El Paso Placed 5 Pipeline Projects in Service for 2008
El Paso Pipeline Partners has reported its fourth quarter and full-year 2008 financial and operational results for the partnership as well as its outlook for 2009.
- Net income increased to $43.1 million from $19.0 million in the fourth quarter of 2007
- Earnings of $0.37 per common unit in the fourth quarter 2008
- Increased cash distributions to $0.32 per common and subordinated unit, a 6.7 percent increase from prior quarter
- WIC Medicine Bow expansion placed into service in October
- CIG High Plains Pipeline placed into service in November
"I am proud of the financial and operational success we've accomplished during the first full year of our partnership," said Jim Yardley, president and chief executive officer of El Paso Pipeline Partners. "In 2008, we placed five pipeline projects in service, announced two new expansions, and completed our first acquisition, which increased interests in our existing pipeline assets. Most importantly, we are managing this growth while preserving our financial strength and managing liquidity as we look to the future."
For the quarter and 12 months ended December 31, 2008, El Paso Pipeline Partners reported net income of $43.1 million and $114.5 million, respectively, compared with $19.0 million and $65.6 million, respectively, for the same periods in 2007. EBIT for the quarter and 12 months ended December 31, 2008, were $51.6 million and $137.4 million, respectively, compared with $23.1 million and $75.2 million, respectively, for the same 2007 period. The increase in net income and EBIT for both periods is due primarily to increased earnings from equity investments following the acquisition of additional interests in Colorado Interstate Gas (CIG) and Southern Natural Gas (SNG), and the completion of pipeline expansion projects, which offset higher operating expenses.
The partnership began recording earnings from its equity investments following the initial contribution of 10 percent interests in CIG and SNG from El Paso Corporation in connection with its initial public offering. Subsequently, the partnership acquired additional 30 percent and 15 percent interests in CIG and SNG on September 30, 2008, respectively, and accounts for these transactions prospectively from the date of acquisition.
Operating income for the quarter and 12 months ended December 31, 2008 was $21.4 million and $77.1 million, respectively, compared with $15.1 million and $63.1 million, respectively, for the same 2007 periods. Operating costs for the quarter increased as a result of public company expenses, acquisition costs, and increased transportation costs related to the acquisition of capacity on third party pipelines to support the Piceance Lateral expansion.
Distributable cash flow for the year ended December 31, 2008 was $146.2 million, with distribution coverage of 1.20 times.
Following the acquisition of additional ownership interests in CIG and SNG, El Paso Pipeline Partners now owns 40 percent and 25 percent of each, respectively.
Equity earnings from CIG for the quarter and 12 months ended December 31, 2008, were $18.9 million and $29.0 million, respectively. For the quarter and 12 months ended December 31, 2008, the partnership's share of CIG's distributable cash flow was $17.4 million and $35.0 million, respectively.
SNG generated equity earnings of $10.7 million and $29.8 million for the quarter and 12 months ended December 31, 2008, respectively. El Paso Pipeline Partners' share of SNG's distributable cash flow was $8.8 million, and $32.9 million for the quarter, and 12 months ended December 31, 2008, respectively.
Debt and Interest Expense
For the quarter and 12 months ended December 31, 2008, interest and debt expense was $8.5 million and $22.9 million, respectively. Interest and debt expense relates primarily to amounts borrowed under the partnership's credit facility and the private placement debt issued September 30, 2008, to finance acquisition of additional ownership interests in CIG and SNG.
El Paso Pipeline Partners maintains a $750 million revolving credit facility, which is underwritten by a diverse group of 25 financial institutions. The facility, which has a November 2012 maturity date, had available capacity of approximately $150 million as of December 31, 2008. The partnership will utilize this facility, cash distributions from its unconsolidated affiliated pipelines, and a $20 million demand note receivable from El Paso Corporation to fund its on-going growth capital expenditures. The partnership does not expect a need to access the capital markets until after 2009.
During the 12 months ended December 31, 2008, WIC invested $82.7 million, primarily for the Kanda Lateral, Piceance Lateral, and Medicine Bow expansions. Maintenance capital expenditures for the year ended December 31, 2008 were $1.3 million. The partnership was not required to make any capital contributions to either CIG or SNG during 2008. During the quarter, the WIC Medicine Bow expansion and the CIG High Plains Pipeline were placed in service.
Building on a successful 2008, the partnership also announced future outlook highlights. In 2009, the partnership expects to generate approximately $180 million of distributable cash flow. This represents an increase of more than 20 percent over 2008, due to higher interests in its equity pipelines CIG and SNG, and recently completed expansion projects.
The partnership expects to spend $64 million in expansion capital, and $2 million in maintenance capital.
CIG and SNG are expected to spend total growth capital of approximately $200 million for expansion projects in 2009, which will be funded by amounts recovered from notes receivable under the cash management program with El Paso, and by capital contributions from their partners, including El Paso Pipeline Partners. The partnership anticipates its share of such capital contributions to be approximately $40 million in 2009.
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