USA: El Paso Pipeline Partners Reports Fourth Quarter and Full-Year Results

 

El Paso Pipeline Partners, L.P. reported fourth quarter and full-year 2010 financial and operational results.

Highlights:

— $0.53 earnings per common unit for fourth quarter 2010

— $118 million distributable cash flow for fourth quarter 2010, a 91 percent increase from fourth quarter 2009

— $212 million adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) for fourth quarter 2010, compared with $143 million for fourth quarter 2009

— Raised quarterly cash distributions to $0.44 per common and subordinated unit for the fourth quarter 2010, a 22 percent increase from the fourth quarter of 2009

— Distribution coverage ratio of 1.4 times for the fourth quarter and full year 2010

“The sharp improvement in our financial results highlights the success of our acquisition growth strategy and efficient project execution,” said Jim Yardley, president and chief executive officer of El Paso Pipeline Partners. “During 2010, we acquired $2.4 billion of assets and placed three organic growth projects in-service, collectively $100 million under budget. These efforts resulted in a substantial expansion of our asset base, while maintaining a very predictable and steady cash flow profile and a strong balance sheet. As we move forward, we plan to continue executing on our strategy of delivering profitable expansion projects and accretive acquisitions to provide consistent future growth for our unitholders.”

Financial Results

In November 2010, El Paso Pipeline Partners completed its acquisition of the remaining 49-percent member interest in both Southern LNG (SLNG) and Elba Express and an additional 15 percent general partner interest in Southern Natural Gas (SNG) from El Paso Corporation in exchange for aggregate consideration of $1,133 million. Following the acquisition of these interests the partnership consolidates SNG for financial reporting purposes. Financial results for all periods presented include retrospective adjustments to include 60 percent of SNG and to reflect El Paso Corporation’s 40 percent interest in SNG as non-controlling interests.

Revenues for the fourth quarter and full year 2010 increased 14 percent and 20 percent, respectively, from same periods in 2009. Operating income for the fourth quarter and full year 2010 rose 17 percent and 28 percent, respectively, from the same periods in 2009, and net income attributable to EPB for the fourth quarter and full year 2010 was up 5 percent and 19 percent, respectively, from the fourth quarter and full year 2009.

Full year 2010 results include a $21 million non-cash asset write down based on a Federal Energy Regulatory Commission order related to the 2009 sale of the Natural Buttes compressor station and gas processing plant. Excluding the impact of this non-cash item, net income attributable to EPB in 2010 was 23 percent higher than that of 2009.

The significant increase in revenues, operating income and net income attributable to EPB for the fourth quarter and full year 2010 was primarily due to the completion of a number of organic growth projects including the SLNG Elba Phase IIIA (Elba IIIA) expansion, the Elba Express Pipeline, the WIC System Expansion, and the CIG Raton 2010 expansion. Additionally, net income attributable to EPB increased as a result of the acquisition of an incremental 49 percent interest in SLNG and Elba Express. Higher earnings at SNG related to its rate case settlement in September 2009 also contributed to the improved full year financial performance.

Adjusted EBITDA for the fourth quarter 2010 was $212 million, up 49 percent from the fourth quarter 2009. For the full year 2010, Adjusted EBITDA was $695 million, representing an increase of 28 percent from 2009.

Distributable cash flow for the fourth quarter 2010 increased 91 percent from the fourth quarter 2009 to $118 million. For the full year 2010, distributable cash flow increased to $390 million, or 65 percent from 2009. Distribution coverage for both the fourth quarter and full year 2010 was 1.4 times.

The primary drivers for the year-to-year increase in fourth quarter Adjusted EBITDA and distributable cash flow were the acquisitions of SLNG, Elba Express, and additional interests in SNG. The completion of organic growth projects in 2010 also contributed to the improved results for the quarter. Additionally, full year 2010 Adjusted EBITDA and distributable cash flow were positively impacted by not only the acquisitions and expansion projects in 2010, but also the acquisition of additional interests in Colorado Interstate Gas (CIG) and the completion of the Totem Storage facility and Piceance Lateral expansion in 2009.

Interest and Debt Expense

For the fourth quarter and full year 2010, interest and debt expense rose by $23 million and $58 million, respectively, from the same periods in 2009. This increase is primarily due to the issuance of an aggregate $535 million of senior unsecured notes in March 2010 and June 2010 and $750 million of senior unsecured notes in November 2010. These funds were principally used to partially finance acquisitions of interests in SLNG, Elba Express and SNG, with the balance used to retire debt associated with the construction of Elba Express and to reduce outstanding borrowings on EPB’s revolving credit facility. The interest expense increase was partially offset by a lower average debt balance outstanding under the partnership’s credit facility.

Capital Expenditures

During 2010, El Paso Pipeline Partners invested $318 million in growth projects, primarily for the Elba IIIA expansion, Elba Express Pipeline, WIC System Expansion, CIG Raton 2010 and the first phase of SNG’s South System III expansion project. These projects were completed on time and, on a consolidated basis, were approximately $100 million under budget. Maintenance capital expenditures for 2010 totaled $94 million.

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Source: El Paso Pipeline Partners, February 25, 2011;


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