Delaware
|
|
76-0380342
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(State or other jurisdiction of
incorporation or organization)
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|
(I.R.S. Employer
Identification No.)
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Page
Number
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||
PART I. FINANCIAL INFORMATION
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||
Item 1.
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Financial Statements (Unaudited)
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3
|
Consolidated Statements of Income - Three Months Ended March 31, 2011 and 2010
|
||
Consolidated Balance Sheets – March 31, 2011 and December 31, 2010
|
||
Consolidated Statements of Cash Flows – Three Months Ended March 31, 2011 and 2010
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||
Notes to Consolidated Financial Statements
|
||
Item 2.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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General and Basis of Presentation
|
||
Critical Accounting Policies and Estimates
|
||
Results of Operations
|
||
Financial Condition
|
||
Recent Accounting Pronouncements
|
||
Information Regarding Forward-Looking Statements
|
||
Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4.
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Controls and Procedures
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PART II. OTHER INFORMATION
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||
Item 1.
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Legal Proceedings
|
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Item 1A.
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Risk Factors
|
58
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
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58
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Item 3.
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Defaults Upon Senior Securities
|
58
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Item 4.
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(Removed and Reserved)
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58
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Item 5.
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Other Information
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58
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Item 6.
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Exhibits
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|
Signature
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||
Three Months Ended
March 31,
|
||||||||
2011
|
2010
|
|||||||
Revenues
|
||||||||
Natural gas sales
|
$ | 806.0 | $ | 1,017.5 | ||||
Services
|
784.4 | 738.5 | ||||||
Product sales and other
|
402.4 | 373.6 | ||||||
Total Revenues
|
1,992.8 | 2,129.6 | ||||||
Operating Costs, Expenses and Other
|
||||||||
Gas purchases and other costs of sales
|
815.7 | 1,016.6 | ||||||
Operations and maintenance
|
308.6 | 452.9 | ||||||
Depreciation, depletion and amortization
|
221.8 | 227.3 | ||||||
General and administrative
|
189.2 | 101.1 | ||||||
Taxes, other than income taxes
|
48.6 | 45.1 | ||||||
Other expense (income)
|
(0.2 | ) | (1.3 | ) | ||||
Total Operating Costs, Expenses and Other
|
1,583.7 | 1,841.7 | ||||||
Operating Income
|
409.1 | 287.9 | ||||||
Other Income (Expense)
|
||||||||
Earnings from equity investments
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64.9 | 46.7 | ||||||
Amortization of excess cost of equity investments
|
(1.5 | ) | (1.4 | ) | ||||
Interest expense
|
(132.0 | ) | (117.0 | ) | ||||
Interest income
|
5.3 | 5.5 | ||||||
Other, net
|
1.6 | 6.7 | ||||||
Total Other Income (Expense)
|
(61.7 | ) | (59.5 | ) | ||||
Income Before Income Taxes
|
347.4 | 228.4 | ||||||
Income Taxes
|
(6.5 | ) | (1.0 | ) | ||||
Net Income
|
340.9 | 227.4 | ||||||
Net Income Attributable to Noncontrolling Interests
|
(3.1 | ) | (2.1 | ) | ||||
Net Income Attributable to Kinder Morgan Energy Partners, L.P.
|
$ | 337.8 | $ | 225.3 | ||||
Calculation of Limited Partners’ Interest in Net Income (Loss)
|
||||||||
Attributable to Kinder Morgan Energy Partners, L.P.:
|
||||||||
Net Income Attributable to Kinder Morgan Energy Partners, L.P.
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$ | 337.8 | $ | 225.3 | ||||
Less: General Partner’s interest
|
(280.6 | ) | (249.2 | ) | ||||
Limited Partners’ Interest in Net Income (Loss)
|
$ | 57.2 | $ | (23.9 | ) | |||
Limited Partners’ Net Income (Loss) per Unit
|
$ | 0.18 | $ | (0.08 | ) | |||
Weighted Average Number of Units Used in Computation of Limited
Partners’ Net Income (Loss) per Unit
|
317.2 | 298.8 | ||||||
Per Unit Cash Distribution Declared
|
$ | 1.14 | $ | 1.07 |
March 31,
2011
|
December 31, 2010
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents
|
$ | 178.4 | $ | 129.1 | ||||
Restricted deposits
|
4.4 | 50.0 | ||||||
Accounts, notes and interest receivable, net
|
831.6 | 951.8 | ||||||
Inventories
|
93.0 | 92.0 | ||||||
Gas in underground storage
|
27.4 | 2.2 | ||||||
Fair value of derivative contracts
|
35.2 | 24.0 | ||||||
Other current assets
|
17.7 | 37.6 | ||||||
Total current assets
|
1,187.7 | 1,286.7 | ||||||
Property, plant and equipment, net
|
14,695.5 | 14,603.9 | ||||||
Investments
|
3,903.0 | 3,886.0 | ||||||
Notes receivable
|
117.9 | 115.0 | ||||||
Goodwill
|
1,229.4 | 1,233.6 | ||||||
Other intangibles, net
|
289.3 | 302.2 | ||||||
Fair value of derivative contracts
|
190.9 | 260.7 | ||||||
Deferred charges and other assets
|
179.6 | 173.0 | ||||||
Total Assets
|
$ | 21,793.3 | $ | 21,861.1 | ||||
LIABILITIES AND PARTNERS’ CAPITAL
|
||||||||
Current liabilities
|
||||||||
Current portion of debt
|
$ | 1,333.2 | $ | 1,262.4 | ||||
Cash book overdrafts
|
35.9 | 32.5 | ||||||
Accounts payable
|
588.2 | 630.9 | ||||||
Accrued interest
|
91.6 | 239.6 | ||||||
Accrued taxes
|
78.1 | 44.7 | ||||||
Deferred revenues
|
103.7 | 96.6 | ||||||
Fair value of derivative contracts
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380.5 | 281.5 | ||||||
Accrued other current liabilities
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165.0 | 176.0 | ||||||
Total current liabilities
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2,776.2 | 2,764.2 | ||||||
Long-term liabilities and deferred credits
|
||||||||
Long-term debt
|
||||||||
Outstanding
|
10,415.6 | 10,277.4 | ||||||
Value of interest rate swaps
|
530.4 | 604.9 | ||||||
Total Long-term debt
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10,946.0 | 10,882.3 | ||||||
Deferred income taxes
|
245.7 | 248.3 | ||||||
Fair value of derivative contracts
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282.3 | 172.2 | ||||||
Other long-term liabilities and deferred credits
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445.5 | 501.6 | ||||||
Total long-term liabilities and deferred credits
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11,919.5 | 11,804.4 | ||||||
Total Liabilities
|
14,695.7 | 14,568.6 | ||||||
Commitments and contingencies (Notes 4 and 10)
|
||||||||
Partners’ Capital
|
||||||||
Common units
|
4,217.4 | 4,282.2 | ||||||
Class B units
|
59.6 | 63.1 | ||||||
i-units
|
2,850.4 | 2,807.5 | ||||||
General partner
|
247.6 | 244.3 | ||||||
Accumulated other comprehensive loss
|
(356.6 | ) | (186.4 | ) | ||||
Total Kinder Morgan Energy Partners, L.P. partners’ capital
|
7,018.4 | 7,210.7 | ||||||
Noncontrolling interests
|
79.2 | 81.8 | ||||||
Total Partners’ Capital
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7,097.6 | 7,292.5 | ||||||
Total Liabilities and Partners’ Capital
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$ | 21,793.3 | $ | 21,861.1 |
Three Months Ended
March 31,
|
||||||||
2011
|
2010
|
|||||||
Cash Flows From Operating Activities
|
||||||||
Net Income
|
$ | 340.9 | $ | 227.4 | ||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation, depletion and amortization
|
221.8 | 227.3 | ||||||
Amortization of excess cost of equity investments
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1.5 | 1.4 | ||||||
Noncash compensation expense allocated from parent (Note 9)
|
89.9 | 1.4 | ||||||
Earnings from equity investments
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(64.9 | ) | (46.7 | ) | ||||
Distributions from equity investments
|
64.8 | 49.8 | ||||||
Changes in components of working capital:
|
||||||||
Accounts receivable
|
99.7 | 49.0 | ||||||
Inventories
|
- | (7.5 | ) | |||||
Other current assets
|
20.0 | 23.8 | ||||||
Accounts payable
|
(39.1 | ) | (9.1 | ) | ||||
Accrued interest
|
(148.0 | ) | (127.8 | ) | ||||
Accrued taxes
|
33.5 | 6.1 | ||||||
Accrued liabilities
|
(20.9 | ) | (12.4 | ) | ||||
Rate reparations, refunds and other litigation reserve adjustments
|
(63.0 | ) | 158.0 | |||||
Other, net
|
(18.7 | ) | (25.9 | ) | ||||
Net Cash Provided by Operating Activities
|
517.5 | 514.8 | ||||||
Cash Flows From Investing Activities
|
||||||||
Acquisitions of assets and investments
|
(65.9 | ) | (226.3 | ) | ||||
Capital expenditures
|
(265.0 | ) | (218.8 | ) | ||||
Sale or casualty of property, plant and equipment, and other net assets net of removal costs
|
0.9 | 13.4 | ||||||
Net proceeds from margin and restricted deposits
|
43.2 | 15.9 | ||||||
Contributions to equity investments
|
(22.2 | ) | (135.6 | ) | ||||
Distributions from equity investments in excess of cumulative earnings
|
79.1 | 57.3 | ||||||
Net Cash Used in Investing Activities
|
(229.9 | ) | (494.1 | ) | ||||
Cash Flows From Financing Activities
|
||||||||
Issuance of debt
|
2,522.7 | 957.0 | ||||||
Payment of debt
|
(2,304.6 | ) | (524.0 | ) | ||||
Debt issue costs
|
(7.1 | ) | (0.2 | ) | ||||
Increase in cash book overdrafts
|
3.4 | 10.8 | ||||||
Proceeds from issuance of common units
|
81.2 | - | ||||||
Contributions from noncontrolling interests
|
1.8 | 1.7 | ||||||
Distributions to partners and noncontrolling interests:
|
||||||||
Common units
|
(247.4 | ) | (217.7 | ) | ||||
Class B units
|
(6.0 | ) | (5.6 | ) | ||||
General Partner
|
(278.2 | ) | (245.5 | ) | ||||
Noncontrolling interests
|
(6.6 | ) | (6.0 | ) | ||||
Net Cash Used in Financing Activities
|
(240.8 | ) | (29.5 | ) | ||||
Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
2.5 | (3.4 | ) | |||||
Net increase (decrease) in Cash and Cash Equivalents
|
49.3 | (12.2 | ) | |||||
Cash and Cash Equivalents, beginning of period
|
129.1 | 146.6 | ||||||
Cash and Cash Equivalents, end of period
|
$ | 178.4 | $ | 134.4 | ||||
Noncash Investing and Financing Activities
|
||||||||
Assets acquired by the assumption or incurrence of liabilities
|
$ | - | $ | 10.5 | ||||
Assets acquired by the issuance of common units
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$ | - | $ | 81.7 | ||||
Contribution of net assets to investments
|
$ | 7.9 | $ | - | ||||
Supplemental Disclosures of Cash Flow Information
|
||||||||
Cash paid during the period for interest (net of capitalized interest)
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$ | 251.1 | $ | 213.5 | ||||
Cash paid during the period for income taxes
|
$ | 1.3 | $ | 2.7 |
Products
Pipelines
|
Natural Gas
Pipelines
|
CO
2
|
Terminals
|
Kinder Morgan
Canada
|
Total
|
|||||||||||||||||||
Historical Goodwill.
|
$ | 263.2 | $ | 337.0 | $ | 46.1 | $ | 337.9 | $ | 626.5 | $ | 1,610.7 | ||||||||||||
Accumulated impairment losses(a).
|
- | - | - | - | (377.1 | ) | (377.1 | ) | ||||||||||||||||
Balance as of December 31, 2010
|
263.2 | 337.0 | 46.1 | 337.9 | 249.4 | 1,233.6 | ||||||||||||||||||
Acquisitions.
|
- | - | - | - | - | - | ||||||||||||||||||
Disposals(b).
|
- | - | - | (10.6 | ) | - | (10.6 | ) | ||||||||||||||||
Impairments
|
- | - | - | - | - | - | ||||||||||||||||||
Currency translation adjustments
|
- | - | - | - | 6.4 | 6.4 | ||||||||||||||||||
Balance as of March 31, 2011
|
$ | 263.2 | $ | 337.0 | $ | 46.1 | $ | 327.3 | $ | 255.8 | $ | 1,229.4 |
(a)
|
On April 18, 2007, we announced that we would acquire the Trans Mountain pipeline system from KMI, and we completed this transaction on April 30, 2007. Following the provisions of generally accepted accounting principles, the consideration of this transaction caused KMI to consider the fair value of the Trans Mountain pipeline system, and to determine whether goodwill related to these assets was impaired. Based on this determination, KMI recorded a goodwill impairment charge of $377.1 million in the first quarter of 2007, and because we have included all of the historical results of Trans Mountain as though the net assets had been transferred to us on January 1, 2006, this impairment is now included in our accumulated impairment losses. We have no other goodwill impairment losses.
|
(b)
|
First quarter 2011 disposal related to the sale of our ownership interest in the boat fleeting business we acquired from Megafleet Towing Co., Inc. in April 2009 (discussed further in Note 2.)
|
March 31,
2011
|
December 31,
2010
|
|||||||
Customer relationships, contracts and agreements
|
||||||||
Gross carrying amount
|
$ | 398.8 | $ | 399.8 | ||||
Accumulated amortization
|
(121.6 | ) | (112.0 | ) | ||||
Net carrying amount
|
277.2 | 287.8 | ||||||
Technology-based assets, lease value and other
|
||||||||
Gross carrying amount
|
15.7 | 17.9 | ||||||
Accumulated amortization
|
(3.6 | ) | (3.5 | ) | ||||
Net carrying amount
|
12.1 | 14.4 | ||||||
Total Other intangibles, net
|
$ | 289.3 | $ | 302.2 |
|
Kinder Morgan Energy Partners, L.P. Senior Notes
|
Entity
|
Our Ownership Interest
|
Investment Type
|
Total
Entity
Debt
|
Our Contingent
Share of
Entity Debt
|
(a)
|
||||||||||
Fayetteville Express Pipeline LLC(b)
|
50 | % |
Limited Liability
|
$ | 962.5 |
(c)
|
$ | 481.3 | |||||||
|
|||||||||||||||
Cortez Pipeline Company(d)
|
50 | % |
General Partner
|
$ | 140.1 |
(e)
|
$ | 86.2 |
(f)
|
||||||
Nassau County,
Florida Ocean Highway and Port Authority(g)
|
N/A |
N/A
|
N/A | $ | 18.3 |
(h)
|
(a)
|
Represents the portion of the entity’s debt that we may be responsible for if the entity cannot satisfy its obligations.
|
(b)
|
Fayetteville Express Pipeline LLC is a limited liability company and the owner of the Fayetteville Express natural gas pipeline system. The remaining limited liability company member interest in Fayetteville Express Pipeline LLC is owned by Energy Transfer Partners, L.P.
|
(c)
|
Amount represents borrowings under a $1.1 billion, unsecured revolving bank credit facility that is due May 11, 2012.
|
(d)
|
Cortez Pipeline Company is a Texas general partnership that owns and operates a common carrier carbon dioxide pipeline system. The remaining general partner interests are owned by ExxonMobil Cortez Pipeline, Inc., an indirect wholly-owned subsidiary of Exxon Mobil Corporation, and Cortez Vickers Pipeline Company, an indirect subsidiary of M.E. Zuckerman Energy Investors Incorporated.
|
(e)
|
Amount consists of (i) $32.1 million aggregate principal amount of Series D notes due May 15, 2013 (interest on the Series D notes is paid annually and based on a fixed interest rate of 7.14% per annum); (ii) $100.0 million of variable rate Series E notes due December 11, 2012 (interest on the Series E notes is paid quarterly and based on an interest rate of three-month LIBOR plus a spread); and (iii) $8.0 million of outstanding borrowings under a $40.0 million committed revolving bank credit facility that is also due December 11, 2012.
|
(f)
|
We are severally liable for our percentage ownership share (50%) of the Cortez Pipeline Company debt ($70.1 million). In addition, as of March 31, 2011, Shell Oil Company shares our several guaranty obligations jointly and severally for $32.1 million of Cortez’s debt balance related to the Series D notes; however, we are obligated to indemnify Shell for the liabilities it incurs in connection with such guaranty. Accordingly, as of March 31, 2011, we have a letter of credit in the amount of $16.1 million issued by JP Morgan Chase, in order to secure our indemnification obligations to Shell for 50% of the Cortez debt balance of $32.1 million related to the Series D notes.
Further, pursuant to a Throughput and Deficiency Agreement, the partners of Cortez Pipeline Company are required to contribute capital to Cortez in the event of a cash deficiency. The agreement contractually supports the financings of Cortez Capital Corporation, a wholly-owned subsidiary of Cortez Pipeline Company, by obligating the partners of Cortez Pipeline to fund cash deficiencies at Cortez Pipeline, including anticipated deficiencies and cash deficiencies relating to the repayment of principal and interest on the debt of Cortez Capital Corporation. The partners’ respective parent or other companies further severally guarantee the obligations of the Cortez Pipeline owners under this agreement.
|
(g)
|
Arose from our Vopak terminal acquisition in July 2001. Nassau County, Florida Ocean Highway and Port Authority is a political subdivision of the state of Florida.
|
(h)
|
We have posted a letter of credit as security for borrowings under Adjustable Demand Revenue Bonds issued by the Nassau County, Florida Ocean Highway and Port Authority. The bonds were issued for the purpose of constructing certain port improvements located in Fernandino Beach, Nassau County, Florida. Our subsidiary, Nassau Terminals LLC is the operator of the marine port facilities. The bond indenture is for 30 years and allows the bonds to remain outstanding until December 1, 2020. Principal payments on the bonds are made on the first of December each year, and corresponding reductions are made to the letter of credit. As of March 31, 2011, this letter of credit had a face amount of $18.3 million.
|
March 31,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
Common units
|
220,012,759 | 218,880,103 | ||||||
Class B units
|
5,313,400 | 5,313,400 | ||||||
i-units
|
93,506,543 | 91,907,987 | ||||||
Total limited partner units
|
318,832,702 | 316,101,490 |
Three Months Ended March 31,
|
||||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||
KMP
|
Noncontrolling
Interests
|
Total
|
KMP
|
Noncontrolling interests
|
Total
|
|||||||||||||||||||
Beginning Balance
|
$ | 7,210.7 | $ | 81.8 | $ | 7,292.5 | $ | 6,644.5 | $ | 79.6 | $ | 6,724.1 | ||||||||||||
Units issued as consideration pursuant to common unit compensation plan for non-employee directors
|
0.2 | - | 0.2 | 0.2 | - | 0.2 | ||||||||||||||||||
Units issued as consideration in the acquisition of assets
|
- | - | - | 81.7 | - | 81.7 | ||||||||||||||||||
Units issued for cash
|
81.2 | - | 81.2 | - | - | - | ||||||||||||||||||
Distributions paid in cash
|
(531.6 | ) | (6.6 | ) | (538.2 | ) | (468.8 | ) | (6.0 | ) | (474.8 | ) | ||||||||||||
Noncash compensation expense allocated from KMI(a)
|
89.0 | 0.9 | 89.9 | 1.4 | - | 1.4 | ||||||||||||||||||
Cash contributions
|
- | 1.8 | 1.8 | - | 1.7 | 1.7 | ||||||||||||||||||
Other adjustments
|
1.3 | - | 1.3 | - | - | - | ||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||
Net Income
|
337.8 | 3.1 | 340.9 | 225.3 | 2.1 | 227.4 | ||||||||||||||||||
Other comprehensive income:
|
||||||||||||||||||||||||
Change in fair value of derivatives utilized for hedging purposes
|
(259.8 | ) | (2.6 | ) | (262.4 | ) | 24.4 | 0.2 | 24.6 | |||||||||||||||
Reclassification of change in fair value of derivatives to net income
|
52.5 | 0.5 | 53.0 | 47.0 | 0.5 | 47.5 | ||||||||||||||||||
Foreign currency translation adjustments
|
50.1 | 0.5 | 50.6 | 59.2 | 0.6 | 59.8 | ||||||||||||||||||
Adjustments to pension and other postretirement benefit plan liabilities
|
(13.0 | ) | (0.2 | ) | (13.2 | ) | (2.3 | ) | - | (2.3 | ) | |||||||||||||
Total other comprehensive income(loss)
|
(170.2 | ) | (1.8 | ) | (172.0 | ) | 128.3 | 1.3 | 129.6 | |||||||||||||||
Comprehensive income
|
167.6 | 1.3 | 168.9 | 353.6 | 3.4 | 357.0 | ||||||||||||||||||
Ending Balance
|
$ | 7,018.4 | $ | 79.2 | $ | 7,097.6 | $ | 6,612.6 | $ | 78.7 | $ | 6,691.3 |
(a)
|
For further information about this expense, see Note 9. We do not have any obligation, nor do we expect to pay any amounts related to this expense.
|
Net open position
long/(short)
|
|
Derivatives designated as hedging contracts
|
|
Crude oil
|
(24.9) million barrels
|
Natural gas fixed price
|
(28.8) billion cubic feet
|
Natural gas basis
|
(28.8) billion cubic feet
|
Derivatives not designated as hedging contracts
|
|
Natural gas basis
|
1.7 billion cubic feet
|
Fair Value of Derivative Contracts
|
|||||||||||||||||
Asset derivatives
|
Liability derivatives
|
||||||||||||||||
March 31,
|
December 31,
|
March 31,
|
December 31,
|
||||||||||||||
2011
|
2010
|
2011
|
2010
|
||||||||||||||
Balance sheet location
|
Fair value
|
Fair value
|
Fair value
|
Fair value
|
|||||||||||||
Derivatives designated as hedging contracts
|
|||||||||||||||||
Energy commodity derivative contracts
|
Current
|
$ | 19.9 | $ | 20.1 | $ | (372.4 | ) | $ | (275.9 | ) | ||||||
Non-current
|
24.6 | 43.1 | (189.9 | ) | (103.0 | ) | |||||||||||
Subtotal
|
44.5 | 63.2 | (562.3 | ) | (378.9 | ) | |||||||||||
Interest rate swap agreements
|
Current
|
10.6 | - | - | - | ||||||||||||
Non-current
|
166.3 | 217.6 | (92.4 | ) | (69.2 | ) | |||||||||||
Subtotal
|
176.9 | 217.6 | (92.4 | ) | (69.2 | ) | |||||||||||
Total
|
221.4 | 280.8 | (654.7 | ) | (448.1 | ) | |||||||||||
Derivatives not designated as hedging contracts
|
|||||||||||||||||
Energy commodity derivative contracts
|
Current
|
4.7 | 3.9 | (8.1 | ) | (5.6 | ) | ||||||||||
Total
|
4.7 | 3.9 | (8.1 | ) | (5.6 | ) | |||||||||||
Total derivatives
|
$ | 226.1 | $ | 284.7 | $ | (662.8 | ) | $ | (453.7 | ) |
Derivatives in fair value hedging relationships
|
Location of gain/(loss) recognized in income on derivative
|
Amount of gain/(loss) recognized in income on derivative(a)
|
Hedged items in fair value hedging relationships
|
Location of gain/(loss) recognized in income on related hedged item
|
Amount of gain/(loss) recognized in income on related hedged items(a)
|
||||||||||||||
Three Months Ended
|
Three Months Ended
|
||||||||||||||||||
March 31,
|
March 31,
|
||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
||||||||||||||||
Interest rate swap agreements
|
Interest, net – income/(expense)
|
$ | (63.9 | ) | $ | 65.6 |
Fixed rate debt
|
Interest, net – income/(expense)
|
$ | 63.9 | $ | (65.6 | ) | ||||||
Total
|
$ | (63.9 | ) | $ | 65.6 |
Total
|
$ | 63.9 | $ | (65.6 | ) |
(a)
|
Amounts reflect the change in the fair value of interest rate swap agreements and the change in the fair value of the associated fixed rate debt which exactly offset each other as a result of no hedge ineffectiveness. Amounts do not reflect the impact on interest expense from the interest rate swap agreements under which we pay variable rate interest and receive fixed rate interest.
|
Derivatives not designated as
hedging contracts
|
Location of gain/(loss) recognized
In income on derivative
|
Amount of gain/(loss) recognized
in income on derivative
|
|||||||
Three Months Ended March 31,
|
|||||||||
2011
|
2010
|
||||||||
Energy commodity derivative contracts
|
Gas purchases and other costs of sales
|
$ | 0.1 | $ | 0.7 | ||||
Total
|
$ | 0.1 | $ | 0.7 |
Asset position
|
||||
Interest rate swap agreements
|
$ | 176.9 | ||
Energy commodity derivative contracts
|
49.2 | |||
Gross exposure
|
226.1 | |||
Netting agreement impact
|
(49.4 | ) | ||
Net exposure
|
$ | 176.7 |
Credit ratings downgraded (a)
|
Incremental obligations
|
Cumulative obligations(b)
|
||||||
One notch to BBB-/Baa3
|
$ | - | $ | 4.4 | ||||
Two notches to below BBB-/Baa3 (below investment grade)
|
$ | 87.0 | $ | 91.4 |
(a)
|
If there are split ratings among the independent credit rating agencies, most counterparties use the higher credit rating to determine our incremental collateral obligations, while the remaining use the lower credit rating. Therefore, a two notch downgrade to below BBB-/Baa3 by one agency would not trigger the entire $87.0 million incremental obligation.
|
(b)
|
Includes current posting at current rating.
|
|
▪
|
Level 1 Inputs—quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;
|
|
▪
|
Level 2 Inputs—inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability; and
|
|
▪
|
Level 3 Inputs—unobservable inputs for the asset or liability. These unobservable inputs reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances (which might include the reporting entity’s own data).
|
Asset fair value measurements using
|
||||||||||||||||
Total
|
Quoted prices in
active markets
for identical
assets (Level 1)
|
Significant other
observable
inputs (Level 2)
|
Significant
unobservable
inputs (Level 3)
|
|||||||||||||
As of March 31, 2011
|
||||||||||||||||
Energy commodity derivative contracts(a)
|
$ | 49.2 | $ | 12.8 | $ | 6.9 | $ | 29.5 | ||||||||
Interest rate swap agreements
|
$ | 176.9 | $ | - | $ | 176.9 | $ | - | ||||||||
As of December 31, 2010
|
||||||||||||||||
Energy commodity derivative contracts(a)
|
$ | 67.1 | $ | - | $ | 23.5 | $ | 43.6 | ||||||||
Interest rate swap agreements
|
$ | 217.6 | $ | - | $ | 217.6 | $ | - |
Liability fair value measurements using
|
||||||||||||||||
Total
|
Quoted prices in
active
markets
for identical
liabilities
(Level 1)
|
Significant other
observable
inputs (Level 2)
|
Significant
unobservable
inputs (Level 3)
|
|||||||||||||
As of March 31, 2011
|
||||||||||||||||
Energy commodity derivative contracts(a)
|
$ | (570.4 | ) | $ | (8.7 | ) | $ | (529.0 | ) | $ | (32.7 | ) | ||||
Interest rate swap agreements
|
$ | (92.4 | ) | $ | - | $ | (92.4 | ) | $ | - | ||||||
As of December 31, 2010
|
||||||||||||||||
Energy commodity derivative contracts(a)
|
$ | (384.5 | ) | $ | - | $ | (359.7 | ) | $ | (24.8 | ) | |||||
Interest rate swap agreements
|
$ | (69.2 | ) | $ | - | $ | (69.2 | ) | $ | - |
(a)
|
Level 1 consists primarily of NYMEX natural gas futures. Level 2 consists primarily of OTC West Texas Intermediate swaps and OTC natural gas swaps that are settled on NYMEX. Level 3 consists primarily of natural gas basis swaps and West Texas Intermediate options.
|
Three Months Ended
|
||||||||
March 31,
|
||||||||
2011
|
2010
|
|||||||
Derivatives-net asset (liability)
|
||||||||
Beginning of period
|
$ | 18.8 | $ | 13.0 | ||||
Transfers into Level 3
|
- | - | ||||||
Transfers out of Level 3
|
- | - | ||||||
Total gains or (losses)
|
- | - | ||||||
Included in earnings
|
0.1 | - | ||||||
Included in other comprehensive income
|
(22.8 | ) | 8.6 | |||||
Purchases
|
4.6 | - | ||||||
Issuances
|
- | - | ||||||
Sales
|
- | - | ||||||
Settlements
|
(3.9 | ) | 1.0 | |||||
End of period
|
$ | (3.2 | ) | $ | 22.6 | |||
The amount of total gains or (losses) for the period included in earnings attributable to the change in unrealized gains or (losses) relating to assets held at the reporting date
|
$ | - | $ | (0.1 | ) |
March 31, 2011
|
December 31, 2010
|
|||||||||||||||
Carrying
Value
|
Estimated
fair value
|
Carrying
Value
|
Estimated
fair value
|
|||||||||||||
Total debt
|
$ | 11,748.8 | $ | 12,589.1 | $ | 11,539.8 | $ | 12,443.4 |
|
▪
|
Products Pipelines— the transportation and terminaling of refined petroleum products, including gasoline, diesel fuel, jet fuel and natural gas liquids;
|
|
▪
|
Natural Gas Pipelines—the sale, transport, processing, treating, storage and gathering of natural gas;
|
|
▪
|
CO
2
—the production and sale of crude oil from fields in the Permian Basin of West Texas and the transportation and marketing of carbon dioxide used as a flooding medium for recovering crude oil from mature oil fields;
|
|
▪
|
Terminals—the transloading and storing of refined petroleum products and dry and liquid bulk products, including coal, petroleum coke, cement, alumina, salt and other bulk chemicals; and
|
|
▪
|
Kinder Morgan Canada—the transportation of crude oil and refined products from Alberta, Canada to marketing terminals and refineries in British Columbia, the state of Washington and the Rocky Mountains and Central regions of the United States.
|
Three Months Ended
March 31,
|
||||||||
2011
|
2010
|
|||||||
Revenues
|
||||||||
Products Pipelines
|
||||||||
Revenues from external customers
|
$ | 225.6 | $ | 207.5 | ||||
Natural Gas Pipelines
|
||||||||
Revenues from external customers
|
1,019.4 | 1,236.7 | ||||||
CO
2
|
||||||||
Revenues from external customers
|
340.8 | 321.8 | ||||||
Terminals
|
||||||||
Revenues from external customers
|
331.4 | 303.8 | ||||||
Intersegment revenues
|
0.3 | 0.3 | ||||||
Kinder Morgan Canada
|
||||||||
Revenues from external customers
|
75.6 | 59.8 | ||||||
Total segment revenues
|
1,993.1 | 2,129.9 | ||||||
Less: Total intersegment revenues
|
(0.3 | ) | (0.3 | ) | ||||
Total consolidated revenues
|
$ | 1,992.8 | $ | 2,129.6 |
Three Months Ended
March 31,
|
||||||||
2011
|
2010
|
|||||||
Segment earnings before depreciation, depletion, amortization
and amortization of excess cost of equity investments(a)
|
||||||||
Products Pipelines(b)
|
$ | 180.5 | $ | 6.4 | ||||
Natural Gas Pipelines
|
222.6 | 220.6 | ||||||
CO
2
|
262.0 | 253.2 | ||||||
Terminals
|
174.4 | 150.5 | ||||||
Kinder Morgan Canada
|
47.9 | 45.0 | ||||||
Total segment earnings before DD&A
|
887.4 | 675.7 | ||||||
Total segment depreciation, depletion and amortization
|
(221.8 | ) | (227.3 | ) | ||||
Total segment amortization of excess cost of investments
|
(1.5 | ) | (1.4 | ) | ||||
General and administrative expenses(c)
|
(189.2 | ) | (101.1 | ) | ||||
Unallocable interest expense, net of interest income
|
(131.7 | ) | (116.3 | ) | ||||
Unallocable income tax expense
|
(2.3 | ) | (2.2 | ) | ||||
Total consolidated net income
|
$ | 340.9 | $ | 227.4 |
March 31,
2011
|
December 31,
2010
|
|||||||
Assets
|
||||||||
Products Pipelines
|
$ | 4,375.1 | $ | 4,369.1 | ||||
Natural Gas Pipelines
|
8,681.5 | 8,809.7 | ||||||
CO
2
|
2,127.0 | 2,141.2 | ||||||
Terminals
|
4,243.6 | 4,138.6 | ||||||
Kinder Morgan Canada
|
1,901.4 | 1,870.0 | ||||||
Total segment assets
|
21,328.6 | 21,328.6 | ||||||
Corporate assets(d)
|
464.7 | 532.5 | ||||||
Total consolidated assets
|
$ | 21,793.3 | $ | 21,861.1 |
(a)
|
Includes revenues, earnings from equity investments, allocable interest income, and other, net, less operating expenses, allocable income taxes, and other expense (income).
|
(b)
|
First quarter 2010 includes a $158.0 million increase in expense associated with rate case liability adjustments.
|
(c)
|
First quarter 2011 includes an $87.1 million increase in expense associated with a one-time special cash bonus payment that will be paid to non-senior management employees in May 2011; however, we do not have any obligation, nor do we expect to pay any amounts related to this expense.
|
(d)
|
Includes cash and cash equivalents; margin and restricted deposits; unallocable interest receivable, prepaid assets and deferred charges; and risk management assets related to the fair value of interest rate swaps.
|
March 31,
2011
|
December 31,
2010
|
|||||||
Derivatives – asset/(liability)
|
||||||||
Current assets
|
$ | 3.7 | $ | - | ||||
Noncurrent assets
|
$ | 3.7 | $ | 12.7 | ||||
Current liabilities
|
$ | (281.4 | ) | $ | (221.4 | ) | ||
Noncurrent liabilities
|
$ | (86.9 | ) | $ | (57.5 | ) |
|
SFPP
|
|
The following FERC dockets, which pertain to all protesting shippers, are currently pending:
|
|
▪
|
FERC Docket No. IS08-390 (West Line Rates)—Protestants: BP, ExxonMobil, ConocoPhillips, Valero Marketing, Chevron, the Airlines—Status: FERC order issued on February 17, 2011. While the order made certain findings that were adverse to SFPP, it ruled in favor of SFPP on many significant issues. Subsequently, SFPP made a compliance filing which estimates approximately $16.0 million in refunds. However, SFPP also filed a rehearing request on certain adverse rulings in the FERC order. It is not possible to predict the outcome of the FERC review of the rehearing request or appellate review of this order; and
|
|
▪
|
FERC Docket No. IS09-437 (East Line Rates)—Protestants: BP, ExxonMobil, ConocoPhillips, Valero Marketing, Chevron, Western Refining, and Southwest Airlines—Status: Initial decision issued on February 10, 2011. A FERC administrative law judge generally made findings adverse to SFPP, found that East Line rates should have been lower, and recommended that SFPP pay refunds for alleged over-collections. SFPP has filed a brief with the FERC taking exception to these and other portions of the initial decision. The FERC will review the initial decision, and while the initial decision is inconsistent with a number of the issues ruled on in FERC’s February 17, 2011 order in Docket No. IS08-390, it is not possible to predict the outcome of FERC or appellate review.
|
|
|
Calnev
|
|
▪
|
FERC Docket Nos. OR07-7, OR07-18, OR07-19 & OR07-22 (not consolidated) (Calnev Rates)—Complainants: Tesoro, Airlines, BP, Chevron, ConocoPhillips and Valero Marketing—Status: Before a FERC settlement judge; and
|
|
▪
|
FERC Docket Nos. OR09-15/OR09-20 (not consolidated) (Calnev Rates)—Complainants: Tesoro/BP—Status: Before a FERC settlement judge.
|
|
▪
|
FERC Docket No. IS09-377 (2009 Index Rate Increases)—Protestants: BP, Chevron, and Tesoro—Status: Requests for rehearing of FERC dismissal pending before FERC.
|
|
Trailblazer Pipeline Company LLC
|
|
Kinder Morgan Interstate Gas Transmission LLC Section 5 Proceeding
|
Three Months Ended
March 31,
|
Earnings
|
|||||||||||||||
2011
|
2010
|
increase/(decrease)
|
||||||||||||||
(In millions, except percentages)
|
||||||||||||||||
Earnings before depreciation, depletion and amortization expense and amortization of excess cost of equity investments(a)
|
||||||||||||||||
Products Pipelines(b)
|
$ | 180.5 | $ | 6.4 | $ | 174.1 | 2,720 | % | ||||||||
Natural Gas Pipelines(c)
|
222.6 | 220.6 | 2.0 | 1 | % | |||||||||||
CO
2
(d)
|
262.0 | 253.2 | 8.8 | 3 | % | |||||||||||
Terminals(e)
|
174.4 | 150.5 | 23.9 | 16 | % | |||||||||||
Kinder Morgan Canada
|
47.9 | 45.0 | 2.9 | 6 | % | |||||||||||
Segment earnings before depreciation, depletion and amortization expense and amortization of excess cost of equity investments
|
887.4 | 675.7 | 211.7 | 31 | % | |||||||||||
Depreciation, depletion and amortization expense
|
(221.8 | ) | (227.3 | ) | 5.5 | 2 | % | |||||||||
Amortization of excess cost of equity investments
|
(1.5 | ) | (1.4 | ) | (0.1 | ) | (7 | )% | ||||||||
General and administrative expense(f)
|
(189.2 | ) | (101.1 | ) | (88.1 | ) | (87 | )% | ||||||||
Unallocable interest expense, net of interest income(g)
|
(131.7 | ) | (116.3 | ) | (15.4 | ) | (13 | )% | ||||||||
Unallocable income tax expense
|
(2.3 | ) | (2.2 | ) | (0.1 | ) | (5 | )% | ||||||||
Net income
|
340.9 | 227.4 | 113.5 | 50 | % | |||||||||||
Net income attributable to noncontrolling interests(h)
|
(3.1 | ) | (2.1 | ) | (1.0 | ) | (48 | )% | ||||||||
Net income attributable to Kinder Morgan Energy Partners, L.P.
|
$ | 337.8 | $ | 225.3 | $ | 112.5 | 50 | % |
(a)
|
Includes revenues, earnings from equity investments, allocable interest income and other, net, less operating expenses, allocable income taxes, and other expense (income). Operating expenses include natural gas purchases and other costs of sales, operations and maintenance expenses, and taxes, other than income taxes.
|
(b)
|
2011 amount includes a $0.2 million increase in income from unrealized foreign currency gains on long-term debt transactions. 2010 amount includes a $158.0 million increase in expense associated with rate case liability adjustments, and a $0.5 million increase in income resulting from unrealized foreign currency gains on long-term debt transactions.
|
(c)
|
2010 amount includes a $0.9 million unrealized gain on derivative contracts used to hedge forecasted natural gas sales, and a $0.4 million increase in income from certain measurement period adjustments related to our October 1, 2009 natural gas treating business acquisition.
|
(d)
|
2011 and 2010 amounts include increases in income of $3.7 million and $5.4 million, respectively, from unrealized gains on derivative contracts used to hedge forecasted crude oil sales.
|
(e)
|
2011 amount includes (i) a $4.5 million decrease in expense (reflecting tax savings) related to non-cash compensation expense allocated to us from KMI (we do not have any obligation, nor do we expect to pay any amounts related to this expense); (ii) a $2.2 million increase in income from adjustments associated with the sale of our ownership interest in the boat fleeting business we acquired from Megafleet Towing Co., Inc. in April 2009; (iii) a $2.0 million increase in expense from casualty insurance deductibles and the write-off of assets related to casualty losses; and (iv) a $0.6 million increase in expense associated with the settlement of a litigation matter at our Carteret, New Jersey liquids terminal. 2010 amount includes a $0.4 million increase in expense related to storm and flood clean-up and repair activities.
|
(f)
|
Includes unallocated litigation and environmental expenses. 2011 amount includes (i) a combined $89.9 million increase in non-cash compensation expense, allocated to us from KMI (including $87.1 million related to a special bonus expense to non-senior management employees; however, we do not have any obligation, nor do we expect to pay any amounts related to this expense); and (ii) a $0.5 million increase in expense for certain asset and business acquisition costs. 2010 amount includes (i) a $1.6 million increase in legal expense associated with items disclosed in these footnotes such as legal settlements and pipeline failures; (ii) a $1.4 million increase in non-cash compensation expense, allocated to us from KMI (we do not have any obligation, nor do we expect to pay any amounts related to this expense); (iii) a $1.4 million increase in expense for certain asset and business acquisition costs; and (iv) a $0.3 million decrease in expense related to capitalized overhead costs associated with the 2008 hurricane season.
|
(g)
|
2011 and 2010 amounts include increases in imputed interest expense of $0.2 million and $0.4 million, respectively, related to our January 1, 2007 Cochin Pipeline acquisition.
|
(h)
|
2011 and 2010 amounts include decreases of $1.1 million and $2.3 million, respectively, in net income attributable to our noncontrolling interests, related to the combined effect from all of the three month 2011 and 2010 items previously disclosed in these footnotes.
|
Three Months Ended
March 31,
|
||||||||||||||||
2011
|
2010
|
increase/(decrease)
|
||||||||||||||
(In millions, except operating statistics and percentages)
|
||||||||||||||||
Revenues
|
$ | 225.6 | $ | 207.5 | $ | 18.1 | 9 | % | ||||||||
Operating expenses(a)
|
(52.3 | ) | (208.9 | ) | 156.6 | 75 | % | |||||||||
Other income
|
0.1 | - | 0.1 | n/a | ||||||||||||
Earnings from equity investments
|
10.9 | 5.8 | 5.1 | 88 | % | |||||||||||
Interest income and Other, net(b)
|
1.3 | 2.6 | (1.3 | ) | (50 | )% | ||||||||||
Income tax expense
|
(5.1 | ) | (0.6 | ) | (4.5 | ) | (750 | )% | ||||||||
Earnings before depreciation, depletion and amortization
expense and amortization of excess cost of equity investments
|
$ | 180.5 | $ | 6.4 | $ | 174.1 | 2,720 | % | ||||||||
Gasoline (MMBbl)(c)
|
95.9 | 93.8 | 2.1 | 2 | % | |||||||||||
Diesel fuel (MMBbl)
|
36.6 | 32.8 | 3.8 | 12 | % | |||||||||||
Jet fuel (MMBbl)
|
25.6 | 24.8 | 0.8 | 3 | % | |||||||||||
Total refined product volumes (MMBbl)
|
158.1 | 151.4 | 6.7 | 4 | % | |||||||||||
Natural gas liquids (MMBbl)
|
6.6 | 5.9 | 0.7 | 12 | % | |||||||||||
Total delivery volumes (MMBbl)(d)
|
164.7 | 157.3 | 7.4 | 5 | % | |||||||||||
Ethanol (MMBbl)(e)
|
7.3 | 7.2 | 0.1 | 1 | % |
(a)
|
2010 amount includes a $158.0 million increase in expense associated with rate case liability adjustments.
|
(b)
|
2011 and 2010 amounts include increases in income of $0.2 million and $0.5 million, respectively, resulting from unrealized foreign currency gains on long-term debt transactions.
|
(c)
|
Volumes include ethanol pipeline volumes.
|
(d)
|
Includes Pacific, Plantation, Calnev, Central Florida, Cochin and Cypress pipeline volumes.
|
(e)
|
Represents total ethanol volumes, including ethanol pipeline volumes included in gasoline volumes above.
|
EBDA
increase/(decrease)
|
Revenues
increase/(decrease)
|
|||||||||||||||
(In millions, except percentages)
|
||||||||||||||||
Cochin Pipeline
|
$ | 7.0 | 80 | % | $ | 9.7 | 94 | % | ||||||||
Pacific operations
|
4.3 | 6 | % | 2.1 | 2 | % | ||||||||||
Southeast Terminals
|
2.7 | 17 | % | 4.0 | 18 | % | ||||||||||
Plantation Pipeline
|
2.5 | 24 | % | - | - | |||||||||||
West Coast Terminals
|
2.0 | 11 | % | 3.0 | 13 | % | ||||||||||
Calnev Pipeline
|
(1.8 | ) | (12 | )% | (1.2 | ) | (7 | )% | ||||||||
All others (including eliminations)
|
(0.3 | ) | (1 | )% | 0.5 | 2 | % | |||||||||
Total Products Pipelines
|
$ | 16.4 | 10 | % | $ | 18.1 | 9 | % |
|
▪
|
a $7.0 million (80%) increase in earnings from our Cochin natural gas liquids pipeline system. The increase was chiefly due to a $9.7 million (94%) increase in operating revenues, driven by an overall 77% increase in throughput volumes
. The increase in delivery volume in the first quarter of 2011 was system-wide—West leg (U.S.) volumes increased due to a higher demand for liquids products related to colder winter weather, and East leg (Canadian) volumes increased due to both an additional shipper and to the exercise of a certain shipper incentive tariff offered in the first quarter of 2011
;
|
|
▪
|
a $4.3 million (6%) increase in earnings from our Pacific operations—consisting of a $2.1 million (2%) increase from higher operating revenues and a $2.3 million (9%) increase due to lower combined operating expenses. The increase in revenues was driven by a $3.3 million (12%) increase in fee-based terminal revenues, mainly attributable to a 5% increase in ethanol handling volumes that were due in part to mandated increases in ethanol blending rates in California since the beginning of 2010. The increase in earnings due to lower operating expenses was largely due to incremental product gains of $1.7 million;
|
|
▪
|
a $2.7 million (17%) increase in earnings from our Southeast terminal operations—due primarily to higher product inventory gains relative to the first quarter of 2010;
|
|
▪
|
a $2.5 million (24%) increase in earnings from our 51%-owned Plantation Pipe Line Company—due to higher net income earned by Plantation in the first quarter of 2011. The increase in Plantation’s earnings
was largely associated with both an absence of an expense from the write-off of an uncollectible receivable in the first quarter of 2010, and higher transportation revenues associated with an 18% increase in product delivery volumes;
|
|
▪
|
a $2.0 million (11%) increase in earnings from our West Coast terminal operations—mainly due to higher revenues at our combined Carson/Los Angeles Harbor terminal resulting from the completion of various terminal expansion projects that increased liquids tank capacity since the end of the first quarter of 2010; and
|
|
▪
|
a $1.8 million (12%) decrease in earnings from our Calnev Pipeline—mainly due to a $1.2 million (7%) drop in revenues largely associated with a 14% decrease in ethanol handling volumes relative to the first quarter of 2010. The decrease in volumes was due both to lower deliveries to the Las Vegas market, and to ethanol blending services offered by a competing terminal.
|
Three Months Ended
March 31,
|
||||||||||||||||
2011
|
2010
|
increase/(decrease)
|
||||||||||||||
(In millions, except operating statistics and percentages)
|
||||||||||||||||
Revenues(a)
|
$ | 1,019.4 | $ | 1,236.7 | $ | (217.3 | ) | (18 | )% | |||||||
Operating expenses(b)
|
(843.7 | ) | (1,051.5 | ) | 207.8 | 20 | % | |||||||||
Earnings from equity investments
|
47.1 | 33.8 | 13.3 | 39 | % | |||||||||||
Interest income and Other, net
|
1.1 | 2.2 | (1.1 | ) | (50 | )% | ||||||||||
Income tax expense
|
(1.3 | ) | (0.6 | ) | (0.7 | ) | (117 | )% | ||||||||
Earnings before depreciation, depletion and amortization
expense and amortization of excess cost of equity investments
|
$ | 222.6 | $ | 220.6 | $ | 2.0 | 1 | % | ||||||||
Natural gas transport volumes (Bcf)(c)
|
694.4 | 632.3 | 62.1 | 10 | % | |||||||||||
Natural gas sales volumes (Bcf)(d)
|
191.2 | 189.0 | 2.2 | 1 | % |
(a)
|
2010 amount includes a $0.4 million increase in revenues from certain measurement period adjustments related to our October 1, 2009 natural gas treating business acquisition.
|
(b)
|
2010 amount includes unrealized gains of $0.9 million on derivative contracts used to hedge forecasted natural gas sales.
|
(c)
|
Includes Kinder Morgan Interstate Gas Transmission LLC, Trailblazer Pipeline Company LLC, TransColorado Gas Transmission Company LLC, Rockies Express Pipeline LLC, Midcontinent Express Pipeline LLC, Kinder Morgan Louisiana Pipeline LLC and Texas intrastate natural gas pipeline group, and for 2011 only, Fayetteville Express Pipeline LLC pipeline volumes.
|
(d)
|
Represents Texas intrastate natural gas pipeline group volumes.
|
EBDA
increase/(decrease)
|
Revenues
increase/(decrease)
|
|||||||||||||||
(In millions, except percentages)
|
||||||||||||||||
KinderHawk Field Services(a)
|
$ | 9.7 | n/a | $ | n/a | n/a | ||||||||||
Midcontinent Express Pipeline(a)
|
4.8 | 87 | % | n/a | n/a | |||||||||||
Casper and Douglas Natural Gas Processing
|
2.8 | 57 | % | 1.6 | 5 | % | ||||||||||
Texas Intrastate Natural Gas Pipeline Group
|
2.6 | 3 | % | (210.7 | ) | (19 | )% | |||||||||
Kinder Morgan Interstate Gas Transmission
|
(10.6 | ) | (34 | )% | (7.1 | ) | (18 | )% | ||||||||
Rockies Express Pipeline(a)
|
(2.3 | ) | (11 | )% | n/a | n/a | ||||||||||
Trailblazer Pipeline
|
(2.0 | ) | (16 | )% | (0.1 | ) | (1 | )% | ||||||||
All others (including eliminations)
|
(1.7 | ) | (4 | )% | (0.6 | ) | (1 | )% | ||||||||
Total Natural Gas Pipelines
|
$ | 3.3 | 2 | % | $ | (216.9 | ) | (18 | )% |
(a)
|
Equity investments. We record earnings under the equity method of accounting, but we receive distributions in amounts essentially equal to equity earnings plus depreciation and amortization expenses less sustaining capital expenditures.
|
|
▪
|
incremental equity earnings from our 50%-owned KinderHawk Field Services LLC, which we acquired on May 21, 2010;
|
|
▪
|
incremental equity earnings from our 50%-owned Midcontinent Express natural gas pipeline system, due primarily to the June 2010 completion of two natural gas compression projects that increased the system’s Zone 1 transportation capacity from 1.5 billion to 1.8 billion cubic feet per day, and Zone 2 capacity from 1.0 billion to 1.2 billion cubic feet per day;
|
|
▪
|
an increase of $2.8 million (57%) from our Casper Douglas gas processing operations, primarily attributable to higher natural gas processing spreads;
|
|
▪
|
an increase of $2.6 million (3%) from our Texas intrastate natural gas pipeline group, due largely to higher sales and storage margins;
|
|
▪
|
a decrease of $10.6 million (34%) from our Kinder Morgan Interstate Gas Transmission pipeline system, driven by a $4.2 million decrease from lower pipeline net fuel recoveries, and a $4.0 million decrease from lower natural gas transportation and storage services. Both decreases in earnings were due in part to a 9% drop in system-wide transportation volumes in the first quarter of 2011, due mainly to a negative impact on long-haul deliveries resulting from unfavorable basis differentials;
|
|
▪
|
a decrease of $2.3 million (11%) from our 50%-owned Rockies Express pipeline system, reflecting lower net income earned by Rockies Express Pipeline LLC. The decrease in Rockies Express’s earnings
was largely due to (i) higher interest expense associated with the securing of permanent financing for its pipeline construction costs (Rockies Express Pipeline LLC issued
$1.7 billion aggregate principal amount of fixed rate senior notes in a private offering in March 2010); and (ii) higher expenses associated with the write-off of certain transportation fuel recovery receivables pursuant to a contractual agreement; and
|
|
▪
|
a decrease of $2.0 million (16%) from our Trailblazer pipeline system, mainly attributable to unfavorable cashouts on operating balancing agreements, and partly attributable to both lower base rates as a result of rate case settlements made since the end of the first quarter of 2010, and lower backhaul transportation services relative to the first quarter of 2010.
|
Three Months Ended
March 31,
|
||||||||||||||||
2011
|
2010
|
increase/(decrease)
|
||||||||||||||
(In millions, except operating statistics and percentages)
|
||||||||||||||||
Revenues(a)
|
$ | 340.8 | $ | 321.8 | $ | 19.0 | 6 | % | ||||||||
Operating expenses
|
(83.6 | ) | (79.1 | ) | (4.5 | ) | (6 | )% | ||||||||
Earnings from equity investments
|
5.8 | 6.5 | (0.7 | ) | (11 | )% | ||||||||||
Other, net
|
0.1 | - | 0.1 | n/a | ||||||||||||
Income tax (expense) benefit
|
(1.1 | ) | 4.0 | (5.1 | ) | (128 | )% | |||||||||
Earnings before depreciation, depletion and amortization
expense and amortization of excess cost of equity investments
|
$ | 262.0 | $ | 253.2 | $ | 8.8 | 3 | % | ||||||||
Southwest Colorado carbon dioxide production (gross)(Bcf/d)(b)
|
1.3 | 1.3 | - | - | ||||||||||||
Southwest Colorado carbon dioxide production (net)(Bcf/d)(b)
|
0.5 | 0.5 | - | - | ||||||||||||
SACROC oil production (gross)(MBbl/d)(c)
|
28.9 | 30.0 | (1.1 | ) | (4 | )% | ||||||||||
SACROC oil production (net)(MBbl/d)(d)
|
24.1 | 25.0 | (0.9 | ) | (4 | )% | ||||||||||
Yates oil production (gross)(MBbl/d)(c)
|
21.9 | 25.6 | (3.7 | ) | (14 | )% | ||||||||||
Yates oil production (net)(MBbl/d)(d)
|
9.7 | 11.4 | (1.7 | ) | (15 | )% | ||||||||||
Katz oil production (gross)(MBbl/d)(c)
|
0.2 | 0.3 | (0.1 | ) | (33 | )% | ||||||||||
Katz oil production (net)(MBbl/d)(d)
|
0.2 | 0.3 | (0.1 | ) | (33 | )% | ||||||||||
Natural gas liquids sales volumes (net)(MBbl/d)(d)
|
8.3 | 9.7 | (1.4 | ) | (14 | )% | ||||||||||
Realized weighted average oil price per Bbl(e)(f)
|
$ | 68.78 | $ | 60.50 | $ | 8.28 | 14 | % | ||||||||
Realized weighted average natural gas liquids price per Bbl(f)(g)
|
$ | 60.93 | $ | 55.06 | $ | 5.87 | 11 | % |
(a)
|
2011 and 2010 amounts include unrealized gains of $3.7 million and $5.4 million, respectively, on derivative contracts used to hedge forecasted crude oil sales.
|
(b)
|
Includes McElmo Dome and Doe Canyon sales volumes.
|
(c)
|
Represents 100% of the production from the field. We own an approximately 97% working interest in the SACROC unit and an approximately 50% working interest in the Yates unit.
|
(d)
|
Net to us, after royalties and outside working interests.
|
(e)
|
Includes all of our crude oil production properties.
|
(f)
|
Hedge gains/losses for crude oil and natural gas liquids are included with crude oil.
|
(g)
|
Includes production attributable to leasehold ownership and production attributable to our ownership in processing plants and third party processing agreements.
|
EBDA
increase/(decrease)
|
Revenues
increase/(decrease)
|
|||||||||||||||
(In millions, except percentages)
|
||||||||||||||||
Oil and Gas Producing Activities
|
$ | 5.3 | 3 | % | $ | 11.9 | 5 | % | ||||||||
Sales and Transportation Activities
|
5.2 | 8 | % | 13.9 | 19 | % | ||||||||||
Intrasegment eliminations
|
- | - | (5.1 | ) | (41 | )% | ||||||||||
Total CO
2
|
$ | 10.5 | 4 | % | $ | 20.7 | 7 | % |
|
▪
|
an increase of $11.9 million (5%) due to higher operating revenues, driven by an $11.2 million (6%) increase in crude oil sales revenues. The overall increase in sales revenues was due to
higher average realizations for U.S. crude oil (from an average realization of $60.50 per barrel in the first quarter of 2010 compared with $68.78 per barrel in the first quarter of 2011), and was partially offset
by a decrease in crude oil sales volumes of 7% (due to a year-over-year decline in production); and
|
|
▪
|
a decrease of $6.6 million (9%) due to higher combined operating expenses, driven by a $7.0 million (14%) increase in operating and maintenance expenses resulting from higher carbon dioxide supply expenses, primarily due to initiating carbon dioxide injections into the Katz field, and from higher prices charged by the industry’s material and service providers (for items such as outside services, maintenance, and well workover services), which impacted rig costs, other materials and services, and capital and exploratory costs.
|
|
▪
|
an increase of $13.9 million (19%) due to higher combined operating revenues, driven by a $13.0 million (26%) increase in carbon dioxide sales revenues. Average carbon dioxide sales price increased 25% in the first quarter of 2011 (from $1.00 per thousand cubic feet in first quarter 2010 to $1.25 per thousand cubic feet in first quarter 2011), due largely to the fact that a portion of our carbon dioxide sales contracts are indexed to oil prices which have increased relative to the first quarter of last year;
|
|
▪
|
a decrease of $5.1 million (127%) due to higher income tax expenses, due primarily to decreases in expense in the first quarter of 2010 due to favorable Texas margin tax liability adjustments related to the expensing of previously capitalized carbon dioxide costs; and
|
|
▪
|
a decrease of $2.9 million (21%) due to higher operating expenses, associated mainly with both higher carbon dioxide supply expenses, and higher labor expenses that resulted from a decrease in the amount of labor capitalized to construction projects when compared to the first quarter of last year.
|
Three Months Ended
March 31,
|
||||||||||||||||
2011
|
2010
|
increase/(decrease)
|
||||||||||||||
(In millions, except operating statistics and percentages)
|
||||||||||||||||
Revenues
|
$ | 331.7 | $ | 304.1 | $ | 27.6 | 9 | % | ||||||||
Operating expenses(a)
|
(167.2 | ) | (155.9 | ) | (11.3 | ) | (7 | )% | ||||||||
Other income(b)
|
0.1 | 1.3 | (1.2 | ) | (92 | )% | ||||||||||
Earnings from equity investments
|
2.1 | 0.2 | 1.9 | 950 | % | |||||||||||
Other, net
|
0.7 | 0.9 | (0.2 | ) | (22 | )% | ||||||||||
Income tax benefit (expense)(c)
|
7.0 | (0.1 | ) | 7.1 | n/m | |||||||||||
Earnings before depreciation, depletion and amortization
expense and amortization of excess cost of equity investments
|
$ | 174.4 | $ | 150.5 | $ | 23.9 | 16 | % | ||||||||
Bulk transload tonnage (MMtons)(d)
|
23.7 | 21.4 | 2.3 | 11 | % | |||||||||||
Ethanol (MMBbl)
|
15.7 | 15.5 | 0.2 | 1 | % | |||||||||||
Liquids leaseable capacity (MMBbl)
|
58.8 | 57.9 | 0.9 | 2 | % | |||||||||||
Liquids utilization %
|
94.4 | % | 96.4 | % | (2.0 | )% | (2 | )% |
(a)
|
2011 amount includes (i) a combined $1.5 million increase in expense at our Carteret, New Jersey liquids terminal, associated with fire damage and repair activities, and the settlement of a certain litigation matter; (ii) a $0.7 million increase in expense associated with the sale of our ownership interest in the boat fleeting business we acquired from Megafleet Towing Co., Inc. in April 2009; and (iii) a $0.1 million increase in expense associated with the write-off of assets related to casualty losses. 2010 amount includes a $0.4 million increase in expense related to storm and flood clean-up and repair activities.
|
(b)
|
2011 amount includes both a $1.0 million gain from adjustments associated with the sale of our ownership interest in the boat fleeting business we acquired from Megafleet Towing Co., Inc. in April 2009, and a $1.0 million loss from the write-off of assets related to casualty losses.
|
(c)
|
2011 amount includes a $4.5 million decrease in expense (reflecting tax savings) related to non-cash compensation expense allocated to us from KMI (we do not have any obligation, nor do we expect to pay any amounts related to this expense), and a $1.9 million decrease in expense (reflecting tax savings) related to the net decrease in income from the sale of our ownership interest in the boat fleeting business described in both footnotes (a) and (b) and in Note 3 to our 2010 Form 10-K/A.
|
(d)
|
Volumes for acquired terminals are included for both periods.
|
EBDA
increase/(decrease)
|
Revenues
increase/(decrease)
|
|||||||||||||||
(In millions, except percentages)
|
||||||||||||||||
Gulf Liquids
|
$ | 9.0 | 25 | % | $ | 10.0 | 21 | % | ||||||||
Southeast
|
2.9 | 26 | % | 2.0 | 8 | % | ||||||||||
Ethanol
|
2.3 | 34 | % | 1.5 | 14 | % | ||||||||||
Mid-Atlantic
|
2.1 | 19 | % | 4.8 | 19 | % | ||||||||||
All others (including intrasegment eliminations and unallocated income tax expenses)
|
(0.9 | ) | (1 | )% | 4.8 | 2 | % | |||||||||
Total Terminals
|
$ | 15.4 | 10 | % | $ | 23.1 | 8 | % |
Three Months Ended
March 31,
|
||||||||||||||||
2011
|
2010
|
increase/(decrease)
|
||||||||||||||
(In millions, except operating statistics and percentages)
|
||||||||||||||||
Revenues
|
$ | 75.6 | $ | 59.8 | $ | 15.8 | 26 | % | ||||||||
Operating expenses
|
(26.4 | ) | (19.5 | ) | (6.9 | ) | (35 | )% | ||||||||
Earnings from equity investments
|
(1.0 | ) | 0.4 | (1.4 | ) | (350 | )% | |||||||||
Interest income and Other, net
|
3.4 | 5.8 | (2.4 | ) | (41 | )% | ||||||||||
Income tax expense
|
(3.7 | ) | (1.5 | ) | (2.2 | ) | (147 | )% | ||||||||
Earnings before depreciation, depletion and amortization
expense and amortization of excess cost of equity investments
|
$ | 47.9 | $ | 45.0 | $ | 2.9 | 6 | % | ||||||||
Transport volumes (MMBbl)(a)
|
26.7 | 23.8 | 2.9 | 12 | % |
(a)
|
Represents Trans Mountain pipeline system volumes.
|
EBDA
increase/(decrease)
|
Revenues
increase/(decrease)
|
|||||||||||||||
(In millions, except percentages)
|
||||||||||||||||
Trans Mountain Pipeline
|
$ | 4.5 | 11 | % | $ | 15.7 | 27 | % | ||||||||
Express Pipeline
|
(1.3 | ) | (32 | )% | n/a | n/a | ||||||||||
Jet Fuel Pipeline
|
(0.3 | ) | (23 | )% | 0.1 | 5 | % | |||||||||
Total Kinder Morgan Canada
|
$ | 2.9 | 6 | % | $ | 15.8 | 26 | % |
Three Months Ended
March 31,
|
||||||||||||||||
2011
|
2010
|
increase/(decrease)
|
||||||||||||||
(In millions, except percentages)
|
||||||||||||||||
General and administrative expenses(a)
|
$ | 189.2 | $ | 101.1 | $ | 88.1 | 87 | % | ||||||||
Unallocable interest expense, net of interest income(b)
|
$ | 131.7 | $ | 116.3 | $ | 15.4 | 13 | % | ||||||||
Unallocable income tax expense
|
$ | 2.3 | $ | 2.2 | $ | 0.1 | 5 | % | ||||||||
Net income attributable to noncontrolling interests(c)
|
$ | 3.1 | $ | 2.1 | $ | 1.0 | 48 | % |
(a)
|
Includes such items as salaries and employee-related expenses, payroll taxes, insurance, office supplies and rentals, unallocated litigation and environmental expenses, and shared corporate services. 2011 amount includes (i) a combined $89.9 million increase in non-cash compensation expense, allocated to us from KMI (including $87.1 million related to a special bonus expense to non-senior management employees; however, we do not have any obligation, nor do we expect to pay any amounts related to this expense); and (ii) a $0.5 million increase in expense for certain asset and business acquisition costs. 2010 amount includes (i) a $1.6 million increase in legal expense associated with items disclosed in these footnotes such as legal settlements and pipeline failures; (ii) a $1.4 million increase in non-cash compensation expense, allocated to us from KMI (we do not have any obligation, nor do we expect to pay any amounts related to this expense); (iii) a $1.4 million increase in expense for certain asset and business acquisition costs; and (iv) a $0.3 million decrease in expense related to capitalized overhead costs associated with the 2008 hurricane season.
|
(b)
|
2011 and 2010 amounts include increases in imputed interest expense of $0.2 million and $0.4 million, respectively, related to our January 1, 2007 Cochin Pipeline acquisition.
|
(c)
|
2011 and 2010 amounts include decreases of $1.1 million and $2.3 million, respectively, in net income attributable to our noncontrolling interests, related to the combined effect from all of the three month 2011 and 2010 items previously disclosed in these footnotes.
|
|
▪
|
cash distributions and sustaining capital expenditures with existing cash and cash flows from operating activities;
|
|
▪
|
expansion capital expenditures and working capital deficits with retained cash (which may result from including i-units in the determination of cash distributions per unit but paying quarterly distributions on i-units in additional i-units rather than cash), additional borrowings, and the issuance of additional common units or the proceeds from purchases of additional i-units by KMR;
|
|
▪
|
interest payments with cash flows from operating activities; and
|
|
▪
|
debt principal payments with additional borrowings, as such debt principal payments become due, or by the issuance of additional common units or the proceeds from purchases of additional i-units by KMR.
|
|
▪
|
a $23.1 million increase in cash relative to net changes in working capital items, primarily due to (i) a $28.6 million increase in cash from the collection and payment of trade and related party receivables and payables (including collections and payments on natural gas transportation and exchange imbalance receivables and payables), due primarily to the timing of invoices received from customers and paid to vendors and suppliers; (ii) a $27.4 million increase in cash from net changes in accrued tax liabilities, driven by lower net settlements of property tax liabilities in the first quarter of 2011; and (iii) a $37.6 million decrease in cash due to higher interest payments (net of interest collections) in the first quarter of 2011, primarily due to higher average borrowings relative to the first quarter a year ago;
|
|
▪
|
a $20.4 million increase in cash from overall higher partnership income—after adjusting our quarter-to-quarter $113.5 million increase in net income for the following four non-cash items: (i) a $158.0 million expense in the first quarter of 2010 resulting from rate case liability adjustments; (ii) an $18.2 million decrease due to higher undistributed earnings from equity investees; (iii) a $5.4 million decrease due to lower non-cash depreciation, depletion and amortization expenses (including amortization of excess cost of equity investments); and (iv) an $88.5 million increase due to certain higher non-cash compensation expenses allocated to us from KMI (as discussed in Note 9 “Related Party Transactions” to our consolidated financial statements included elsewhere in this report, we do not have any obligation, nor do we expect to pay any amounts related to these allocated expenses). The quarter-to-quarter increase in partnership income in 2011 versus 2010 is discussed above in “—Results of Operations” (including all of the certain items disclosed in the associated table footnotes);
|
|
▪
|
a $15.0 million increase in cash from higher distributions of earnings from equity investees (distributions of capital are discussed below in “—Investing Activities”). The increase was chiefly due to incremental distributions of $9.5 million received from our 50%-owned KinderHawk Field Services LLC (acquired in May 2010), and $4.0 million received from our 49%-owned Greens Bayou Fleeting, LLC (formed in February 2011); and
|
|
▪
|
a $63.0 million decrease in cash attributable to payments made in March 2011 for transportation rate settlements on our Pacific operations’ refined products pipelines.
|
|
▪
|
a $160.4 million increase in cash due to lower acquisitions of assets and investments in the first quarter of 2011. The increase was driven by the $50.0 million we paid in January 2011 for our preferred equity interest in Watco Companies, LLC (discussed further in Note 2 to our consolidated financial statements included elsewhere in this report), versus the $115.7 million in cash we paid to acquire three unit train ethanol handling terminals from US Development Group LLC in January 2010, and the $97.0 million we paid to acquire certain terminal assets from Slay Industries in March 2010;
|
|
▪
|
a $113.4 million increase in cash used due to lower contributions to equity investees in the first quarter of 2011. In the first quarter of 2011, our capital contributions totaled $22.2 million. Our contributions included payments of $14.4 million to our 50%-owned Eagle Ford Gathering LLC. The joint venture used the contributions as partial funding for natural gas gathering infrastructure expansions. In the first quarter of 2010, we contributed an aggregate amount of $135.6 million, including $130.5 million to Rockies Express Pipeline LLC;
|
|
▪
|
a $27.3 million increase in cash due to lower period-to-period payments for margin and restricted deposits associated with energy commodity cash flow hedging activities in the first three months of 2011;
|
|
▪
|
a $21.8 million increase in cash due to higher capital distributions (distributions in excess of cumulative earnings) received in the first quarter of 2011, including incremental distributions of $7.0 million received from KinderHawk Field Services LLC, and incremental distributions of $4.2 million received from our 50%-owned Fayetteville Express Pipeline LLC (which began firm contract natural gas transportation to customers on January 1, 2011). Current accounting practice requires us to classify and report cumulative cash distributions in excess of cumulative equity earnings as a return of capital; however, this change in classification does not impact our cash available for distribution; and
|
|
▪
|
a $46.2 million decrease in cash due to higher capital expenditures, as described above in “—Capital Expenditures.”
|
|
▪
|
a $221.8 million decrease in cash from overall debt financing activities—which include our issuances and payments of debt and our debt issuance costs. The overall decrease in cash was primarily due to (i) a $375.0 million decrease from lower net borrowings under our bank credit facility (due in part to our short-term credit rating upgrade in February 2011, we made no short-term borrowings under our bank credit facility in the first quarter of 2011 but instead made borrowings under our commercial paper program); (ii) a $244.1 million decrease due to higher net commercial paper repayments; and (iii) a combined $392.7 million increase in cash from both issuing and repaying our senior notes (discussed in Note 4 “Debt—Kinder Morgan Energy Partners, L.P. Senior Notes” to our consolidated financial statements included elsewhere in this report);
|
|
▪
|
a $63.4 million decrease in cash due to higher partnership distributions in the first quarter of 2011, when compared to the first quarter a year ago. Distributions to all partners, consisting of our common and Class B unitholders, our general partner and noncontrolling interests, totaled $538.2 million in the first quarter of 2011 and $474.8 million in the first quarter of 2010. Further information regarding our distributions is discussed following in “—Partnership Distributions;” and
|
|
▪
|
an $81.2 million increase in cash from higher partnership equity issuances. The increase relates to the proceeds we received, after commissions and underwriting expenses, from the sales of additional common units in the first quarter of 2011 (discussed in Note 5 “Partners’ Capital—Equity Issuances” to our consolidated financial statements included elsewhere in this report).
|
|
▪
|
price trends and overall demand for natural gas liquids, refined petroleum products, oil, carbon dioxide, natural gas, electricity, coal, steel and other bulk materials and chemicals in North America;
|
|
▪
|
economic activity, weather, alternative energy sources, conservation and technological advances that may affect price trends and demand;
|
|
▪
|
changes in our tariff rates implemented by the Federal Energy Regulatory Commission, California Public Utilities Commission, Canada’s National Energy Board or another regulatory agency;
|
|
▪
|
our ability to acquire new businesses and assets and integrate those operations into our existing operations, as well as our ability to expand our facilities;
|
|
▪
|
difficulties or delays experienced by railroads, barges, trucks, ships or pipelines in delivering products to or from our terminals or pipelines;
|
|
▪
|
our ability to successfully identify and close acquisitions and make cost-saving changes in operations;
|
|
▪
|
shut-downs or cutbacks at major refineries, petrochemical or chemical plants, ports, utilities, military bases or other businesses that use our services or provide services or products to us;
|
|
▪
|
changes in crude oil and natural gas production from exploration and production areas that we serve, such as the Permian Basin area of West Texas, the U.S. Rocky Mountains, areas of shale gas formation and the Alberta oil sands;
|
|
▪
|
changes in laws or regulations, third-party relations and approvals, and decisions of courts, regulators and governmental bodies that may adversely affect our business or our ability to compete;
|
|
▪
|
changes in accounting pronouncements that impact the measurement of our results of operations, the timing of when such measurements are to be made and recorded, and the disclosures surrounding these activities;
|
|
▪
|
our ability to offer and sell equity securities and debt securities or obtain debt financing in sufficient amounts to implement that portion of our business plan that contemplates growth through acquisitions of operating businesses and assets and expansions of our facilities;
|
|
▪
|
our indebtedness, which could make us vulnerable to general adverse economic and industry conditions, limit our ability to borrow additional funds, and/or place us at competitive disadvantages compared to our competitors that have less debt or have other adverse consequences;
|
|
▪
|
interruptions of electric power supply to our facilities due to natural disasters, power shortages, strikes, riots, terrorism, war or other causes;
|
|
▪
|
our ability to obtain insurance coverage without significant levels of self-retention of risk;
|
|
▪
|
acts of nature, accidents, sabotage, terrorism or other similar acts causing damage greater than our insurance coverage limits;
|
|
▪
|
capital and credit markets conditions, inflation and interest rates;
|
|
▪
|
the political and economic stability of the oil producing nations of the world;
|
|
▪
|
national, international, regional and local economic, competitive and regulatory conditions and developments;
|
|
▪
|
our ability to achieve cost savings and revenue growth;
|
|
▪
|
foreign exchange fluctuations;
|
|
▪
|
the timing and extent of changes in commodity prices for oil, natural gas, electricity and certain agricultural products;
|
|
▪
|
the extent of our success in discovering, developing and producing oil and gas reserves, including the risks inherent in exploration and development drilling, well completion and other development activities;
|
|
▪
|
engineering and mechanical or technological difficulties that we may experience with operational equipment, in well completions and workovers, and in drilling new wells;
|
|
▪
|
the uncertainty inherent in estimating future oil and natural gas production or reserves that we may experience;
|
|
▪
|
the ability to complete expansion projects on time and on budget;
|
|
▪
|
the timing and success of our business development efforts; and
|
|
▪
|
unfavorable results of litigation and the fruition of contingencies referred to in Note 10 to our consolidated financial statements included elsewhere in this report.
|
4.1 —
|
Certificate of the Vice President and Chief Financial Officer and the Vice President and Treasurer of Kinder Morgan Management, LLC and Kinder Morgan G.P., Inc., on behalf of Kinder Morgan Energy Partners, L.P., establishing the terms of the 3.500% Senior Notes due March 1, 2016, and the 6.375% Senior Notes due March 1, 2041.
|
|
4.2 —
|
Certain instruments with respect to long-term debt of Kinder Morgan Energy Partners, L.P. and its consolidated subsidiaries which relate to debt that does not exceed 10% of the total assets of Kinder Morgan Energy Partners, L.P. and its consolidated subsidiaries are omitted pursuant to Item 601(b) (4) (iii) (A) of Regulation S-K, 17 C.F.R. sec.229.601. Kinder Morgan Energy Partners, L.P. hereby agrees to furnish supplementally to the Securities and Exchange Commission a copy of each such instrument upon request.
|
|
|
11 —
|
Statement re: computation of per share earnings.
|
12 —
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Statement re: computation of ratio of earnings to fixed charges.
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31.1—
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Certification by CEO pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
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31.2—
|
Certification by CFO pursuant to Rule 13a-14 or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1—
|
Certification by CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2—
|
Certification by CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101 —
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) our Consolidated Statements of Income for the three months ended March 31, 2011 and 2010; (ii) our Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010; (iii) our Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010; and (iv) the notes to our Consolidated Financial Statements.
|
|
KINDER MORGAN ENERGY PARTNERS, L.P.
|
||
|
Registrant (A Delaware limited partnership)
|
|
By:
|
KINDER MORGAN G.P., INC.,
|
|
|
its sole General Partner
|
|
By:
|
KINDER MORGAN MANAGEMENT, LLC,
|
||
|
the Delegate of Kinder Morgan G.P., Inc.
|
Date: April 29, 2011
|
By:
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/s/ Kimberly A. Dang
|
||||
Kimberly A. Dang
Vice President and Chief Financial Officer
(principal financial and accounting officer)
|
|
(1)
|
the sum of the present values, calculated as of the Redemption Date, of:
|
|
•
|
each interest payment that, but for the redemption, would have been payable on the Note, or portion of a Note, being redeemed on each interest payment date occurring after the Redemption Date, excluding any accrued interest for the period prior to the Redemption Date; and
|
|
•
|
the principal amount that, but for the redemption, would have been payable at the stated maturity of the Note, or portion of a Note, being redeemed;
|
|
(2)
|
the principal amount of the Note, or portion of a Note, being redeemed.
|
|
the sum of the present values, calculated as of the Redemption Date, of:
|
·
|
each interest payment that, but for the redemption, would have been payable on the Security, or portion of a Security, being redeemed on each Interest Payment Date occurring after the Redemption Date, excluding any accrued interest for the period prior to the Redemption Date; and
|
·
|
the principal amount that, but for the redemption, would have been payable at the Stated Maturity of the Security, or portion of a Security, being redeemed;
|
|
the principal amount of the Security, or portion of a Security, being redeemed.
|
Three Months Ended
|
Three Months Ended
|
|||||||
|
March 31, 2011
|
March 31, 2010
|
||||||
Earnings:
Pre-tax income from continuing operations before adjustment for net income attributable to the noncontrolling interest and equity earnings (including amortization of excess cost of equity investments) per statements of income
|
$ | 284.0 | $ | 183.1 | ||||
Add:
|
||||||||
Fixed charges
|
140.8 | 126.1 | ||||||
Amortization of capitalized interest
|
1.0 | 1.0 | ||||||
Distributed income of equity investees
|
64.8 | 49.8 | ||||||
Less:
|
||||||||
Interest capitalized from continuing operations
|
(3.3 | ) | (4.1 | ) | ||||
Noncontrolling interest in pre-tax income of subsidiaries
with no fixed charges
|
(0.2 | ) | (0.1 | ) | ||||
Income as adjusted
|
$ | 487.1 | $ | 355.8 | ||||
Fixed charges:
Interest and debt expense, net per statements of income (includes amortization of debt discount, premium, and debt issuance costs; excludes capitalized interest)
|
$ | 135.3 | $ | 121.1 | ||||
Add:
|
||||||||
Portion of rents representative of the interest factor
|
5.5 | 5.0 | ||||||
Fixed charges
|
$ | 140.8 | $ | 126.1 | ||||
|
||||||||
Ratio of earnings to fixed charges
|
3.46 | 2.82 | ||||||
1.
|
I have reviewed this quarterly report on Form 10-Q of Kinder Morgan Energy Partners, L.P.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
Chairman and Chief Executive Officer
of Kinder Morgan Management, LLC, the delegate of Kinder Morgan G.P., Inc., the General Partner of Kinder Morgan Energy Partners, L.P.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Kinder Morgan Energy Partners, L.P.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States;
|
c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|