4 th Quarter 2008 Earnings Review and 2009 Outlook February 6, 2009

Transcription

1 4 th Quarter 2008 Earnings Review and 2009 Outlook February 6, 2009

2 Safe Harbor Statement Some of the statements in this document concerning future company performance will be forward-looking within the meanings of the securities laws. Actual results may materially differ from those discussed in these forward-looking statements, and you should refer to the additional information contained in Spectra Energy Partners 10-K and other filings made with the SEC concerning factors that could cause actual results to be different than those contemplated in today's discussion. Reg G Disclosure In addition, today s discussion includes certain non-gaap financial measures as defined under SEC Regulation G. A reconciliation of those measures to the most directly comparable GAAP measures is available on Spectra Energy Partners Investor Relations website at 2

3 2008 Overview Greg Rizzo President & CEO

4 2008 Accomplishments Net income for 2008 of $101.3 MM 38 Cash Available for Distribution of $119 MM 36 Increased quarterly cash distribution to 36 cents per unit Distribution per LP Unit Q Q Q Q Q Q % growth in % growth since IPO 2008 expansion capex of about $130 MM 3 East Tennessee projects in-service on-time and adding revenues Gulfstream s Phase III and IV phased into service and adding revenues Completed MHP s Egan Cavern 4 MHP s Egan Cavern 3 and Moss Bluff Cavern 4 expansion construction initiated Closed Saltville Gas Storage acquisition 4

5 Strategy Experienced leadership team executing consistent strategy Build on contracted position Deliver on organic growth projects Opportunistically pursue acquisitions 5

6 Financial Overview Laura Buss Sayavedra Vice President & CFO

7 2008 Financial Summary 4 th Quarter 2008 Net Income of $25.4 million; $0.35 per unit Cash Available for Distribution of $23.8 million Full year 2008 Net Income of $101.3 million; $1.40 per unit Ongoing net income of $98.8 million Cash Available for Distribution of $119 million Exceeded 2008 Forecast Cash Available for Distribution exceeded 2008 forecast due to strong demand and new contracts 7

8 4th Quarter Earnings Summary ($ millions) Three Months Ended December Operating Revenues $ 33.2 $ 30.7 Operating Expenses Operating Income Equity earnings Gulfstream (24.5%) Market Hub Partners (50%) Other Income and Expenses, Net 0.1 (0.1) Interest Income Interest Expense (4.5) (6.3) Earnings Before Income Taxes Income Tax Expense (Benefit) (0.2) 1.8 Net Income $ 25.4 $

9 Earnings from Equity Investments - Gulfstream ($ millions) Three Months Ended December Gulfstream Operating Income $ 37.6 $ 30.2 Interest and Other (9.8) (9.6) Net Income 100% Equity in earnings of Gulfstream - SEP share $ 7.1 $ 5.1 Phase III and Phase IV contracts provide secure long term cash flows 9

10 Earnings from Equity Investments Market Hub Partners ($ millions) Three Months Ended December Market Hub Partners Operating Income $ 18.3 $ 17.5 Interest and Other Net Income 100% Equity in earnings of Market Hub Partners SEP share $ 9.1 $ 9.0 New contracts at Egan provided revenue growth at Market Hub Partners 10

11 Cash Available for Distribution (CAD) ($ millions) Three Months Ended December Adjusted EBITDA $ 19.6 $ 19.5 Cash Available from Equity Investments Gulfstream Market Hub Partners Less: Cash Paid for Interest Expense (net) Maintenance Capital Expenditures Total Cash Available for Distribution $ 23.8 $ th Quarter Cash Available for Distribution benefited from completed expansion projects 11

12 Debt and Available Liquidity ($ millions) December Debt East Tennessee Natural Gas (5.71%; Due 2012) $ 150 Long Term Debt (Floating Rate) 259 Term Loan (Floating Rate) 31 Total Debt $ 440 Available Liquidity Credit Facility 500 Add: Cash and Investments 63 Less: Borrowings (excluding East Tennesee) (290) Available Liquidity $ 273 Leverage Ratio 2.7x Interest Coverage 10.2x Well positioned to fund current and future growth with available liquidity 12

13 2009 Cash Available for Distribution Outlook Nearly 10% growth in CAD to estimated $130 MM Driven primarily by expansions at Gulfstream and MHP Change in CAD calculation for 2009 forward Cash Available for Distribution (in $millions) 2008 CAD Saltville 1Q Project Development Costs Adjusted 2008 CAD EBITDA from Expansions and Other Net Interest Expense Maintenance CapEx Estimated 2009 CAD

14 2009 Capital Spending Outlook 2009 expansion capex of approximately $60 million Investment in Gulfstream for final completion of Phases III and IV Investment in Market Hub Partners to continue build-out of Egan Cavern 3 and Moss Bluff Cavern 4 Development of next stage East Tennessee Natural Gas Greenway Project 2009 expansion capex funded using existing credit facility 14

15 Business Overview Greg Rizzo President & CEO

16 Strategically Located Assets Well-Positioned for gas supply/demand trends Access to faster-growing Southeast markets and also able to tap Northeast market East Tennessee Producer-customers continue to develop traditional and coal bed methane production areas Shale plays under development Contracts: 8 yr average life Gulfstream Solid position in Florida Peninsula Fully contracted Contracts: 20 yr average life MHP Excellent supply and market access and highly flexible services through pipeline network interconnectivity Ideally situated to balance growing power market and emerging LNG supply Contracts: 3yr average life 16

17 2009 Execution Projects Gulfstream 1/09 7/09 12/09 12/10 12/11 12/12 Phase III In service Aug 2008 / Final 160MM/d contracts commence June 2009 Phase IV Contracts began Sep 2008 / Facility phased in beginning Oct 2008 Contracts / Final expansion fully phased in Jan 2009 Market Hub Partners Egan Cavern 3 Moss Bluff Cavern 4 Begin gas service 2H 2009 Equipment in service 2H 2009 Gas Service 2H 2011 In service 2H 2012 Remaining periods of capital outlay Periods of EBITDA contributions Total Capital Expenditures for current projects (a) Total Estimated Annual EBITDA for current projects $ 230 MM $ 40 MM (a) Total capital expenditures include amounts of Spectra Energy Partners Predecessor 17

18 Funding Capacity for Capital Projects Total available liquidity as of 12/31/2008: $ 273 MM Total capital for 2009 execution projects: $ 230 MM Less: Capital spent through 12/31/2008 (including pre-ipo): (110) MM Total remaining capital for execution projects: 120 MM Available Liquidity for Future Projects $ 153 MM 18

19 East Tennessee s Greenway Expansion Program Near-term opportunities driven by coal bed methane and emerging shale production Important scalable projects remain and are in demand with producers Next stage Greenway projects Being defined in 2009 Majority of capex in Target in-service in

20 Looking Ahead Distribution per LP Unit Continue CAD growth Execute on portfolio of growth projects Capitalize on strong financial position Secure next stage organic growth Pursue strategic acquisitions Q Q Q Q Q Q 2008 Well-positioned to continue delivering superior value to our unitholders 20

21 Questions and Answers 21

22 Appendix A Additional Information 22

23 Change in Cash Available for Distribution Revised calculation of Cash Available for Distribution (CAD) beginning Jan 1, 2009* Revision eliminates the effect of project development cost provisions and reversals to follow operating cash flow (in millions) 2008 Cash Available for Distribution, as reported $ Net Project development cost provisions (reversals) included in 2008 O&M Cash Available for Distribution, as revised Less: Saltville results excluded for periods prior to closing on 4/4/08 ( 2.8) 2008 Cash Available for Distribution - as revised $ Estimated 2009 Cash Available for Distribution $ *Note: Revised CAD for years prior to 2008 to be provided in 2008 Form 10-K. 23

24 Debt Schedule ($ millions) December Debt East Tennessee Natural Gas (5.71%; Due 2012) $ 150 $500 MM Credit Facility* (current rate: Libor +35bps; Due 2012) 209 Term Loan (current rate: Libor +35bps; Due 2012) 31 MHP Demand Note (Libor; Due 2012) 50 Total Debt $ 440 Indirect Debt Gulfstream Natural Gas Unsecured 15 year note (5.56%, Due 2015) $ 500 Unsecured 25 year note (6.19%, Due 2025) 350 Total Indirect Debt $ 850 * A subsidiary of Lehman Brothers is a lender under the Spectra Energy Partners bank credit facility as of December 31, As Lehman Brothers Holding, Inc. has filed bankruptcy, Spectra Energy Partners considers the $16.1 million of unfunded commitments from Lehman to be unavailable. 24

25 Appendix B Projects in Execution Information 25

26 Gulfstream Natural Gas Phase III and IV Expansions Completed Gulfstream provides solid revenue base from long-term contracts Gulfstream Phase III: Initial in-service Aug 2008 Contract commenced Aug 2008 Full contract phase-in Jun 2009 SEP Est Capex: $5 MM Gulfstream Phase IV: Initial in-service Oct 2008 Contract commenced Sep 2008 Full contract phase-in Jan 2009 SEP Est Capex: $2 MM In-Service Total Capacity (MDth/d) Compression (HP) Pipeline Length (Miles) Phase III Aug 31, NA 35 Phase IV Oct 26, , Project Name Final completion and additional revenue ramp-up in 2H

27 Market Hub Partners Egan Cavern 3 on target for 2009 in-service Egan is the premier salt cavern asset in North America Egan Cavern 3: SEP s share of total capex: ~$80 million Cavern development process continuing Initial gas service expected 2H 2009 SEP Est Capex: $30 million Project Name Egan Cavern 3 Description 8 Bcf expansion & 16 miles of 24 pipe In Service Phased-in 2H H 2012 Strategically positioned to take advantage of supply and market peaking opportunities 27

28 Market Hub Partners Moss Bluff Moss Bluff is key player in the Texas intrastate market Moss Bluff Cavern 4 SEP s share of total capex: ~$60 million Permitted by Texas Railroad Commission Cavern development process continuing On schedule for 2H 2011 in-service SEP Est Capex: $20 million Project Name Moss Bluff Cavern 4 Description Pipeline & interconnect upgrades 6.5 Bcf expansion In Service 2H H 2011 Strategically located to capture regional shale supplies and LNG terminal opportunities 28

29 Appendix C SEC Regulation G Schedules 29

30 SEC Regulation G Spectra Energy Partners, LP Non-GAAP Reconciliation for SEC Regulation G 4th Quarter 2008 Earnings Review February 6, 2009 Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization ( EBITDA ) The materials for Spectra Energy Partners investor meetings at the 4 th Quarter 2008 Earnings Review on February 6, 2009, include a discussion of adjusted EBITDA (earnings before interest, taxes and depreciation and amortization). Adjusted EBITDA is a non-gaap financial measure. The most directly comparable GAAP measure for adjusted EBITDA is net income plus interest expense, income taxes, and depreciation and amortization, less equity in earnings of Gulfstream and MHP, interest income, and other income and expenses. Cash Available for Distribution The materials for Spectra Energy Partners investor meetings at the 4th Quarter 2008 Earnings Review on February 6, 2009, include a discussion of Cash Available for Distribution. Cash Available for Distribution is a non-gaap financial measure. The most directly comparable GAAP measure for Cash Available for Distribution is Adjusted EBITDA (defined above) less net cash paid for interest expense (income),net and maintenance capital expenditures. Effective January 1, 2009, Cash Available for Distribution will exclude net project development costs and cash paid for taxes. Ongoing Net Income The materials for Spectra Energy Partners investor meetings at the 4th Quarter 2008 Earnings Review on February 6, 2009, include a discussion of ongoing net income. Ongoing net income is a non-gaap financial measure, as it represents net income adjusted for the impact of special items. Special items represent certain charges and credits which management believes will not be recurring on a regular basis. The most directly comparable GAAP measure for ongoing net income is reported net income, which includes the impact of special items. 30

31 Reg G Reconciliation for Estimated 2009 CAD Spectra Energy Partners, LP Adjusted EBITDA and Cash Available for Distribution (Unaudited) (in millions) Projected 2009 Reconciliation of Non-GAAP "Adjusted EBITDA" and "Cash Available for Distribution" to GAAP "Net Income" Net income $ 97.3 Add: Interest expense (net) 19.4 Income tax expense (benefit) Depreciation and amortization 27.4 Less: Equity in earnings of Gulfstream 31.9 Equity in earnings of Market Hub 36.7 Other income (expenses), net 0.1 Adjusted EBITDA 75.4 Add: Cash Available for Distribution from Gulfstream 40.4 Cash Available for Distribution from Market Hub 42.5 Project Development Costs, net 2.7 Less: Cash paid for interest expense, net 17.3 Maintenance capital expenditures 13.7 Cash Available for Distribution $

32 Reconciliation of Net Income to Cash Available for Distribution Spectra Energy Partners, LP (Unaudited) Three Months Ended Year Ended December 31 December 31 (In millions) Net Income $ 25.4 $ 21.7 $ $ Interest expense Income tax expense (benefit) (0.2) 1.8 (1.4) (97.9) Depreciation and amortization Less: Equity Earnings from Equity Investments Interest income Other income, net 0.1 (0.1) Adjusted EBITDA $ 19.6 $ 19.5 $ 78.2 $ 87.0 Cash Available from Equity Investments Gulfstream Market Hub Partners Less: Cash paid for interest expense (net) Maintenance capital expenditures Total Cash Available for Distribution $ 23.8 $ 21.6 $ $