Acquisitions | TEP Acquisition of Trailblazer On April 1, 2014 , TEP closed the acquisition of Trailblazer from a wholly owned subsidiary of TD for total consideration valued at approximately $164 million , consisting of $150 million in cash and the issuance of 385,140 common units (valued at approximately $14 million based on the March 31, 2014 closing price of TEP’s common units). On that same date, the general partner contributed additional capital in the amount of approximately $263,000 in exchange for the issuance of 7,860 general partner units in order to maintain its 2% general partner interest. The acquisition of Trailblazer represents a change in reporting entity and a transaction between entities under common control. The excess purchase price over the net book value of Trailblazer's assets and liabilities was accounted for as a deemed distribution as discussed further in Note 10 – Partnership Equity and Distributions . TEP Acquisitions of 66.7% of Pony Express Effective September 1, 2014 , TEP acquired a controlling 33.3% membership interest in Pony Express for total consideration of approximately $600 million . At closing, Pony Express, TD, and TEP entered into the Second Amended Pony Express LLC Agreement, which sets forth the relative rights of TD and TEP as the owners of Pony Express. Of the total consideration of $600 million , TEP directly paid TD $30 million , consisting of $27 million in cash and 70,340 TEP common units with an aggregate fair value of approximately $3 million , in exchange for the transfer by TD to TEP of a 1.9585% membership interest in Pony Express (computed before giving effect to the issuance of the new membership interest by Pony Express to TEP). TEP also contributed cash of $570 million to Pony Express in exchange for a newly issued membership interest which, when combined with the membership interest transferred from TD and the parties' entry at closing into the Second Amended Pony Express LLC Agreement, constituted TEP's 33.3% membership interest in Pony Express, which represented 100% of the preferred membership units issued by Pony Express. Of the $570 million cash consideration received by Pony Express, $300 million was immediately distributed to TD at closing and $270 million was retained by Pony Express to fund the estimated remaining costs of construction for the Pony Express System and the lateral in Northeast Colorado. The $270 million cash balance was subsequently swept to TD under a cash management agreement between Pony Express and TD and was recorded as a related party loan which bears interest at TD's incremental borrowing rate. There was no remaining balance outstanding on the related party loan at June 30, 2015 . The terms of TEP's first acquisition of a 33.3% membership interest in Pony Express provided TEP a minimum quarterly preference payment of $16.65 million through the quarter ending September 30, 2015 (prorated to approximately $5.4 million for the quarter ended September 30, 2014) with distributions thereafter shared in accordance with the terms of the Second Amended Pony Express LLC Agreement. At the effective date of that transaction, TEP determined that Pony Express was a VIE of which TEP was the primary beneficiary, and consolidated Pony Express accordingly. For additional discussion and disclosure, see Note 3 – Variable Interest Entities . The acquisition of the initial 33.3% membership interest in Pony Express represented a transaction between entities under common control and a change in reporting entity. Effective March 1, 2015 , TEP acquired an additional 33.3% membership interest in Pony Express for cash consideration of $700 million . At closing, Pony Express, TD, and TEP entered into the Pony Express LLC Agreement effective March 1, 2015, which sets forth the relative rights of TD and TEP as the owners of Pony Express. The terms of the transaction increased the minimum quarterly preference payment provided to TEP to $36.65 million through the quarter ending December 31, 2015 (prorated to approximately $23.5 million for the quarter ended March 31, 2015) with distributions thereafter shared in accordance with the terms of the Pony Express LLC Agreement. Upon the effective date of the transaction, TEP reevaluated its VIE assessment and determined that Pony Express continues to be considered a VIE of which TEP is the primary beneficiary. The acquisition of the additional 33.3% membership interest in Pony Express represents a transaction between entities under common control and an acquisition of noncontrolling interests. As a result, financial information for periods prior to the transaction have not been recast to reflect the additional 33.3% membership interest. Historical Financial Information The results of our acquisitions of Trailblazer and a 66.7% membership interest in Pony Express are included in the condensed consolidated balance sheet as of June 30, 2015 . The results of our acquisitions of Trailblazer and the initial 33.3% membership interest in Pony Express are included in the condensed consolidated balance sheet as of December 31, 2014 . The results of our acquisitions of Trailblazer and the initial 33.3% membership interest in Pony Express are included in the condensed consolidated statements of income for the three and six months ended June 30, 2015 and 2014 . The results of our acquisition of an additional 33.3% membership interest in Pony Express are included in the condensed consolidated statements of income prospectively beginning March 1, 2015. The following tables present the previously reported condensed consolidated statements of income for the three and six months ended June 30, 2014 adjusted for the acquisition of the initial 33.3% membership interest in Pony Express: Three Months Ended June 30, 2014 TEP Consolidate Tallgrass Pony Express Pipeline, LLC Eliminations TEP (As currently reported) (in thousands) Revenues: Sales of natural gas, NGLs, and crude oil $ 39,042 $ — $ — $ 39,042 Transportation services 30,569 — — 30,569 Processing and other revenues 7,709 — — 7,709 Total Revenues 77,320 — — 77,320 Operating Costs and Expenses: Cost of sales (exclusive of depreciation and amortization shown below) 37,214 — — 37,214 Cost of transportation services (exclusive of depreciation and amortization shown below) 3,958 — 1,330 5,288 Operations and maintenance 10,055 — — 10,055 Depreciation and amortization 8,768 757 — 9,525 General and administrative 7,124 — — 7,124 Taxes, other than income taxes 1,639 — — 1,639 Total Operating Costs and Expenses 68,758 757 1,330 70,845 Operating Income (Loss) 8,562 (757 ) (1,330 ) 6,475 Other (Expense) Income: Interest (expense) income, net (2,140 ) 3 — (2,137 ) Gain on remeasurement of unconsolidated investment 9,388 — — 9,388 Equity in earnings of unconsolidated investment 273 — — 273 Other income, net 729 — — 729 Total Other Income 8,250 3 — 8,253 Net Income (Loss) 16,812 (754 ) (1,330 ) 14,728 Net loss attributable to noncontrolling interests 55 503 — 558 Net income (loss) attributable to partners $ 16,867 $ (251 ) $ (1,330 ) $ 15,286 Six Months Ended June 30, 2014 TEP Consolidate Tallgrass Pony Express Pipeline, LLC Eliminations TEP (As currently reported) (in thousands) Revenues: Sales of natural gas, NGLs, and crude oil $ 92,757 $ — $ — $ 92,757 Transportation services 64,673 — — 64,673 Processing and other revenues 14,669 — — 14,669 Total Revenues 172,099 — — 172,099 Operating Costs and Expenses: Cost of sales (exclusive of depreciation and amortization shown below) 85,420 — — 85,420 Cost of transportation services (exclusive of depreciation and amortization shown below) 7,820 — 2,585 10,405 Operations and maintenance 18,068 — — 18,068 Depreciation and amortization 16,320 1,514 — 17,834 General and administrative 13,773 — — 13,773 Taxes, other than income taxes 3,595 — — 3,595 Total Operating Costs and Expenses 144,996 1,514 2,585 149,095 Operating Income (Loss) 27,103 (1,514 ) (2,585 ) 23,004 Other (Expense) Income: Interest (expense) income, net (3,433 ) — — (3,433 ) Gain on remeasurement of unconsolidated investment 9,388 — — 9,388 Equity in earnings of unconsolidated investment 717 — — 717 Other income, net 1,669 — — 1,669 Total Other Income 8,341 — — 8,341 Net Income (Loss) 35,444 (1,514 ) (2,585 ) 31,345 Net loss attributable to noncontrolling interests 55 1,010 — 1,065 Net income (loss) attributable to partners $ 35,499 $ (504 ) $ (2,585 ) $ 32,410 Formation of BNN Water Solutions, LLC On November 26, 2013, TEP, through its wholly-owned subsidiary Tallgrass Energy Investments, LLC ("TEI"), entered into a joint venture agreement with BNN Energy LLC ("BNN") to form Grasslands Water Services I, LLC ("GWSI"), which subsequently built and began operating an intrastate water pipeline in Colorado. TEP accounted for its 50% equity interest in GWSI as an equity method investment. On May 13, 2014, TEI entered into a contribution agreement with BNN and several other parties to form a new entity known as Water Solutions. Under the terms of the contribution agreement, TEI agreed to contribute its existing 50% interest in GWSI, along with $7.6 million cash, in exchange for an 80% membership interest in Water Solutions. As part of the transaction, GWSI was renamed BNN Redtail, LLC ("Redtail"), became a subsidiary of Water Solutions, and issued preferred equity interests to TEI. Among the assets contributed by BNN and the other parties to the transaction were the other 50% interest in Redtail and a 100% equity interest in Alpha Reclaim Technology, LLC ("Alpha"), a company which sources treated wastewater from municipalities in Texas. Alpha is wholly-owned by Redtail. Upon closing of the transaction, TEP obtained a controlling financial interest in Water Solutions and accordingly has accounted for the transaction as a step acquisition under ASC 805. On the acquisition date, TEP remeasured its previously held 50% equity interest in Redtail to its fair value of $11.9 million , recognized a gain of $9.4 million , and consolidated Water Solutions. The 20% equity interest in Water Solutions held by noncontrolling interests was recorded at its acquisition date fair value of $1.4 million . The fair values of the previously held equity interest and the noncontrolling interest were determined using a discounted cash flow analysis. These fair value measurements are based on significant inputs that are not observable in the market and thus represent fair value measurements categorized within Level 3 of the fair value hierarchy under ASC 820. At December 31, 2014, the assets acquired and liabilities assumed in the acquisition were recorded at provisional amounts based on the preliminary purchase price allocation. During the three months ended June 30, 2015, the preliminary purchase price allocation with respect to Water Solutions was finalized with no material adjustments. On May 20, 2015, TEP acquired an additional 12% equity interest in Water Solutions from NR2, LLC for cash consideration of $600,000 , which was accounted for as an acquisition of noncontrolling interest. As of June 30, 2015 , TEP's aggregate membership interest in Water Solutions was 92% . |