El Paso Pipeline Partners Reports Third Quarter 2010 Results (USA)


El Paso Pipeline Partners, L.P.  is reporting today third quarter 2010 financial and operational results for the partnership.

Highlights:

* $0.47 adjusted earnings per common unit for third quarter 2010

* $0.39 reported earnings per common unit, versus $0.35 per common unit for third quarter 2009. Third quarter 2010 earnings per unit includes an $0.08 non-cash asset write down based on a FERC order related to the 2009 sale of the Natural Buttes facilities.

* $84.4 million distributable cash flow for the third quarter 2010, compared with $55.1 million for third quarter 2009

* Raised quarterly cash distributions to $0.41 per common and subordinated unit for the third quarter 2010, a 17-percent increase from the third quarter of 2009

“We are pleased with our outstanding results this quarter as we continue to execute on our growth strategy,” said Jim Yardley, president and chief executive officer of El Paso Pipeline Partners. “During the quarter, we successfully completed a $415 million equity offering which will continue our growth momentum as we intend to quickly invest the proceeds.

Also, we are placing into service three more organic expansion projects before year end 25 percent under budget. This growth is supported by our well-positioned assets which have unique customer connectivity and deliver strong cash flow throughout varying market and commodity price environments. We plan to continue this successful strategy well into the future.”

Financial Results

For the quarter and nine months ended September 30, 2010, El Paso Pipeline Partners reported an increase in net income attributable to EPB of 16 percent and 28 percent, respectively, from the quarter and nine months ended September 30, 2009. Operating income for the quarter and nine months ended September 30, 2010 increased 20 percent and 36 percent, respectively, from the quarter and nine months ended September 30, 2009.

Results this quarter also 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. This item is included as an addition to operating and maintenance expense for the third quarter 2010. Excluding the impact of the non-cash asset write down, net income for the quarter and nine months ended September 30, 2010 was higher by 38 percent and 35 percent, respectively.

Adjusted earnings before interest, taxes, depreciation, and amortization expense (Adjusted EBITDA) for the quarter and nine months ended September 30, 2010 was $106.1 million and $369.4 million, respectively, compared with $101.8 million and $307.0 million, respectively, for the same periods in 2009. Distributable cash flow for the third quarter 2010 was $84.4 million, compared with $55.1 million for the third quarter 2009 period, an increase of 53 percent.

For the nine months ended September 30, 2010 distributable cash flow was $260.7 million compared with $170.3 million for the same 2009 periods, an increase of 53 percent. Distribution coverage for third quarter of 2010 was 1.2 times. The significant increases in financial results for the quarter and nine months ended September 30, 2010, were primarily due to organic growth expansions including the completion of the Piceance Lateral expansion in late 2009, as well as the Elba Island LNG Phase IIIA (Elba IIIA) expansion, and Elba Express pipeline in March 2010.

In addition, the acquisition of additional interests in Southern Natural Gas (SNG) in June 2010 and increased earnings at SNG related to its rate case settlement in September 2009 contributed to the increases. Financial results also increased for the nine months ended period due to the completion of the Totem Storage facility in late 2009.

Distributable cash flow was higher due to the acquisition of interests in Southern LNG Company (SLNG) in March 2010, and the acquisition of increased interests in Colorado Interstate Gas (CIG) in July 2009.

Equity Investments

El Paso Pipeline Partners recognized $27.1 million in equity earnings for the quarter and $62.2 million for the nine months ended September 30, 2010 from its ownership interest in SNG, compared with $11.2 million and $35.7 million, respectively, for the same 2009 periods. The partnership’s share of SNG’s distributable cash flow was $23.3 million and $64.6 million for the quarter and nine months ended September 30, 2010, respectively, compared with $10.6 million and $34.1 million, respectively, for the same 2009 periods.

The increase in earnings and distributable cash flow from El Paso Pipeline Partners’ equity investment in SNG for both periods is due to increased revenues as a result of SNG’s rate case settlement in September 2009 and as a result of the acquisition of the additional 20-percent interest in SNG in June 2010.

Interest and Debt Expense

For the quarter and nine months ended September 30, 2010, interest and debt expense was $33.9 million and $84.7 million, respectively, compared with $18.5 million and $50.2 million, respectively, for the same 2009 periods. The increase is primarily due to interest expense related to the issuance of an aggregate $535 million of senior unsecured notes in March 2010 and June 2010 used to partially finance acquisitions of interests in SLNG, Elba Express and SNG, a $165 million project financing for Elba Express in May 2009, a $135 million debt issuance by SLNG in February 2009 to finance its terminal expansion, and increased obligations incurred associated with the construction of the WYCO Totem Storage project, which was completed in June 2009.

The additional interest expense was partially offset by a lower average debt balance outstanding under the partnership’s credit facility.

Capital Projects

The Partnership continues to execute on its significant backlog of organic growth projects and expects to place three expansions in service on schedule, before year end, the WIC System Expansion, the CIG Raton 2010 expansion, and the first phase of the SNG South System III expansion.

In total, net to EPB’s interest, these three projects are expected to be approximately $65 million under budget. The projects are also expected to be completed within their projected in-service dates. During the nine months ended September 30, 2010, El Paso Pipeline Partners invested $119 million, primarily for the WIC System Expansion, CIG Raton 2010, Elba IIIA, and Elba Express pipeline projects. Maintenance capital expenditures for the nine months totaled $14 million.

Source: El Paso Pipeline Partners, November 3, 2010

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