income | 32.6 | 2.5 | 35.1 | |||||||||
Other Income (Deductions) | ||||||||||||
Interest expense — affiliated | (3.3 | ) | 0.5 | (b) | (2.8 | ) | ||||||
Other interest expense | (0.1 | ) | (9.1 | )(c) | (9.5 | ) | ||||||
(0.3 | )(d) | |||||||||||
Allowance for borrowed funds used during construction | 1.6 | — | 1.6 | |||||||||
Interest income | — | 0.8 | (e) | 0.8 | ||||||||
Total Other Income (Deductions) | (1.8 | ) | (8.1 | ) | (9.9 | ) | ||||||
Income Before Income Taxes | 30.8 | (5.6 | ) | 25.2 | ||||||||
Income Taxes | 10.7 | (10.6 | )(f) | 0.1 | ||||||||
Net Income | $ | 20.1 | $ | 5.0 | $ | 25.1 | ||||||
General partner’s interest in net income | $ | 0.5 | ||||||||||
Limited partners’ interest in net income | $ | 24.6 | ||||||||||
Net income per limited partners’ unit | ||||||||||||
Common units | $ | 0.90 | ||||||||||
Subordinated units | $ | 0.55 | ||||||||||
Weighted average number of limited partners’ units outstanding | ||||||||||||
Common units | 21,084,349 | |||||||||||
Subordinated units | 10,222,715 | |||||||||||
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Predecessor | Pro Forma | Partnership | ||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
(In millions) | ||||||||||||
ASSETS | ||||||||||||
Property Plant and Equipment | ||||||||||||
Total property plant and equipment | $ | 1,136.9 | $ | — | $ | 1,136.9 | ||||||
Accumulated provision for depreciation and amortization | (815.4 | ) | — | (815.4 | ) | |||||||
Net Property Plant and Equipment | 321.5 | — | 321.5 | |||||||||
Other Assets | ||||||||||||
Assets held for sale | 5.3 | (5.3 | )(a) | — | ||||||||
Current Assets | ||||||||||||
Cash and cash equivalents | — | 250.0 | (g) | 89.7 | ||||||||
(18.9 | )(h) | |||||||||||
(54.9 | )(i) | |||||||||||
163.0 | (j) | |||||||||||
(2.0 | )(k) | |||||||||||
(220.8 | )(l) | |||||||||||
(37.0 | )(m) | |||||||||||
37.0 | (n) | |||||||||||
(26.7 | )(o) | |||||||||||
Marketable securities | — | 37.0 | (m) | 37.0 | ||||||||
Accounts receivable | 60.7 | (60.7 | )(p) | — | ||||||||
Accounts receivable — affiliated | 1.7 | (1.7 | )(p) | — | ||||||||
Materials and supplies, at average cost | 8.8 | — | 8.8 | |||||||||
Exchange gas receivable | 37.1 | — | 37.1 | |||||||||
Regulatory assets | 2.3 | — | 2.3 | |||||||||
Prepaid insurance | 6.8 | — | 6.8 | |||||||||
Prepayments and other | 2.5 | (1.1 | )(f) | 1.4 | ||||||||
Total Current Assets | 119.9 | 63.2 | 183.1 | |||||||||
Other Assets | ||||||||||||
Regulatory assets | 13.4 | — | 13.4 | |||||||||
Goodwill | 321.3 | — | 321.3 | |||||||||
Deferred charges and other | 1.9 | — | 1.9 | |||||||||
Total Other Assets | 336.6 | — | 336.6 | |||||||||
Total Assets | 783.3 | 57.9 | 841.2 | |||||||||
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SEPTEMBER 30, 2007
Predecessor | Pro Forma | Partnership | ||||||||||
Historical | Adjustments | Pro Forma | ||||||||||
(In millions) | ||||||||||||
PARTNERS’CAPITAL/PARENT NET EQUITY | ||||||||||||
Parents net equity | $ | 508.3 | $ | 39.9 | (f) | $ | 0.0 | |||||
(54.9 | )(i) | |||||||||||
(220.8 | )(l) | |||||||||||
(5.3 | )(a) | |||||||||||
(62.4 | )(p) | |||||||||||
(204.8 | )(q) | |||||||||||
Common unitholders — public | — | 250.0 | (g) | 231.1 | ||||||||
(18.9 | )(h) | |||||||||||
Common unitholders — sponsor | — | 90.4 | (q) | 90.4 | ||||||||
Covertible subordinated unitholders — sponsor | — | 107.7 | (q) | 107.7 | ||||||||
General partner interest | — | 6.7 | (q) | 6.7 | ||||||||
Total partners’ capital/parent net equity | 508.3 | (72.4 | ) | 435.9 | ||||||||
Long-term debt, excluding amounts due within one year | 67.9 | 163.0 | (j) | 265.9 | ||||||||
37.0 | (n) | |||||||||||
(2.0 | )(k) | |||||||||||
Total Capitalization | 576.2 | 125.6 | 701.8 | |||||||||
Current Liabilities | ||||||||||||
Short-term borrowings — affiliated | 26.7 | (26.7 | )(o) | — | ||||||||
Accounts payable | 8.9 | — | 8.9 | |||||||||
Accounts payable — affiliated | 28.9 | — | 28.9 | |||||||||
Customer deposits | 1.8 | — | 1.8 | |||||||||
Taxes accrued | 6.2 | (0.8 | )(f) | 5.4 | ||||||||
Exchange gas payable | 15.3 | — | 15.3 | |||||||||
Regulatory liabilities | 0.5 | — | 0.5 | |||||||||
Accrued liability for postretirement and postemployment benefits | 0.1 | — | 0.1 | |||||||||
Other accruals | 5.1 | — | 5.1 | |||||||||
Total Current Liabilities | 93.5 | (27.5 | ) | 66.0 | ||||||||
Other Liabilities and Deferred Credits | ||||||||||||
Deferred income taxes | 40.6 | (40.2 | )(f) | 0.4 | ||||||||
Deferred investment tax credits | 0.2 | — | 0.2 | |||||||||
Accrued liability for postretirement and postemployment benefits | 10.8 | — | 10.8 | |||||||||
Regulatory liabilities and other removal costs | 49.8 | — | 49.8 | |||||||||
Asset retirement obligations | 3.5 | — | 3.5 | |||||||||
Other noncurrent liabilities | 8.7 | — | 8.7 | |||||||||
Total Other Liabilities and Deferred Credits | 113.6 | (40.2 | ) | 73.4 | ||||||||
Commitments and Contingencies | — | — | — | |||||||||
Total Partners’ Capital/Parent Net Equity and Liabilities | $ | 783.3 | $ | 57.9 | $ | 841.2 | ||||||
F-6
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1. | Basis of Presentation, The Offering and Other Transactions |
• | Columbia Gulf’s distribution of accounts receivable of $62.4 million to subsidiaries of NiSource; | |
• | Our receipt of $235.0 million in net proceeds after deducting underwriting discounts, but before paying expenses associated with the offering and related formation transactions and structuring fees payable to Lehman Brothers Inc. from the issuance and sale of 12,500,000 common units to the public at an assumed price of $20.00 per common unit; | |
• | Our borrowing approximately $37.0 million in term debt and $163.0 million in revolving debt under our new $250.0 million credit facility; | |
• | Our use of proceeds and borrowings to pay transaction expenses and underwriting commissions, retire assumed indebtedness, reimburse subsidiaries of NiSource for certain capital expenditures, make distributions to subsidiaries of NiSource, and fund identified capital expenditures and working capital; and | |
• | The disposition of certain offshore assets currently owned by Columbia Gulf. On October 30, 2007 Columbia Gulf and Tennessee Gas Pipeline Company (Tennessee) entered into a binding purchase and sale agreement whereby Tennessee will buy certain assets in the offshore Gulf of Mexico. |
2. | Pro Forma Adjustments and Assumptions |
F-7
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F-8
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3. | Pro Forma Net Income per Unit |
F-9
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F-10
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Year Ended December 31, | 2006 | 2005 | 2004 | |||||||||
(In millions) | ||||||||||||
Operating Revenues | ||||||||||||
Transportation revenues | $ | 108.4 | $ | 97.7 | $ | 105.1 | ||||||
Transportation revenues — affiliated | 13.4 | 16.6 | 19.5 | |||||||||
Other revenues | 1.4 | 1.7 | 2.3 | |||||||||
Other revenues — affiliated | 0.1 | 0.1 | 0.1 | |||||||||
Total Operating Revenues | 123.3 | 116.1 | 127.0 | |||||||||
Operating Expenses | ||||||||||||
Operation and maintenance | 43.5 | 30.9 | 38.4 | |||||||||
Operation and maintenance — affiliated | 17.7 | 20.4 | 17.3 | |||||||||
Depreciation and amortization | 22.0 | 22.2 | 23.2 | |||||||||
Other taxes | 8.1 | 8.5 | 7.8 | |||||||||
Total Operating Expenses | 91.3 | 82.0 | 86.7 | |||||||||
Operating Income | 32.0 | 34.1 | 40.3 | |||||||||
Other Income (Deductions) | ||||||||||||
Interest expense — affiliated | (4.0 | ) | (5.1 | ) | (5.3 | ) | ||||||
Other interest expense | — | — | (0.1 | ) | ||||||||
Allowance for borrowed funds used during construction | 1.3 | 0.1 | — | |||||||||
Interest income | 0.1 | — | 0.1 | |||||||||
Interest income — affiliated | 0.4 | 0.6 | 0.3 | |||||||||
Other, net | 0.7 | 0.5 | — | |||||||||
Total Other Income (Deductions) | (1.5 | ) | (3.9 | ) | (5.0 | ) | ||||||
Income Before Income Taxes | 30.5 | 30.2 | 35.3 | |||||||||
Income Taxes | 12.2 | 11.7 | 13.1 | |||||||||
Net Income | $ | 18.3 | $ | 18.5 | $ | 22.2 | ||||||
Common dividends declared | $ | 15.0 | $ | 30.6 | $ | — | ||||||
F-11
Table of Contents
As of December 31, | 2006 | 2005 | ||||||
(In millions) | ||||||||
ASSETS | ||||||||
Property Plant and Equipment | ||||||||
Total property plant and equipment | $ | 1,393.4 | $ | 1,373.4 | ||||
Accumulated provision for depreciation and amortization | (1,082.8 | ) | (1,067.9 | ) | ||||
Net Property Plant and Equipment | 310.6 | 305.5 | ||||||
Current Assets | ||||||||
Accounts receivable (less reserve of $1.6 and $1.2, respectively) | 70.8 | 14.4 | ||||||
Accounts receivable — affiliated | 15.2 | 21.2 | ||||||
Materials and supplies, at average cost | 8.1 | 7.6 | ||||||
Exchange gas receivable | 11.3 | 31.1 | ||||||
Regulatory assets | 1.6 | 1.8 | ||||||
Prepayments and other | 6.8 | 3.4 | ||||||
Total Current Assets | 113.8 | 79.5 | ||||||
Other Assets | ||||||||
Regulatory assets | 15.7 | 9.3 | ||||||
Goodwill | 321.3 | 321.3 | ||||||
Deferred charges and other | 1.7 | 0.4 | ||||||
Total Other Assets | 338.7 | 331.0 | ||||||
Total Assets | $ | 763.1 | $ | 716.0 | ||||
F-12
Table of Contents
As of December 31, | 2006 | 2005 | ||||||
(In millions, except shares outstanding) | ||||||||
CAPITALIZATION AND LIABILITIES | ||||||||
Capitalization Common Shareholder’s Equity Common stock — $10 par value — 3,000 shares authorized, 1,933 shares issued and outstanding | $ | — | $ | — | ||||
Additional paid-in capital | 418.5 | 418.3 | ||||||
Retained earnings | 69.7 | 66.4 | ||||||
Total Common Shareholder’s Equity | 488.2 | 484.7 | ||||||
Long-term debt-affiliated, excluding amounts due within one year | 67.9 | 67.9 | ||||||
Total Capitalization | 556.1 | 552.6 | ||||||
Current Liabilities | ||||||||
Short-term borrowings-affiliated | 13.7 | — | ||||||
Accounts payable | 30.1 | 8.1 | ||||||
Accounts payable-affiliated | 9.5 | 2.3 | ||||||
Customer deposits | 1.1 | 1.1 | ||||||
Taxes accrued | 4.1 | 6.8 | ||||||
Exchange gas payable | 25.5 | 39.8 | ||||||
Regulatory liabilities | 0.3 | 0.1 | ||||||
Accrued liability for postretirement and postemployment benefits | 0.1 | 0.8 | ||||||
Other accruals | 13.0 | 11.1 | ||||||
Total Current Liabilities | 97.4 | 70.1 | ||||||
Other Liabilities and Deferred Credits | ||||||||
Deferred income taxes | 40.5 | 37.4 | ||||||
Deferred investment tax credits | 0.2 | 0.2 | ||||||
Deferred credits | 0.1 | — | ||||||
Accrued liability for postretirement and postemployment benefits | 12.8 | 7.2 | ||||||
Regulatory liabilities and other removal costs | 46.9 | 43.2 | ||||||
Asset retirement obligations | 3.4 | 3.2 | ||||||
Other noncurrent liabilities | 5.7 | 2.1 | ||||||
Total Other Liabilities and Deferred Credits | 109.6 | 93.3 | ||||||
Commitments and Contingencies | — | — | ||||||
Total Capitalization and Liabilities | $ | 763.1 | $ | 716.0 | ||||
F-13
Table of Contents
Year Ended December 31, | 2006 | 2005 | 2004 | |||||||||
(In millions) | ||||||||||||
Operating Activities | ||||||||||||
Net income | $ | 18.3 | $ | 18.5 | $ | 22.2 | ||||||
Adjustments to reconcile net income to net cash flows from operating activities: | ||||||||||||
Depreciation and amortization | 22.0 | 22.2 | 23.2 | |||||||||
Deferred income taxes and investment tax credits | 2.8 | 1.0 | 2.8 | |||||||||
Stock compensation expense | 0.1 | 0.1 | — | |||||||||
Changes in assets and liabilities: | ||||||||||||
Accounts receivable | (31.7 | ) | 2.3 | 2.7 | ||||||||
Inventories | (0.5 | ) | (0.6 | ) | 0.1 | |||||||
Accounts payable | 27.2 | 3.2 | 0.4 | |||||||||
Customer deposits | — | (0.1 | ) | 1.2 | ||||||||
Taxes accrued | (2.4 | ) | 3.6 | 0.9 | ||||||||
Exchange gas receivable/payable | 0.5 | 0.3 | 0.3 | |||||||||
Other accruals | 3.4 | 2.6 | (7.6 | ) | ||||||||
Prepayments and other current assets | (3.1 | ) | (0.4 | ) | 0.1 | |||||||
Regulatory assets/liabilities | 0.3 | (1.7 | ) | — | ||||||||
Postretirement and postemployment benefits | 0.3 | 0.9 | 0.6 | |||||||||
Deferred credits | 0.1 | — | — | |||||||||
Deferred charges and other noncurrent assets | (0.9 | ) | 0.2 | 0.4 | ||||||||
Other noncurrent liabilities | 3.7 | (1.1 | ) | (2.0 | ) | |||||||
Net Cash Flows from Operating Activities | 40.1 | 51.0 | 45.3 | |||||||||
Investing Activities | ||||||||||||
Capital expenditures | (25.1 | ) | (31.5 | ) | (7.0 | ) | ||||||
Cost to replace capital items, net of insurance recoveries (see Note 14) | (25.0 | ) | (5.1 | ) | — | |||||||
Changes in short-term lendings — affiliated | 11.3 | 16.3 | (27.6 | ) | ||||||||
Net Cash Flows used for Investing Activities | (38.8 | ) | (20.3 | ) | (34.6 | ) | ||||||
Financing Activities | ||||||||||||
Issuance of long-term debt | — | 67.9 | — | |||||||||
Retirement of long-term debt | — | (67.9 | ) | — | ||||||||
Changes in short-term borrowings — affiliated | 13.7 | — | (10.7 | ) | ||||||||
Capital contributed | — | (0.1 | ) | — | ||||||||
Dividends paid — common stock | (15.0 | ) | (30.6 | ) | — | |||||||
Net Cash Flows used for Financing Activities | (1.3 | ) | (30.7 | ) | (10.7 | ) | ||||||
Increase (decrease) in cash and cash equivalents | — | — | — | |||||||||
Cash and cash equivalents at beginning of year | — | — | — | |||||||||
Cash and cash equivalents at end of period | $ | — | $ | — | $ | — | ||||||
Supplemental Disclosures of Cash Flow Information | ||||||||||||
Cash paid for interest | $ | 4.0 | $ | 5.2 | $ | 5.4 | ||||||
Interest capitalized | 1.3 | 0.1 | 0.0 | |||||||||
Cash paid for income taxes | 11.7 | 7.4 | 9.8 |
F-14
Table of Contents
Common Stock | Additional | |||||||||||||||||||
Shares | Paid-In | Retained | ||||||||||||||||||
Outstanding | Value | Capital | Earnings | Total | ||||||||||||||||
(In millions, except for shares outstanding) | ||||||||||||||||||||
Balance January 1, 2004 | 1,933 | $ | — | $ | 416.6 | $ | 56.3 | $ | 472.9 | |||||||||||
Net Income | 22.2 | 22.2 | ||||||||||||||||||
Capital contributed | 1.2 | 1.2 | ||||||||||||||||||
Tax benefit allocation | 0.5 | 0.5 | ||||||||||||||||||
Balance December 31, 2004 | 1,933 | $ | — | $ | 418.3 | $ | 78.5 | $ | 496.8 | |||||||||||
Net Income | 18.5 | 18.5 | ||||||||||||||||||
Cash dividends: | ||||||||||||||||||||
Common stock | (30.6 | ) | (30.6 | ) | ||||||||||||||||
Capital contributed | (0.1 | ) | (0.1 | ) | ||||||||||||||||
Tax benefit allocation | 0.1 | 0.1 | ||||||||||||||||||
Balance December 31, 2005 | 1,933 | $ | — | $ | 418.3 | $ | 66.4 | $ | 484.7 | |||||||||||
Net Income | 18.3 | 18.3 | ||||||||||||||||||
Cash dividends: | ||||||||||||||||||||
Common stock | (15.0 | ) | (15.0 | ) | ||||||||||||||||
Tax benefit allocation | 0.2 | — | 0.2 | |||||||||||||||||
Balance December 31, 2006 | 1,933 | $ | — | $ | 418.5 | $ | 69.7 | $ | 488.2 | |||||||||||
F-15
Table of Contents
1. | Nature of Operations and Summary of Significant Accounting Policies |
• | Corporate services, such as human resources, finance and accounting, legal and senior executives; | |
• | Business services, including payroll, accounts payable and information technology; and | |
• | Pension and other post-retirement benefit costs. |
F-16
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
At December 31, | 2006 | 2005 | ||||||
(In millions) | ||||||||
Assets | ||||||||
Other postretirement costs | $ | 8.5 | $ | 8.2 | ||||
FERC annual charge assessment | 1.0 | 1.1 | ||||||
Retirement income plan costs | 1.0 | 1.4 | ||||||
AFUDC | 0.3 | 0.3 | ||||||
Unrecognized pension benefit and OPEB cost (SFAS 158) | 6.4 | — | ||||||
Other | 0.1 | 0.1 | ||||||
Total Assets | $ | 17.3 | $ | 11.1 | ||||
Liabilities | ||||||||
SFAS 109 — excess deferred taxes | 0.3 | 0.4 | ||||||
Asset retirement obligations (see Note 4) | 3.4 | 3.2 | ||||||
Cost of Removal (see Note 4) | 46.6 | 42.9 | ||||||
Other | 0.3 | — | ||||||
Total Liabilities | $ | 50.6 | $ | 46.5 | ||||
F-17
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
At December 31, | 2006 | 2005 | ||||||
(In millions) | ||||||||
Onshore — | ||||||||
Pipelines | $ | 697.8 | $ | 692.5 | ||||
Facilities, structures and other | 347.4 | 332.3 | ||||||
Offshore — | ||||||||
Pipelines | 213.2 | 224.2 | ||||||
Facilities, structures and other | 44.1 | 44.1 | ||||||
Construction work in progress | 18.8 | 8.2 | ||||||
Other | 72.1 | 72.1 | ||||||
Total property plant and equipment | 1,393.4 | 1,373.4 | ||||||
Accumulated provision for depreciation and amortization | (1,082.8 | ) | (1,067.9 | ) | ||||
Net property plant and equipment | $ | 310.6 | $ | 305.5 | ||||
2006 | 2005 | 2004 | ||||||||||
Offshore | 1.0% | 1.0% | 1.0% | |||||||||
Onshore | 1.7% | 1.7% | 1.7% | |||||||||
Other | 2.0% - 11.4% | 2.0% - 11.4% | 2.0% - 11.4% |
F-18
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
% of Revenues Years Ended December 31, | ||||||||||||
Customer | 2006 | 2005 | 2004 | |||||||||
Columbia Gas of Ohio, Inc. | 7% | 10% | 12% |
F-19
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
2. | Recent Accounting Pronouncements |
F-20
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
F-21
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
3. | Restructuring Activities |
4. | Asset Retirement Obligations |
F-22
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
5. | Regulatory Matters |
• | transportation of natural gas; | |
• | rates and charges for natural gas transportation; | |
• | certification and construction of new facilities; | |
• | initiation, extension or abandonment of services; | |
• | maintenance of accounts and records; | |
• | commercial relationships and communications between pipelines and certain affiliates; | |
• | terms and conditions of service and service contracts with customers; | |
• | depreciation and amortization policies; and | |
• | acquisition, extension and abandonment of facilities. |
F-23
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
6. | Income Taxes |
Year Ended December 31, | 2006 | 2005 | 2004 | |||||||||
(In millions) | ||||||||||||
Income Taxes | ||||||||||||
Current | ||||||||||||
Federal | $ | 8.8 | $ | 9.1 | $ | 9.2 | ||||||
State | 0.6 | 1.6 | 1.1 | |||||||||
Total Current | 9.4 | 10.7 | 10.3 | |||||||||
Deferred | ||||||||||||
Federal | 3.5 | 0.8 | 2.6 | |||||||||
State | (0.7 | ) | 0.2 | 0.2 | ||||||||
Total Deferred | 2.8 | 1.0 | 2.8 | |||||||||
Total Income Taxes | $ | 12.2 | $ | 11.7 | $ | 13.1 | ||||||
F-24
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
Year Ended December 31, | 2006 | 2005 | 2004 | |||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||
Book income before income taxes | $ | 30.5 | $ | 30.2 | $ | 35.3 | ||||||||||||||||||
Tax expense at statutory federal income tax rate | 10.7 | 35.1 | % | 10.6 | 35.1 | % | 12.4 | 35.1 | % | |||||||||||||||
Increases (reductions) in taxes resulting from: | ||||||||||||||||||||||||
State income taxes, net of federal income tax benefit | — | — | 1.1 | 3.6 | 0.8 | 2.3 | ||||||||||||||||||
Estimated non-deductible expenses | 1.7 | 5.6 | — | — | — | — | ||||||||||||||||||
Other, net | (0.2 | ) | (0.7 | ) | — | — | (0.1 | ) | (0.3 | ) | ||||||||||||||
Total Income Taxes | $ | 12.2 | 40.0 | % | $ | 11.7 | 38.7 | % | $ | 13.1 | 37.1 | % | ||||||||||||
At December 31, | 2006 | 2005 | ||||||
(In millions) | ||||||||
Deferred tax liabilities | ||||||||
Accelerated depreciation and other property differences | $ | 57.1 | $ | 53.5 | ||||
Other regulatory assets | 6.6 | 4.2 | ||||||
Total Deferred Tax Liabilities | 63.7 | 57.7 | ||||||
Deferred tax assets | ||||||||
Regulatory liabilities and cost of removal | (17.9 | ) | (16.6 | ) | ||||
Pensions and other postretirement/postemployment benefits | (3.9 | ) | (3.0 | ) | ||||
Other, net | (2.5 | ) | (1.5 | ) | ||||
Total Deferred Tax Assets | (24.3 | ) | (21.1 | ) | ||||
Deferred income taxes related to current assets and liabilities | 1.1 | 0.8 | ||||||
Non-Current Deferred Tax Liability | $ | 40.5 | $ | 37.4 | ||||
7. | Pension and Other Postretirement Benefits |
F-25
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
8. | Common Stock |
9. | Long-Term Debt |
Date | Maturity | Issued | Outstanding | |||||||||||||
Series of Obligation | of Issue | Date | Rate | Amount | ||||||||||||
(In millions) | ||||||||||||||||
Installment Promissory Notes | 11/28/2005 | 11/28/2012 | 5.28 | % | $ | 23.8 | ||||||||||
Installment Promissory Notes | 11/28/2005 | 11/28/2015 | 5.41 | % | 17.3 | |||||||||||
Installment Promissory Notes | 11/28/2005 | 11/28/2016 | 5.45 | % | 6.8 | |||||||||||
Installment Promissory Notes | 11/28/2005 | 11/28/2025 | 5.92 | % | 20.0 | |||||||||||
Total Installment Promissory Notes | $ | 67.9 | ||||||||||||||
F-26
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
10. | Short-Term Borrowings |
11. | Fair Value of Financial Instruments |
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
At December 31, | 2006 | 2006 | 2005 | 2005 | ||||||||||||
(In millions) | ||||||||||||||||
Long-term debt | $ | 67.9 | $ | 65.5 | $ | 67.9 | $ | 67.4 |
12. | Other Commitments and Contingencies |
D. | Environmental Matters. |
F-27
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
F-28
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
E. | Operating Leases. |
(In millions) | ||||
2007 | $ | 0.4 | ||
2008 | 0.2 | |||
2009 | 0.1 | |||
2010 | 0.1 | |||
2011 | 0.1 | |||
After | 3.7 | |||
Total future minimum payments | $ | 4.6 | ||
F. | Firm Service Obligations. |
F-29
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
F-30
Table of Contents
Years Ended December 31, 2006, 2005 and 2004
F-31
Table of Contents
Nine Months Ended September 30, | 2007 | 2006 | ||||||
(Unaudited) | ||||||||
(In millions) | ||||||||
Operating Revenues | ||||||||
Transportation revenues | $ | 89.1 | $ | 79.5 | ||||
Transportation revenues — affiliated | 9.3 | 10.2 | ||||||
Other revenues | 1.2 | 1.1 | ||||||
Total Operating Revenues | 99.6 | 90.8 | ||||||
Operating Expenses | ||||||||
Operation and maintenance | 31.3 | 27.9 | ||||||
Operation and maintenance — affiliated | 13.1 | 13.3 | ||||||
Depreciation and amortization | 16.4 | 16.5 | ||||||
Other taxes | 6.2 | 6.0 | ||||||
Total Operating Expenses | 67.0 | 63.7 | ||||||
Operating Income | 32.6 | 27.1 | ||||||
Other Income (Deductions) | ||||||||
Interest expense — affiliated | (3.3 | ) | (2.8 | ) | ||||
Other interest expense | (0.1 | ) | — | |||||
Allowance for borrowed funds used during construction | 1.6 | 0.6 | ||||||
Interest income | — | 0.1 | ||||||
Interest income — affiliated | — | 0.4 | ||||||
Other, net | — | 0.7 | ||||||
Total Other Income (Deductions) | (1.8 | ) | (1.0 | ) | ||||
Income Before Income Taxes | 30.8 | 26.1 | ||||||
Income Taxes | 10.7 | 9.2 | ||||||
Net Income | $ | 20.1 | $ | 16.9 | ||||
Common dividends declared | $ | — | $ | 15.0 | ||||
F-32
Table of Contents
As of September 30, | 2007 | |||
(Unaudited) | ||||
(In millions) | ||||
ASSETS | ||||
Property Plant and Equipment | ||||
Total property plant and equipment | $ | 1,136.9 | ||
Accumulated provision for depreciation and amortization | (815.4 | ) | ||
Net Property Plant and Equipment | 321.5 | |||
Other Assets | ||||
Assets held for sale | 5.3 | |||
Current Assets | ||||
Accounts receivable (less reserve of $1.6) | 60.7 | |||
Accounts receivable — affiliated | 1.7 | |||
Materials and supplies, at average cost | 8.8 | |||
Exchange gas receivable | 37.1 | |||
Regulatory assets | 2.3 | |||
Pre-paid insurance | 6.8 | |||
Prepayments and other | 2.5 | |||
Total Current Assets | 119.9 | |||
Other Assets | ||||
Regulatory assets | 13.4 | |||
Goodwill | 321.3 | |||
Deferred charges and other | 1.9 | |||
Total Other Assets | 336.6 | |||
Total Assets | $ | 783.3 | ||
F-33
Table of Contents
As of September 30, | 2007 | |||
(Unaudited) | ||||
(In millions, except | ||||
shares outstanding) | ||||
CAPITALIZATION AND LIABILITIES | ||||
Capitalization | ||||
Common Shareholder’s Equity | ||||
Common stock — $10 par value — 3,000 shares authorized, 1,933 shares issued and outstanding | $ | — | ||
Additional paid-in capital | 418.5 | |||
Retained earnings | 89.8 | |||
Total Common Shareholder’s Equity | 508.3 | |||
Long-term debt-affiliated, excluding amounts due within one year | 67.9 | |||
Total Capitalization | 576.2 | |||
Current Liabilities | ||||
Short-term borrowings — affiliated | 26.7 | |||
Accounts payable | 8.9 | |||
Accounts payable — affiliated | 28.9 | |||
Customer deposits | 1.8 | |||
Taxes accrued | 6.2 | |||
Exchange gas payable | 15.3 | |||
Regulatory liabilities | 0.5 | |||
Accrued liability for postretirement and postemployment benefits | 0.1 | |||
Other accruals | 5.1 | |||
Total Current Liabilities | 93.5 | |||
Other Liabilities and Deferred Credits | ||||
Deferred income taxes | 40.6 | |||
Deferred investment tax credits | 0.2 | |||
Accrued liability for postretirement and postemployment benefits | 10.8 | |||
Regulatory liabilities and other removal costs | 49.8 | |||
Asset retirement obligations | 3.5 | |||
Other noncurrent liabilities | 8.7 | |||
Total Other Liabilities and Deferred Credits | 113.6 | |||
Commitments and Contingencies | — | |||
Total Capitalization and Liabilities | $ | 783.3 | ||
F-34
Table of Contents
Nine Months Ended September 30, | 2007 | 2006 | ||||||
(Unaudited) | ||||||||
(In millions) | ||||||||
Operating Activities | ||||||||
Net income | $ | 20.1 | $ | 16.9 | ||||
Adjustments to reconcile net income to net cash flows from operating activities: | ||||||||
Depreciation and amortization | 16.4 | 16.5 | ||||||
Deferred income taxes and investment tax credits | 0.7 | — | ||||||
Stock compensation expense | 0.1 | 0.1 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts receivable | 13.3 | 0.4 | ||||||
Inventories | (0.6 | ) | (0.5 | ) | ||||
Accounts payable | (24.7 | ) | (2.7 | ) | ||||
Customer deposits | 0.7 | — | ||||||
Taxes accrued | 2.0 | 0.8 | ||||||
Other accruals | (8.2 | ) | (2.5 | ) | ||||
Prepayments and other current assets | (2.5 | ) | (6.6 | ) | ||||
Regulatory assets/liabilities | (0.5 | ) | 0.3 | |||||
Postretirement and postemployment benefits | (0.2 | ) | 0.3 | |||||
Deferred credits | (0.1 | ) | 0.1 | |||||
Deferred charges and other noncurrent assets | 0.4 | (0.8 | ) | |||||
Other noncurrent liabilities | 3.1 | 4.4 | ||||||
Net Cash Flows from Operating Activities | 20.0 | 26.7 | ||||||
Investing Activities | ||||||||
Capital expenditures | (22.1 | ) | (14.3 | ) | ||||
Cost to replace capital items, net of insurance recoveries (see Note 11) | (10.9 | ) | (19.9 | ) | ||||
Changes in short-term lendings — affiliated | — | 11.3 | ||||||
Net Cash Flows used for Investing Activities | (33.0 | ) | (22.9 | ) | ||||
Financing Activities | ||||||||
Changes in short-term borrowings — affiliated | 13.0 | 11.2 | ||||||
Dividends paid — common stock | — | (15.0 | ) | |||||
Net Cash Flows provided from (used for) Financing Activities | 13.0 | (3.8 | ) | |||||
Increase (decrease) in cash and cash equivalents | — | — | ||||||
Cash and cash equivalents at beginning of year | — | — | ||||||
Cash and cash equivalents at end of period | $ | — | $ | — | ||||
Supplemental Disclosures of Cash Flow Information | ||||||||
Cash paid for interest | $ | 3.4 | $ | 2.8 | ||||
Interest capitalized | 1.6 | 0.6 | ||||||
Cash paid for income taxes | 9.4 | 10.0 |
F-35
Table of Contents
Common Stock | Additional | |||||||||||||||||||
Shares | Paid-in | Retained | ||||||||||||||||||
Outstanding | Value | Capital | Earnings | Total | ||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In millions, except for shares outstanding) | ||||||||||||||||||||
Balance January 1, 2007 | 1,933 | $ | — | $ | 418.5 | $ | 69.7 | $ | 488.2 | |||||||||||
Net Income | 20.1 | 20.1 | ||||||||||||||||||
Balance September 30, 2007 | 1,933 | $ | — | $ | 418.5 | $ | 89.8 | $ | 508.3 | |||||||||||
Total | ||||||||||||||||||||
(In millions, except for shares outstanding) | ||||||||||||||||||||
Balance January 1, 2006 | 1,933 | $ | — | $ | 418.3 | $ | 66.4 | $ | 484.7 | |||||||||||
Net Income | 16.9 | 16.9 | ||||||||||||||||||
Cash dividends: | ||||||||||||||||||||
Common stock | (15.0 | ) | (15.0 | ) | ||||||||||||||||
Balance September 30, 2006 | 1,933 | $ | — | $ | 418.3 | $ | 68.3 | $ | 486.6 | |||||||||||
F-36
Table of Contents
1. | Nature of Operations and Summary of Significant Accounting Policies |
• | Corporate services, such as human resources, finance and accounting, legal and senior executives, | |
• | Business services, including payroll, accounts payable and information technology, and | |
• | Pension and other post-retirement benefit costs. |
2. | Recent Accounting Pronouncements |
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3. | Restructuring Activities |
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4. | Assets Held for Sale |
5. | Asset Retirement Obligations |
6. | Regulatory Matters |
F-39
Table of Contents
7. | Income Taxes |
8. | Pension and Other Postretirement Benefits |
F-40
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9. | Other Commitments and Contingencies |
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11. | Capital Costs for Damages. |
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F-43
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ASSETS | ||||
Total Assets | $ | — | ||
PARTNERS’ EQUITY | ||||
Partners’ Equity | ||||
Limited partners’ equity | $ | 1,960 | ||
General partners’ equity | 40 | |||
Less note receivable from NiSource Inc. and its subsidiary NiSource GP, LLC | (2,000 | ) | ||
Total Liabilities and Partners’ Equity | $ | — | ||
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1. | Nature of Operations |
F-45
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F-46
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ASSETS | ||||
Current Assets | ||||
Investment in NiSource Energy Partners, L.P. | $ | 40 | ||
Total Assets | $ | 40 | ||
LIABILITIES AND PARTNERS’ EQUITY | ||||
Liabilities | ||||
Payable to NiSource Energy Partners, L.P. | $ | 40 | ||
Total Liabilities | 40 | |||
Owner’s Equity | ||||
Total owner’s equity | 1,000 | |||
Less receivable from NiSource Inc and its subsidiaries | (1,000 | ) | ||
Total Owner’s Equity | — | |||
Total Liabilities and Owner’s Equity | $ | 40 | ||
F-47
Table of Contents
1. | Nature of Operations |
F-48
Table of Contents
AGREEMENT OF LIMITED PARTNERSHIP
OF
NISOURCE ENERGY PARTNERS, L.P.
A-1
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B-1
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o U.S. Citizen, Resident or Domestic Entity | o Non-resident Alien | |
o Foreign Corporation |
B-2
Table of Contents
B-3
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• | Individuals (U.S. ornon-U.S.) | |
• | C corporations (U.S. ornon-U.S.) | |
• | Tax exempt organizations subject to tax on unrelated business taxable income or “UBTI,” including IRAs, 401(k) plans and Keough accounts | |
• | S corporations with shareholders that are individuals, trusts or tax exempt organizations subject to tax on UBTI |
• | S corporations (unless they have ESOP shareholders*) | |
• | Partnerships (unless its partners include mutual funds, real estate investment trusts or “REITs,” governmental entities and agencies, S corporations with ESOP shareholders* or other partnerships with such partners) | |
• | Trusts (unless beneficiaries are not subject to tax) |
• | Mutual Funds | |
• | REITs | |
• | Governmental entities and agencies | |
• | S corporations with ESOP shareholders*( |
B-4
Table of Contents
• | If you have an institutional sales account with Lehman Brothers Inc., you should fax signed forms to [ • ] by 12:00 pm Eastern time on [ • ], 2008 (the “Return Date”). | |
• | If you have any other type of brokerage account with any of the broker-dealers on page 2, you should fax signed forms to your retail broker or financial advisor upon initial indication of interest. |
Return Date will not be allocated units in this offering.
C-1
Table of Contents
• | Individuals (U.S. ornon-U.S.) | |
• | C corporations (U.S. ornon-U.S.) | |
• | Tax exempt organizations subject to tax on unrelated business taxable income or “UBTI,” including IRAs, 401(k) plans and Keough accounts | |
• | S corporations with shareholders that are individuals, trusts or tax exempt organizations subject to tax on UBTI |
• | Partnerships (unless its partners include mutual funds, real estate investment trusts or “REITs,” governmental entities and agencies, S corporations with ESOP shareholders1 ( or other partnerships with such partners) | |
• | Trusts (unless beneficiaries are not subject to tax) |
• | Mutual Funds | |
• | REITs | |
• | Governmental entities and agencies | |
• | S corporations with ESOP shareholders1 |
C-2
Table of Contents
D-1
Table of Contents
D-2
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D-3
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D-4
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Table of Contents
ITEM 13. | Other Expenses of Issuance and Distribution |
SEC registration fee | $ | 9,268 | ||
FINRA filing fee | 30,688 | |||
New York Stock Exchange listing fee | * | |||
Printing and engraving expenses | * | |||
Legal fees and expenses | * | |||
Accounting fees and expenses | * | |||
Transfer agent and registrar fees | * | |||
Third party asset valuation | * | |||
Structuring fee | * | |||
TOTAL | $ | 3,900,000 | ||
* | To be filed by amendment. |
ITEM 14. | Indemnification of Directors and Officers |
ITEM 15. | Recent Sales of Unregistered Securities |
ITEM 16. | Exhibits and Financial Statement Schedules |
1 | .1* | — | Form of Underwriting Agreement. | |||
3 | .1 | — | Certificate of Limited Partnership of NiSource Energy Partners, L.P. | |||
3 | .2* | — | Form of First Amended and Restated Agreement of Limited Partnership of NiSource Energy Partners, L.P. (included as Appendix A to the Prospectus) | |||
3 | .3 | — | Certificate of Formation of NiSource GP, LLC | |||
3 | .4* | — | Form of Amended and Restated Limited Liability Company Agreement of NiSource GP, LLC | |||
5 | .1* | — | Opinion of Vinson & Elkins LLP relating to the legality of the securities being registered. | |||
8 | .1* | — | Opinion of Vinson & Elkins LLP relating to tax matters. |
II-1
Table of Contents
10 | .1* | — | Form of Credit Agreement | |||
10 | .2* | — | Form of Contribution, Conveyance and Assumption Agreement | |||
10 | .3* | — | Form of Omnibus Agreement | |||
10 | .4* | — | Form of Long Term Incentive Plan of NiSource Energy Partners, L.P. | |||
21 | .1* | — | Subsidiaries of NiSource Energy Partners, L.P. | |||
23 | .1 | — | Consent of Deloitte & Touche LLP | |||
23 | .2* | — | Consent of Vinson & Elkins LLP (contained in Exhibit 5.1) | |||
24 | .1 | — | Power of Attorney (included on signature page) |
* | To be filed by amendment |
II-2
Table of Contents
Additions | Deductions for | |||||||||||||||||||
Balance at | Charged to | Charged to | Purposes for | |||||||||||||||||
Beginning of | Costs and | Other | which Reserves | Balance at End | ||||||||||||||||
Period | Expense | Accounts | were Created | of Period | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
December 31, 2006: | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 1,158 | $ | — | $ | 497 | 83 | $ | 1,572 | |||||||||||
Environmental reserves | 168 | — | — | 12 | 156 | |||||||||||||||
$ | 1,326 | $ | — | $ | 497 | $ | 95 | $ | 1,728 | |||||||||||
December 31, 2005: | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 1,960 | $ | — | $ | — | $ | 802 | $ | 1,158 | ||||||||||
Environmental reserves | 41 | 163 | — | 36 | 168 | |||||||||||||||
$ | 2,001 | $ | 163 | $ | — | $ | 838 | $ | 1,326 | |||||||||||
December 31, 2004 | ||||||||||||||||||||
Allowance for doubtful accounts | $ | 1,960 | $ | — | $ | — | $ | — | $ | 1,960 | ||||||||||
Environmental reserves | 25 | 40 | — | 24 | 41 | |||||||||||||||
$ | 1,985 | $ | 40 | $ | — | $ | 24 | $ | 2,001 |
ITEM 17. | Undertakings |
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By: | NISOURCE GP, LLC, its general partner |
Title: President and Chief Executive Officer
Signature | Title | |||
/s/ Robert C. Skaggs, Jr. Robert C. Skaggs, Jr. | Chairman of the Board | |||
/s/ Christopher A. Helms Christopher A. Helms | President, Chief Executive Officer and Director (Principal Executive Officer) | |||
/s/ Michael W. O’Donnell Michael W. O’Donnell | Executive Vice President, Chief Financial Officer and Director (Principal Financial and Accounting Officer) | |||
/s/ James F. Thomas James F. Thomas | Executive Vice President, Chief Commercial Officer and Director |
II-4
Table of Contents
1 | .1* | — | Form of Underwriting Agreement. | |||
3 | .1 | — | Certificate of Limited Partnership of NiSource Energy Partners, L.P. | |||
3 | .2* | — | Form of First Amended and Restated Agreement of Limited Partnership of NiSource Energy Partners, L.P. (included as Appendix A to the Prospectus) | |||
3 | .3 | — | Certificate of Formation of NiSource GP, LLC | |||
3 | .4* | — | Form of Amended and Restated Limited Liability Company Agreement of NiSource GP, LLC | |||
5 | .1* | — | Opinion of Vinson & Elkins LLP relating to the legality of the securities being registered. | |||
8 | .1* | — | Opinion of Vinson & Elkins LLP relating to tax matters. | |||
10 | .1* | — | Form of Credit Agreement | |||
10 | .2* | — | Form of Contribution, Conveyance and Assumption Agreement | |||
10 | .3* | — | Form of Omnibus Agreement | |||
10 | .4* | — | Form of Long Term Incentive Plan of NiSource Energy Partners, L.P. | |||
21 | .1* | — | Subsidiaries of NiSource Energy Partners, L.P. | |||
23 | .1 | — | Consent of Deloitte & Touche LLP | |||
23 | .2* | — | Consent of Vinson & Elkins LLP (contained in Exhibit 5.1) | |||
24 | .1* | — | Power of Attorney (included on signature page) |
* | To be filed by amendment |