Partnership Equity and Distributions | 3 Months Ended |
Mar. 31, 2014 |
Equity [Abstract] | ' |
Partnership Equity and Distributions | ' |
8 | Partnership Equity and Distributions | | | | | | | | | | | | | | | | | | | | | |
TEP’s partnership agreement requires TEP to distribute its available cash, as defined below, to unitholders of record on the applicable record date within 45 days after the end of each quarter, beginning with the quarter ended June 30, 2013. TEP’s partnership agreement provides that available cash, each quarter, is first distributed to the common unitholders and the general partner on a pro rata basis until each common unitholder has received $0.2875 per unit, which amount is defined in TEP’s partnership agreement as the minimum quarterly distribution (“MQD”). During the subordination period, defined below, holders of the subordinated units are not entitled to receive a distribution of available cash until each holder of common units has received the MQD, and if the MQD is not paid for any quarter, the cumulative amount of any arrearages in the payment of the MQD from prior quarters. |
The following table shows the distributions for the year ended 2013 and three months ended March 31, 2014: |
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| | | | Distributions | | | | |
| | | | LimitedPartners | | | General Partner | | | | | | Distributions | |
Common and | per Limited |
Three Months Ended | | Date Paid | | Subordinated | | Incentive | | | 2% | | | Total | | | Partner Unit |
| | | | (in thousands, except per unit amounts) | | | | |
March 31, 2014 | | May 14, 2014(2) | | $ | 13,288 | | | $ | 126 | | | $ | 274 | | | $ | 13,688 | | | $ | 0.325 | |
December 31, 2013 | | February 12, 2014 | | | 12,757 | | | | 63 | | | | 262 | | | | 13,082 | | | | 0.315 | |
September 30, 2013 | | November 13, 2013 | | | 12,049 | | | | — | | | | 245 | | | | 12,294 | | | | 0.2975 | |
June 30, 2013 | | 13-Aug-13 | | | 5,759 | | | | — | | | | 118 | | | | 5,877 | | | | 0.1422 | (1) |
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(1) | The distribution declared on July 18, 2013 for the second quarter of 2013 represented a prorated amount of the MQD of $0.2875 per common unit, based upon the number of days between the closing of the IPO on May 17, 2013 to June 30, 2013. | | | | | | | | | | | | | | | | | | | | | |
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(2) | The distribution declared on April 1, 2014 for the first quarter of 2014 is expected to be paid May 14, 2014 subsequent to the date of this Quarterly Report to 40,885,140 common unitholders of record at the close of business on April 30, 2014. | | | | | | | | | | | | | | | | | | | | | |
Subordinated Units |
All subordinated units are currently held by TD. The principal difference between the common units and subordinated units is that in any quarter during the subordination period, holders of the subordinated units are not entitled to receive a distribution of available cash until the holders of common units have received the MQD (inclusive of any cumulative arrearages of previously unpaid MQD from previous quarters). Furthermore, subordinated unitholders are not entitled to receive arrearages from previous quarterly distributions. The practical effect of the subordinated units is to increase the likelihood that during the subordination period there will be available cash to be distributed on the common units. The subordination period will end, and the subordinated units will convert to common units, on a one-for-one basis, when certain distribution milestones described in the partnership agreement have been met. |
Incentive Distribution Rights |
The general partner owns a 2% general partner interest in TEP which, as of March 31, 2014, was represented by 826,531 general partner units. As discussed in Note 14 – Subsequent Events, in April 2014, in connection with TEP’s acquisition of Trailblazer, the general partner contributed capital in exchange for the issuance of an additional 7,860 general partner units in order to continue to maintain its 2% general partner interest. The general partner also owns all of the IDRs. IDRs represent the right to receive an increasing percentage (13%, 23% and 48%) of quarterly distributions of available cash from operating surplus after the MQD and the target distribution levels have been achieved. The general partner may transfer these rights separately from its general partner interest, subject to restrictions in TEP’s partnership agreement. Under TEP’s partnership agreement, the general partner may at any time contribute additional capital to TEP in order to maintain its 2% general partner interest. |
The following discussion related to incentive distributions assumes that TEP’s general partner maintains its 2.0% general partner interest and continues to own all of the IDRs. |
If for any quarter: |
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| • | | TEP has distributed available cash from operating surplus to all of the common unitholders (and during the subordination period, to the subordinated unitholders) in an amount equal to the MQD for each outstanding unit for such quarter; and | | | | | | | | | | | | | | | | | | | |
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| • | | TEP has distributed available cash from operating surplus on outstanding common units in an amount necessary to eliminate any cumulative arrearages in the payment of the MQD to common unitholders; | | | | | | | | | | | | | | | | | | | |
then, TEP will distribute additional available cash from operating surplus for that quarter among the unitholders and the general partner in the following manner: |
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| • | | first, 98% to all unitholders, pro rata, and 2% to TEP’s general partner, until each unitholder receives a total of $0.3048 per unit for that quarter (the “first target distribution”); | | | | | | | | | | | | | | | | | | | |
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| • | | second, 85% to all unitholders, pro rata, and 15% to TEP’s general partner, until each unitholder receives a total of $0.3536 per unit for that quarter (the “second target distribution”); | | | | | | | | | | | | | | | | | | | |
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| • | | third, 75% to all unitholders, pro rata, and 25% to TEP’s general partner, until each unitholder receives a total of $0.4313 per unit for that quarter (the “third target distribution”); and | | | | | | | | | | | | | | | | | | | |
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| • | | thereafter, 50% to all unitholders, pro rata, and 50% to TEP’s general partner. | | | | | | | | | | | | | | | | | | | |
Definition of Available Cash |
Available cash generally means, for any quarter, all cash and cash equivalents on hand at the end of that quarter: |
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| • | | less, the amount of cash reserves established by TEP’s general partner to: | | | | | | | | | | | | | | | | | | | |
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| • | | provide for the proper conduct of TEP’s business (including reserves for future capital expenditures, for anticipated future credit needs subsequent to that quarter, for legal matters and for refunds of collected rates reasonably likely to be refunded as a result of a settlement or hearing related to FERC rate proceedings); | | | | | | | | | | | | | | | | | | | |
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| • | | comply with applicable law or regulation, any of TEP’s debt instruments or other agreements; or | | | | | | | | | | | | | | | | | | | |
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| • | | provide funds for distributions to unitholders and to TEP’s general partner for any one or more of the next four quarters (provided that TEP’s general partner may not establish cash reserves for distributions if the effect of the establishment of such reserves will prevent TEP from distributing the MQD on all common units and any cumulative arrearages on such common units for the current quarter); | | | | | | | | | | | | | | | | | | | |
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| • | | plus, if TEP’s general partner so determines, all or any portion of the cash on hand on the date of distribution of available cash for the quarter, including cash on hand resulting from working capital borrowings made subsequent to the end of such quarter. | | | | | | | | | | | | | | | | | | | |
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Distributions to TD |
As discussed in Note 2 – Summary of Significant Accounting Policies, prior to May 17, 2013, the net amount of transfers for loans made each day through the centralized cash management system, less reimbursement payments under the agency agreement described in Note 3 – Related Party Transactions, was recognized as equity distributions during that time period. Net distributions from TEP to TD for the three months ended March 31, 2013 were approximately $23.1 million. Excluding the cash distributions paid to TD as a common and subordinated unitholder, as discussed above, there were no net distributions from TEP to TD for the quarter ended March 31, 2014. |