Northern Border (NYSE:NBP)
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Northern Border Partners, L.P. (NYSE:NBP) today reported
third quarter 2005 net income of $48.4 million or $0.98 per unit
compared with net income of $34.7 million or $0.69 per unit for third
quarter 2004. Year-to-date 2005, Northern Border Partners reported net
income of $111.1 million, or $2.22 per unit, compared with $104.6
million, or $2.08 per unit for the same period in 2004. Cash flow as
measured by earnings before interest, taxes, depreciation and
amortization (EBITDA) was $106.9 million for third quarter 2005 up
from $88.1 million in the third quarter of 2004. Year-to-date 2005
EBITDA was $278.0 million compared with $266.5 million for the same
period one year ago.
"All business segments delivered strong third quarter results.
This, coupled with non-recurring items realized in the quarter,
resulted in record quarterly earnings," said Bill Cordes, chief
executive officer of Northern Border Partners. "Therefore, we are
increasing our earnings guidance for the full year 2005. Net income is
expected to be in the range of $2.83 per unit to $2.89 per unit.
Distributable cash flow (DCF) is expected to be $3.61 per unit to
$3.67 per unit."
"Our results for 2006 are expected to be fairly consistent with
2005 from a base business perspective excluding non-recurring items,"
Cordes continued. "We anticipate net income to be in the range of
$2.50 per unit to $2.60 per unit and distributable cash flow to be in
the range of $3.65 per unit to $3.85 per unit."
THIRD QUARTER 2005 HIGHLIGHTS
Third quarter results included:
-- Higher operating revenue from interstate pipelines of
approximately $8.2 million in third quarter 2005, resulting
primarily from the sale of bankruptcy claims held against
Enron and Enron North America. Northern Border Pipeline
realized $9.4 million ($6.6 million net to the Partnership) of
non-recurring revenue from the sale of the bankruptcy claims
which was offset by a $2.0 million ($1.4 million net to the
Partnership) reduction in revenue as a result of capacity sold
at discounted rates.
-- Increased operating income of approximately $5.4 million from
the Partnership's Williston Basin gathering and processing
operations. Gathered and processed volumes increased by 20
percent and the average price realized for natural gas
increased by 39 percent while the average price realized for
natural gas liquids increased by 26 percent.
-- Consolidated interest expense of approximately $22.1 million
in third quarter 2005 compared with $19.3 million in the third
quarter 2004 due to higher average interest rates, offset by
slightly lower average debt outstanding.
-- Equity earnings from our joint venture investments which were
$6.5 million greater in third quarter 2005 than third quarter
2004, due primarily to a settlement of our preferred
distributions from Bighorn Gas Gathering. In the third quarter
of 2005, Northern Border Partners recognized $5.4 million for
settlement of Preferred A distributions related to 2004 and
2005.
-- In August, the Partnership completed the purchase of an
additional 3.7 percent interest in Fort Union Gas Gathering
for approximately $5.1 million. This brings the Partnership's
total ownership position in this gathering system to 37
percent.
-- In September, Northern Border Pipeline accepted the Federal
Energy Regulatory Commission's (FERC) certificate of public
convenience and necessity for the Chicago III Expansion
Project. This project will add 130 mmcfd of transportation
capacity from Harper, Iowa to Chicago, Illinois and is fully
subscribed by four shippers under long-term firm service
transportation agreements with terms ranging from five and
one-half to ten years. Construction is estimated to cost
approximately $21 million and the target in-service date is
April 2006.
Interstate Natural Gas Pipeline Segment
The interstate natural gas pipeline segment contributed net income
of $36.7 million in third quarter 2005, compared with $30.6 million in
third quarter 2004.
Operating revenue for the segment includes:
-- Northern Border Pipeline's $9.4 million of non-recurring
revenue from the sale of its bankruptcy claims;
-- a decrease of $2.0 million related to capacity on Northern
Border Pipeline sold at discounted rates;
-- higher revenues on Midwestern Gas Transmission of $0.6 million
and Viking Gas Transmission of $0.2 million.
Average daily throughput for the interstate natural gas pipeline
segment increased 8 percent in the quarter totaling 3,264 million
cubic feet per day (mmcfd) compared with 3,029 mmcfd in third quarter
2004.
Northern Border Pipeline had 63 mmcfd of transportation capacity
that was unsold for October. As of October 31, 2005, 88 mmcfd was
available for contracting for November and December 2005 on the Port
of Morgan to Ventura segment.
The following chart provides additional information related to
Northern Border Pipeline's contracting levels and revenue for the
three and nine months ended September 30, 2005. Northern Border
Pipeline rates are based on the distance of the transportation path.
As a result, the weighted average system rate varies due to the
changing transportation paths as well as discounting activity.
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Northern Border Pipeline Company
Total System Revenue Summary
----------------------------------------------------------------------
Third Quarter Year to Date
-------------------------------------
2005 2004 2005 2004
----------------------------------------------------------------------
Percent Contracted(1) 101% 100% 97% 101%
Weighted Average System Rate
($/mcf) (2) $0.360(3) $0.374 $0.372(3) $0.376
Total Revenue (Millions) $79.6(3) $81.6 $232.3(3) $246.4
1. Compared to a design capacity of 2,374 mmcfd.
2. Amounts shown in dollars per thousand cubic feet (mcf).
3. Amounts exclude revenue from sale of Enron bankruptcy claims.
*T
Natural Gas Gathering and Processing Segment
Net income from the natural gas gathering and processing segment
during third quarter 2005 was $22.1 million, an increase of 56 percent
or $7.9 million over the third quarter 2004.
The primary differences between the periods were:
-- Gathering and processing volumes in the Williston Basin of 67
mmcfd compared with 56 mmcfd in third quarter 2004, a 20
percent increase, primarily attributable to increased
production and system expansions in the Grasslands and
Marmarth systems.
-- Increased prices realized for natural gas and natural gas
liquids. Average prices realized, net of hedging, during the
third quarter were $0.93 per gallon for natural gas liquids
and $6.83 per million British thermal units (mmBtu) for
natural gas. The combined impact of increased inlet volumes
and prices realized was an increase in gross margins for
Williston Basin of $8.3 million compared with the third
quarter of 2004.
-- Volumes on the Partnership's wholly-owned gathering systems in
the Powder River Basin of 177 mmcfd versus 216 mmcfd or a 18
percent decline compared to the third quarter 2004. Since this
decrease is primarily due to the loss of high-pressure
gathered volumes, our revenues from these systems declined by
only 8 percent. Approximately 78 percent of the volumes for
the third quarter 2005 in our wholly-owned Powder River Basin
gathering systems are low pressure volumes and we derive
approximately 88 percent of our revenues from these volumes.
-- Higher operations and maintenance expense of approximately
$5.8 million. In third quarter 2004, operations and
maintenance expense included a recovery of $1.8 million of
allowance for doubtful accounts related to bankruptcy claims
and a gain from the sale of gathering assets of $3.1 million.
Third quarter 2005 included higher operating expenses
primarily as a result of system expansions.
-- Increased equity earnings of $6.3 million due to of the
Bighorn Gas Gathering Preferred A settlement ($5.4 million)
and better performance for Bighorn Gas Gathering, Fort Union
Gas Gathering, and Lost Creek Gas Gathering.
Coal Slurry Pipeline Segment
Net income for the coal slurry pipeline segment was $1.7 million
for third quarter 2005, up from $0.9 million for the third quarter
2004 primarily the result of adjustments to depreciation expense for
the assets of Black Mesa.
BUSINESS OUTLOOK
Net income for 2005 is now expected to range from $142 million to
$145 million ($2.83 per unit to $2.89 per unit). EBITDA is expected to
be in the range of $363 million to $370 million. Distributable cash
flow is expected to be $178 million to $182 million or $3.61 per unit
to $3.67 per unit.
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Northern Border Partners
Reconciliation of EBITDA to Net Income - Projected 2005
----------------------------------------------------------------------
Interstate
Natural Gas Gas Gathering
Consolidated Pipelines & Processing Coal Slurry
----------------------------------------------------------------------
Low High Low High Low High Low High
----------------------------------------------------------------------
EBITDA $363 $370 $283 $286 $81 $84 $5 $6
Minority Interest (45) (46) (45) (46) - - - -
Interest Expense,
Net (86) (88) (44) (45) - - - -
Depreciation &
Amortization
Expense (85) (86) (66) (67) (15) (16) (2) (3)
Income Taxes (5) (6) (3) (4) - - (1) (1)
----------------------------------------------------------------------
Net Income $142 $145 $122 $124 $65 $67 $1 $2
======================================================================
Note: The reconciliations of EBITDA and Net Income do not total due to
use of ranges for the various components of the reconciliation and
unallocated Partnership expenses.
*T
Results for 2006 are expected to be in line with 2005 results from
a base business perspective. The base business perspective would
exclude 2005 non-recurring items including the Preferred A settlement
of $5.4 million from Bighorn Gas Gathering and the income from the
sale of bankruptcy claims totaling approximately $8.2 million, net to
the Partnership. Additionally, the temporary shut-down of Black Mesa
Pipeline is expected to reduce 2006 net income compared to 2005 by
approximately $5.0 million.
Net income for 2006 is now expected to range from $126 million to
$131 million ($2.50 per unit to $2.60 per unit). EBITDA is expected to
be in the range of $348 million to $358 million. Distributable cash
flow is expected to be $181 million to $189 million or $3.65 per unit
to $3.85 per unit.
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Northern Border Partners
Reconciliation of EBITDA to Net Income - Projected 2006
----------------------------------------------------------------------
Interstate Gas
Natural Gas Gathering &
Consolidated Pipelines Processing Coal Slurry
----------------------------------------------------------------------
Low High Low High Low High Low High
----------------------------------------------------------------------
EBITDA $348 $358 $272 $277 $86 $91 ($7) ($3)
Minority Interest (41) (42) (41) (42) - - - -
Interest Expense, Net (90) (93) (44) (45) - - - -
Depreciation &
Amortization Expense (89) (91) (70) (72) (17) (18) - -
Income Taxes (2) (3) (4) (5) - - 3 1
----------------------------------------------------------------------
Net Income $126 $131 $112 $115 $69 $73 ($4) ($2)
======================================================================
Note: The reconciliations of EBITDA and Net Income do not total due to
use of ranges for the various components of the reconciliation and
unallocated Partnership expenses.
*T
Interstate Natural Gas Pipeline Segment
The Partnership's projections for transportation demand on its
interstate natural gas pipelines assume:
-- Midwestern will have strong southbound flows as shippers look
for alternatives to Gulf Coast supply; and Viking will remain
flat to 2005.
-- Canadian natural gas supply will remain steady and import
levels will be similar in 2006 as in 2005.
-- The anticipated natural gas price differential during the
upcoming April and May shoulder months compared with the
2006-07 winter heating season are expected to impact demand
for Northern Border Pipeline transportation capacity again in
2006.
-- Northern Border Pipeline is likely to again experience
seasonal fluctuations in throughput during 2006 and some
discounting may be required to maximize revenue.
-- Northern Border Pipeline's Chicago III Expansion Project goes
into service in April 2006.
Based on those assumptions, the following table represents a
forecast of Northern Border Pipeline contracting levels and
corresponding revenue for the remainder of the current year, along
with 2006. Included for comparison purposes is actual contracting
levels and revenue for 2004.
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Northern Border Pipeline Company
Total System Revenue Forecast
(Years Ended December 31)
----------------------------------------------------------------------
2004 2005 2006
---------------------------------------------
Actual Forecast Forecast
----------------------------------------------------------------------
Percent Currently
Contracted (1) 101% 97% 71%
Percent Expected To Be
Contracted N/A 97%-98% 97%-102%
Weighted Average System
Rate ($/mcf) (2) $0.375 $0.363-$0.368(3) $0.345-$0.362
Total Revenue (Millions) $329 $310-$314(3) $305-$320
1. Compared to a design capacity of 2,374 mmcfd.
2. Amounts shown in dollars per thousand cubic feet (mcf).
3. Amounts exclude revenue from sale of Enron bankruptcy claims.
*T
As required by the provisions of the settlement of its last rate
case, on November 1, 2005, Northern Border Pipeline filed a rate case
with the FERC. The filing proposes:
-- an increase in rates based on an increase in overall revenue
requirement of 7.8 percent;
-- a change to the rate design approach with a supply zone and
market area utilizing a fixed rate per dekatherm and a
dekatherm-mile rate, respectively;
-- a compressor usage surcharge primarily to recover costs
related to powering electric compressors; and
-- the implementation of a short-term, firm-service rate
structure on a prospective basis.
Additionally, the filing incorporates:
-- an overall cost of capital of 10.56 percent based on a rate of
return on equity of 14.20 percent;
-- an adjustment in the billing determinants primarily to reflect
discounting of capacity;
-- an increase in the depreciation rate for transmission plant
from 2.25 percent to 2.84 percent and the institution of a
negative salvage rate of 0.59 percent;
-- the continuation of the inclusion of income taxes in the
calculation of the rates.
The Partnership cannot predict the outcome or the timing of final
resolution of this proceeding.
Natural Gas Gathering and Processing Segment
The Partnership's outlook for this segment is based on our
expectations for the performance of the Basins where we have interests
including these assumptions:
-- In the Williston Basin, the Partnership expects that
casinghead gas volumes will continue to increase at least
through 2006, but at a slower rate of growth than 2005.
-- The Partnership anticipates that favorable natural gas and
natural gas liquids prices will continue in 2006.
-- For the remainder of 2005, approximately 77 percent of the
projected natural gas equity volumes are hedged and 65 percent
of the projected equity natural gas liquids volumes are
hedged. For 2006, approximately 47 percent of the equity
natural gas volumes and 24 percent of the equity natural gas
liquids volumes are hedged.
-- Overall, drilling in the Powder River Basin is expected to
continue to increase, led by positive developments in drilling
in the Big George Coal in the western portion of the Basin.
Coal Slurry Pipeline Segment
We expect Black Mesa Pipeline to be temporarily shut down upon
expiration of our coal slurry transportation contract on December 31,
2005. The Mohave Generating Station (Mohave) co-owners, the Hopi
Tribe, the Navajo Nation, Peabody Western Coal Company and other
interested parties continue to negotiate water and coal supply issues.
Black Mesa is working to resolve coal slurry transportation issues so
that operations may resume in the future. If there are successful
resolutions of all of these issues and the project receives a
favorable Environmental Impact Statement, we believe our coal slurry
pipeline will be modified and reconstructed in late 2008 and 2009. We
expect to incur temporary shut down and standby costs of approximately
$2 million in the fourth quarter of 2005 and approximately $4 to $6
million in 2006. If these issues are not resolved and Mohave is
permanently closed, we expect to incur pipeline removal and
remediation costs of approximately $2 million to $4 million,
(pre-tax), net of salvage, and to take a non-cash impairment charge of
approximately $12 million (pre-tax) related to goodwill and the
remaining undepreciated cost of the assets. Depending on how
negotiations progress and in accordance with accounting rules an
impairment charge may be required prior to final resolution of the
issues concerning Mohave even though the project may ultimately
proceed.
Our 2005 and 2006 guidance includes the expected costs of a
temporary shut-down of the Black Mesa Pipeline, but does not
anticipate any impairment charges.
DISTRIBUTION DECLARATION
On October 20, 2005, the Partnership Policy Committee declared the
Partnership's quarterly cash distribution of $0.80 per unit for the
third quarter of 2005. The indicated annual rate is $3.20. The
distribution is payable November 14, 2005 to unitholders of record on
October 31, 2005.
CONFERENCE CALL
Northern Border Partners will host a conference call on Thursday,
November 3, 2005 at 10:00 a.m. Eastern Time to review third quarter
2005 results and discuss 2005 and 2006 guidance. This call may be
accessed via the Partnership's website at
http://www.northernborderpartners.com. An audio replay of the call
will be available through November 30, 2005 by dialing, toll free in
the United States and Canada, 800-405-2236 and entering passcode
11041885.
NON-GAAP FINANCIAL MEASURES
The Partnership has disclosed in this press release EBITDA and DCF
amounts that are non-GAAP financial measures. Management believes
EBITDA and DCF provide useful information to investors as a measure of
comparability to peer companies. However, these calculations may vary
from company to company, so the Partnership's computations may not be
comparable to those of other companies'. DCF is not necessarily the
same as available cash as defined in the Partnership Agreements.
Management further uses EBITDA to compare the financial performance of
its segments and to internally manage those business segments. The
three and nine months ended 2005 and 2004 reconciliations of EBITDA to
net income and EBITDA to cash flow from operating activities, and
computations of DCF are included in the financial information with
this release. On a consolidated basis, EBITDA is reconciled to cash
flow from operating activities determined under GAAP. For segment
information of this press release, EBITDA is reconciled to net income
rather than to cash flow from operating activities, since the
Partnership does not determine segment cash flow from operating
activities due to its intercompany cash management activity.
Reconciliations of projected 2005 and projected 2006 EBITDA to
projected net income and computations of projected DCF are also
included with this release.
Northern Border Partners, L.P. is a publicly traded partnership
formed to own, operate and acquire a diversified portfolio of energy
assets. The Partnership owns and manages natural gas pipelines and is
engaged in the gathering and processing of natural gas. More
information can be found at http://www.northernborderpartners.com.
FORWARD-LOOKING STATEMENT
This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. Although Northern Border
Partners believes that its expectations regarding future events are
based on reasonable assumptions, it can give no assurance that its
goals will be achieved. Important factors that could cause actual
results to differ materially from those in the forward-looking
statements herein include:
Interstate Natural Gas Pipeline Segment:
-- the impact of unsold capacity on Northern Border Pipeline
being greater or less than expected;
-- the ability to market pipeline capacity on favorable terms,
which is affected by:
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-- future demand for and prices of natural gas;
-- competitive conditions in the overall natural gas and
electricity markets;
-- availability of supplies of Canadian and United States
natural gas;
-- availability of additional storage capacity; weather
conditions; and
-- competitive developments by Canadian and U.S. natural gas
transmission peers;
*T
-- orders by the FERC which are significantly different than our
assumptions related to Northern Border Pipeline's November
2005 rate case;
-- our ability to successfully advocate our position before the
FERC or reach a reasonable settlement with the FERC staff and
opposing parties;
-- performance of contractual obligations by the shippers;
-- political and regulatory developments that impact FERC,
proceedings involving interstate pipelines and the interstate
pipelines' success in sustaining their positions in such
proceedings;
-- the ability to recover operating costs, costs of property,
plant and equipment and regulatory assets in our rates;
-- timely receipt of approval by FERC for construction and
operation of the Midwestern Gas Transmission Eastern Extension
Project and required regulatory clearances; our ability to
acquire all necessary rights-of-way and obtain agreements for
interconnects in a timely manner; our ability to promptly
obtain all necessary materials and supplies required for
construction.
Natural Gas Gathering and Processing Segment:
-- the rate of development, well performance, gas quality, and
competitive conditions in gas fields near our natural gas
gathering systems in the Powder River and Williston Basins and
our investments in the Powder River and Wind River Basins;
-- prices of natural gas and natural gas liquids;
-- the composition and quality of the natural gas we gather and
process in our plants;
-- the efficiency of our plants in processing natural gas and
extracting natural gas liquids.
Coal Slurry Pipeline Segment:
-- renewal of the coal slurry pipeline transportation contract
under reasonable terms;
-- the impact of a potential impairment charge.
General:
-- developments in the December 2, 2001, filing by Enron of a
voluntary petition for bankruptcy protection under Chapter 11
of the United States Bankruptcy Code affecting our settled
claims;
-- regulatory actions and receipt of expected regulatory
clearances;
-- actions by rating agencies;
-- the ability to control operating costs;
-- conditions in the capital markets and the ability to access
the capital markets;
-- the risk inherent in the use of information systems in our
business, implementation of new software and hardware, and the
impact on the timeliness of information for financial
reporting; and
-- acts of nature, sabotage, terrorism or other similar acts
causing damage to our facilities or our suppliers' or
shippers' facilities.
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*T
Northern Border Partners, L.P.
Financial Highlights
----------------------
(Unaudited: In Millions Except Per Unit Amounts)
Third Quarter Year to Date
2005 2004 2005 2004
-------- -------- --------- --------
Operating Revenue $183.0 $147.3 $492.8 $433.6
Income From Continuing Operations $48.9 $34.4 $110.8 $103.1
Net Income $48.4 $34.7 $111.1 $104.6
Per Unit Income From Continuing
Operations $0.99 $0.68 $2.21 $2.05
Per Unit Net Income $0.98 $0.69 $2.22 $2.08
Cash Flows From Operating
Activities $91.3 $62.2 $202.6 $192.0
EBITDA (1) $106.9 $88.1 $278.0 $266.5
Distributable Cash Flow $63.3 $48.4 $148.4 $149.6
Distributable Cash Flow Per Unit $1.30 $0.98 $3.01 $3.04
Consolidated Statement of Income
----------------------------------
(Unaudited: In Millions Except Per Unit Amounts)
Third Quarter Year to Date
2005 2004 2005 2004
--------- -------- -------- --------
Operating Revenue $183.0 $147.3 $492.8 $433.6
--------- -------- -------- --------
Operating Expenses
Product Purchases 45.3 26.1 113.3 71.0
Operations and Maintenance 32.2 28.2 95.5 86.6
Depreciation and
Amortization 20.4 21.3 63.2 64.2
Taxes Other Than Income 10.2 9.6 29.0 27.4
--------- -------- -------- --------
Total Operating Expenses 108.1 85.2 301.0 249.2
--------- -------- -------- --------
Operating Income 74.9 62.1 191.8 184.4
Interest Expense, Net (22.1) (19.3) (64.6) (56.4)
Other Income (Expense), Net 1.5 0.3 2.8 1.5
Equity Earnings from Investments 10.4 3.9 19.3 13.9
Minority Interest (13.9) (11.3) (34.7) (36.2)
--------- -------- -------- --------
Income From Continuing
Operations Before Income Taxes 50.8 35.7 114.6 107.2
Income Taxes 1.9 1.3 3.8 4.1
--------- -------- -------- --------
Income From Continuing
Operations 48.9 34.4 110.8 103.1
Discontinued Operations, net of
tax (0.5) 0.3 0.3 1.5
--------- -------- -------- --------
Net Income $48.4 $34.7 $111.1 $104.6
========= ======== ======== ========
Per Unit Income From Continuing
Operations $0.99 $0.68 $2.21 $2.05
========= ======== ======== ========
Per Unit Net Income $0.98 $0.69 $2.22 $2.08
========= ======== ======== ========
Average Units Outstanding 46.4 46.4 46.4 46.4
========= ======== ======== ========
Northern Border Partners, L.P.
Reconciliation of non-GAAP Financial Measures
-----------------------------------------------
(Unaudited: In Millions Except Per Unit Amounts)
Reconciliation of EBITDA to Net Third Quarter Year to Date
Income
2005 2004 2005 2004
--------- -------- -------- --------
EBITDA (1) $106.9 $88.1 $278.0 $266.5
Minority Interest (13.9) (11.3) (34.7) (36.2)
Interest Expense, Net (22.1) (19.3) (64.6) (56.4)
Depreciation and
Amortization (including
amounts in Other
Income, Net and
Discontinued
Operations) (20.3) (21.4) (63.3) (64.7)
Income taxes (including
amounts in Discontinued
Operations) (2.4) (1.4) (4.6) (4.7)
Equity AFUDC (included in
Other Income, Net) 0.2 0.0 0.3 0.1
--------- -------- -------- --------
Net Income $48.4 $34.7 $111.1 $104.6
========= ======== ======== ========
Reconciliation of EBITDA to Cash
Flows From Operating Activities
EBITDA (1) $106.9 $88.1 $278.0 $266.5
Interest Expense, Net (22.1) (19.3) (64.6) (56.4)
Changes in Current Assets
and Liabilities 11.4 3.1 5.6 2.5
Equity Earnings from
Investments (10.4) (3.9) (19.3) (13.9)
Distributions Received from
Equity Investments 9.4 1.6 12.1 9.2
Changes in Reserves and
Deferred Credits 0.4 (0.1) (0.4) (1.8)
Gain on Sale of Assets 0.0 (3.2) 0.0 (3.4)
Other (4.3) (4.1) (8.8) (10.7)
--------- -------- -------- --------
Cash Flows From Operating
Activities $91.3 $62.2 $202.6 $192.0
========= ======== ======== ========
Reconciliation of EBITDA to
Distributable Cash Flow
EBITDA (1) $106.9 $88.1 $278.0 $266.5
Interest Expense, Net (22.1) (19.3) (64.6) (56.4)
Maintenance Capital (7.3) (4.8) (18.9) (12.7)
Distributions to Minority
Interest (11.8) (15.5) (43.8) (46.8)
Other (2.4) (0.1) (2.3) (1.0)
--------- -------- -------- --------
Distributable Cash Flow $63.3 $48.4 $148.4 $149.6
========= ======== ======== ========
Distributable Cash Flow Per Unit $1.30 $0.98 $3.01 $3.04
========= ======== ======== ========
Northern Border Partners, L.P.
Other Financial Information
-----------------------------
(Unaudited: In Millions)
September December
30, 31,
2005 2004
--------- ---------
Summary Balance Sheet Data
Total assets by segment:
Interstate Natural Gas
Pipeline $1,877.6 $1,904.7
Natural Gas Gathering and
Processing 590.8 570.1
Coal Slurry Pipeline 16.7 18.3
Other (assets not
allocated to segments) 21.2 21.6
--------- ---------
Total consolidated
assets $2,506.3 $2,514.7
========= =========
Consolidated capitalization:
Long-term debt, including
current maturities $1,331.8 $1,330.4
Partners' capital 771.6 780.2
Minority interests in
partners' equity 280.7 290.1
Accumulated other
comprehensive income (11.9) 9.2
--------- ---------
Total capitalization 2,372.2 2,409.9
Consolidated other current
liabilities and reserves and
deferred credits 134.1 104.8
--------- ---------
Total liabilities and
capitalization $2,506.3 $2,514.7
========= =========
Third Quarter Year to Date
2005 2004 2005 2004
--------- --------- -------- --------
Capital Expenditures and Equity
Investments (2)
Maintenance -
Interstate Natural Gas
Pipeline $5.6 $3.4 $14.5 $9.0
Natural Gas Gathering
and Processing 0.6 1.3 1.5 2.1
Coal Slurry Pipeline 0.0 0.1 0.0 1.5
Other 1.1 0.0 2.9 0.1
--------- --------- -------- --------
7.3 4.8 18.9 12.7
--------- --------- -------- --------
Growth -
Interstate Natural Gas
Pipeline 4.0 0.2 8.2 0.3
Natural Gas Gathering
and Processing 10.7 3.3 19.4 4.9
Coal Slurry Pipeline 0.0 0.0 0.0 0.0
--------- --------- -------- --------
14.7 3.5 27.6 5.2
--------- --------- -------- --------
Total $22.0 $8.3 $46.5 $17.9
========= ========= ======== ========
(1) EBITDA is computed from (a) net income plus (b) minority interest;
(c) interest expense, net; (d) income taxes; and (e) depreciation
and amortization less (f) equity AFUDC.
(2) Management classifies expenditures that are expected to generate
additional revenues or significant operating efficiency as growth
capital expenditures and equity investments. Any remaining capital
expenditures are classified as maintenance.
(3) Volume information presented in operating results includes 100% of
the volumes for joint ventures and equity investments as well as for
wholly-owned subsidiaries.
Northern Border Partners, L.P.
Summary Segment Information
-----------------------------
(Unaudited)
Third Quarter Year to Date
2005 2004 2005 2004
--------- -------- -------- ---------
Interstate Natural Gas Pipeline
Segment
Operating Results (3):
Gas Delivered (mmcf) 293,079 271,929 856,943 847,505
Average Throughput (mmcfd) 3,264 3,029 3,216 3,167
Financial Results (In
Millions):
Operating Revenue $103.2 $95.0 $282.4 $287.1
--------- -------- -------- ---------
Operating Expenses
Operations and Maintenance 15.7 15.9 45.5 43.5
Depreciation and
Amortization 16.9 16.8 49.9 50.0
Taxes Other Than Income 9.4 8.8 26.3 24.9
--------- -------- -------- ---------
Total Operating Expenses 42.0 41.5 121.7 118.4
--------- -------- -------- ---------
Operating Income 61.2 53.5 160.7 168.7
Interest Expense, Net (11.3) (10.7) (33.7) (32.1)
Other Income, Net 1.2 (0.2) 2.1 0.4
Equity Earnings from Investments 0.6 0.4 1.2 1.0
--------- -------- -------- ---------
Income Before Income Taxes 51.7 43.0 130.3 138.0
Income Taxes 1.1 1.1 2.7 3.7
--------- -------- -------- ---------
Net Income 50.6 41.9 127.6 134.3
Net income to Minority Interest (13.9) (11.3) (34.7) (36.2)
--------- -------- -------- ---------
Net Income to Northern Border
Partners $36.7 $30.6 $92.9 $98.1
========= ======== ======== =========
EBITDA (1) $79.6 $70.5 $213.7 $220.4
========= ======== ======== =========
Distributions from Northern
Border Pipeline:
Paid to Northern Border
Partners $27.6 $36.1 $102.1 $109.2
Paid to Minority Interest $11.8 $15.5 $43.8 $46.8
--------- -------- -------- ---------
Total Distributions $39.4 $51.6 $145.9 $156.0
========= ======== ======== =========
Reconciliation of EBITDA to Net
Income
EBITDA (1) $79.6 $70.5 $213.7 $220.4
Minority Interest (13.9) (11.3) (34.7) (36.2)
Interest Expense, Net (11.3) (10.7) (33.7) (32.1)
Depreciation and
Amortization (16.8) (16.8) (50.0) (50.3)
Income taxes (1.1) (1.1) (2.7) (3.7)
Equity AFUDC (included in
Other Income (Expense)) 0.2 0.0 0.3 0.0
--------- -------- -------- ---------
Net Income $36.7 $30.6 $92.9 $98.1
========= ======== ======== =========
Northern Border Partners, L.P.
Summary Segment Information
---------------------------
(Unaudited)
Third Quarter Year to Date
2005 2004 2005 2004
--------- --------- --------- ---------
Natural Gas Gathering and
Processing Segment
Operating Results (3):
Volumes (mmcfd):
Gathering 1,037 1,041 1,032 1,013
Processing 67 56 64 54
Financial Results (In
Millions):
Operating Revenue $73.6 $46.8 $192.1 $130.1
--------- --------- --------- ---------
Operating Expenses
Product Purchases 45.3 26.1 113.3 71.0
Operations and Maintenance 11.4 5.6 32.4 26.3
Depreciation and
Amortization 3.9 3.7 11.8 11.1
Taxes Other Than Income 0.7 0.6 2.0 1.8
--------- --------- --------- ---------
Total Operating Expenses 61.3 36.0 159.5 110.2
--------- --------- --------- ---------
Operating Income 12.3 10.8 32.6 19.9
Interest Expense, Net (0.1) (0.1) (0.2) (0.3)
Other Income (Expense) 0.1 0.0 0.5 0.2
Equity Earnings from
Investments 9.8 3.5 18.1 12.9
--------- --------- --------- ---------
Income Before Income Taxes 22.1 14.2 51.0 32.7
Income Taxes 0.0 0.0 0.0 0.0
--------- --------- --------- ---------
Net Income 22.1 14.2 51.0 32.7
========= ========= ========= =========
EBITDA (1) $26.1 $18.0 $63.0 $44.1
========= ========= ========= =========
Distributions Received from
Equity Investments $9.4 $1.6 $12.1 $9.2
========= ========= ========= =========
Reconciliation of EBITDA to
Net Income
EBITDA (1) $26.1 $18.0 $63.0 $44.1
Interest Expense, Net (0.1) (0.1) (0.2) (0.3)
Depreciation and
Amortization (3.9) (3.7) (11.8) (11.1)
Income taxes 0.0 0.0 0.0 0.0
--------- --------- --------- ---------
Net Income $22.1 $14.2 $51.0 $32.7
========= ========= ========= =========
Northern Border Partners, L.P.
Summary Segment Information
---------------------------
(Unaudited)
Third Quarter Year to Date
2005 2004 2005 2004
--------- --------- --------- ---------
Coal Slurry Pipeline Segment
Operating Results:
Tons of Coal Shipped (In
Thousands) 1,150 1,217 3,534 3,346
Financial Results (In
Millions):
Operating Revenue $6.3 $5.5 $18.3 $16.3
--------- --------- --------- ---------
Operating Expenses
Operations and Maintenance 4.1 3.4 11.6 9.9
Depreciation and
Amortization (0.5) 0.8 1.4 3.0
Taxes Other Than Income 0.2 0.2 0.6 0.6
--------- --------- --------- ---------
Total Operating Expenses 3.8 4.4 13.6 13.5
--------- --------- --------- ---------
Operating Income 2.5 1.1 4.7 2.8
Other Income 0.0 0.0 0.0 0.0
--------- --------- --------- ---------
Income Before Income Taxes 2.5 1.1 4.7 2.8
Income Taxes 0.8 0.2 1.1 0.4
--------- --------- --------- ---------
Net Income $1.7 $0.9 $3.6 $2.4
========= ========= ========= =========
EBITDA (1) $2.0 $1.9 $6.1 $5.8
========= ========= ========= =========
Reconciliation of EBITDA to
Net Income
EBITDA (1) $2.0 $1.9 $6.1 $5.8
Depreciation and
Amortization 0.5 (0.8) (1.4) (3.0)
Income taxes (0.8) (0.2) (1.1) (0.4)
--------- --------- --------- ---------
Net Income $1.7 $0.9 $3.6 $2.4
========= ========= ========= =========
Northern Border Partners, L.P.
Reconciliation of non-GAAP Financial Measures
---------------------------------------------
(Unaudited: In Millions Except Per Unit Amounts)
Reconciliation of EBITDA to Net Income - Projected 2005 and 2006
Projected 2005 Projected 2006
----------------------- -----------------------
Low High Low High
----------- ----------- ----------- -----------
EBITDA $363 $370 $348 $358
Minority Interest ($45) ($46) ($41) ($42)
Interest Expense, Net ($86) ($88) ($90) ($93)
Depreciation and
Amortization Expense ($85) ($86) ($89) ($91)
Income Taxes ($5) ($6) ($2) ($3)
=========== =========== =========== ===========
Net Income(a) $142 $145 $126 $131
=========== =========== =========== ===========
Per Unit Net Income $2.83 $2.89 $2.50 $2.60
=========== =========== =========== ===========
(a) The reconciliations of EBITDA and Net Income do not total due to
use of ranges for the various components of the reconciliation.
Reconciliation of EBITDA to Distributable Cash Flow -
Projected 2005 and 2006
Projected 2005 Projected 2006
----------------------- -----------------------
Low High Low High
----------- ----------- ----------- -----------
EBITDA (from above) $363 $370 $348 $358
Interest Expense, Net ($86) ($88) ($90) ($93)
Maintenance Capital ($37) ($39) ($23) ($28)
Distributions to
Minority Interest ($60) ($62) ($53) ($55)
Other ($2) ($3) ($2) ($3)
=========== =========== =========== ===========
Distributable Cash
Flow(b) $178 $182 $181 $189
=========== =========== =========== ===========
Distributable Cash
Flow per Unit $3.61 $3.67 $3.65 $3.85
=========== =========== =========== ===========
(b) The reconciliations of EBITDA and Distributable Cash Flow do not
total due to use of ranges for the various components of the
reconciliation.
*T