ALLIANCE PIPELINE LIMITED PARTNERSHIP Statements of Income. September (1) (1) (unaudited, thousands of Canadian dollars)

Transcription

1 ALLIANCE PIPELINE LIMITED PARTNERSHIP Statements of Income Three Months Ended Nine Months Ended 2012 (1) 2012 (1) (unaudited, thousands of Canadian dollars) Revenues Transportation revenue (Note 3) 102, , , ,978 Transportation revenue from related parties 11,542 11,640 34,890 34, , , , ,920 Expenses General and administrative 12,575 10,492 37,685 34,974 Operations and maintenance 23,059 30,620 66,059 72,251 Costs incurred under administrative services agreement (Note 5) 10,026 8,682 34,944 32,893 Reimbursement under administrative services agreement (Note 5) (10,339) (9,243) (36,309) (34,625) Depreciation and amortization (Note 4) 29,362 30,103 89,048 90,233 64,683 70, , ,726 Operating Income 49,396 47, , ,194 Interest and other income , Amortization of deferred financing charges (245) (263) (743) (811) Interest expense (19,539) (20,839) (59,938) (64,154) Net Income 30,503 27,101 86,636 82,097 Net income attributable to Limited Partner ownership interests in Alliance Pipeline Limited Partnership 30,198 26,830 85,770 81,276 Net income attributable to General Partner ownership interests in Alliance Pipeline Limited Partnership See accompanying notes to the financial statements (1) Revised, see Note 2.

2 ALLIANCE PIPELINE LIMITED PARTNERSHIP Statements of Comprehensive Income Three Months Ended Nine Months Ended 2012 (1) 2012 (1) (unaudited, thousands of Canadian dollars) Net Income 30,503 27,101 86,636 82,097 Other Comprehensive Income (Loss) Gains and losses on derivative instruments designated as cash flow hedges (15) Reclassification to net income of gains and losses on derivative instruments designated as cash flow hedges Other comprehensive income (loss) Comprehensive Income 30,503 27,101 86,636 82,123 Comprehensive income attributable to Limited Partner ownership interests in Alliance Pipeline Limited Partnership 30,198 26,830 85,770 81,302 Comprehensive income attributable to General Partner ownership interests in Alliance Pipeline Limited Partnership See accompanying notes to the financial statements (1) Revised, see Note 2.

3 ALLIANCE PIPELINE LIMITED PARTNERSHIP Statements of Cash Flow Three Months Ended Nine Months Ended 2012 (1) 2012 (1) (unaudited, thousands of Canadian dollars) Operating Activities Net income 30,503 27,101 86,636 82,097 Non-cash transportation revenue adjustment (Note 3) 779 (4,187) 10,423 1,265 Depreciation and amortization 29,362 30,103 89,048 90,233 Amortization of deferred financing charges Changes in trade accounts receivable 576 (336) (452) (572) Changes in accounts receivable from related parties (Note 5) (923) 2,399 (321) 990 Changes in prepaids, deposits and other 2,269 1,351 (672) (277) Changes in trade accounts payable and accrued liabilities (18,008) 20,614 16,477 16,838 Changes in accounts payable to related parties (Note 5) 420 (160) 54 (74) Other (1,340) (473) (95) (1,672) 43,883 76, , ,639 Investing Activities Changes in trust accounts 29,651 (39,211) (55,846) (35,471) Changes in property, plant and equipment (Note 4) 1,185 (254) 1,635 (3,623) 30,836 (39,465) (54,211) (39,094) Financing Activities Capital contributions Repayment of long-term debt (39,915) - (39,915) (38,930) Distributions to partners (34,800) (37,200) (107,700) (111,600) (74,715) (37,200) (147,615) (149,630) Net change in cash and cash equivalents Cash and cash equivalents, beginning of period 2,033 2,020 2,022 1,115 Cash and cash equivalents, end of period 2,037 2,030 2,037 2,030 Supplemental disclosure of cash flow information: Interest payments (37,184) (70) (40,725) (43,282) Non-cash changes in property, plant and equipment (990) (953) (1,151) (531) See accompanying notes to the financial statements (1) Revised, see Note 2.

4 ALLIANCE PIPELINE LIMITED PARTNERSHIP Balance Sheets (unaudited, thousands of Canadian dollars) 2012 (1) ASSETS Current assets Cash 2,037 2,022 Trust accounts 114,740 29,544 Trade accounts receivable 35,534 35,082 Accounts receivable from related parties (Note 5) 9,115 8,794 Prepaids, deposits and other 2,619 1,947 Current portion of regulatory assets (Note 3) 918 7, ,963 84,787 Regulatory assets (Note 3) - 2,092 Other long-term assets 16,203 17,223 Long-term receivable Property, plant and equipment (Note 4) 1,398,875 1,487,662 Intangible assets 59 1,183 1,580,747 1,593,654 LIABILITIES Current liabilities Trade accounts payable and accrued liabilities (Note 7) 40,187 22,559 Accounts payable to related parties (Note 5) Current portion of long-term debt 81,556 79,831 Restricted transportation deposit 29,350 - Other current liabilities 1,803 1, , ,839 Regulatory liabilities (Note 3) 1,768 - Other long-term liabilities 7,411 8,268 Long-term debt 1,078,639 1,120,279 Commitments and contingencies (Note 8) PARTNERS' EQUITY 339, ,268 See accompanying notes to the financial statements 1,580,747 1,593,654 (1) Revised, see Note 2.

5 ALLIANCE PIPELINE LIMITED PARTNERSHIP Statements of Changes in Partners' Equity (unaudited, thousands of Canadian dollars) 2012 (1) Class A Units Class A - number of units 556, ,207 Class A unit value - opening balance 281, ,066 Net income and comprehensive income 75,752 95,859 Distributions to partners (94,169) (130,018) Class A unit value - closing balance 263, ,907 Class B Units Class B - number of units 73,558 73,558 Class B unit value - opening balance 48,425 52,943 Net income and comprehensive income 10,018 12,677 Distributions to partners (12,454) (17,195) Class B unit value - closing balance 45,989 48,425 Contributed Surplus Contributed surplus - opening balance 22,733 21,833 Partner contributions Contributed surplus - closing balance 22,733 22,733 General Partner General Partner - opening balance 7,203 7,594 Net income and comprehensive income 866 1,096 Distributions to partners (1,077) (1,487) General Partner - closing balance 6,992 7,203 PARTNERS' EQUITY BEFORE ACCUMULATED OTHER COMPREHENSIVE INCOME 339, ,268 Accumulated other comprehensive income (AOCI) AOCI - opening balance - (26) Other comprehensive income - 26 AOCI - closing balance - - TOTAL PARTNERS' EQUITY 339, ,268 See accompanying notes to the financial statements (1) Revised, see Note 2.

6 NOTES TO THE FINANCIAL STATEMENTS 1 ALLIANCE PIPELINE LIMITED PARTNERSHIP (Unaudited, in thousands of Canadian dollars, unless otherwise noted) NOTE 1 BASIS OF PRESENTATION The interim financial statements of Alliance Pipeline Limited Partnership (Alliance) have been prepared by management in accordance with United States generally accepted accounting principles (GAAP). Operating results for the nine months ended,, are not necessarily indicative of the results that may be expected for the full year ending,. The interim financial statements should be read in conjunction with the financial statements and the notes for the year ended, In management s opinion, the financial statements have been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies. NOTE 2 REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS In connection with the preparation of the financial statements for the first quarter of, Alliance identified a requirement to revise the manner in which Alliance recognized the regulatory asset associated with cost recovery of the depreciable assets. Previously, the cumulative difference between depreciation expense included in the financial statements and depreciation expense negotiated in the transportation service agreements was recognized as the long-term receivable. Based on this, Alliance no longer recognizes the cumulative difference between depreciation expense included in the financial statements and depreciation expense negotiated with shippers in the transportation service agreements. In accordance with accounting guidance found in Accounting Standard Codification 250 Accounting Changes and Error Corrections (ASC 250), Alliance assessed the materiality of the change in previously issued financial statements and concluded that the adjustments were not material to any of the periods presented. In accordance with ASC 250, Alliance revised previously issued financial statements to correct the effect of the accounting change. The quantitative analysis of the impact of the revision on the previously issued financial statements was disclosed in the financial statements for the period ended March 31,.

7 NOTES TO THE FINANCIAL STATEMENTS 2 NOTE 3 REGULATED OPERATIONS TRANSPORTATION REVENUE Transportation revenue is adjusted to reflect differences between the period in which costs are recovered through toll receipts and the period these costs are expensed in the financial statements, as follows: Three Months Ended Nine Months Ended Tolls invoiced 114, , , ,185 Increase (decrease) for: Transportation revenue adjustments current year (794) 2,010 (6,122) (7,797) Transportation revenue adjustments prior years 14 2,177 (4,301) 6,532 (780) 4,187 (10,423) (1,265) Transportation revenue 114, , , ,920 Surcharge Revenue Alliance receives surcharge revenue from the Taylor Aitken Creek (TAC) facilities in British Columbia. The TAC facilities provide service to shippers through take or pay contracts that are billed based on the shipper s primary receipt point capacities at TAC locations. For the three months ended,, the TAC surcharge provided $1.2 million (, $1.2 million) and $3.6 million for the nine months ended, (, $3.6 million). Additional revenue arises from providing Receipt Only Service (ROS) to shippers at Taylor Junction, British Columbia. Take or pay contracts for ROS provided revenue of $1.4 million for the three months ended, (, $1.4 million) and $4.1 million for the nine months ended, (, $4.1 million). ALLIANCE PIPELINE LIMITED PARTNERSHIP SEPTEMBER 30,

8 NOTES TO THE FINANCIAL STATEMENTS 3 Significant Shippers Alliance has three shippers that each represent 15%, 14%, and 13% of contracted revenue (September 30, %, 13%, and 13%). Total contracted revenue based on transportation service agreements from these shippers amounted to $47.4 million for the three months ended, (, $48.6 million) and $143.3 million for the nine months ended, (, $143.0 million). IMPACT OF REGULATED OPERATIONS The following table describes the impact of accounting for regulated operations to the financial statements. Balance Sheets Impact Regulatory Asset (Liability) 2012 Transportation revenue adjustments current year 918 7,398 Transportation revenue adjustments long-term (6,034) (3,901) Transportation revenue adjustments prior years 4,266 5,993 Statements of Income Impact Revenue (Expense) Three Months Ended Nine Months Ended Transportation revenue adjustments current year (918) 2,177 (6,480) 6,532 Transportation revenue adjustments long-term (219) (840) (2,133) (10,433) Transportation revenue adjustments prior years 379 2,177 (1,727) 2,686 ALLIANCE PIPELINE LIMITED PARTNERSHIP SEPTEMBER 30,

9 NOTES TO THE FINANCIAL STATEMENTS 4 NOTE 4 Cost PROPERTY, PLANT AND EQUIPMENT 2012 Pipeline in service assets 2,747,522 2,747,522 Renewals and replacements 28,791 28,801 General plant and administrative assets 46,874 46,874 Assets under construction Capital spares 19,437 20,331 Land 2,554 2,554 Accumulated depreciation 2,845,596 2,846,082 Pipeline in service assets 1,388,963 1,305,811 Renewals and replacements 18,391 14,796 General plant and administrative assets 39,367 37,813 1,446,721 1,358,420 1,398,875 1,487,662 Property, plant and equipment includes an equity component of allowance for funds used during construction of $135.1 million (, $135.1 million) as a capitalized asset, recorded at cost. The recorded value, after accumulated amortization, is $66.1 million (, $70.0 million). Depreciation expense for property, plant and equipment is included as part of depreciation and amortization expense in the Statements of Income. For the three months ended,, Alliance recognized $29.2 million of depreciation expense related to property, plant and equipment (, $29.6 million) and $87.9 million for the nine months ended, (, $88.6 million). ALLIANCE PIPELINE LIMITED PARTNERSHIP SEPTEMBER 30,

10 NOTES TO THE FINANCIAL STATEMENTS 5 NOTE 5 RELATED PARTIES COSTS INCURRED AND REIMBURSED UNDER ADMINISTRATIVE SERVICE AGREEMENTS Three Months Ended Nine months Ended Operations and maintenance NRGreen Power Limited Partnership ,908 1,046 Alliance Pipeline L.P. (69) (68) (205) (207) General and administrative Alliance Pipeline L.P. 8,885 8,236 32,359 31,255 Aux Sable entities NRGreen Power Limited Partnership Costs incurred under administrative service agreements 10,026 8,682 34,944 32,893 Reimbursement of costs incurred under administrative service agreements (10,026) 8,682 (34,944) (32,893) Common administrative asset charge Alliance Pipeline L.P. (313) (561) (1,365) (1,732) (10,339) (9,243) (36,309) (34,625) ACCOUNTS RECEIVABLE FROM RELATED PARTIES (EXCLUDING TRANSPORTATION REVENUE) 2012 Alliance Pipeline entities 3,477 4,357 NRGreen Power Limited Partnership 1, Enbridge entities Aux Sable entities ,268 4,960 ALLIANCE PIPELINE LIMITED PARTNERSHIP SEPTEMBER 30,

11 NOTES TO THE FINANCIAL STATEMENTS 6 ACCOUNTS PAYABLE TO RELATED PARTIES 2012 Alliance Pipeline entities NRGreen Power Limited Partnership Occasionally Alliance leases and sells equipment to related entities. All amounts earned as a result of these transactions are presented as other income. The total income earned for the three months ended, is $0.3 million (, 2012 nil), and $0.3 million for the nine months ended, (, 2012 nil). NOTE 6 FINANCIAL INSTRUMENTS FAIR VALUE OF FINANCIAL INSTRUMENTS At,, the carrying value of long-term debt is $1,160.2 million (, $1,200.1 million) and the fair value is $1,321.4 million (, $1,417.2 million). Alliance is in compliance with all the terms and conditions of its committed credit facilities and expects to remain in compliance throughout. The debt service coverage ratio covenant is required to be 1.25 or above. At,, the debt service coverage ratio is 2.02 (, ). NOTE 7 TRADE ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 2012 Trade accounts payable and accrued liabilities 4,994 4,772 Interest accruals 19, Operating accruals 5,920 7,279 Capital accruals 3,244 1,285 Employee benefits payable 5,788 8,475 Other Trade accounts payable and accrued liabilities 40,187 22,559 ALLIANCE PIPELINE LIMITED PARTNERSHIP SEPTEMBER 30,

12 NOTES TO THE FINANCIAL STATEMENTS 7 NOTE 8 COMMITMENTS AND CONTINGENCIES Alliance expensed $1.2 million in operating leases for the three-month period ended, (, $1.1 million) and $3.4 million for the nine months ended, (, $3.2 million). NOTE 9 SUBSEQUENT EVENTS On September 26,, the Board of Directors of the General Partner approved a distribution of $34.7 million, which is expected to be paid by Alliance to the partners of Alliance on or about October 30,. Subsequent events were evaluated until the Audit Committee review and approval on October 23,, upon which date the financial statements became available to be issued. ALLIANCE PIPELINE LIMITED PARTNERSHIP SEPTEMBER 30,