El Paso Pipeline Partners Cites Solid Cash Flow Exiting 2009

El Paso Pipeline Partners has reported its fourth quarter and full-year 2009 financial and operational results for the partnership.

Highlights:

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

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

Financial Results

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

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

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

Equity Investments

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

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

Interest and Debt Expense

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

Liquidity

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

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

Capital Projects

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

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