Northern Border Partners, L.P. (NYSE:NBP) today reported third
quarter 2005 net income of $48.4 million or $0.98 per unit compared
with net income of $34.7 million or $0.69 per unit for third
quarter 2004. Year-to-date 2005, Northern Border Partners reported
net income of $111.1 million, or $2.22 per unit, compared with
$104.6 million, or $2.08 per unit for the same period in 2004. Cash
flow as measured by earnings before interest, taxes, depreciation
and amortization (EBITDA) was $106.9 million for third quarter 2005
up from $88.1 million in the third quarter of 2004. Year-to-date
2005 EBITDA was $278.0 million compared with $266.5 million for the
same period one year ago. "All business segments delivered strong
third quarter results. This, coupled with non-recurring items
realized in the quarter, resulted in record quarterly earnings,"
said Bill Cordes, chief executive officer of Northern Border
Partners. "Therefore, we are increasing our earnings guidance for
the full year 2005. Net income is expected to be in the range of
$2.83 per unit to $2.89 per unit. Distributable cash flow (DCF) is
expected to be $3.61 per unit to $3.67 per unit." "Our results for
2006 are expected to be fairly consistent with 2005 from a base
business perspective excluding non-recurring items," Cordes
continued. "We anticipate net income to be in the range of $2.50
per unit to $2.60 per unit and distributable cash flow to be in the
range of $3.65 per unit to $3.85 per unit." THIRD QUARTER 2005
HIGHLIGHTS Third quarter results included: -- Higher operating
revenue from interstate pipelines of approximately $8.2 million in
third quarter 2005, resulting primarily from the sale of bankruptcy
claims held against Enron and Enron North America. Northern Border
Pipeline realized $9.4 million ($6.6 million net to the
Partnership) of non-recurring revenue from the sale of the
bankruptcy claims which was offset by a $2.0 million ($1.4 million
net to the Partnership) reduction in revenue as a result of
capacity sold at discounted rates. -- Increased operating income of
approximately $5.4 million from the Partnership's Williston Basin
gathering and processing operations. Gathered and processed volumes
increased by 20 percent and the average price realized for natural
gas increased by 39 percent while the average price realized for
natural gas liquids increased by 26 percent. -- Consolidated
interest expense of approximately $22.1 million in third quarter
2005 compared with $19.3 million in the third quarter 2004 due to
higher average interest rates, offset by slightly lower average
debt outstanding. -- Equity earnings from our joint venture
investments which were $6.5 million greater in third quarter 2005
than third quarter 2004, due primarily to a settlement of our
preferred distributions from Bighorn Gas Gathering. In the third
quarter of 2005, Northern Border Partners recognized $5.4 million
for settlement of Preferred A distributions related to 2004 and
2005. -- In August, the Partnership completed the purchase of an
additional 3.7 percent interest in Fort Union Gas Gathering for
approximately $5.1 million. This brings the Partnership's total
ownership position in this gathering system to 37 percent. -- In
September, Northern Border Pipeline accepted the Federal Energy
Regulatory Commission's (FERC) certificate of public convenience
and necessity for the Chicago III Expansion Project. This project
will add 130 mmcfd of transportation capacity from Harper, Iowa to
Chicago, Illinois and is fully subscribed by four shippers under
long-term firm service transportation agreements with terms ranging
from five and one-half to ten years. Construction is estimated to
cost approximately $21 million and the target in-service date is
April 2006. Interstate Natural Gas Pipeline Segment The interstate
natural gas pipeline segment contributed net income of $36.7
million in third quarter 2005, compared with $30.6 million in third
quarter 2004. Operating revenue for the segment includes: --
Northern Border Pipeline's $9.4 million of non-recurring revenue
from the sale of its bankruptcy claims; -- a decrease of $2.0
million related to capacity on Northern Border Pipeline sold at
discounted rates; -- higher revenues on Midwestern Gas Transmission
of $0.6 million and Viking Gas Transmission of $0.2 million.
Average daily throughput for the interstate natural gas pipeline
segment increased 8 percent in the quarter totaling 3,264 million
cubic feet per day (mmcfd) compared with 3,029 mmcfd in third
quarter 2004. Northern Border Pipeline had 63 mmcfd of
transportation capacity that was unsold for October. As of October
31, 2005, 88 mmcfd was available for contracting for November and
December 2005 on the Port of Morgan to Ventura segment. The
following chart provides additional information related to Northern
Border Pipeline's contracting levels and revenue for the three and
nine months ended September 30, 2005. Northern Border Pipeline
rates are based on the distance of the transportation path. As a
result, the weighted average system rate varies due to the changing
transportation paths as well as discounting activity. -0- *T
Northern Border Pipeline Company Total System Revenue Summary
----------------------------------------------------------------------
Third Quarter Year to Date -------------------------------------
2005 2004 2005 2004
----------------------------------------------------------------------
Percent Contracted(1) 101% 100% 97% 101% Weighted Average System
Rate ($/mcf) (2) $0.360(3) $0.374 $0.372(3) $0.376 Total Revenue
(Millions) $79.6(3) $81.6 $232.3(3) $246.4 1. Compared to a design
capacity of 2,374 mmcfd. 2. Amounts shown in dollars per thousand
cubic feet (mcf). 3. Amounts exclude revenue from sale of Enron
bankruptcy claims. *T Natural Gas Gathering and Processing Segment
Net income from the natural gas gathering and processing segment
during third quarter 2005 was $22.1 million, an increase of 56
percent or $7.9 million over the third quarter 2004. The primary
differences between the periods were: -- Gathering and processing
volumes in the Williston Basin of 67 mmcfd compared with 56 mmcfd
in third quarter 2004, a 20 percent increase, primarily
attributable to increased production and system expansions in the
Grasslands and Marmarth systems. -- Increased prices realized for
natural gas and natural gas liquids. Average prices realized, net
of hedging, during the third quarter were $0.93 per gallon for
natural gas liquids and $6.83 per million British thermal units
(mmBtu) for natural gas. The combined impact of increased inlet
volumes and prices realized was an increase in gross margins for
Williston Basin of $8.3 million compared with the third quarter of
2004. -- Volumes on the Partnership's wholly-owned gathering
systems in the Powder River Basin of 177 mmcfd versus 216 mmcfd or
a 18 percent decline compared to the third quarter 2004. Since this
decrease is primarily due to the loss of high-pressure gathered
volumes, our revenues from these systems declined by only 8
percent. Approximately 78 percent of the volumes for the third
quarter 2005 in our wholly-owned Powder River Basin gathering
systems are low pressure volumes and we derive approximately 88
percent of our revenues from these volumes. -- Higher operations
and maintenance expense of approximately $5.8 million. In third
quarter 2004, operations and maintenance expense included a
recovery of $1.8 million of allowance for doubtful accounts related
to bankruptcy claims and a gain from the sale of gathering assets
of $3.1 million. Third quarter 2005 included higher operating
expenses primarily as a result of system expansions. -- Increased
equity earnings of $6.3 million due to of the Bighorn Gas Gathering
Preferred A settlement ($5.4 million) and better performance for
Bighorn Gas Gathering, Fort Union Gas Gathering, and Lost Creek Gas
Gathering. Coal Slurry Pipeline Segment Net income for the coal
slurry pipeline segment was $1.7 million for third quarter 2005, up
from $0.9 million for the third quarter 2004 primarily the result
of adjustments to depreciation expense for the assets of Black
Mesa. BUSINESS OUTLOOK Net income for 2005 is now expected to range
from $142 million to $145 million ($2.83 per unit to $2.89 per
unit). EBITDA is expected to be in the range of $363 million to
$370 million. Distributable cash flow is expected to be $178
million to $182 million or $3.61 per unit to $3.67 per unit. -0- *T
Northern Border Partners Reconciliation of EBITDA to Net Income -
Projected 2005
----------------------------------------------------------------------
Interstate Natural Gas Gas Gathering Consolidated Pipelines &
Processing Coal Slurry
----------------------------------------------------------------------
Low High Low High Low High Low High
----------------------------------------------------------------------
EBITDA $363 $370 $283 $286 $81 $84 $5 $6 Minority Interest (45)
(46) (45) (46) - - - - Interest Expense, Net (86) (88) (44) (45) -
- - - Depreciation & Amortization Expense (85) (86) (66) (67)
(15) (16) (2) (3) Income Taxes (5) (6) (3) (4) - - (1) (1)
----------------------------------------------------------------------
Net Income $142 $145 $122 $124 $65 $67 $1 $2
======================================================================
Note: The reconciliations of EBITDA and Net Income do not total due
to use of ranges for the various components of the reconciliation
and unallocated Partnership expenses. *T Results for 2006 are
expected to be in line with 2005 results from a base business
perspective. The base business perspective would exclude 2005
non-recurring items including the Preferred A settlement of $5.4
million from Bighorn Gas Gathering and the income from the sale of
bankruptcy claims totaling approximately $8.2 million, net to the
Partnership. Additionally, the temporary shut-down of Black Mesa
Pipeline is expected to reduce 2006 net income compared to 2005 by
approximately $5.0 million. Net income for 2006 is now expected to
range from $126 million to $131 million ($2.50 per unit to $2.60
per unit). EBITDA is expected to be in the range of $348 million to
$358 million. Distributable cash flow is expected to be $181
million to $189 million or $3.65 per unit to $3.85 per unit. -0- *T
Northern Border Partners Reconciliation of EBITDA to Net Income -
Projected 2006
----------------------------------------------------------------------
Interstate Gas Natural Gas Gathering & Consolidated Pipelines
Processing Coal Slurry
----------------------------------------------------------------------
Low High Low High Low High Low High
----------------------------------------------------------------------
EBITDA $348 $358 $272 $277 $86 $91 ($7) ($3) Minority Interest (41)
(42) (41) (42) - - - - Interest Expense, Net (90) (93) (44) (45) -
- - - Depreciation & Amortization Expense (89) (91) (70) (72)
(17) (18) - - Income Taxes (2) (3) (4) (5) - - 3 1
----------------------------------------------------------------------
Net Income $126 $131 $112 $115 $69 $73 ($4) ($2)
======================================================================
Note: The reconciliations of EBITDA and Net Income do not total due
to use of ranges for the various components of the reconciliation
and unallocated Partnership expenses. *T Interstate Natural Gas
Pipeline Segment The Partnership's projections for transportation
demand on its interstate natural gas pipelines assume: --
Midwestern will have strong southbound flows as shippers look for
alternatives to Gulf Coast supply; and Viking will remain flat to
2005. -- Canadian natural gas supply will remain steady and import
levels will be similar in 2006 as in 2005. -- The anticipated
natural gas price differential during the upcoming April and May
shoulder months compared with the 2006-07 winter heating season are
expected to impact demand for Northern Border Pipeline
transportation capacity again in 2006. -- Northern Border Pipeline
is likely to again experience seasonal fluctuations in throughput
during 2006 and some discounting may be required to maximize
revenue. -- Northern Border Pipeline's Chicago III Expansion
Project goes into service in April 2006. Based on those
assumptions, the following table represents a forecast of Northern
Border Pipeline contracting levels and corresponding revenue for
the remainder of the current year, along with 2006. Included for
comparison purposes is actual contracting levels and revenue for
2004. -0- *T Northern Border Pipeline Company Total System Revenue
Forecast (Years Ended December 31)
----------------------------------------------------------------------
2004 2005 2006 --------------------------------------------- Actual
Forecast Forecast
----------------------------------------------------------------------
Percent Currently Contracted (1) 101% 97% 71% Percent Expected To
Be Contracted N/A 97%-98% 97%-102% Weighted Average System Rate
($/mcf) (2) $0.375 $0.363-$0.368(3) $0.345-$0.362 Total Revenue
(Millions) $329 $310-$314(3) $305-$320 1. Compared to a design
capacity of 2,374 mmcfd. 2. Amounts shown in dollars per thousand
cubic feet (mcf). 3. Amounts exclude revenue from sale of Enron
bankruptcy claims. *T As required by the provisions of the
settlement of its last rate case, on November 1, 2005, Northern
Border Pipeline filed a rate case with the FERC. The filing
proposes: -- an increase in rates based on an increase in overall
revenue requirement of 7.8 percent; -- a change to the rate design
approach with a supply zone and market area utilizing a fixed rate
per dekatherm and a dekatherm-mile rate, respectively; -- a
compressor usage surcharge primarily to recover costs related to
powering electric compressors; and -- the implementation of a
short-term, firm-service rate structure on a prospective basis.
Additionally, the filing incorporates: -- an overall cost of
capital of 10.56 percent based on a rate of return on equity of
14.20 percent; -- an adjustment in the billing determinants
primarily to reflect discounting of capacity; -- an increase in the
depreciation rate for transmission plant from 2.25 percent to 2.84
percent and the institution of a negative salvage rate of 0.59
percent; -- the continuation of the inclusion of income taxes in
the calculation of the rates. The Partnership cannot predict the
outcome or the timing of final resolution of this proceeding.
Natural Gas Gathering and Processing Segment The Partnership's
outlook for this segment is based on our expectations for the
performance of the Basins where we have interests including these
assumptions: -- In the Williston Basin, the Partnership expects
that casinghead gas volumes will continue to increase at least
through 2006, but at a slower rate of growth than 2005. -- The
Partnership anticipates that favorable natural gas and natural gas
liquids prices will continue in 2006. -- For the remainder of 2005,
approximately 77 percent of the projected natural gas equity
volumes are hedged and 65 percent of the projected equity natural
gas liquids volumes are hedged. For 2006, approximately 47 percent
of the equity natural gas volumes and 24 percent of the equity
natural gas liquids volumes are hedged. -- Overall, drilling in the
Powder River Basin is expected to continue to increase, led by
positive developments in drilling in the Big George Coal in the
western portion of the Basin. Coal Slurry Pipeline Segment We
expect Black Mesa Pipeline to be temporarily shut down upon
expiration of our coal slurry transportation contract on December
31, 2005. The Mohave Generating Station (Mohave) co-owners, the
Hopi Tribe, the Navajo Nation, Peabody Western Coal Company and
other interested parties continue to negotiate water and coal
supply issues. Black Mesa is working to resolve coal slurry
transportation issues so that operations may resume in the future.
If there are successful resolutions of all of these issues and the
project receives a favorable Environmental Impact Statement, we
believe our coal slurry pipeline will be modified and reconstructed
in late 2008 and 2009. We expect to incur temporary shut down and
standby costs of approximately $2 million in the fourth quarter of
2005 and approximately $4 to $6 million in 2006. If these issues
are not resolved and Mohave is permanently closed, we expect to
incur pipeline removal and remediation costs of approximately $2
million to $4 million, (pre-tax), net of salvage, and to take a
non-cash impairment charge of approximately $12 million (pre-tax)
related to goodwill and the remaining undepreciated cost of the
assets. Depending on how negotiations progress and in accordance
with accounting rules an impairment charge may be required prior to
final resolution of the issues concerning Mohave even though the
project may ultimately proceed. Our 2005 and 2006 guidance includes
the expected costs of a temporary shut-down of the Black Mesa
Pipeline, but does not anticipate any impairment charges.
DISTRIBUTION DECLARATION On October 20, 2005, the Partnership
Policy Committee declared the Partnership's quarterly cash
distribution of $0.80 per unit for the third quarter of 2005. The
indicated annual rate is $3.20. The distribution is payable
November 14, 2005 to unitholders of record on October 31, 2005.
CONFERENCE CALL Northern Border Partners will host a conference
call on Thursday, November 3, 2005 at 10:00 a.m. Eastern Time to
review third quarter 2005 results and discuss 2005 and 2006
guidance. This call may be accessed via the Partnership's website
at http://www.northernborderpartners.com. An audio replay of the
call will be available through November 30, 2005 by dialing, toll
free in the United States and Canada, 800-405-2236 and entering
passcode 11041885. NON-GAAP FINANCIAL MEASURES The Partnership has
disclosed in this press release EBITDA and DCF amounts that are
non-GAAP financial measures. Management believes EBITDA and DCF
provide useful information to investors as a measure of
comparability to peer companies. However, these calculations may
vary from company to company, so the Partnership's computations may
not be comparable to those of other companies'. DCF is not
necessarily the same as available cash as defined in the
Partnership Agreements. Management further uses EBITDA to compare
the financial performance of its segments and to internally manage
those business segments. The three and nine months ended 2005 and
2004 reconciliations of EBITDA to net income and EBITDA to cash
flow from operating activities, and computations of DCF are
included in the financial information with this release. On a
consolidated basis, EBITDA is reconciled to cash flow from
operating activities determined under GAAP. For segment information
of this press release, EBITDA is reconciled to net income rather
than to cash flow from operating activities, since the Partnership
does not determine segment cash flow from operating activities due
to its intercompany cash management activity. Reconciliations of
projected 2005 and projected 2006 EBITDA to projected net income
and computations of projected DCF are also included with this
release. Northern Border Partners, L.P. is a publicly traded
partnership formed to own, operate and acquire a diversified
portfolio of energy assets. The Partnership owns and manages
natural gas pipelines and is engaged in the gathering and
processing of natural gas. More information can be found at
http://www.northernborderpartners.com. FORWARD-LOOKING STATEMENT
This press release includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. Although Northern
Border Partners believes that its expectations regarding future
events are based on reasonable assumptions, it can give no
assurance that its goals will be achieved. Important factors that
could cause actual results to differ materially from those in the
forward-looking statements herein include: Interstate Natural Gas
Pipeline Segment: -- the impact of unsold capacity on Northern
Border Pipeline being greater or less than expected; -- the ability
to market pipeline capacity on favorable terms, which is affected
by: -0- *T -- future demand for and prices of natural gas; --
competitive conditions in the overall natural gas and electricity
markets; -- availability of supplies of Canadian and United States
natural gas; -- availability of additional storage capacity;
weather conditions; and -- competitive developments by Canadian and
U.S. natural gas transmission peers; *T -- orders by the FERC which
are significantly different than our assumptions related to
Northern Border Pipeline's November 2005 rate case; -- our ability
to successfully advocate our position before the FERC or reach a
reasonable settlement with the FERC staff and opposing parties; --
performance of contractual obligations by the shippers; --
political and regulatory developments that impact FERC, proceedings
involving interstate pipelines and the interstate pipelines'
success in sustaining their positions in such proceedings; -- the
ability to recover operating costs, costs of property, plant and
equipment and regulatory assets in our rates; -- timely receipt of
approval by FERC for construction and operation of the Midwestern
Gas Transmission Eastern Extension Project and required regulatory
clearances; our ability to acquire all necessary rights-of-way and
obtain agreements for interconnects in a timely manner; our ability
to promptly obtain all necessary materials and supplies required
for construction. Natural Gas Gathering and Processing Segment: --
the rate of development, well performance, gas quality, and
competitive conditions in gas fields near our natural gas gathering
systems in the Powder River and Williston Basins and our
investments in the Powder River and Wind River Basins; -- prices of
natural gas and natural gas liquids; -- the composition and quality
of the natural gas we gather and process in our plants; -- the
efficiency of our plants in processing natural gas and extracting
natural gas liquids. Coal Slurry Pipeline Segment: -- renewal of
the coal slurry pipeline transportation contract under reasonable
terms; -- the impact of a potential impairment charge. General: --
developments in the December 2, 2001, filing by Enron of a
voluntary petition for bankruptcy protection under Chapter 11 of
the United States Bankruptcy Code affecting our settled claims; --
regulatory actions and receipt of expected regulatory clearances;
-- actions by rating agencies; -- the ability to control operating
costs; -- conditions in the capital markets and the ability to
access the capital markets; -- the risk inherent in the use of
information systems in our business, implementation of new software
and hardware, and the impact on the timeliness of information for
financial reporting; and -- acts of nature, sabotage, terrorism or
other similar acts causing damage to our facilities or our
suppliers' or shippers' facilities. -0- *T Northern Border
Partners, L.P. Financial Highlights ----------------------
(Unaudited: In Millions Except Per Unit Amounts) Third Quarter Year
to Date 2005 2004 2005 2004 -------- -------- --------- --------
Operating Revenue $183.0 $147.3 $492.8 $433.6 Income From
Continuing Operations $48.9 $34.4 $110.8 $103.1 Net Income $48.4
$34.7 $111.1 $104.6 Per Unit Income From Continuing Operations
$0.99 $0.68 $2.21 $2.05 Per Unit Net Income $0.98 $0.69 $2.22 $2.08
Cash Flows From Operating Activities $91.3 $62.2 $202.6 $192.0
EBITDA (1) $106.9 $88.1 $278.0 $266.5 Distributable Cash Flow $63.3
$48.4 $148.4 $149.6 Distributable Cash Flow Per Unit $1.30 $0.98
$3.01 $3.04 Consolidated Statement of Income
---------------------------------- (Unaudited: In Millions Except
Per Unit Amounts) Third Quarter Year to Date 2005 2004 2005 2004
--------- -------- -------- -------- Operating Revenue $183.0
$147.3 $492.8 $433.6 --------- -------- -------- -------- Operating
Expenses Product Purchases 45.3 26.1 113.3 71.0 Operations and
Maintenance 32.2 28.2 95.5 86.6 Depreciation and Amortization 20.4
21.3 63.2 64.2 Taxes Other Than Income 10.2 9.6 29.0 27.4 ---------
-------- -------- -------- Total Operating Expenses 108.1 85.2
301.0 249.2 --------- -------- -------- -------- Operating Income
74.9 62.1 191.8 184.4 Interest Expense, Net (22.1) (19.3) (64.6)
(56.4) Other Income (Expense), Net 1.5 0.3 2.8 1.5 Equity Earnings
from Investments 10.4 3.9 19.3 13.9 Minority Interest (13.9) (11.3)
(34.7) (36.2) --------- -------- -------- -------- Income From
Continuing Operations Before Income Taxes 50.8 35.7 114.6 107.2
Income Taxes 1.9 1.3 3.8 4.1 --------- -------- -------- --------
Income From Continuing Operations 48.9 34.4 110.8 103.1
Discontinued Operations, net of tax (0.5) 0.3 0.3 1.5 ---------
-------- -------- -------- Net Income $48.4 $34.7 $111.1 $104.6
========= ======== ======== ======== Per Unit Income From
Continuing Operations $0.99 $0.68 $2.21 $2.05 ========= ========
======== ======== Per Unit Net Income $0.98 $0.69 $2.22 $2.08
========= ======== ======== ======== Average Units Outstanding 46.4
46.4 46.4 46.4 ========= ======== ======== ======== Northern Border
Partners, L.P. Reconciliation of non-GAAP Financial Measures
----------------------------------------------- (Unaudited: In
Millions Except Per Unit Amounts) Reconciliation of EBITDA to Net
Third Quarter Year to Date Income 2005 2004 2005 2004 ---------
-------- -------- -------- EBITDA (1) $106.9 $88.1 $278.0 $266.5
Minority Interest (13.9) (11.3) (34.7) (36.2) Interest Expense, Net
(22.1) (19.3) (64.6) (56.4) Depreciation and Amortization
(including amounts in Other Income, Net and Discontinued
Operations) (20.3) (21.4) (63.3) (64.7) Income taxes (including
amounts in Discontinued Operations) (2.4) (1.4) (4.6) (4.7) Equity
AFUDC (included in Other Income, Net) 0.2 0.0 0.3 0.1 ---------
-------- -------- -------- Net Income $48.4 $34.7 $111.1 $104.6
========= ======== ======== ======== Reconciliation of EBITDA to
Cash Flows From Operating Activities EBITDA (1) $106.9 $88.1 $278.0
$266.5 Interest Expense, Net (22.1) (19.3) (64.6) (56.4) Changes in
Current Assets and Liabilities 11.4 3.1 5.6 2.5 Equity Earnings
from Investments (10.4) (3.9) (19.3) (13.9) Distributions Received
from Equity Investments 9.4 1.6 12.1 9.2 Changes in Reserves and
Deferred Credits 0.4 (0.1) (0.4) (1.8) Gain on Sale of Assets 0.0
(3.2) 0.0 (3.4) Other (4.3) (4.1) (8.8) (10.7) --------- --------
-------- -------- Cash Flows From Operating Activities $91.3 $62.2
$202.6 $192.0 ========= ======== ======== ======== Reconciliation
of EBITDA to Distributable Cash Flow EBITDA (1) $106.9 $88.1 $278.0
$266.5 Interest Expense, Net (22.1) (19.3) (64.6) (56.4)
Maintenance Capital (7.3) (4.8) (18.9) (12.7) Distributions to
Minority Interest (11.8) (15.5) (43.8) (46.8) Other (2.4) (0.1)
(2.3) (1.0) --------- -------- -------- -------- Distributable Cash
Flow $63.3 $48.4 $148.4 $149.6 ========= ======== ======== ========
Distributable Cash Flow Per Unit $1.30 $0.98 $3.01 $3.04 =========
======== ======== ======== Northern Border Partners, L.P. Other
Financial Information ----------------------------- (Unaudited: In
Millions) September December 30, 31, 2005 2004 --------- ---------
Summary Balance Sheet Data Total assets by segment: Interstate
Natural Gas Pipeline $1,877.6 $1,904.7 Natural Gas Gathering and
Processing 590.8 570.1 Coal Slurry Pipeline 16.7 18.3 Other (assets
not allocated to segments) 21.2 21.6 --------- --------- Total
consolidated assets $2,506.3 $2,514.7 ========= =========
Consolidated capitalization: Long-term debt, including current
maturities $1,331.8 $1,330.4 Partners' capital 771.6 780.2 Minority
interests in partners' equity 280.7 290.1 Accumulated other
comprehensive income (11.9) 9.2 --------- --------- Total
capitalization 2,372.2 2,409.9 Consolidated other current
liabilities and reserves and deferred credits 134.1 104.8 ---------
--------- Total liabilities and capitalization $2,506.3 $2,514.7
========= ========= Third Quarter Year to Date 2005 2004 2005 2004
--------- --------- -------- -------- Capital Expenditures and
Equity Investments (2) Maintenance - Interstate Natural Gas
Pipeline $5.6 $3.4 $14.5 $9.0 Natural Gas Gathering and Processing
0.6 1.3 1.5 2.1 Coal Slurry Pipeline 0.0 0.1 0.0 1.5 Other 1.1 0.0
2.9 0.1 --------- --------- -------- -------- 7.3 4.8 18.9 12.7
--------- --------- -------- -------- Growth - Interstate Natural
Gas Pipeline 4.0 0.2 8.2 0.3 Natural Gas Gathering and Processing
10.7 3.3 19.4 4.9 Coal Slurry Pipeline 0.0 0.0 0.0 0.0 ---------
--------- -------- -------- 14.7 3.5 27.6 5.2 --------- ---------
-------- -------- Total $22.0 $8.3 $46.5 $17.9 ========= =========
======== ======== (1) EBITDA is computed from (a) net income plus
(b) minority interest; (c) interest expense, net; (d) income taxes;
and (e) depreciation and amortization less (f) equity AFUDC. (2)
Management classifies expenditures that are expected to generate
additional revenues or significant operating efficiency as growth
capital expenditures and equity investments. Any remaining capital
expenditures are classified as maintenance. (3) Volume information
presented in operating results includes 100% of the volumes for
joint ventures and equity investments as well as for wholly-owned
subsidiaries. Northern Border Partners, L.P. Summary Segment
Information ----------------------------- (Unaudited) Third Quarter
Year to Date 2005 2004 2005 2004 --------- -------- --------
--------- Interstate Natural Gas Pipeline Segment Operating Results
(3): Gas Delivered (mmcf) 293,079 271,929 856,943 847,505 Average
Throughput (mmcfd) 3,264 3,029 3,216 3,167 Financial Results (In
Millions): Operating Revenue $103.2 $95.0 $282.4 $287.1 ---------
-------- -------- --------- Operating Expenses Operations and
Maintenance 15.7 15.9 45.5 43.5 Depreciation and Amortization 16.9
16.8 49.9 50.0 Taxes Other Than Income 9.4 8.8 26.3 24.9 ---------
-------- -------- --------- Total Operating Expenses 42.0 41.5
121.7 118.4 --------- -------- -------- --------- Operating Income
61.2 53.5 160.7 168.7 Interest Expense, Net (11.3) (10.7) (33.7)
(32.1) Other Income, Net 1.2 (0.2) 2.1 0.4 Equity Earnings from
Investments 0.6 0.4 1.2 1.0 --------- -------- -------- ---------
Income Before Income Taxes 51.7 43.0 130.3 138.0 Income Taxes 1.1
1.1 2.7 3.7 --------- -------- -------- --------- Net Income 50.6
41.9 127.6 134.3 Net income to Minority Interest (13.9) (11.3)
(34.7) (36.2) --------- -------- -------- --------- Net Income to
Northern Border Partners $36.7 $30.6 $92.9 $98.1 ========= ========
======== ========= EBITDA (1) $79.6 $70.5 $213.7 $220.4 =========
======== ======== ========= Distributions from Northern Border
Pipeline: Paid to Northern Border Partners $27.6 $36.1 $102.1
$109.2 Paid to Minority Interest $11.8 $15.5 $43.8 $46.8 ---------
-------- -------- --------- Total Distributions $39.4 $51.6 $145.9
$156.0 ========= ======== ======== ========= Reconciliation of
EBITDA to Net Income EBITDA (1) $79.6 $70.5 $213.7 $220.4 Minority
Interest (13.9) (11.3) (34.7) (36.2) Interest Expense, Net (11.3)
(10.7) (33.7) (32.1) Depreciation and Amortization (16.8) (16.8)
(50.0) (50.3) Income taxes (1.1) (1.1) (2.7) (3.7) Equity AFUDC
(included in Other Income (Expense)) 0.2 0.0 0.3 0.0 ---------
-------- -------- --------- Net Income $36.7 $30.6 $92.9 $98.1
========= ======== ======== ========= Northern Border Partners,
L.P. Summary Segment Information ---------------------------
(Unaudited) Third Quarter Year to Date 2005 2004 2005 2004
--------- --------- --------- --------- Natural Gas Gathering and
Processing Segment Operating Results (3): Volumes (mmcfd):
Gathering 1,037 1,041 1,032 1,013 Processing 67 56 64 54 Financial
Results (In Millions): Operating Revenue $73.6 $46.8 $192.1 $130.1
--------- --------- --------- --------- Operating Expenses Product
Purchases 45.3 26.1 113.3 71.0 Operations and Maintenance 11.4 5.6
32.4 26.3 Depreciation and Amortization 3.9 3.7 11.8 11.1 Taxes
Other Than Income 0.7 0.6 2.0 1.8 --------- --------- ---------
--------- Total Operating Expenses 61.3 36.0 159.5 110.2 ---------
--------- --------- --------- Operating Income 12.3 10.8 32.6 19.9
Interest Expense, Net (0.1) (0.1) (0.2) (0.3) Other Income
(Expense) 0.1 0.0 0.5 0.2 Equity Earnings from Investments 9.8 3.5
18.1 12.9 --------- --------- --------- --------- Income Before
Income Taxes 22.1 14.2 51.0 32.7 Income Taxes 0.0 0.0 0.0 0.0
--------- --------- --------- --------- Net Income 22.1 14.2 51.0
32.7 ========= ========= ========= ========= EBITDA (1) $26.1 $18.0
$63.0 $44.1 ========= ========= ========= ========= Distributions
Received from Equity Investments $9.4 $1.6 $12.1 $9.2 =========
========= ========= ========= Reconciliation of EBITDA to Net
Income EBITDA (1) $26.1 $18.0 $63.0 $44.1 Interest Expense, Net
(0.1) (0.1) (0.2) (0.3) Depreciation and Amortization (3.9) (3.7)
(11.8) (11.1) Income taxes 0.0 0.0 0.0 0.0 --------- ---------
--------- --------- Net Income $22.1 $14.2 $51.0 $32.7 =========
========= ========= ========= Northern Border Partners, L.P.
Summary Segment Information --------------------------- (Unaudited)
Third Quarter Year to Date 2005 2004 2005 2004 --------- ---------
--------- --------- Coal Slurry Pipeline Segment Operating Results:
Tons of Coal Shipped (In Thousands) 1,150 1,217 3,534 3,346
Financial Results (In Millions): Operating Revenue $6.3 $5.5 $18.3
$16.3 --------- --------- --------- --------- Operating Expenses
Operations and Maintenance 4.1 3.4 11.6 9.9 Depreciation and
Amortization (0.5) 0.8 1.4 3.0 Taxes Other Than Income 0.2 0.2 0.6
0.6 --------- --------- --------- --------- Total Operating
Expenses 3.8 4.4 13.6 13.5 --------- --------- --------- ---------
Operating Income 2.5 1.1 4.7 2.8 Other Income 0.0 0.0 0.0 0.0
--------- --------- --------- --------- Income Before Income Taxes
2.5 1.1 4.7 2.8 Income Taxes 0.8 0.2 1.1 0.4 --------- ---------
--------- --------- Net Income $1.7 $0.9 $3.6 $2.4 =========
========= ========= ========= EBITDA (1) $2.0 $1.9 $6.1 $5.8
========= ========= ========= ========= Reconciliation of EBITDA to
Net Income EBITDA (1) $2.0 $1.9 $6.1 $5.8 Depreciation and
Amortization 0.5 (0.8) (1.4) (3.0) Income taxes (0.8) (0.2) (1.1)
(0.4) --------- --------- --------- --------- Net Income $1.7 $0.9
$3.6 $2.4 ========= ========= ========= ========= Northern Border
Partners, L.P. Reconciliation of non-GAAP Financial Measures
--------------------------------------------- (Unaudited: In
Millions Except Per Unit Amounts) Reconciliation of EBITDA to Net
Income - Projected 2005 and 2006 Projected 2005 Projected 2006
----------------------- ----------------------- Low High Low High
----------- ----------- ----------- ----------- EBITDA $363 $370
$348 $358 Minority Interest ($45) ($46) ($41) ($42) Interest
Expense, Net ($86) ($88) ($90) ($93) Depreciation and Amortization
Expense ($85) ($86) ($89) ($91) Income Taxes ($5) ($6) ($2) ($3)
=========== =========== =========== =========== Net Income(a) $142
$145 $126 $131 =========== =========== =========== =========== Per
Unit Net Income $2.83 $2.89 $2.50 $2.60 =========== ===========
=========== =========== (a) The reconciliations of EBITDA and Net
Income do not total due to use of ranges for the various components
of the reconciliation. Reconciliation of EBITDA to Distributable
Cash Flow - Projected 2005 and 2006 Projected 2005 Projected 2006
----------------------- ----------------------- Low High Low High
----------- ----------- ----------- ----------- EBITDA (from above)
$363 $370 $348 $358 Interest Expense, Net ($86) ($88) ($90) ($93)
Maintenance Capital ($37) ($39) ($23) ($28) Distributions to
Minority Interest ($60) ($62) ($53) ($55) Other ($2) ($3) ($2) ($3)
=========== =========== =========== =========== Distributable Cash
Flow(b) $178 $182 $181 $189 =========== =========== ===========
=========== Distributable Cash Flow per Unit $3.61 $3.67 $3.65
$3.85 =========== =========== =========== =========== (b) The
reconciliations of EBITDA and Distributable Cash Flow do not total
due to use of ranges for the various components of the
reconciliation. *T
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