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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
Commission File Number 333-42578
IROQUOIS GAS TRANSMISSION SYSTEM, L.P.
(Exact name of registrant as specified in its charter)
Delaware 06-1285387
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
One Corporate Drive
Suite 600
Shelton, Connecticut 06484-6211
(Address of principal executive (Zip code)
offices)
(203) 925-7200
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
IROQUOIS GAS TRANSMISSION SYSTEM, L.P. AND SUBSIDIARY
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Income -
Three Months Ended September 30, 2002 and 2001 and
Nine Months Ended September 30, 2002 and 2001 3
Consolidated Balance Sheets - September 30, 2002
and December 31, 2001 4
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2002 and 2001 5
Consolidated Statement of Changes in Partners'
Equity - Nine Months Ended September 30, 2002 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk 9
ITEM 4. Controls and Procedures 10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 11
ITEM 5. Other Information 11
ITEM 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Certifications 13
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IROQUOIS GAS TRANSMISSION SYSTEM, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
OPERATING REVENUES $30,081 $30,526 $93,923 $95,744
OPERATING EXPENSES
Operation and maintenance 7,862 4,960 18,917 15,129
Depreciation and amortization 5,912 5,964 17,638 17,758
Taxes other than income taxes 2,694 2,637 8,267 8,150
Operating expenses 16,468 13,561 44,822 41,037
OPERATING INCOME 13,613 16,965 49,101 54,707
OTHER INCOME/(EXPENSES)
Allowance for equity funds
used during construction 594 102 1,449 217
Other, net 35 380 198 1,228
Other income/(expenses) 629 482 1,647 1,445
INTEREST EXPENSE
Interest Expense 7,176 6,814 19,800 22,221
Interest Expense Capitalized (693) (156) (1,729) (320)
Interest expense, net 6,483 6,658 18,071 21,901
INCOME BEFORE TAXES 7,759 10,789 32,677 34,251
PROVISION FOR TAXES 3,084 4,364 12,987 13,876
NET INCOME 4,675 6,425 19,690 20,375
The accompanying notes are an integral part of these consolidated
financial statements.
PART I. FINANCIAL INFORMATION (Continued)
ITEM 1. FINANCIAL STATEMENTS (Continued)
IROQUOIS GAS TRANSMISSION SYSTEM, L.P. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
September 30, December 31,
ASSETS 2002 2001
(Unaudited)
CURRENT ASSETS
Cash and temporary cash investments $ 58,408 $ 21,715
Accounts receivable - trade, net 5,332 6,480
Accounts receivable - affiliates 4,698 5,267
Other current assets 5,617 3,505
Total Current Assets 74,055 36,967
NATURAL GAS TRANSMISSION PLANT
Natural gas plant in service 778,805 776,961
Construction work in progress 85,858 40,659
864,663 817,620
Accumulated depreciation and amortization (301,839) (284,401)
Natural Gas Transmission Plant, Net 562,824 533,219
OTHER ASSETS AND DEFERRED CHARGES
Regulatory assets - income tax related 13,523 13,298
Regulatory assets - other 1,708 1,850
Other assets and deferred charges 15,373 6,411
Total Other Assets and Deferred Charges 30,604 21,559
TOTAL ASSETS $ 667,483 $ 591,745
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,639 $ 7,655
Accrued interest 9,181 2,909
Current portion of long-term debt 22,222 22,222
Accrued property tax 2,568 4,001
Other current liabilities 3,205 3,377
Total Current Liabilities 39,815 40,164
LONG-TERM DEBT 385,556 344,444
OTHER NON-CURRENT LIABILITIES
Unrealized loss-interest rate hedge, net of tax 2,874 1,783
Other 3,364 1,292
Total Other Non-Current Liabilities 6,238 3,075
AMOUNTS EQUIVALENT TO DEFERRED INCOME TAXES
Generated by Partnership 95,472 88,623
Payable by Partners (81,949) (75,325)
Total Amounts Equivalent to Deferred
Income Taxes 13,523 13,298
Commitments and Contingencies - -
Total Liabilities 445,132 400,981
Partners' Equity 222,351 190,764
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 667,483 $ 591,745
The accompanying notes are an integral part of these consolidated financial
statements.
PART I. FINANCIAL INFORMATION (Continued)
ITEM 1. FINANCIAL STATEMENTS (Continued)
IROQUOIS GAS TRANSMISSION SYSTEM, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Nine Months Ended
September 30,
2002 2001
OPERATING ACTIVITIES:
Net Income $ 19,690 $ 20,375
Adjusted for the following:
Depreciation and amortization 17,638 17,758
Allowance for equity funds used during construction (1,449) (217)
Deferred regulatory asset-income tax related (225) 474
Amounts equivalent to deferred income taxes 225 (474)
Income and other taxes payable by partners 12,987 13,876
Other assets and deferred charges (8,962) (247)
Other non-current liabilities 2,072 195
CHANGES IN WORKING CAPITAL:
Accounts receivable 1,717 3,097
Other current assets (2,112) (1,580)
Accounts payable (5,016) (317)
Accrued interest 6,272 4,324
Other current liabilities (1,605) (424)
NET CASH PROVIDED BY OPERATING ACTIVITIES 41,232 56,840
INVESTING ACTIVITIES:
Capital expenditures (45,651) (16,328)
NET CASH USED FOR INVESTING ACTIVITIES (45,651) (16,328)
FINANCING ACTIVITIES:
Partner distributions -- (10,000)
Long-term debt borrowings 200,000 --
Repayments of long-term debt (158,888) (16,667)
NET CASH PROVIDED BY/USED FOR FINANCING ACTIVITIES 41,112 (26,667)
NET INCREASE IN CASH AND TEMPORARY
CASH INVESTMENTS 36,693 13,845
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF YEAR 21,715 25,013
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF PERIOD $ 58,408 $ 38,858
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest $ 12,932 $ 17,353
The accompanying notes are an integral part of these consolidated financial
statements.
PART I. FINANCIAL INFORMATION (Continued)
ITEM 1. FINANCIAL STATEMENTS (Continued)
IROQUOIS GAS TRANSMISSION SYSTEM, L.P. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' EQUITY
For the Nine Months Ended September 30, 2002
(In Thousands)
(Unaudited)
PARTNERS' EQUITY
BALANCE AT DECEMBER 31, 2001 $190,764
Year-to-date net income 19,690
Taxes payable by Partners 12,987
Other comprehensive loss, net of tax (1,090)
PARTNERS' EQUITY
BALANCE AT SEPTEMBER 30, 2002 $222,351
The accompanying notes are an integral part of this consolidated
financial statement.
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
IROQUOIS GAS TRANSMISSION SYSTEM, L.P. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated financial statements included herein have been prepared
by Iroquois Gas Transmission System, L.P., ("Iroquois" or "Company") without
audit pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
results for the interim periods. Certain information and notes normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations. However, the Company believes that the
disclosures are adequate to make the information presented not misleading.
These financial statements should be read in conjunction with the financial
statements and the notes thereto included in Iroquois' Annual Report on Form
10-K for the year ended December 31, 2001("Iroquois' Form 10-K").
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make assumptions and estimates that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. Comprehensive income consisted of the following:
(in thousands) Three months ended Nine months ended
September 30, September 30,
2002 2001 2002 2001
Net income $4,675 $6,425 $19,690 $20,375
Other comprehensive income
Unrealized loss on interest rate
hedge, net of tax (1,041) (1,134) (1,090) (2,309)
Comprehensive income $3,634 $5,291 $18,600 $18,066
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
The Company owns an interstate natural gas pipeline system extending from the
United States-Canada border near Waddington, New York through Connecticut to
South Commack, Long Island, New York. Iroquois' pipeline system commenced
full operations on January 25, 1992, and is operated by the Company's wholly
owned subsidiary, Iroquois Pipeline Operating Company.
During the later part of 1999, the Company held negotiations with its
shippers, which led to the settlement of certain remaining issues from
previous rate cases between the Company and its shippers. The settlement
received Federal Energy Regulatory Commission ("FERC") approval on February
10, 2000. The settlement provides for a schedule of rate reductions through
the year 2003, generally precludes additional rate cases during this period
initiated by Iroquois or by any shipper that was a settling party, and
resolves all rate matters outstanding from the Company's previous two rate
cases.
Results of Operations
The components of Operating Revenues and Volumes Transported are provided in
the following table:
Three months ended Nine months ended
Revenues and Volumes Delivered September 30, September 30,
2002 2001 2002 2001
Revenues (dollars in millions)
Long-term firm reserved service $ 27.2 $ 28.5 $ 85.5 $ 88.0
Short-term firm/interruptible/other (1) 2.9 2.0 8.4 7.7
Total revenues $ 30.1 $ 30.5 $ 93.9 $ 95.7
Volumes delivered (million dekatherms)
Long-term firm reserved service 76.3 73.7 224.2 206.5
Short-term firm/interruptible/other 10.5 8.9 31.2 30.4
Total volumes delivered 86.8 82.6 255.4 236.9
____________________
(1)Other revenue includes deferred asset surcharges, park and loan service
revenue and marketing fees.
The Company receives revenues under long-term firm reserved transportation
service contracts with shippers in accordance with service rates approved by
the FERC. The Company also has interruptible transportation service revenues
which, although small relative to overall revenues, are at the margin and
thus can have a significant impact on net income. Such revenues include
short-term firm reserved transportation service contracts having terms of
less than one year as well as standard interruptible transportation service
contracts. While it is common for pipelines to be obligated under their
FERC-approved rate structures to share some of their interruptible
transportation service revenues with long-term firm reserved service
shippers, Iroquois is not currently obligated to do so under the terms of its
currently effective rate settlement described above. However, there can be
no assurance that this will be the case in the future.
In light of the current credit environment surroundings energy companies, the
Company is continually reviewing credit status of shippers to ensure
compliance with the Company's credit standards. Aside from the Enron default
noted in Liquidity and Capital Resources section, there have been no defaults
under existing shipper service agreements.
Three-month period ended September 30, 2002 compared to the three-month
period ended September 30, 2001.
Revenues. Total revenues for the three-month period ended September 30, 2002
decreased $0.4 million or 1.3% compared to the three-month period ended
September 30, 2001. The decrease in long-term firm revenues of $1.3 million
was primarily attributable to the rate decrease effective January 1, 2002 of
approximately $0.024 per Dekatherm. The increase in short-term
firm/interruptible/other revenues of approximately $0.9 million was
attributable primarily to increased volumes for interruptible service during
the three-month period ended September 30, 2002.
Operation and Maintenance Expense. Operation and maintenance expense
includes operating, maintenance and administrative expenses for the Company's
corporate office in Shelton, Connecticut and field support for the mainline,
metering and compression facilities. Operations and maintenance expense
increased $2.9 million for the three-month period ended September 30, 2002
compared to the three-month period ended September 30, 2001. This increase
was primarily due to a $2.0 million provision related to the Company's
Eastern Long Island (ELI) project which has been deferred, as well as
increased payroll, benefit and insurance costs.
Other Income/(Expenses). Other income/(expenses) include certain investment
income and the net of income and expense adjustments not recognized
elsewhere. Other income/(expenses) increased almost $0.2 million for the
three-month period ended September 30, 2002 compared to the three-month
period ended September 30, 2001 due to an increase in the allowance for
equity funds used during construction ("equity AFUDC") of $0.5 million
partially offset by and a decrease in interest income of $0.3 million. The
increase in the equity AFUDC primarily related to Iroquois' expenditures for
the Eastchester Extension. The decrease in interest income was primarily the
result of declining interest rates and investment balances.
Interest Expense, Net. Interest expense, net decreased $0.2 million for the
three-month period ended September 30, 2002 compared to the three-month
period ended September 30, 2001 due to an increase in interest expense
capitalized of $0.5 million, partially offset by an increase in interest
expense $0.3 million. The increase in interest expense capitalized was
primarily due to Iroquois' expenditures for the Eastchester Extension. The
increase in interest expense is primarily due to the issuance of $170 million
of senior unsecured notes on August 14, 2002. For more information
concerning this financing, see the Liquidity and Capital Resources section.
Provision for Taxes. Income tax expense decreased approximately $1.3 million
for the three-month period ended September 30, 2002 as compared to the same
period in 2001. This decrease was due primarily to a decrease in taxable
income.
Nine-month period ended September 30, 2002 compared to the nine-month period
ended September 30, 2001.
Revenues. Total revenues for the nine-month period ended September 30, 2002
decreased $1.8 million or 1.9% compared to the nine-month period ended
September 30, 2001. The decrease in long-term firm revenues of $2.5 million
was primarily attributable to the rate decrease effective January 1, 2002 of
approximately $0.024 per Dekatherm, partially offset by increased volumes due
to new long-term firm contracts in place in 2002. The net increase in short-
term firm/interruptible/other revenues of $0.7 million was attributable
primarily to increased volumes for interruptible service during the second
and third quarters of 2002, partially offset by decreased volumes due to
warmer winter temperatures and the consequent decrease in demand for natural
gas during the first three months of 2002.
Operation and Maintenance Expense. Operation and maintenance expense includes
operating, maintenance and administrative expenses for the Company's
corporate office in Shelton, Connecticut and field support for the mainline,
metering and compression facilities. Operation and maintenance expense
increased $3.8 million for the nine-month period ended September 30, 2002
compared to the nine-month period ended September 30, 2001. The increase is
due to a $2.0 million provision related to the Company's Eastern Long Island
project which has been deferred, as well as increased payroll, benefits and
insurance costs.
Other Income/(Expenses). Other income/(expenses) for the nine-month period
ended September 30, 2002 increased $0.2 million over the nine-month period
ended September 30, 2001. The increase was primarily due to an increase in
the equity AFUDC recorded on the Eastchester Extension of $1.2 million,
partially offset by a decrease in interest income of approximately $1.0
million resulting from declining interest rates and investment balances.
Interest Expense, Net. Interest expense, net decreased $3.8 million for the
nine-month period ended September 30, 2002 compared to the nine-month period
ended September 30, 2001, due to a decrease in interest expense of $2.4
million and an increase in interest expense capitalized of $1.4 million. The
decrease in interest expense primarily reflects lower interest rates on
floating rate debt as well as a lower average long-term debt balance due to
scheduled debt repayments, partially offset by increased interest expense due
to the issuance of $170 million of senior unsecured notes on August 14, 2002.
The increase in interest expense capitalized was primarily due to Iroquois'
expenditures for the Eastchester Extension.
Provision for Taxes. Income tax expense decreased approximately $0.9 million
for the nine-month period ended September 30, 2002 as compared to the same
period in 2001. This decrease was due primarily to a decrease in taxable
income.
Liquidity and Capital Resources
Capital expenditures for the first nine months of 2002 were $45.7 million
compared to $16.3 million during the first nine months of 2001, reflecting
the increased level of construction activity over the period, related
primarily to the Eastchester Extension, various general plant purchases and
other minor projects.
Cash flow (defined as net income adjusted for non-cash items such as
depreciation and deferred income taxes) represents the cash generated from
operations available for capital expenditures, partner distributions and
other operational needs. Net cash provided by operating activities decreased
by $15.6 million for the nine months ended September 2002, as compared to the
same period in 2001, partially due to an increase in debt issuance costs
associated with the financing related to the Eastchester Extension, which was
completed on August 14, 2002 and is more fully described below, and a
decrease in accounts payable balances, primarily due to timing of
construction activities. This decrease was partially offset by the receipt
of approximately $0.9 million from a firm shipper, who had reassumed the
payment obligation in respect of capacity it had released under a firm
contract to Enron Corporation, a company currently undergoing bankruptcy
proceedings.
Cash flow related to financing activities increased by $67.8 million for the
nine months ended September 2002, as compared to the same period in 2001, due
to the Eastchester Extension financing. No new borrowings were made in 2001.
On August 14, 2002, Iroquois issued $170 million of senior unsecured notes
that mature on October 31, 2027. The proceeds from the sale of the notes were
used to repay a portion of the first tranche of term loans under the
Company's amended credit agreement. This agreement provides for borrowings
from time to time against a second tranche of term loans, which, with cash
from operations, will be used to finance the construction of the Company's
Eastchester Extension and Athens Expansion and for general corporate
purposes. Our amended credit facilities provide for a second tranche of term
loans in an aggregate amount not to exceed $120 million to be drawn over a
twelve month period. As of September 30, 2002, the debt outstanding under our
amended credit facilities was $37.8 million.
Iroquois also is party to a $10.0 million, 364-day, variable rate revolving
line of credit to support working capital requirements. As of September 30,
2002 and December 31, 2001, there were no borrowings outstanding under this
facility.
Total capital expenditures for 2002 are estimated to be approximately $142.1
million, including approximately $129.4 million for the Eastchester
Extension. The remaining capital expenditures planned for 2002 are primarily
for construction of a meter station and tap, two compressor stations to
accommodate future growth, and various general plant purchases and other
minor projects. Iroquois expects to fund the remaining expansion projects
through additional borrowings under our existing credit facilities, and
internal sources, including cash from operations and increased equity
contributions (by limiting distribution to partners), in accordance with the
partnership agreement. Iroquois' management makes recommendations to the
partnership management committee regarding the amount and timing of
distributions to partners. The amount and timing of distributions is subject
to internal cash requirements for construction, financing and operational
requirements. Distributions and cash calls require the approval of the
management committee. Iroquois' 2002 capital expenditures to date have been
funded with a combination of internally generated funds, and from the
proceeds of the financing described above.
On June 19, 2002, the Company entered into forward interest rate agreements
with two major financial institutions in the aggregate notional amount of
$120.0 million. On July 31, 2002, the Company entered into additional
forward interest rate agreements with the same institutions in the aggregate
notional amount of $50.0 million. The forward interest rate agreements were
entered into to hedge the underlying interest rate for the unsecured notes
which the Company anticipated issuing. The senior notes were issued on
August 14, 2002. Upon the closing of the financing transaction, the forward
interest rate agreements were terminated and the Company paid $5.8 million to
settle those contracts.
At September 30, 2002, the Company had no off-balance sheet transactions,
arrangements or other relationships with unconsolidated entities or persons
that would adversely affect liquidity, availability of capital resources,
financial position or results of operations.
Information Regarding Forward Looking Statements
This quarterly report contains various forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements are based on current expectations, are not guarantees of future
performance and include assumptions about future market conditions,
operations and results. They are made in reliance on the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. Iroquois
can give no assurance that such expectations will be achieved. Among the
many factors that could cause actual results to differ materially from those
in the forward-looking statements herein are: future demand and prices for
natural gas; availability of supplies of Canadian natural gas; regulatory,
political, legislative and judicial developments, particularly with regard to
regulation by the Federal Energy Regulatory Commission; competitive
conditions in the marketplace; changes in the receptivity of the financial
markets to Iroquois or other oil and gas credits similar to Iroquois and,
accordingly, our strategy for financing any such change in business strategy
or expansion. A discussion of these and other factors which may affect our
actual results, performance, achievements or financial position is contained
in the "Risk Factors" section of Iroquois' Annual Report on Form 10-K, which
is on file with the United States Securities and Exchange Commission.
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company's interest rate exposure results from the portion of its
consolidated debt portfolio subject to variable rates. To mitigate potential
fluctuations in interest rates, the Company maintains a significant portion
of its consolidated debt portfolio in fixed rate debt. The Company also uses
interest rate swap agreements to manage its level of exposure to interest
rate changes. As of September 30, 2002, the Company had $37.8 million of
variable rate debt outstanding. The Company's interest rate swap agreements
almost completely match the Company's outstanding bank debt. Holding other
variables constant, including levels of indebtedness, a one percentage point
increase in interest rates would not impact pre-tax earnings. For a further
discussion about the Company's interest rate swaps, see Iroquois' Form 10-K,
Note 3 to the Consolidated Financial Statements.
The Partnership's pension plan assets are made up of equity and fixed income
investments. Fluctuations in those markets could cause the Partnership to
recognize increased or decreased pension income or expense.
PART I. FINANCIAL INFORMATION - (Concluded)
ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures. Within the 90 days prior to the date of
filing of this report, we carried out an evaluation, under the supervision
and with the participation of the Company's management, including the
Company's principle executive officer along with the chief financial officer,
of the effectiveness of the design and operation of our disclosure controls
and procedures pursuant to Exchange Act Rule 13a-14. Based upon that
evaluation, the Company's principle executive officer along with the chief
financial officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information relating to the
Company (including its consolidated subsidiaries) required to be included in
our periodic SEC filings.
Internal controls. There have been no significant changes in our internal
controls or in other factors that could significantly affect internal
controls, including any corrective action with regard to significant
deficiencies and material weakness subsequent to the date we carried out this
evaluation.
PART II. OTHER INFORMATION
IROQUOIS GAS TRANSMISSION SYSTEM, L.P. AND SUBSIDIARY
ITEM 1. Legal Proceedings
A description of the Company's legal and regulatory proceedings is contained
in the Company's annual report on Form 10-K for the year ended December 31,
2001.
The Company is constructing its Eastchester Expansion Project and some of the
upstream facilities have been placed into service. Construction of the Long
Island Sound portion of the project has commenced. The Triborough Bridge &
Tunnel Authority ("TBTA") has raised certain concerns about the location of
the Eastchester Expansion Project near two of its bridges (the Throgs Neck
and Whitestone bridges) and has filed requests for rehearing of various FERC
orders authorizing construction of the project in Long Island Sound. The
FERC has denied the TBTA's requests for rehearing, most recently in an order
issued on October 30, 2002. In addition, on October 24, 2002 the TBTA
submitted a letter to the U.S. Army Corps of Engineers ("USCOE") protesting
the USCOE's issuance of a permit to Iroquois. The Company does not expect
the USCOE to withdraw its permit as a result of the TBTA's letter. It is not
known what further actions the TBTA might take in response to the FERC's or
the USCOE's orders.
Iroquois' motion to consolidate its Eastern Long Island ("ELI") project with
the competing Islander East Pipeline Company, L.L.C's ("Islander East")
application, previously mentioned in the Form 10-Q filed for the quarter
ending March 31, 2002, was denied by the FERC in the September 19, 2002
issuance of a preliminary determination on non-environmental issues. On that
same date, the FERC issued a certificate of public convenience and necessity
to Islander East. While Iroquois disagrees with the result, it is the FERC's
opinion that there is sufficient forecasted long-term market demand to
support findings that both projects will be needed by 2010. The September
19, 2002 preliminary determination on the ELI Project concluded that, pending
final environmental review, the public convenience and necessity requires the
granting of the requested authorization to Iroquois.
On October 4, 2002 Iroquois filed a motion with the FERC requesting deferral
of consideration of the ELI Project based on the FERC's September 19, 2002
orders on the ELI and the Islander East Projects. Iroquois has also made the
same request of the Connecticut Siting Council regarding their review
process. Iroquois believes the FERC should defer action on the environmental
reviews and analysis to permit the FERC, governmental entities at the state
and local level, Iroquois and interested private stakeholders to consider the
implications of the September 19, 2002 orders and to assess the likelihood
that the Islander East project can promptly obtain the various other federal,
state and local permits that are prerequisites for the construction of that
project.
On October 10, 2002, the FERC granted Iroquois' motion for deferral of the
ELI Project and directed Iroquois to provide the FERC with an update on the
status of the Project by not later than January 31, 2003. The request for
deferral is still pending at the Connecticut Siting Council.
On October 31, 2002, the FERC issued a certificate of public convenience and
necessity to the Company authorizing it to construct and operate a proposed
compressor station in Brookfield, Connecticut. One of the project shippers
has notified the Company that it does not intend to participate in the
project. The Company intends to defer the proposed project in-service date
to November 2004 to reflect current market conditions.
No further material legal proceedings or material developments occurred since
September 30, 2002.
ITEMS 2-5 are not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits: (none)
(b) Reports on Form 8-K.
1. The Company filed a Current Report on Form 8-K, dated August 2, 2002,
reporting a press release announcing the Company's intention to offer in a
private placement $170 million of Senior Notes due 2027.
2. The Company filed a Current Report on Form 8-K, August 2, 2002, which
discussed a summary of the credit ratings of the Company's firm
transportation shippers as of July 31, 2002 and included a brief discussion
of the Company's internal credit standards. In addition, in connection with
the Company's August 14, 2002 bond offering, the Company also furnished
reports prepared by an independent engineer and an independent market
consultant concerning the Company's Eastchester Extension Project.
3. The Company filed a Current Report on Form 8-K, dated August 12, 2002,
which discussed a summary of the credit ratings of the Company's internal
credit standards.
4. The Company filed a Current Report on Form 8-K, dated October 4, 2002,
reporting a press release announcing that the Company has requested that the
Federal Regulatory Commission defer taking action on its application for the
Eastern Long Island Extension.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
IROQUOIS GAS TRANSMISSION SYSTEM, L.P.
(A Delaware Limited Partnership)
Date: (November 13 , 2002) By: Iroquois Pipeline Operating Company,
as its Agent
/S/ Craig Frew
_________________
Craig Frew
President
/S/ Paul Bailey
_________________
Paul Bailey
Vice President & Chief Financial Officer
I, Craig Frew, the principle executive officer of the Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Iroquois Gas
Transmission System, L.P.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in the 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 quarterly
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures 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 quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
DATE: NOVEMBER 13, 2002
_____________________________
/S/ CRAIG FREW
CRAIG FREW
PRESIDENT
I, Paul Bailey, the chief financial officer of the Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Iroquois Gas
Transmission System, L.P.;
2. Based on my knowledge, this quarterly 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in the 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 quarterly
report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
a) designed such disclosure controls and procedures 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 quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
DATE: NOVEMBER 13, 2002
_______________________
/S/ PAUL BAILEY
PAUL BAILEY