Attached files
Exhibit 99.2
GAS TRANSMISSION NORTHWEST LLC
Financial Statements
March 31, 2013 and 2012
(Unaudited)
GAS TRANSMISSION NORTHWEST LLC
(Formerly, Gas Transmission Northwest Corporation)
Balance Sheets
Unaudited
(In thousands)
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|
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March 31, 2013 |
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December 31, |
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Assets |
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|
|
|
| |
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Current assets: |
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|
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|
| |
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Cash and cash equivalents |
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$ |
43 |
|
46 |
|
|
Demand loan receivable from affiliate |
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36,446 |
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20,534 |
| |
|
Accounts receivable: |
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|
|
|
| |
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Trade, net of allowance of $0 in 2012 and $0 in 2011 |
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16,714 |
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17,726 |
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Affiliate |
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234 |
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513 |
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Other |
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243 |
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393 |
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Materials and supplies |
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5,754 |
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5,806 |
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Other |
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2,856 |
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5,012 |
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|
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|
|
|
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Total current assets |
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62,290 |
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50,030 |
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|
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|
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|
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Property, plant, and equipment: |
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|
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Property, plant, and equipment |
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1,711,417 |
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1,700,825 |
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Construction work in progress |
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4,017 |
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15,253 |
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|
|
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1,715,434 |
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1,716,078 |
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Less accumulated depreciation and amortization |
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(927,669 |
) |
(919,794 |
) | |
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|
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Total property, plant, and equipment, net |
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787,765 |
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796,284 |
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Other assets: |
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Regulatory assets |
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2,121 |
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2,164 |
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Other |
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927 |
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949 |
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|
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Total other assets |
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3,048 |
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3,113 |
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Total assets |
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$ |
853,103 |
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849,427 |
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Liabilities and Members’ Equity |
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Current liabilities: |
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Accounts payable: |
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Trade |
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$ |
1,905 |
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6,205 |
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Affiliates |
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2,560 |
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3,430 |
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Other |
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5,013 |
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3,863 |
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Taxes payable (other than income) |
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1,689 |
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726 |
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Accrued interest |
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5,883 |
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1,471 |
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Total current liabilities |
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17,050 |
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15,695 |
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Long-term debt |
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325,000 |
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325,000 |
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Other liabilities |
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20,607 |
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20,421 |
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Members’ equity |
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490,446 |
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488,311 |
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Total liabilities and members’ equity |
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$ |
853,103 |
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849,427 |
|
See accompanying notes to financial statements.
GAS TRANSMISSION NORTHWEST LLC
(Formerly, Gas Transmission Northwest Corporation)
Statements of Income
Unaudited
(In thousands)
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Three Months Ended March 31, |
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2013 |
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2012 |
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Operating revenues |
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$ |
48,948 |
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51,974 |
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Operating expenses: |
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Operation and maintenance |
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8,679 |
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8,948 |
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Depreciation and amortization |
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9,185 |
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9,187 |
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Taxes, other than income |
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2,320 |
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2,468 |
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Total operating expenses |
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20,184 |
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20,603 |
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Operating income |
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28,764 |
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31,371 |
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Other income, net |
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(75 |
) |
13 |
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Interest and debt expense |
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4,465 |
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4,483 |
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Interest income from affiliates |
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(9 |
) |
(7 |
) | |
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|
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Net income |
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$ |
24,383 |
|
26,882 |
|
See accompanying notes to financial statements.
GAS TRANSMISSION NORTHWEST LLC
(Formerly, Gas Transmission Northwest Corporation)
Statements of Members’ Equity
Unaudited
(In thousands)
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Three Months Ended March 31, |
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2013 |
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2012 |
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Balance at beginning of period |
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$ |
488,311 |
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507,216 |
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Net income |
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24,383 |
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26,882 |
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Distributions to members |
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(22,248 |
) |
(21,404 |
) | |
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Balance at end of period |
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$ |
490,446 |
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512,694 |
|
See accompanying notes to financial statements.
GAS TRANSMISSION NORTHWEST LLC
(Formerly, Gas Transmission Northwest Corporation)
Statements of Cash Flows
Unaudited
(In thousands)
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Three Months Ended March 31, |
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2013 |
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2012 |
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Cash flows from operating activities: |
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Net income |
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$ |
24,383 |
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26,882 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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|
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Depreciation and amortization |
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9,185 |
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9,187 |
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Allowance for funds used during construction, equity |
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(59 |
) |
(30 |
) | |
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Asset and liability changes: |
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|
|
|
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Accounts receivable |
|
928 |
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(55 |
) | |
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Other current assets |
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2,209 |
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2,083 |
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Regulatory assets |
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43 |
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62 |
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Noncurrent assets |
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20 |
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40 |
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Accounts payable |
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(3,618 |
) |
(5,182 |
) | |
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Other current liabilities |
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5,375 |
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5,446 |
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Regulatory liabilities |
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(17 |
) |
115 |
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Net cash provided by operating activities |
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38,449 |
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38,548 |
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Cash flows from investing activities: |
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Additions to property, plant, and equipment |
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(292 |
) |
(3,653 |
) | |
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Change in affiliate demand loan receivable |
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(15,912 |
) |
(13,491 |
) | |
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Net cash (used in) provided by investing activities |
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(16,204 |
) |
(17,144 |
) | |
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Cash flows from financing activities: |
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Distribution to members |
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(22,248 |
) |
(21,404 |
) | |
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Net cash used in financing activities |
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(22,248 |
) |
(21,404 |
) | |
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Net change in cash and cash equivalents |
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(3 |
) |
— |
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Cash and cash equivalents at beginning of year |
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46 |
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50 |
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Cash and cash equivalents at end of year |
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$ |
43 |
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50 |
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Supplemental cash flow information: |
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Cash activities: |
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Interest paid, net of capitalized interest |
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$ |
— |
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— |
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Noncash financing activities: |
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Accruals for property, plant and equipment |
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$ |
— |
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— |
|
See accompanying notes to financial statements.
Gas Transmission Northwest LLC
Notes to Financial Statements
(Unaudited)
(1) Description of Business
Gas Transmission Northwest LLC, formerly Gas Transmission Northwest Corporation (the Company), was originally incorporated in the state of California on August 9, 1957. The Company was a wholly owned direct subsidiary of TransCanada American Investments, Ltd. (TAIL) and a wholly owned indirect subsidiary of TransCanada PipeLines Limited, TransCanada PipeLine USA Ltd, and TransCanada Corporation. These four entities are individually, or collectively, referred to herein as “TransCanada”.
On April 1, 2011, the Company was converted to a limited liability company (LLC). On April 26, 2011, TAIL and TC Pipe Lines, LP (TCLP) entered into a Purchase and Sale Agreement whereby TCLP acquired from TAIL a 25% interest in the Company. On May 3, 2011 the acquisition was completed.
The Company’s 1,353-mile transmission system extends from Kingsgate, British Columbia to Malin, Oregon. It interconnects with TransCanada’s BC System at the British Columbia-Idaho border, with Williams (Northwest Pipeline Corporation) at Spokane and Palouse, Washington and at Stanfield, Oregon. At Malin, Oregon it interconnects with Tuscarora Gas Transmission Company, (a subsidiary of TC PipeLines, LP), Pacific Gas & Electric and the Ruby Pipeline (Kinder Morgan, Inc.). The transmission system transports natural gas from producing fields primarily located in Western Canada, but also receives U.S. domestic gas supplies at Stanfield, Oregon and Malin, Oregon. The Company’s transmission system has the capacity to transport more than 2.9 billion cubic feet of gas a day (Bcf/d) with the capability of delivering more than 2.1 Bcf/d to California and upto 1 Bcf/d to the Pacific Northwest.
(2) Basis of Presentation
These unaudited financial statements have been prepared in accordance with interim period reporting requirements. Because this is an interim period, this report does not include all the disclosures required by generally accepted accounting principles. This quarterly report should be read in conjunction with the Company’s 2012 audited financial statements, which includes a summary of the Company’s significant accounting policies and other disclosures. The Company has made all adjustments that are of a normal recurring nature to fairly present its interim period results. Prior year amounts have been reclassified where necessary to conform to the 2013 presentation. Due to the Company’s business, information for interim periods may not be indicative of the Company’s results of operations for the entire year.
(3) Commitments and Contingencies
(a) Legal Proceedings
In December 2009, PacifiCorp filed suit against the Company and Northwest Pipeline in Oregon State Court for approximately $7 million for damage to equipment at the Hermist on plant and lost profits. The plant is a natural gas generating facility located in Hermiston, Oregon. The Company’s motion to remove the case to federal court was successful.
The parties conducted a site visit in December 2011. A number of Summary Judgment Motions pending by all parties were heard and the court-ordered mediation occurred, without resolution in May 2012 In July 2012, the federal judge ruled that the issue of “commercially free” gas in the GTN’s tariff is subject to interpretation by the Federal Energy Regulatory Commission (FERC). FERC ruled that “commercially free” does not mean gas free of liquids but instead is to be determined on a case-by-case basis. Thus, the case is returned to the federal court for resolution.
Gas Transmission Northwest LLC
Notes to Financial Statements
(Unaudited)
(b) Regulatory Matters
The Company’s transportation rates were established in November 2011 in accordance with a settlement approved by the FERC and were effective January 1, 2012. The settlement provides for a four-year moratorium period during which the Company and the settling parties are prohibited from taking certain actions, including making certain filings that would be inconsistent with the settlement. This settlement also requires the Company to file a general section 4 rate case for an effective date of January 1, 2016.
(c) Environmental Matters
The Company is not aware of any material contingent liabilities with respect to compliance with applicable environmental laws and regulations.
(d) Other Commercial Commitments
The Company holds cancelable easements or rights-of-way arrangements from landowners permitting the use of land for the construction and operation of the Company’s pipeline system. Currently, the Company’s obligations under these easements are not material to its results of operations.
(e) Other
The Company is from time to time subject to litigation incidental to its business. The Company is not aware of any contingent liabilities that would have a material adverse effect on the Company’s financial condition, results of operations, or cash flows.
(4) Income Taxes
The Company converted to a limited liability company (LLC) on April1, 2011. The Company is no longer subject to income taxes and settled all current and deferred income tax balances pursuant to our tax sharing agreement with TransCanada PipeLine USA Ltd.
(5) Transactions with Affiliated Companies
(a) Cash Management Program
The Company participates in TransCanada’s cash management program, which matches short-term cash surpluses and needs of participating affiliates, thus minimizing total borrowings from outside sources. Monies advanced under the agreement are considered to be a loan, accruing interest and repayable on demand. The Company shall receive interest on monies advanced to TransCanada at the rate of interest earned by TransCanada on its short-term cash investments. The Company shall pay interest on monies advanced from TransCanada based on TransCanada’s short-term borrowing costs or commercial paper rate. At March 31, 2013, and December 31, 2012, the Company had a demand loan receivable from TransCanada of $36.5 million and $20.5 million, respectively.
(b) Affiliate Expenses
The Company is charged by TransCanada for services such as legal, tax, treasury, human resources, other administrative functions, and for other costs incurred on its behalf. These include, but are not limited to, employee benefit costs and property and liability insurance costs.
Gas Transmission Northwest LLC
Notes to Financial Statements
(Unaudited)
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Three Months Ended |
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March 31, |
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2013 |
|
2012 |
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Costs charged by TransCanada’s subsidiaries |
|
$ |
6.8 |
|
$ |
7.1 |
|
|
Impact on the Company’s net income |
|
$ |
6.5 |
|
$ |
6.9 |
|
These costs are based on direct assignment to the extent practicable, or by using allocation methods that are reasonable reflections of the utilization of services provided to or for the benefits received by the Company.
At March 31, 2013 and December 31, 2012, the Company owed $2.4 million and $2.8 million, respectively to these affiliates classified as accounts payable to associated companies on the balance sheet
(6) Subsequent Events
On April 18, 2013, the Management Committee declared a distribution in the amount of $33.3 million. The distribution was paid on May 1, 2013.
Subsequent events have been assessed through May 13, 2013, which is the date the financial statements were issued, and management has concluded there were no events or transactions during this period that would require recognition or disclosure in the consolidated financial statements other than those already reflected.