SOURCEGAS ARKANSAS INC. E. Financial Statements and Statistical Schedules

Transcription

1 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SOURCEGAS ARKANSAS INC E. Financial Statements and Statistical Schedules E-1.1 E-1.2 Balance Sheet - SourceGas LLC Balance Sheet - SGA E-2 Income Statement - SGA E-3 Other Income and Deductions E-4 Adjustments to Other Income and Deductions E-5 Audited Financial Statements E-6 Standard Journal Entries E-9-1 E-9-2 E-9-3 E-9-4 E-9-5 Chart of Accounts FERC Codes Cost Centers WBS Codes Profit Centers E-10 Organizational Chart E-11.1 E-11.2 Per Book Billing Determinants and Revenues - Test Year Billing Determinants - Pro Forma Year E-13 Other Operating Statistics E-14 Calculation of AFUDC E-15 Cushion Gas Storage E-16 Working Gas Storage E-16a Working Gas Storage Historical Portion of Test Year E-16b Working Gas Storage Projected Portion of Test Year E-17.1 E-17.1a E-17.2 E-17.2a Trial Balance SourceGas Arkansas Trial Balance SGA Plant in Service Trial Balance SourceGas LLC Trial Balance SG LLC Plant in Service

2 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 Schedule E-1.1 SOURCEGAS LLC (Wholly owned by SourceGas Holdings LLC) STANDALONE BALANCE SHEET Line No (In thousands) September 30, Description 2014 (1) (2) 1 ASSETS 2 Current assets: 3 Cash and cash equivalents $ 1,230,887 4 Trade accounts receivable, net - 5 Associated companies receivable 9,556,241 6 Notes receivable - intercompany 139,198,529 7 Gas in underground storage - 8 ulatory assets - 9 Inventories - 10 Deferred income taxes, net - 11 Prepayments and other 4,665, Total current assets 154,651, Property, plant and equipment, net 48,741, Goodwill - 16 ulatory assets 9,362, Other assets 1,468, Investment in subsidiaries 775,171, Total assets $ 989,395, LIABILITIES AND MEMBER'S CAPITAL 22 Current liabilities: 23 Trade accounts payable 3,013, Accrued interest 5,025, Accrued taxes 77, ulatory liabilities - 27 Derivative instruments 247, Customer deposits - 29 Deferred revenue - 30 Other 10,942, Total current liabilities 19,306, Derivative instruments - 34 Deferred income taxes, net - 35 Other liabilities 20,354, Long-term debt, net 579,042, Total liabilities 618,704, Equity: 40 Member's capital 371,021, Accumulated other comprehensive loss (330,612) 42 Total member's capital 370,690, Total liabilities and equity $ 989,395,046 Supporting Schedules: none Recap Schedules none Page 1 of 1

3 SCHEDULE: E-1.2 Title: Balance Sheet - SGA SOURCEGAS ARKANSAS INC Balance Sheet September 30, 2014 UNAUDITED Line Account No. Number Description Amount (a) Main-AWG Concentration 447, ACH Clear-AWG Concentration 17, Deposit Clear-AWG Concentration (17,383.42) Check Clear-AWG Disbursements (291,936.28) Other-AWG Disbursements (0.01) Main-AWG Refund Check Clear-AWG Refund (54,434.47) ACH Clear-AWG Refund Deposit Clear-AWG Refund (32.65) Main - Arvest Depository Account 11, Check Clear - Arvest Depository Account (32,379,720.38) ACH Clr - Arvest Depository Account (26,145.70) Deposit Clr - Arvest Depository Account 32,204, Other - Arvest Depository Account 246, Legacy - Arvest Depository Account (565.37) Arvest - Concentration Account 6, Main - AWG LLC Cust Care 4,769, ACH Clear - AWG Cust Care (524,951.72) Deposit Clear - AWG Cust Care (3,866,239.70) Other - AWG Cust Care (537,635.82) 21 ** Cash and Cash Equivalents 4, ulated AR 6,267, Non-reg HomeServe AR 116, Non-ulated AR 78, Merchandise RVC A/R-Short Term Merchandise Loans 116, CIS: Accrued Accounts Receivable 384, CIS: Accrued Accounts Receivable-Gas 3,638, Other Accrued Accounts Receivable (394,871.36) Accounts Rec-Clearing Accounts Rec-Clarification (3,266.87) Page 1 of 10

4 SCHEDULE: E-1.2 Title: Balance Sheet - SGA SOURCEGAS ARKANSAS INC Balance Sheet September 30, 2014 UNAUDITED Line Account No. Number Description Amount (a) 32 * Trade 10,204, Gas Uncollectable Provis ulated Uncollectible Provision (600,279.29) Merchand Uncollect Provis Non-ulated Uncollectible Provision (10,773.13) Other Uncollect Provision - 38 * Provision for Doubtful Accounts (611,052.42) I/C Note Receivable Intercompany AR 969,318, Intercompany Assets Transfers 385, Inter-company Accounts Receivable-AWG Intercompany Interest Receivable Accounts Payable-Partners (828,104,484.22) Offset for ADP Interface (150,058,199.83) System Use Inter-company AR 2,611, System Use Inter-company AP (1,157,593.14) ADVANCE TO AFFILIATES 7, Advances from affiliates (27,442,643.11) CWIP - Intercompany 60, RWIP Salvage-Intercompany (6,360.00) 52 * Associated Companies (34,386,866.60) Other Advncs - 54 ** Deposits Inventory 1,818, Inventory - Fuel 21, Non. Inventory 182, ** Materials and Supplies 2,022, Page 2 of 10

5 SCHEDULE: E-1.2 Title: Balance Sheet - SGA SOURCEGAS ARKANSAS INC Balance Sheet September 30, 2014 UNAUDITED Line Account No. Number Description Amount (a) Gs Strd Undgrd-Curr 7,987, Gas stored in pipeline 199, Liquid natural gas storage 591, Gas Strd Undgrd-Current Accrual 825, ** Gas in Underground Storage 9,604, Short term deferred federal income tax Deferred federal tax asset-current 7,748, Deferred state tax asset-current 158, ** Deferred Income Taxes - Short Term 7,907, Prep Insurance Prep Other Miscell 392, Other Deposits 114, ** Prepayments 506, Other Current Assets Prepaid income tax - State OCS Clearing 400, Company Use Clearing 7, rd Party Billings 2,382, ** Other Current Assets 2,790, *** Total Current Assets (1,957,009.17) Excess Acquisition Costs - GW 107,730, *** Goodwill 107,730, Organization Expense Franchises & Consents 5, Intangible Plant 87, Gathering 22,500, Page 3 of 10

6 SCHEDULE: E-1.2 Title: Balance Sheet - SGA SOURCEGAS ARKANSAS INC Balance Sheet September 30, 2014 UNAUDITED Line Account No. Number Description Amount (a) Asset Retirement Obligation Extraction Storage 3,194, ARO - Underground Storage Storage-Overlays Transmission 110,040, Distribution 180,526, Land 175, Structures 2,196, Office Equip/Machines 1,553, Office Furniture 1,756, Computer Equipment 309, Automobiles 5,305, Light Trucks 6,586, Heavy Trucks 31, Trailers & Others 917, Stores Equipment 15, Tools & Shop Equipment 7,887, Lab Equipment Power Operated Equipment 4,345, Communication Equipment 2,763, Misc. Equipment 53, Other Tangible Equipment Mobile Commun. Equipment Other Storage Assets 6,113, Electronic Meas Equip 65, CNG Equipment Peace Software (0.09) Computer Equipment-3 yr 1,738, Computer Equipment-5 yr 354, Gas Plant Leased to Others Unclassified Assets in Service - Page 4 of 10

7 SCHEDULE: E-1.2 Title: Balance Sheet - SGA SOURCEGAS ARKANSAS INC Balance Sheet September 30, 2014 UNAUDITED Line Account No. Number Description Amount (a) CWIP 166,264, Gas plant acquisition adjustment 2,123, Gas in underground storage-bboy 21,053, Gas in Underg Stor Inject Gas in Underg Stor Withdl Gas in Underg Stor G Lost Transfer to/from Current System Balance Gas Gas Owed to System Gas Nonutility Property CWIP-Transfers to Plant (138,327,897.33) CWIP-Aid in Advance Deposit (224,386.88) CWIP-3rd party billings (13,643,446.64) CWIP-Capitalized Labor/Burden 243, ** Plant 396,014, Retirement While in Progress Structures & Improvements-Leased Clr RWIP Salvage (904,120.00) Accum-Organization Exp Accum-Franchises and Consents (5,305.45) Accum-Intangible Plant (87,855.10) Intangible Plant-Retmts&Dispo-Depreciation Reserve Accum-Capital Leases Accum-Misc. Interconnects Accum provision for gas plant acq adjustment (2,123,698.35) Accum-Non utility RWIP Cost of Removal 669, Accum-Computer Equip-5yr (82,669.68) Accum-Capital Leases Accum-Computer Equip-3yr (435,281.33) Accum-Asset Retirement Obligation - Page 5 of 10

8 SCHEDULE: E-1.2 Title: Balance Sheet - SGA SOURCEGAS ARKANSAS INC Balance Sheet September 30, 2014 UNAUDITED Line Account No. Number Description Amount (a) Accum-Transmission (36,890,405.04) Accum-Transmission Op Unit Disposals Accum-Other Storage Assets (5,868,307.63) Accum-Electronic Meas Equip (167,705.48) Accum-CNG Equipment (5,664.00) Accum-Gathering (21,464,877.01) Accum-Gatherings-Overlays Accum-Extraction Accum-Extraction Op Unit Disposals Accum-Storage (2,177,502.21) Accum-Storage Op Unit Disposals Accum-GPHFFU-Compressors Accum-Gas Plt Leased to Others 3, Accum-Distribution (70,049,195.84) Accum-Distribution Op Unit Disposals Accum-Structures (1,555,850.14) Accum-Structures Op Unit Disposals Accum-Office Equip/Machines (1,882,624.92) Accum-Office Furniture (1,448,782.13) Accum-Furniture Op Unit Disposals Accum-Computer Equip (34,882.95) Accum-Computer Equip Op Unit Disposals Accum-Automobiles (2,003,373.29) Accum-Light Trucks (2,557,771.65) Accum-Light Trucks Op Unit Disposals Accum-Heavy Trucks Accum-Heavy Trucks Op Unit Disposals Accum-Tractor Units Over-The-Road Accum-Trailers & Others (321,112.61) Accum-Trailers & Oth Op Unit Disposals Accum-Leasehold Imp Accum-Land/Land Rights Page 6 of 10

9 SCHEDULE: E-1.2 Title: Balance Sheet - SGA SOURCEGAS ARKANSAS INC Balance Sheet September 30, 2014 UNAUDITED Line Account No. Number Description Amount (a) Accum-Land/Land Rights Disposals Accum-Stores Equipment (13,094.75) Accum-Tools & Shop Equipment (2,425,759.69) Accum-Lab Equipment Accum-Power Operated Equipment (52,272.49) Accum-Power Equip Op Unit Disposals Accum-Communication Equipment (1,445,972.90) Accum-Misc. Equipment (15,881.61) Accum-Other Tangible Equipment Accum-Depreciation Accruals (11,250.26) Accum-Overlays ** Accumulated DD&A (153,357,939.18) 192 *** Total Property, Plant and Equipmen 242,656, Deferral collections 6,181, Unrec Increm Gas Csts-Add 1,492, ** Deferred Gas Cost 7,673, Unrecovered plant & regulatory costs 303, Rate Cast Costs-Subject to commission approval 13, DSM ulatory Asset (1,786,508.24) ulatory Asset Unrealized MTM 585, Other Def Debits 126, Other ulatory Assets Other preliminary survey & investigation charges 55, ** ulatory Assets (702,201.94) Oth Def Debits MTM Val ** Fair Value of Derivatives - Long T Deferred tax asset-long term 7,970, Page 7 of 10

10 SCHEDULE: E-1.2 Title: Balance Sheet - SGA SOURCEGAS ARKANSAS INC Balance Sheet September 30, 2014 UNAUDITED Line Account No. Number Description Amount (a) 207 ** Deferred Income Taxes - Long Term 7,970, *** Total Deferred Charges and Other 14,942, **** TOTAL ASSETS 363,372, Accruals-Other (911,145.64) Expense Accrual (307,443.27) CIS Refund Clearing Account (6,942.15) Gas Purchase Accrual (3,722,574.31) Gas Purchase Payable 50, AP Other Customer Donations Payable (143.92) Accounts Payable-Invoice Accr (2,054,721.61) AP-Gas Purch Vendors (15,102.79) P-Card Processing (37,426.81) Unclaimed Cks-Cust Refund Unclaimed Cks-AP Disbursement GR/IR Clearing 13, ** Trade Accounts Payable (6,990,976.78) Int Acc Meter Deposits (15,000.00) Accrued Interest Payable Accrued interest on custr deposit-sap billing sys (1,797.26) Unrecognized interest payable (8,117.00) 228 ** Accrued Interest (24,914.26) Federal Income Tax Payable (8,741,187.60) State Income Tax Payable (442,542.08) Uncertain tax positions (1,183,549.00) Severence Tax (30.84) Page 8 of 10

11 SCHEDULE: E-1.2 Title: Balance Sheet - SGA SOURCEGAS ARKANSAS INC Balance Sheet September 30, 2014 UNAUDITED Line Account No. Number Description Amount (a) State Use Tax Property Taxes Charges (2,599,049.17) 235 ** Accrued Taxes (12,966,358.69) MTM Derivative Valuation-Short Term (585,141.42) 237 ** Fair Value of Derivatives - ST (585,141.42) Deferred Tax Liablity-Current (50,445.44) Deferred Federal Tax Liability - Current (2,334,458.08) 240 ** Deferred Income Taxes - ST Liabili (2,384,903.52) Customer Deposits Customer deposits-sap billing system (5,708,893.36) 243 ** Customer Deposits (5,708,893.36) CIS Sales Tax (3,306.07) CIS Sales Tax (400,287.51) Local Franchise Taxes (35,355.30) Local Franchise Tax (152,930.69) Defer Paybl-HomeServ (213,811.58) Other Deposits (51,100.00) CIAC-Short Term (12,430.21) 251 ** Other Current Liabilities (869,221.36) 252 *** Total Current Liabilities (29,530,409.39) Customer Adv for Construct (5,372,361.51) 254 *** Customer Advances from Constructio (5,372,361.51) Deferred Tax Liability-Long Term Deferred tax credits (58,499.48) Deferred income tax 881, Page 9 of 10

12 SCHEDULE: E-1.2 Title: Balance Sheet - SGA SOURCEGAS ARKANSAS INC Balance Sheet September 30, 2014 UNAUDITED Line Account No. Number Description Amount (a) Deferred Federal Tax Liability - Long Term (36,322,059.27) Def St Tax Liab-LT *** Deferred Income Taxes - LT Liabili (35,498,737.44) 261 **** Total Liabilities (70,401,508.34) Members Capital ** Member's Capital Misc Pd in Cap (13,052,464.00) Additional Paid in Capital (247,741,608.53) Common Stock ** Common Stock (260,794,072.53) 268 Net Income (Loss) (8,479,220.25) Retained Earnings (23,697,939.89) 270 ** Retained Earnings (32,177,160.14) 271 *** Member's Capital (292,971,232.67) 272 **** Total Member's Capital (292,971,232.67) 273 ***** TOTAL LIABILITIES AND MEMBER'S CAPITAL (363,372,741.01) Supporting Schedule: (a) E-17 Recap Schedule: (A) B-3, F Page 10 of 10

13 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SourceGas Arkansas Inc Income Statement Six Months Ended September 30, 2014 UNAUDITED SCHEDULE E-2 Title: Income Statement - SGA Line Description Amount (a) No (1) (2) 1 Operating Revenues 2 Natural Gas Sales $ 37,031,111 3 Transportation And Storage 3,362,532 4 Other Operating Revenues 1,445,531 5 Total Operating Revenues 41,839,174 6 Gas Purchases - Other Costs of Sales $ 18,592,057 7 Gross Margin 23,247,117 8 Operating Expenses 9 Operations and Maintenance $ 12,940, General and Administrative 7,718, Depr, Depl, and Amort 5,266, Taxes Other Than Income 1,087, Total Operating Expenses 27,012, Operating Income $ (3,765,277) 15 Other Income and (Expenses) 16 Interest Income $ 58, Interest Exp and Other Financing Cost 265, Other, Net 138, Total Other Income (Expenses) 462, Income (Loss) Before Taxes (3,302,307) 21 Total Income Tax Benefit (Provision) 3,656, Net Income (Loss) $ 354,053 Supporting Schedules: (a) E-17 Recap Schedules none Note Amounts may not agree with other schedules or foot due to rounding. Page 1 of 1

14 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SOURCEGAS ARKANSAS Schedule E-3 Test Year: Partially Projected Test Year ended March 31, 2015 Title: Other Income and Deductions Docket No U Explanation: Schedule showing test year and pro forma other income and deductions, interest charges and extraordinary items. Amount reflected in the financial statements for the historical portion of the test year. If the test year is entirely historical, column 1 shall show the amount reflected in the financial statements for the test year (1) (2) (3) (4) (5) Line No. Description Account Number Actual Amount per Financial Statements for 6 months ending 09/30/2014 Projected Activity for 6 Months Ending 03/31/2015 Total Test Year Pro Forma Adjustments (a) Pro Forma year 1 Other Income 2 Revenues from merchandising, jobbing and contract work , , , ,661 3 Costs and expenses of merchandising, jobbing and contract work (483,922) (375,655) (859,577) (859,577) 4 Expenses of nonutility operations Miscellaneous nonoperating income ,572-39,572 39,572 6 Gain on disposition of property Total Other Income (4,127) 108, , ,655 8 Other Deductions 9 Loss on disposition of property (2,645) - (2,645) (2,645) 10 Donations (42,864) (37,069) (79,933) (79,933) 11 Penalties Expenditures for certain civic, political and related activities (28,278) (3,599) (31,877) (31,877) 13 Other deductions (135) (8) (143) (143) 14 Total Other Deductions (73,922) (40,677) (114,599) - (114,599) 15 Total Other Income & Deductions (78,049) 68,106 (9,943) - (9,943) 16 Interest Expense (Income) 17 Interest on long-term debt Amortization of debt discount and expense Amortization of loss on reacquired debt Interest on debt to associated companies , ,106 8,046,493 8,205, Other interest expense (100,458) - (100,458) (100,458) 22 Interest and dividend income ,844 2,000 60,844 60, Allowance for other funds used during construction , , , , Allowance for borrowed funds used during construction Credit (324,186) (488,769) (812,955) (812,955) 25 Total Interest Expense (Income) (105,031) (276,560) (381,591) 8,046,493 7,664, Income Before Income Taxes 26, , ,648 (8,046,493) (7,674,845) 27 Provision For Income Taxes - Non-Operating 28 Income taxes, other income and deductions Provision for deferred income taxes, other income and deductions Investment tax credit adjustments, nonutility operations Total Provision For Income Taxes - Non-Operating Net Income Non Operating 26, , ,648 (8,046,493) (7,674,845) Supporting Schedules (a) E-4 Recap Schedules As needed Page 1 of 1

15 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SOURCEGAS ARKANSAS Schedule E-4 Test Year: Partially Projected Test Year ended March 31, 2015 Title: Adjustments to Other Docket No U Income and Deductions Explanation: Schedule showing pro forma adjustments and reclassifications affecting test year other income and deductions (1) (2) (3) (4) (5) (6) Line No. Account Description Account Number Adjustment Number Adjustment Description Total Company Adjustment (A) 1 Other Income 2 Revenues from merchandising, jobbing and contract work Costs and expenses of merchandising, jobbing and contract work Expenses of nonutility operations Miscellaneous nonoperating income Gain on disposition of property Total Other Income 0 8 Other Deductions 9 Loss on disposition of property Donations Penalties Expenditures for certain civic, political and related activities Other deductions Total Other Deductions 0 15 Total Other Income & Deductions 16 Interest Expense (Income) 17 Interest on long-term debt Amortization of debt discount and expense Amortization of loss on reacquired debt Interest on debt to associated companies IS-18 Interest Synchronization 8,046, Other interest expense Interest and dividend income Allowance for other funds used during construction Allowance for borrowed funds used during construction Credit Total Interest Expense (Income) 0 26 Income Before Income Taxes 27 Provision For Income Taxes - Non-Operating 28 Income taxes, other income and deductions Provision for deferred income taxes, other income and deductions Investment tax credit adjustments, nonutility operations Total Provision For Income Taxes - Non-Operating 32 Net Income Non Operating Supporting Schedules Recap Schedules As Needed (A) E-3 Page 1 of 1

16 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 Schedule E-5 Title: Audited Financial Statements Docket No U

17 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SOURCEGAS HOLDINGS LLC CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2014 and 2013 AND REPORT OF INDEPENDENT AUDITORS

18 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 KPMG LLP Suite th Street Denver, CO Independent Auditors' Report The Board of Directors SourceGas Holdings LLC: Report on the Financial Statements We have audited the accompanying consolidated financial statements of Source Gas Holdings LLC and its subsidiaries, which comprise the consolidated balance sheets as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly in all material respects, the financial position of SourceGas Holdings LLC and its subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. KtPtid(c. La) Denver, Colorado March 26, 2015 KPMG L.L. s a De/aware Limited liability partnership, the US, member ffrrn of KPM(I ifhtemational Cooperative ("KPMS IntometIonar), a Swiss entity.

19 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SOURCEGAS HOLDINGS LLC CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2014 and 2013 (In thousands) ASSETS Current assets: Cash $ 3,806 $ 5,117 Trade accounts receivable (less allowance for doubtful accounts of $2,122 and $1,968, respectively) 103, ,360 Gas in underground storage 15,686 13,323 ulatory assets 16,885 7,198 Inventories 6,423 5,916 Deferred income taxes, net 8,948 5,618 Prepayments 4,321 4,684 Other current assets 6,196 4,207 Total current assets 165, ,423 Property, plant and equipment, net 840, ,796 Goodwill 384, ,392 ulatory assets 28,639 21,174 Other assets ,204 Total assets $ 1,422,819 $ 1,310,989 LIABILITIES AND EQUITY Current liabilities: Trade accounts payable 68,959 65,371 Interest accrued 6,221 5,496 Taxes accrued 4,745 9,800 ulatory liabilities 5,010 12,024 Derivative instruments 13,213 6,336 Customer deposits 12,372 12,118 Deferred revenue 5,780 4,721 Other 23,026 18,923 Total current liabilities 139, ,789 Derivative instruments 3,651 5,698 Deferred income taxes, net 44,012 33,810 Other liabilities 39,656 24,506 Long-term debt, net 858, ,166 Total liabilities 1,085, ,969 Equity: Members' capital 345, ,596 Accumulated other comprehensive loss (8,153) (9,576) Total equity 337, ,020 Total liabilities and equity 1,422,819 $ 1,310,989 See accompanying notes to consolidated financial statements. 2

20 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SOURCEGAS HOLDINGS LLC CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 2014 and 2013 (In thousands) Operating revenues: ulated natural gas sales $ 300,663 $ 277,410 ulated transportation and storage 88,821 94,041 Other regulated operating revenues 5,575 6,825 Unregulated and other revenues 97,069 92,586 Total operating revenues 492, ,862 Operating costs and expenses: Purchases and other costs of sales 252, ,014 Operation and maintenance 71,297 69,390 General and administrative 50,641 47,753 Depreciation and amortization 41,003 38,481 Taxes, other than income taxes 7,694 7,436 Total operating costs and expenses 423, ,074 Operating income 68,553 78,788 Other income (expense): Interest income Interest expense and other financing costs (32,511) (34,248) Other, net 1, Total other income (expense), net (30,750) (33,481) Income before income taxes 37,803 45,307 Income tax provision (2,941) (5,383) Net income 34,862 39,924 See accompanying notes to consolidated financial statements. 3

21 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SOURCEGAS HOLDINGS LLC CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME YEARS ENDED DECEMBER 31, 2014 and 2013 (In thousands) Net income 34,862 $ 39,924 Other comprehensive income (loss): Derivative instiuments designated as cash flow hedges: Unrealized losses on commodity derivatives, net of tax of $258 and $152, respectively (395) (232) Reclassification of net realized (gains) losses on commodity derivatives into purchases and other costs of sales, net of tax of $480 and $(301), respectively (733) 461 Reclassification of net realized losses (gains) on commodity derivatives into unregulated revenues, net of tax of tax of $(38) and $3, respectively 57 (4) Unrealized (losses) gains on interest rate swaps (2,130) 594 Reclassification of net realized losses on interest rate swaps into net income 4,624 7,227 Other comprehensive income (loss) 1,423 8,046 Comprehensive income 36,285 $ 47,970 See accompanying notes to consolidated financial statements. 4

22 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SOURCEGAS HOLDINGS LLC CONSOLIDATED STATEMENTS OF EQUITY YEARS ENDED DECEMBER 31, 2014 and 2013 (In thousands) Class A Member Class B Members Member? Capital Total Accumulated Other Comprehensive Loss Total Balance, December 31, 2012 $ 170,336 $ 170,336 $ 340,672 $ (17,622) $ 323,050 Comprehensive income 19,962 19,962 39,924 8,046 47,970 Contributions from members 3,500 3,500 7,000 7,000 Distributions to members (18,000) (18,000) (36,000) (36,000) Balance, December 31, 2013 $ 175,798 $ 175,798 $ 351,596 $ (9,576) $ 342,020 Comprehensive income $ 17,431 $ 17,431 $ 34,862 $ 1,423 $ 36,285 Distributions to members (20,500) (20,500) (41,000) (41,000) Balance, December 31, 2014 $ 172,729 $ 172,729 $ 345,458 $ (8,153) $ 337,305 See accompanying notes to consolidated financial statements. 5

23 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SOURCEGAS HOLDINGS LLC CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2014 and 2013 (In thousands) Cash flows from operating activities: Net income $ 34,862 $ 39,924 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 41,003 38,481 Deferred income taxes, net 9, Unrealized derivative losses 3, Other adjustments 4,131 4,284 Changes in operating assets and liabilities: Trade accounts receivable (5,176) (19,565) Gas in underground storage (2,567) (1,618) ulatory assets and liabilities (14,182) 3,478 Other assets (1,204) 1,004 Trade accounts payable (177) 12,039 Accrued expenses and other liabilities (961) (3,653) Net cash provided by operating activities 68,542 75,419 Cash flows for investing activities: Capital expenditures (121,657) (101,817) Other, net 5,219 1,062 Net cash used in investing activities (116,438) (100,755) Cash flows from financing activities: Proceeds from refinance of term loan 80,000 Payments on term loans (70,000) (80,000) Net borrowings on revolving credit facility 43,600 58,300 Proceeds from long-term debt 115,000 Payment of debt issuance costs (1,015) (390) Contributions from members 7,000 Distributions to members (41,000) (36,000) Net cash provided by financing activities 46,585 28,910 Net (decrease) increase in cash (1,311) 3,574 Cash at beginning of year 5,117 1,543 Cash at end of year $ 3,806 $ 5,117 Supplemental cash flow information: Cash paid for interest $ 31,882 $ 34,498 Cash paid for income taxes, net 428 $ 6,762 Capital expenditures included in trade accounts payable $ 11,225 $ 7,460 See accompanying notes to consolidated financial statements. 6

24 1. Organization and Business SourceGas Holdings LLC Notes to Consolidated Financial Statements Years Ended December 31, 2014 and 2013 SourceGas Holdings LLC ("SourceGas Holdings") and its wholly owned subsidiary, SourceGas LLC, were formed as Delaware limited liability companies in September 2006, As used herein, the terms "the Company" and "SourceGas" refer to SourceGas Holdings and its consolidated subsidiaries, collectively. SourceGas is a natural gas utility company providing distribution, transportation, storage and sales to a diverse mix of customers in the Rocky Mountains and Midwest United States. The Company's primary business is the operation of regulated natural gas local distribution companies located in Arkansas, Colorado, Nebraska and Wyoming. The Company is also engaged in the regulated transportation of natural gas for third parties through its intrastate pipeline systems. In addition to its regulated activities, the Company (i) provides unbundled natural gas sales in Nebraska and Wyoming and (ii) sells, installs and services appliances and equipment. The Company operates primarily through the four subsidiaries of SourceGas LLC as described below. SourceGas Distribution LLC ("SGD"). SGD is a regulated public utility consisting of retail natural gas distribution operations that serves approximately 263,000 customers in Colorado, Nebraska and Wyoming. SOD also sells appliances and heating equipment and provides associated repair services and appliance protection plans. SourceGas Arkansas ("SGA"). SGA is a regulated public utility consisting of retail natural gas distribution operations that serves approximately 161,000 customers in Arkansas. SGA also sells appliances and heating equipment and provides associated repair services and appliance protection plans. Rocky Mountain Natural Gas LLC ("RMNG'). RMNG is a regulated public utility that provides regulated transmission and wholesale natural gas service to SOD at town border stations in western Colorado and also provides intrastate transportation services for natural gas producers, shippers and industrial customers. RMNG generates additional revenues from the processing and sale of natural gas liquids. SourceGas Energy Services Co. ("SGES"). SGES is an unregulated natural gas marketer providing retail distribution customers in Nebraska and Wyoming with unbundled natural gas commodity offerings under the regulatory-approved Choice Gas program. 2. Summary of Significant Accounting Policies Principles of Consolidation These consolidated financial statements are presented in conformity with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of SourceGas Holdings and its subsidiaries, all of which are wholly owned. All material intercompany transactions have been eliminated. Use of Estimates APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 The preparation of these financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the related disclosures. Estimates are based on historical experience and various other assumptions that the Company believes to be reasonable under the circumstances. These estimates 7

25 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 Sour cegas Holdings LLC Notes to Consolidated Financial Statements Years Ended December 31, 2014 and 2013 may involve complex situations requiring a high degree of judginent either in the application and interpretation of existing literature or in the development of estimates that impact the financial statements. The most significant estimates relate to the accounting for regulatory infrastructure program accruals, uncollectible accounts and other allowances for contingent losses, valuation of goodwill and intangible assets, retirement plan benefit obligations, derivative and hedging activities and provisions for income taxes. SourceGas evaluates its estimates on an ongoing basis and actual results could differ from estimates. Effects of ulation SourceGas' natural gas utility operations are subject to regulation with respect to rates, service, maintenance of accounting records, pipeline integrity and various other matters by the respective regulatory authorities in the states in which the Company operates. The Company's accounting policies reflect the financial effects of the ratemaking and accounting practices and policies of those regulatory authorities, where appropriate. As a result, SourceGas recognizes certain costs as regulatory assets that would otherwise be charged to expense and recognizes certain proceeds as regulatory liabilities that would otherwise be recorded as revenue. The Company records regulatory assets when it is probable that costs will be recovered through rates charged to customers and records regulatory liabilities when it is probable that credits will be provided to customers as a result of the ratemaking process. Revenue Recognition Revenue from ulated Operations. ulated retail natural gas distribution revenues, derived primarily from the sale and transportation of natural gas, are recognized when gas is delivered to and received by the customer. SourceGas bills customers of its regulated retail natural gas distribution businesses on a monthly billing cycle basis; however, the billing cycle periods for certain classes of customers do not necessarily coincide with accounting periods used for financial reporting purposes. The Company estimates and accrues revenues applicable to gas delivered to customers, but not yet billed. Estimated unbilled revenues were $58.6 million and $52.4 million at December 31, 2014 and 2013, respectively. Payments received from customers who participate in budget billing, whose balance represents the amount paid in excess of gas delivered, are included in deferred revenue. SoureeGas' revenues for its regulated transmission operations are recognized in the period in which actual volumes are transported. The Company also provides various types of natural gas transportation services to its customers in which the natural gas remains the property of these customers at all times. The customer pays a two-part rate that includes a fixed fee and a per-unit rate for volumes actually transported. The fixed-fee component of the overall rate is recognized as revenue ratably over the contract period. The per-unit charge is recognized as revenue when the volumes are transported. Revenue from Unregulated Operations. Revenue from unregulated natural gas marketing operations is recognized when gas is delivered to the customer. The Company also offers a pricing option known as WinterGuard under which the customer pays a fixed amount per month over a one- or two-year contract period from June to May for the customer's gas consumption during the contract period. The total contract fee is recognized as revenue over the contract period based on the delivered portion of the customer's total estimated consumption. Future consumption is estimated based on the customer's historical gas consumption and normalized weather patterns. Amounts billed to those customers in excess of revenue recognized are recorded as deferred revenue. In January 2015, SGES acquired new Choice Gas Program customers in Nebraska and Wyoming, which increased its customer base by approximately 9,500. 8

26 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SourceGas Holdings LLC Notes to Consolidated Financial Statements Years Ended December 31, 2014 and 2013 In both regulated and unregulated operations, SourceGas bills and collects from its customers certain taxes based on revenues that are imposed by governmental authorities in the jurisdictions in which the Company operates. SourceGas records revenues net of such taxes. Trade Accounts Receivable and Allowance for Doubtful Accounts Trade accounts receivable arise primarily from natural gas sales to residential, commercial, industrial and other customers. Merchandise loans with maturities of less than one year relating to the sales of appliances and heating equipment are included in the trade accounts receivable balance. These receivables are stated on the consolidated balance sheets net of a $2.1 million and $2.0 million allowance for doubtful accounts at December 31, 2014 and 2013, respectively. The allowance for doubtful accounts reflects the Company's estimate of probable losses in its receivable balance determined on the basis of historical experience, specific allowances for high credit risk accounts and other currently available evidence. When specific accounts are determined to be uncollectible, the allowance and receivable are relieved. Gas in Underground Storage The Company uses underground gas storage facilities to help manage the seasonality of its business and to optimize the prices for which gas is purchased. SourceGas' natural gas inventories for unregulated operations are generally carried at the lower of cost or market value using the weighted average cost method. The Company's natural gas inventories for regulated utility operations are generally stated at the lower of average cost or net realizable value. The regulatory treatment of utility gas inventories provides for cost recovery in customer rates. Property, Plant and Equipment Property, plant and equipment consist of the following (in thousands): December 31, Property, plant and equipment; Natural gas distribution $ 721, ,395 Natural gas transmission 288, ,523 Other property, plant and equipment in service 353, ,269 Construction work in progress 57,218 84,684 Total property, plant and equipment 1,421,244 1,303,871 Less accumulated depreciation and amortization (581,055) (550,075) Property, plant and equipment, net $ 840,189 $ 753,796 Property, plant and equipment are stated at original cost, net of contributions in aid of construction. For constructed plant, original cost includes indirect costs from shared resource activities, allowance for funds used during construction ("AFUDC") and other costs that clearly relate to plant construction. AFUDC represents the estimated cost of funds used to finance the construction of major projects and is capitalized when the completed projects are placed in service. Interest expense of $1.4 million and $1.1 million was capitalized in the years ended December 31, 2014 and 2013, respectively. 9

27 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SourceGas Holdings LLC Notes to Consolidated Financial Statements Years Ended December 31, 2014 and 2013 Expenditures that increase capacity, improve efficiency or extend service lives are capitalized. Repairs and maintenance costs are expensed as incurred. The original cost of retirements of depreciable regulated property, plant and equipment, plus the cost of removal, less salvage, is recorded in accumulated depreciation with no effect on current period earnings. Gains or losses are recognized upon retirement of unregulated and regulated property, plant and equipment constituting an operating unit or system when sold or abandoned. ulated plant depreciation is computed on the straight-line remaining life method at composite rates considered sufficient to amortize costs over estimated service lives. Depreciation rates include components that compensate for nonlegal costs of removal (net of salvage value), and retirements, as approved by the appropriate regulatory agency. The composite weighted average depreciation rates were 3.49 percent and 2.98 percent for the years ended December 31, 2014 and 2013, respectively. Depreciation on unregulated property, plant and equipment is generally computed on the straight-line method based upon estimated service lives ranging from 3 to 52 years. Asset Retirement Obligations The Company records a liability at fair value for an asset retirement obligation ("ARO") and corresponding accretion expense when the legal obligation to retire the asset has been incurred with an offsetting increase to the carrying value of the related asset. SourceGas has recorded an ARO in other liabilities of $0.3 million as of December 31, 2014 and Impairment of Long-lived Assets SourceGas reviews the carrying values of its long-lived assets whenever events or changes in circumstances indicate that such carrying values may not be recoverable. For any assets with carrying values that are determined to be unrecoverable, the Company records an impairment charge to write down the carrying amount of the asset to its estimated fair value. SourceGas has not recorded any material asset impairments for the years ended December 31, 2014 and Goodwill and Intangible Assets Goodwill is assigned to reporting units as of the date of the related business combination. SourceGas' reporting units include SOD, SGA, RMNG and SGES. In accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC') 350 Intangibles Goodwill and Other, goodwill and other intangible assets with indefinite lives, such as trademarks and trade names, are reviewed for impairment annually during the fourth fiscal quarter and whenever an event or a change in circumstances indicates that impairment may have occurred. This standard provides companies the option to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount prior to performing the twostep goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. The Company's reporting units' fair value exceeded their carrying value, therefore, only step one of the analysis was performed. An impairment loss is recorded when the canying amount of goodwill and other intangibles exceeds their fair value. No impairments were recorded for the years ended December 31, 2014 and During 2014, the Company corrected immaterial errors related to the accounting of the 2007 acquisition of SourceGas. The acquisition related adjustments reduced cushion gas valued at $1.0 million and $0.2 million of land, which was originally excluded. These prior period errors are not considered material to previously issued consolidated financial statements; therefore, no retrospective adjustments were made. The Company has corrected these errors in its accompanying 10

28 APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SourceGas Holdings LLC Notes to Consolidated Financial Statements Years Ended December 31, 2014 and 2013 consolidated balance sheet as of December 31, 2014 to increase gas in underground storage of $1.0 million and land of $0.2 million, with a decrease to goodwill by $1.2 million. No adjustments were required to be made to the accompanying consolidated statements of income, equity, comprehensive income and cash flows for the year ended December 31, The Company evaluated the annual impairment testing performed from 2008 through 2013 and determined that this decrease in goodwill would not have changed the results of the impairment testing for those years. Derivative Instruments SourceGas utilizes derivative instruments for the purpose of mitigating risks resulting from changes in interest rates, energy commodity prices and volumetric load variances. The objectives and strategies for using derivatives have been tailored to the Company's regulated and unregulated businesses. SourceGas records all derivative instruments at fair value in the consolidated balance sheets as either an asset or liability unless they qualify for certain exceptions, including the normal purchases and normal sales exception. Changes in a derivative's fair value are ultimately recognized in earnings. The timing of when the changes in fair value are recorded in earnings depends on whether the derivative has been designated and qualifies as part of a hedging relationship or if authoritative guidance for rate-regulated entities allows an alternative accounting treatment. Changes in fair value for derivatives that do not meet one of these criteria are recognized in earnings as they occur. Note 7 describes SourceGas' use of derivative instruments and the related effect on its consolidated financial statements. Fair Value of Financial Instruments Certain assets and liabilities are recognized or disclosed at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). GAAP established a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. These levels are as follows: Level 1 Quoted prices in active markets for identical assets or liabilities Level 2 Pricing inputs other than quoted prices included within Level 1, which are either directly or indirectly observable for the asset or liability as of the reporting date. These inputs are derived principally from, or corroborated by, observable market data. 11

29 SourceGas Holdings LLC Notes to Consolidated Financial Statements Years Ended December 31, 2014 and 2013 Level 3 Pricing based upon inputs that are generally unobservable, based on the best information available and reflect management's assumptions on how market participants would price the asset or liability. The Company's financial instruments consist of cash, accounts receivable, accounts payable, longterm debt and derivative instruments. Except for the Senior Notes, the fair values of SourceGas' financial instruments approximate their respective carrying amounts in the consolidated balance sheets. As a result of changes in market interest rates and other factors, the fair value of the Company's fixed-rate Senior Notes was approximately $351.0 million and $362.4 million compared with a net carrying amount of approximately $324.8 million and $324.7 million as of December 31, 2014 and 2013, respectively. SourceGas determined the fair value of the Senior Notes based on the mid-range market price as determined by the bond dealer, which is based on significant other observable inputs within Level 2 of the fair value hierarchy. See Note 7 for fair value measurements of the Company's derivative instruments. Income Taxes APSC FILED Time: 4/1/ :02:58 AM: Recvd 4/1/2015 9:57:55 AM: Docket u-Doc. 27 SourceGas' operations are conducted in the United States through limited liability companies and corporations. The Company is treated as a partnership for federal and state income tax purposes, with each partner taxed separately on its allocated share of the Company's taxable income. Accordingly, the accompanying consolidated financial statements do not include a provision or liability for federal income taxes except for the Company's corporate subsidiaries that are subject to federal or state income taxes. SourceGas accounts for these income taxes using the asset and liability method in accordance with ASC 740, Accounting for Income Taxes. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the change is enacted. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above are reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties payable to the taxing authorities. The Company records interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses. See Note 8 for income tax disclosures and the tax effects of temporary differences that impact deferred tax assets and liabilities, Concentration of Credit Risk Credit risk is the risk of financial loss to the Company if a customer fails to perform its contractual obligations. SourceGas engages in transactions for the purchase and sale of products and services with companies in the natural gas industry and with industrial, commercial and residential natural gas 12