MARKET HUB PARTNERS STORAGE LP, 10-K405/A, 1999-07-13

MARKET HUB PARTNERS STORAGE LP
10-K405/A, 1999-07-13
NATURAL GAS TRANSMISSION

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
------------------

1998 FORM 10-K/A

AMENDMENT NO. 1

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998

Commission file number 333-51713

MARKET HUB PARTNERS STORAGE, L.P.
(Exact name of registrant as specified in its charter)

DELAWARE 76-0558052
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)

16420 PARK TEN PLACE, SUITE 420
HOUSTON, TEXAS 77084
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (281) 597-6777
Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

YES [ ] NO [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

As of February 25, 1999, the aggregate market value of the Company's common
equity held by non-affiliates was $0.
<PAGE>
Market Hub Partners Storage, L.P. (the "Company") hereby amends Items 1, 8 and
11 of its Annual Report on Form 10-K for the fiscal year ended December 31, 1998
(Commission File No. 333-51713) to read in their entirety as set forth below.
Unless otherwise expressly provided in this Amendment, the information in this
Amendment is as of February 25, 1999 (the date of the original filing of the
Company's Form 10-K being amended hereby). For subsequent developments, see the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
and any other subsequent Company filings with the Securities and Exchange
Commission.

ITEM 1. BUSINESS
THE COMPANY

Market Hub Partners Storage, L.P., a Delaware limited partnership (the
"Company"), is one of the largest owners and operators of high deliverability
salt cavern natural gas storage capacity in North America. The Company's Moss
Bluff and Egan facilities, located near Houston, Texas, and in Acadia Parish,
Louisiana, respectively, are strategically positioned at industry-recognized
market hubs near the convergence of major natural gas pipelines and serve as
aggregation points for natural gas collected along the Texas and Louisiana Gulf
Coast. Both of the Company's facilities have bi-directional interconnects to
five pipelines, which form hub and spoke systems and enable the Company to
provide its customers with storage and other services that allow better
management of their variable gas load requirements. At December 31, 1998, the
Company's two facilities maintained approximately 19.7 Bcf (as defined under
"--THE NATURAL GAS STORAGE INDUSTRY DEFINITIONS" in this Item 1) of natural
gas working storage capacity, 97.1% of which was leased under storage contracts
with major utilities, pipeline companies, local distribution companies, natural
gas producers and natural gas marketers. These storage contracts provide a
minimum level of revenue regardless of usage by the customer. The Company
supplements these revenues by providing a variety of load management services
("hub services"). For further discussion on revenues and storage services
offered, refer to "THE NATURAL GAS STORAGE BUSINESS-DESCRIPTION OF SERVICES".

The Company was formed on December 31, 1997, under the laws of the State
of Delaware. The Company's executive offices are located at 16420 Park Ten
Place, Suite 420, Houston, Texas, 77084, and its telephone number is (281)
597-6777.

The Company is a wholly owned subsidiary of Market Hub Partners, L.P.
("MHP"), which was formed in December 1994 by TPC Corporation ("TPC") (a 66.0%
owner that is now a subsidiary of PacifiCorp). MHP, a partnership, is also owned
by subsidiaries of NIPSCO Industries ("NIPSCO") (11.3%), DPL Inc. ("DPL")
(17.0%) and Public Service Enterprise Group, Inc. ("PSEG") (5.7%), all of which
are large utilities or utility holding companies. TPC contributed to MHP its
interest in the market hub assets and facilities, market hub locations,
development plans, permits, leases and signed storage service contracts relating
to its five market hub projects, including the Moss Bluff and Egan facilities.
TPC's four partners contributed in the aggregate the agreed-upon sum of $45.0
million in cash to MHP over the period from 1994 to July 1996. On January 30,
1998, the Company formed Market Hub Partners Finance, Inc. as a wholly owned
subsidiary.

In February 1999, NIPSCO announced that its subsidiary, NI Energy
Services, Inc., had agreed to purchase TPC, including TPC's 66% interest in MHP,
from PacifiCorp. If the purchase is consummated, subsidiaries of NIPSCO will own
approximately 77.3% of MHP. The sale may trigger an obligation of the Company to
make certain change of control incentive payments under the Company's employment
agreements with its executive officers and certain other key employees. See Note
12 to the Consolidated Financial Statements "Subsequent Events" included herein
for further discussion.

The Company's owners currently lease approximately 39.4% of the Company's
storage capacity. The Company leases the remaining storage capacity to third
parties under contracts with, among others, subsidiaries or divisions of Reliant
Energy, El Paso Natural Gas Company, The Coastal Corporation, and Columbia
Energy Services. In order to accommodate the current market demand for the
Company's services, the Company commenced a capital expenditure program in 1997
to increase working gas capacity with the targeted goal of 12.0 Bcf at each
facility (for a combined total of 24.0 Bcf). As of December 31, 1998, working
gas capacity at Moss Bluff and Egan was 10.3 Bcf and 9.4 Bcf, respectively, for
a combined total of 19.7 Bcf. The Company anticipates achieving its 24.0 Bcf
working gas capacity target by the end of 1999. The Company believes that
incremental capacity expansion results in high rates of return due to the
relatively low capital expenditures required to add new capacity and
deliverability and the relatively low incremental costs associated with
operating the new capacity. For further discussion on salt cavern storage and
related expansion, refer to "THE NATURAL GAS STORAGE BUSINESS-STORAGE
FACILITIES".

The chart on the following page illustrates the relationships among the
Company, its subsidiaries, MHP and MHP's owners, subsidiaries of PacifiCorp,
DPL, NIPSCO and PSEG (prior to the contemplated sale by PacifiCorp discussed
above).

1
<PAGE>
MARKET HUB PARTNERS CORPORATE OWNERSHIP
<TABLE>
<CAPTION>
<S> <C> <C>
---------------------------------------------------------
| |
| Subsidiaries of PacifiCorp (66.0%), DPL (17.0%), |
| NIPSCO (11.3%) and PSEG (5.7%) |
| |
---------------------------------------------------------
| |
100% |
| |
---------------- |
| | |
| Market Hub | |
|Partners, Inc.| |
| | |
---------------- |
| |
Approximately Approximately
2% GP 98% LP
| |
------------------------------------------------------------------------------------------------------
| |
| Market Hub Partners, L.P. (MHP) |
| |
------------------------------------------------------------------------------------------------------
| | |
100% | 100%
| | |
--------------------- | |
| | | |
|Market Hub Partners| | |
| Storage, LLC | | |
| | | |
--------------------- | |
| | |
0.01% GP 99.99% LP |
| | |
------------------------------------------------------------------------------------- |
| | |
| Market Hub Partners Storage, L.P. | |
| | |
------------------------------------------------------------------------------------- |
| | | | | |
100% 100% | 100% | |
| | | | | |
| ------------------------------ | ------------------------ | |
| | | | | | | |
| |Moss Bluff Hub Partners, LLC| | |Egan Hub Partners, LLC| | |
| | | | | | | |
| ------------------------------ | ------------------------ | |
| | | | | |
| 0.01% GP 99.99% LP 0.01% GP 99.99% LP |
| | | | | |
- ----------------------------------- ------------------------------- ------------------------- -----------------------------------
| | | | | | | |
|Market Hub Partners Finance, Inc.| |Moss Bluff Hub Partners, L.P.| |Egan Hub Partners, L.P.| |Other Subsidiaries, including the|
| | | | | | | owner of the Tioga Project. |
- ----------------------------------- ------------------------------- ------------------------- | |
-----------------------------------
</TABLE>
Note: "GP" denotes general partnership interests; "LP" denotes limited
partnership interests

2
<PAGE>
THE NATURAL GAS STORAGE INDUSTRY

DEFINITIONS

The term "Bcf" means billion cubic feet of natural gas, "MMcf" means
million cubic feet of natural gas and "Mcf" means thousand cubic feet of natural
gas. The term "MMBtu" means million British Thermal Units and "FERC" refers to
the Federal Energy Regulatory Commission. A "market hub" is a geographic
location of a natural gas storage facility and multiple pipeline
interconnections. The term "working gas capacity" is defined as the amount of
capacity within each facility's salt caverns available for lease; "leased gas
capacity" reflects the amount of working gas capacity leased and includes both
firm and secondary firm contracts (discussed in "THE NATURAL GAS STORAGE
BUSINESS-DESCRIPTION OF SERVICES").

OVERVIEW

There are three principal types of underground natural gas storage sites:
(i) depleted oil or gas reservoirs; (ii) aquifers, which are water-only
reservoirs conditioned to hold natural gas; and (iii) salt cavern formations.
Salt cavern storage facilities, such as those operated by the Company, offer
significant advantages compared to depleted reservoirs and aquifers. Due to the
physical qualities of the salt formations in which these caverns are
constructed, the salt cavern storage facilities generally have higher average
daily deliverability rates than storage facilities that utilize depleted
reservoirs or aquifers. For example, each of the Company's salt cavern storage
facilities is designed to permit withdrawal of all the working gas in such
facility in periods as short as ten days. They are also typically less costly to
operate and more flexible than other competing storage methods. While a
reservoir storage facility typically converts from injection to withdrawal once
or twice a year, a salt cavern facility is capable of switching from injection
to withdrawal, and vice versa, several times a day. Accordingly, the Company
believes that salt cavern storage facilities are better suited to meet
short-duration load swings (E.G., intra-day heating and air-conditioning demand)
and to serve peak demand during major supply interruption events, such as
hurricanes and loss of production due to extreme cold weather.

Several types of customers typically utilize salt cavern storage,
including local distribution companies, gas-fired electric utilities, gas
marketing companies, gas producers and gas pipelines. For example, local
distribution companies can reduce their costs by maintaining a reserve supply of
natural gas at a storage facility. The salt cavern's high deliverability
capability allows distribution companies to access supply quickly, eliminating
the need to purchase gas on short notice at peak prices. Gas-fired electric
utilities typically use other sources of supply for baseload demand, but utilize
gas storage facilities as "peaking" facilities to rapidly meet short-term surges
in demand. Gas marketing companies use salt cavern storage as a tool to maximize
arbitrage profits when the total cost of purchasing gas at off-peak times and
storing it is less than the price at which they can sell gas during periods of
tight supply. Likewise, gas producers can increase profits by storing gas until
prices increase, with the advantage of quick access to that stored supply in a
salt cavern facility. Finally, salt cavern storage allows gas pipeline companies
to increase operating efficiency by physically balancing pipeline receipts and
deliveries with the salt cavern's flexible injection and withdrawal
capabilities, thereby enabling companies to reduce compressor fuel usage through
improved balancing.

Market hubs, or strategic interconnects combined with storage in the
pipeline grid, can be used for a number of purposes. A market hub can be an
advantageous location to make or take delivery of gas, as it provides receipt
point security because all purchase and supply contracts can be written with a
known point of delivery. A market hub with salt cavern storage can improve
efficiency of gas transportation management. Scheduling and imbalance penalties
can be avoided, while pooling supply from different sources at one location can
reduce transportation costs. In addition, high-deliverability storage can be
used to minimize risks created by counterparty failures by eliminating the need
for a party to enter the "spot" market. Finally, salt cavern storage permits
producers, purchasers, marketers and pipelines to take advantage of pricing
differentials. Both commodity and transportation costs can be reduced; commodity
cost through purchases at off-peak prices for use during peak periods, and
transportation cost through access at off-peak "interruptible" rates, compared
to more expensive "firm" transportation.

Changes in the industry have created the need for more efficient methods
of managing the supply of natural gas throughout the pipeline grid. Prior to the
issuance of FERC Order 636 in April 1992, users of natural gas were able to
purchase sufficient natural gas from pipelines, on short notice, to meet
substantially all of their natural gas supply needs, and pipelines were largely
obligated by contract to supply these needs. The Company believes that if

3
<PAGE>
general consumption of natural gas begins to more closely match supply, natural
gas may not be available in sufficient quantities on a timely basis to satisfy
short-duration peak usage needs caused by seasonal temperature variation or
supply interruptions, and such events may increase the demand for flexible,
reliable natural gas supply services.

THE NATURAL GAS STORAGE BUSINESS

STORAGE FACILITIES

GENERAL. A salt cavern is formed by drilling and leaching an underground
cavern in a naturally existing salt formation and installing related surface
equipment. The typical salt cavern storage facility consists of a solution
mining plant, which provides fresh water to dissolve cavities within the
underlying salt, brine handling and disposal facilities, and the necessary
surface facilities to compress natural gas into the cavity and allow it to flow
back into a pipeline. Natural gas is injected under pressure and is generally
not subject to loss because salt is essentially impermeable. All storage
facilities which the Company owns and all storage facility projects which the
Company is planning or developing are salt cavern storage facilities.

MOSS BLUFF FACILITY. The Moss Bluff facility consists of three storage
caverns located in Liberty and Chambers Counties near Houston, Texas, and
provides approximately 10.3 Bcf of working storage capacity at December 31,
1998. The facility typically provides 10-day withdrawal service (approximately
1,030 MMcf/day) and 20-day injection service (approximately 500 MMcf/day),
although it is capable of providing up to approximately 1,200 MMcf/day of
withdrawal capacity and additional wheeling capacity of approximately 715
MMcf/day. The Moss Bluff facility occupies what the Company believes to be an
ideal location on the pipeline grid, with access to five pipelines, three of
which are intrastate and two of which are interstate. The three intrastate
pipeline interconnects are with Channel Industries Gas Company ("Channel")
(which is owned and operated as two pipelines), MidCon Texas ("MidCon") and
Tejas Energy, LLC ("Tejas Energy"). The interstate pipeline interconnects are
with Natural Gas Pipeline Company of America ("NGPL") and Texas Eastern
Transmission ("TETCO"). The interconnections to Channel, TETCO, MidCon and Tejas
Energy are via 4.9 mile dual header system of 16-inch and 20-inch pipe, which
runs south from the facility to the main metering facility near the Liberty and
Chambers Counties border. The interconnection to NGPL is a 16-inch, 9.7 mile
pipe, which was added with the development of the second cavern.

Operations at the Moss Bluff facility were commenced in 1990 with a single
storage cavern providing approximately 1.75 Bcf of working storage capacity.
With the second and third caverns commencing operations during 1994 and 1995,
along with the transfer of the 50% interest of Moss Bluff not already owned by
MHP from a third party in 1996 (refer to Note 1 to the Consolidated Financial
Statements "ORGANIZATION AND BASIS OF PRESENTATION" for further discussion on
this transaction), working gas capacity was increased to approximately 7.8 Bcf
by the end of 1996. In 1997, the Company commenced construction to expand
working gas capacity at Moss Bluff to 12.0 Bcf. During that year, capacity was
increased to 9.5 Bcf through the expansion program and by utilizing SMUG
(Solution Mining Under Gas) technology; average injection capability was also
increased to 475 MMcf/day by placing a fifth compressor in service.

During 1998, the Company budgeted capital expenditures, excluding pad gas
purchases, of approximately $6.0 million for the continued expansion of the Moss
Bluff facility to 12.0 Bcf, of which it spent $5.2 million. Working gas capacity
was 9.5 Bcf at the beginning of the year and was increased to 10.3 Bcf by the
end of 1998. Additionally, the Company added a sixth compressor to the facility,
which increased overall average injection capability to approximately 500
MMcf/day. The Company also purchased approximately $2.1 million in pad gas for
the Moss Bluff facility during 1998.

For fiscal year 1999, the Company has budgeted approximately $4.6 million
in capital expenditures to increase working gas capacity at Moss Bluff to 12.0
Bcf. It is projected that the 12.0 Bcf target will be achieved by the end of
1999, thereby completing the capital expenditure program initiated in 1997.

EGAN FACILITY. The Egan facility consists of two storage caverns located
in Acadia Parish in the south central part of Louisiana that provide the Company
with approximately 9.4 Bcf of working gas storage capacity at December 31, 1998.
The Egan facility typically provides 10-day withdrawal service (approximately
940 MMcf/day) and 20-day injection service (approximately 500 MMcf/day),
although it is capable of providing up to approximately 1,200 MMcf/day of
withdrawal capacity and additional wheeling capacity of approximately 835
MMcf/day. Because of the Egan facility's location in the supply area and
proximity to the interstate and intrastate

4
<PAGE>
pipeline grid, the Company believes the Egan facility is the best located market
hub for matching Gulf Coast production to market demand in the midwestern and
northeastern United States. The Egan facility provides services to customers on
five interstate pipelines: Tennessee Gas Pipeline, Texas Gas Transmission
Company, ANR Pipeline Company ("ANR"), Trunkline Gas Pipeline ("Trunkline") and
Columbia Gas Transmission Company ("Columbia Gas"). The Egan facility
interconnects to pipelines owned by Tennessee Gas and Texas Gas are via 3.5
miles of 24-inch pipes, to pipelines owned by ANR and Trunkline via 1.5 miles of
dual 20-inch pipes and to a Columbia Gas pipeline via 6.7 miles of 24-inch pipe.
During 1998, Egan was connected with Conoco's LGS system (an intrastate
pipeline) that interconnects with their Acadia plant. This plant, in turn,
connects with pipelines owned by Koch Gateway, Columbia Gas and others. The
interconnection with Conoco is one-directional, meaning that the gas can only be
delivered to Egan.

Operations at the Egan facility were commenced in 1995 with a single
storage cavern providing approximately 3.6 Bcf of working gas capacity. The
Company implemented a capital expenditure program in 1997 to increase Egan's
working gas capacity to 12.0 Bcf. A second cavern well was drilled as part of
the expansion program and leaching operations commenced during 1997. At December
31, 1997, total working gas capacity at Egan was 6.5 Bcf. During 1998, the
Company placed in operation the second cavern well.

For 1998, the Company budgeted capital expenditures, excluding pad gas
purchases, of approximately $14.0 million for the continued expansion of the
Egan facility to 12.0 Bcf, of which it spent $11.5 million. Working gas storage
capacity was 6.5 Bcf at the beginning of the year and was increased to 9.4 Bcf
by the end of 1998. Additionally, three compressors were added to the Egan
facility (bringing the total number of compressors at that facility to seven),
which increased overall average injection capability to approximately 500
MMcf/day. The Company also purchased approximately $2.6 million in pad gas for
the Egan facility during 1998.

For fiscal year 1999, the Company has budgeted approximately $2.6 million
in capital expenditures to increase working gas capacity at Egan to 12.0 Bcf. It
is projected that the 12.0 Bcf target will be achieved by the end of 1999,
thereby completing the capital expenditure program initiated in 1997.

The following table depicts storage system data (as discussed above) for
the Company as of December 31, 1998:
<TABLE>
<CAPTION>
MAXIMUM
WITHDRAWAL
CAPACITY
MAXIMUM PLUS ESTIMATED
INJECTION WHEELING WORKING GAS PROJECTED
CAPACITY CAPACITY STORAGE IN-SERVICE
(MMCF/DAY) (MMCF/DAY) (BCF) DATE
---------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
EXISTING
Moss Bluff .................. 500 1,915 10.3 In Service

Egan ........................ 500 2,035 9.4 In Service
---------- ---------- -----------
Subtotal .............. 1,000 3,950 19.7
---------- ---------- -----------
PLANNED EXPANSION
Moss Bluff .................. -0- 735 1.7 December 1999

Egan ........................ -0- 515 2.6 December 1999
---------- ---------- -----------
Subtotal .............. -0- 1,250 4.3
Total ........... 1,000 5,200 24.0
========== ========== ===========
</TABLE>
DESCRIPTION OF SERVICES

STORAGE SERVICES. Storage services are marketed by the Company on an
unbundled basis to utilities, pipeline companies, local distribution companies,
producers and natural gas marketers and permit customers to contract for
injection, storage space and withdrawal capacities. These unbundled services are
currently provided on a firm, secondary firm and interruptible bases. The
majority of the Company's contracts are on a firm basis, where the user pays a
charge for the availability of the storage space and of the injection and
withdrawal rights regardless of usage. In a secondary firm arrangement, the user
customarily pays a lower demand fee than in a firm contract because the facility
has the right to make the storage capacity or injection and withdrawal
facilities unavailable to the secondary firm customer if a customer with a firm
contract requires the space or facilities. Interruptible contracts are similar
to secondary firm contracts, except that no demand fee is paid and the facility
is allowed to give

5
<PAGE>
prior access to both firm and secondary firm customers. Since customers with
firm contracts generally do not utilize 100% of storage and/or withdrawal and
injection capacity at all times, the Company can increase revenues and operating
efficiencies by offering secondary firm and interruptible services to maximize
capacity utilization. The facility may charge fees for the actual use of its
storage capacity and of its injection and withdrawal facilities in addition to
the demand fees charged to reserve availability of capacities. The number of
contracts and their terms for a given storage cavern depend upon the physical
limitations of available space and injection and withdrawal capacity at the
relevant storage cavern.

HUB SERVICES. The Company also offers short-term and interruptible "hub"
services to its customers, a brief description of which is provided below:

o BALANCING SERVICES. Balancing services allow the Company's customers to
borrow natural gas from a storage facility or to park their own natural
gas at the facility within specified volumetric ranges for a limited
time. A shipper using this service can continually keep its
transportation obligations in balance.

o WHEELING SERVICES. Wheeling services are the transportation of natural
gas at a market hub from one pipeline to another over the surface
interconnects and involve no storage service. Wheeling allows the
Company's customers to reach markets or suppliers not normally available
to them. A hub customer can deliver or purchase gas on one pipeline and
have the hub transfer it to another for further shipping.

o TITLE TRANSFER SERVICES. Title transfer services allow the Company's
customers to effect the transfer of natural gas from one storage
facility or pipeline to another without incurring unnecessary
transportation charges.

o IMBALANCE SERVICES. Imbalance services facilitate the trading of
imbalances by shippers on a particular pipeline or between pipelines
with interconnects to a market hub. The hub handles the physical gas
movement, if needed, and the nominations necessary to complete the
transaction.

o LOAN SERVICES. Loaning services involve the loaning of non-critical pad
gas and "extra" gas that the Company has obtained title to through
in-kind fuel payments. The Company enters into loaning transactions only
with counterparties it considers creditworthy.

The Company began offering hub services on a short-term firm and
interruptible basis at Moss Bluff in 1994 and at Egan in 1995. Using inventory
management techniques common to many producing-manufacturing firms, the Company
has developed hub services to enable better management of incremental,
unsubscribed and rollover capacity at the operating facilities. Market hub
services typically provide higher margins than demand storage; however, the
timing of such services is less predictable.

DESCRIPTION OF SIGNIFICANT CONTRACTS

As of December 31, 1998, Moss Bluff and Egan had 10.0 Bcf and 9.2 Bcf of
leased storage capacity (excluding secondary firm contracts), respectively. The
following chart sets forth certain terms with respect to firm storage capacity
based on the Company's agreements with its most significant customers.

MOSS BLUFF FACILITY
<TABLE>
<CAPTION>
CAPACITY
TERMINATION LEASED
CUSTOMER DATE (IN MMCF)
- -------- ---------------- ---------
<S> <C> <C>
Northern Indiana Public Service Company (NIPSCO Industries, Inc.) . April 2014 4,000
Channel Industries Gas Company (El Paso Natural Gas Company) ...... March 2000 750
TPC (PacifiCorp) .................................................. April 2002 600
Reliant Energy HL&P (Reliant Energy, Incorporated) ............... May 1999 600
TPC (PacifiCorp) .................................................. April 2002 500
Texaco Natural Gas, Inc. (Texaco Inc.) ............................ April 1999 500
Western Gas Resources, Inc. (Western)(2) .......................... July 2000 500
Columbia Energy Services, Inc. (The Columbia Gas System, Inc.) .... September 2000 500
Entergy Power Marketing Corporation ............................... June 1999 500
H&N Gas Ltd. ...................................................... August 1999 500
All Other Contracts (3 total) ..................................... Various 1,000
---------
MOSS BLUFF TOTAL ............................................ 9,950
=========
</TABLE>
6
<PAGE>
EGAN FACILITY
<TABLE>
<CAPTION>
CAPACITY
TERMINATION LEASED
CUSTOMER DATE (IN MMCF)
- -------- ---------------- ---------
<S> <C> <C>
Northern Indiana Public Service Company (NIPSCO Industries, Inc.) . April 2016(1) 1,500
ANR Pipeline Company (The Coastal Corporation) .................... November 1999 1,000
Columbia Energy Services, Inc. (The Columbia Gas System, Inc.) .... September 2000 1,000
The East Ohio Gas Company (Consolidated Natural Gas Company) ...... April 2008 900
Coral Energy Resources ............................................ July 1999 800
The Dayton Power & Light Company (DPL Inc.) ....................... September 2000 565
TPC (PacifiCorp) .................................................. April 2006 500
Aquila Energy Marketing ........................................... December 2000 500
Western Gas Resources, Inc. (Western)(2) .......................... April 2000 500
Entergy Power Marketing Corporation ............................... March 1999 500
All Other Contracts (5 total) ..................................... Various 1,410
---------
EGAN TOTAL .................................................. 9,175
=========
</TABLE>
(1) This contract has a primary term expiring April 1, 2016 but may be
terminated by the customer effective April 1, 2006 on 12 months' notice.

(2) PNM Energy Marketing (Public Service of New Mexico) retains ultimate
liability under these contracts.

Certain of the current contracts provide that the customer has the right
to terminate the contract upon the occurrence of certain events of default
specified therein. Additionally, certain of the Company's contracts obligate the
Company to indemnify the customer for any damage or injury occurring during the
period in which the customer's natural gas is in the Company's possession.

MARKETING AND SALES EFFORTS

GENERAL. The Company targets sales efforts on utilities, pipeline
companies, local distribution companies, producers and natural gas marketers. As
of December 31, 1998, available capacity at the Moss Bluff and Egan facilities
for firm demand contracts was effectively sold out. Nonetheless, in light of
planned expansions and the expirations of several firm basis contracts in 1999,
the Company will continue to market firm storage service. In addition, the
Company's increasing sales of hub services have allowed the Company to expand
its customer base and maximize inventory value.

TARGET CUSTOMERS. Local distribution companies have been the primary focus
of the Company's marketing efforts. These companies have traditionally developed
long-term gas supply plans and acquired the necessary storage under long-term
contracts to meet those plans. However, in response to changes in the industry
caused by deregulation, the company has increased its marketing of specialized
services to local distribution companies. Likewise, incentive rates have
increased customers' focus on the cost of the gas supply. In response, the
Company has highlighted the benefits of salt cavern storage and simple hedging
strategies which permit customers to purchase natural gas supplies at off-peak
prices.

The number of natural gas marketers and producers contracting for the
Company's services has steadily increased over the last two years. These
customers have traditionally purchased under shorter-term contracts of two to
three years. However, recent regulatory initiatives designed to encourage
greater accountability among the unregulated merchants, such as the imposition
of more restrictive balancing and scheduling requirements and larger penalties
for noncompliance with such requirements, have made these customers more open to
longer-term contracts.

Interstate pipeline companies represent the Company's smallest customer
base. To date, the Company has had limited success with this market because
prospective pipeline customers have their own low deliverability storage
facilities. In addition, current FERC policy limits rate recovery by pipelines
interested in contracting for upstream capacity in third-party storage
facilities. However, the Company continues to market its services to interstate
pipelines. The Company believes that without a merchant function or an incentive
to manage customer inventories, interstate pipelines are not well positioned to
ensure that existing reservoir storage facilities are filled and cycled by their
transportation customers in a manner that assures satisfactory peak (withdrawal)
and off-peak

7
<PAGE>
(injection) performance and full cost recovery for storage operations. The
Company believes that third-party high deliverability storage is an increasingly
viable option for pipelines attempting to maximize the value of their seasonal
storage capabilities.

ON-LINE INVENTORY TRACKING. The nature of high deliverability salt cavern
storage operations and the services provided by the Company require that the
company have a reliable and efficient system in place to track the physical flow
of natural gas throughout its facilities. The Company utilizes at Moss Bluff and
Egan an on-line inventory tracking system developed by MHP. This system tracks
customer nominations and allocations and provides the Company with accurate fuel
accounting for both customer and Company accounts. By automating what used to be
a manual accounting process, the Company has increased efficiency and reduced
the risk of errors.

SERVICE PRICING TECHNIQUES. The Company intends to continue to price its
services under a market based rate design authorized by applicable state and
federal regulatory bodies. Prices are based upon what the market will bear at a
given time for a particular service. Full consideration is given to operational
and value factors associated with providing a service such as capacity, cycling
rights, pipeline access, current contractual commitments to the surface
facilities, pipeline and cavern pressures and the firm or interruptible nature
of the service.

TECHNOLOGY AND INTELLECTUAL PROPERTY

At the time of formation of MHP, MHP and TPC entered into an agreement
pursuant to which TPC has maintained an extensive technical development program
for the benefit of MHP and its subsidiaries. Key elements in this program
include an existing technical relationship with Sandia National Laboratories
("Sandia"), a leading source of technology for hydrocarbon storage, and
previously included a technical relationship with Gaz de France, the French
state-owned natural gas company ("GDF"). The cooperative effort in technology
has been primarily focused on natural gas storage cavern design, construction
and operation and has enabled TPC to gain recognition for technical leadership
within the industry.

Sandia originally developed technology for the United States Department of
Energy for the Strategic Petroleum Reserve, which stores crude oil in salt
caverns. As a result of this work, the Company believes Sandia is the leading
source in the United States of technology for hydrocarbon storage. Under an
agreement with Sandia, TPC receives three-dimensional computer simulation,
long-term creep and stress relaxation studies, mineral property testing, linear
programming and other advanced support. The Sandia contract was originally
entered into in May 1990 for an initial 12 month period and was subsequently
amended and extended several times, most recently through November 1998.

GDF is recognized as a world leader in natural gas related research and
development, with related expenditures of approximately $200.0 million per year.
Over several decades, GDF has constructed dozens of salt cavern storage
facilities and acquired an extensive patent estate and a depth of operating
skill. GDF was a major shareholder of TPC until PacifiCorp acquired TPC in April
1997. During that time, GDF provided technical assistance to TPC (and indirectly
to MHP) though its ownership relationship and an exclusive technology agreement
that was in effect from 1991 through 1997. Although neither TPC nor MHP
currently has such a relationship or agreement with GDF, MHP continues to
benefit from the experience gained in connection with TPC's and MHP's dealings
with GDF.

BUSINESS STRATEGY

The Company plans to continue to grow its revenue base and to improve its
profitability and cash flow through the implementation of the following key
business strategies:

o OFFER SUPERIOR DELIVERABILITY AND FLEXIBILITY. The Company's marketing
strategy emphasizes the high deliverability and flexibility of its salt
cavern storage facilities relative to conventional reservoir natural gas
storage and targets those customers whose storage and delivery needs are
more variable. For example, salt cavern storage can be used by utilities
as "peaking" facilities to rapidly meet short-swing surges in demand. Salt
cavern storage can allow local distribution companies to reserve a supply
of natural gas at a storage facility that can be delivered quickly,
reducing the need to purchase gas on short notice at peak prices. Natural
gas marketing companies and natural gas production companies can use salt
cavern facilities to store natural gas when prices are low and withdraw
natural gas when prices increase.

8
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A salt cavern's flexible injection and withdrawal capabilities can allow
pipeline companies to increase operating efficiencies and reduce
compressor fuel usage through physically balancing pipeline receipts and
deliveries.

o GENERATE STABLE REVENUES AND CASH FLOWS THROUGH DEMAND STORAGE
CONTRACTS. The Company's primary source of revenues is demand storage
contracts, in which the Company leases storage capacity to customers on a
firm basis for periods ranging from slightly less than one year to twenty
years. Prices per Mcf of storage capacity and the amount of storage
capacity to be leased are generally fixed at the inception of the
contract. Accordingly, these storage contracts, which have a remaining
weighted average life of approximately 5.9 years as of December 31, 1998,
provide a relatively stable source of revenues and cash flows, since the
customer is required to pay a minimum level of storage fees regardless of
usage. In 1998, approximately 89.2% of the Company's total revenues were
generated from the minimum fees under demand storage contracts.

o OPTIMIZE REVENUES AND OPERATING EFFICIENCIES BY OFFERING HUB SERVICES.
The Company offers a variety of load management services to its customers
on a short-term and "interruptible" basis to supplement its storage
revenues (refer to "THE NATURAL GAS STORAGE BUSINESS-DESCRIPTION OF
SERVICES" for further discussion of hub services ). Since the Company's
storage customers generally do not utilize 100% of storage and/or
withdrawal and injection capacities at all times, hub services allow the
Company to optimize revenues and operating efficiencies through the use of
unutilized and unsubscribed capacity. Hub services also provide an
opportunity to attract new customers and market longer-term demand-type
storage contracts to these new customers.

o CAPITALIZE ON FAVORABLE EXPANSION ECONOMICS BY SELECTIVELY EXPANDING
CAPACITY. Due to the favorable economics associated with capacity
expansion, the Company evaluates increasing its capacity at its current
facilities when it has leased close to 100% of storage capacity and demand
for additional capacity remains strong. The Company has previously
expanded capacity six times. High rates of return can be achieved on
incremental capacity expansion due to the relatively low capital
expenditures required to add new capacity and deliverability and the
relatively low incremental costs associated with operating this new
capacity. Through the end of 1997, the Company spent approximately $158.4
million to develop 16.0 Bcf of storage capacity, which is approximately
$9.9 million per Bcf. The $16.7 million that was spent in 1998 to increase
working gas capacity by 3.7 Bcf reflects a per Bcf development cost of
approximately $4.5 million. In 1999, the Company is budgeted to spend
approximately $7.2 million to increase working gas capacity by 4.3 Bcf
(for a combined facilities total of 24.0 Bcf), which reflects a per Bcf
development cost of approximately $1.7 million.

o CONTINUE DEVELOPMENT OF INNOVATIVE TECHNOLOGY TO IMPROVE OPERATING
EFFICIENCIES. The Company will continue to focus and develop innovative
technologies to increase operating efficiencies. The use of SMUG (Solution
Mining Under Gas) technology, which allows for the expansion of existing
caverns without interrupting operations, provides the Company with what it
believes are cost and safety advantages.

COMPETITION

The natural gas storage industry is highly competitive. The Company
competes most directly with other independent, stand-alone storage facilities
and interstate pipelines which offer storage services. Additionally, an increase
in competition in the market could arise from new ventures or expanded
operations from existing competitors. Many of the Company's competitors have
capital and other resources far greater than those of the Company. Competitive
factors include (i) the quantity, location and physical flow characteristics of
interconnected pipelines, (ii) the costs, service and rates of the Company's
competitors, (iii) the ability to offer service from multiple locations and (iv)
ancillary services, such as title tracking and electronic bulletin boards.

REGULATION

Various aspects of the transportation, sale and marketing of natural gas
are subject to or affected by extensive federal regulation under the Natural Gas
Act ("NGA"), the Natural Gas Policy Act of 1978 ("NGPA"), the Natural Gas
Wellhead Decontrol Act of 1989 ("Decontrol Act"), regulations promulgated by the
FERC and certain statutes and regulations promulgated as state laws.

9
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NATURAL GAS TRANSMISSION INDUSTRY

Historically, interstate pipeline companies acted as wholesale merchants
by purchasing natural gas from producers, transporting the natural gas from
production areas to markets and reselling that natural gas to local distribution
companies and large end users. Prior to the enactment of the NGPA in 1978 and
the Decontrol Act of 1989, all sales of natural gas for resale in interstate
commerce, including sales by producers, were subject to the rates and service
jurisdiction of the FERC under the NGA and NGPA. However, as a result of the
NGPA and the Decontrol Act, by no later than January 1, 1993 all so-called
"first sales" of natural gas were federally deregulated, thus allowing all types
of sellers, other than pipelines, local distribution companies and their
affiliates, to market their natural gas free from federal controls. Moreover,
pursuant to Section 311 of the NGPA and under Section 7 of the NGA, the FERC
promulgated regulations by which wholly intrastate natural gas pipeline
companies and local distribution companies served by interstate pipelines may
engage in interstate transactions without becoming subject to the FERC's full
rates and service jurisdiction under the NGA. At the same time, however, the
FERC has retained its traditional jurisdiction over the activities of interstate
pipelines. Under the NGA and the NGPA, the transportation and sale of natural
gas by interstate pipeline companies have been subject to extensive regulation,
including rate regulation, regulation of relations with marketing affiliates and
accounting and reporting requirements. In addition, the construction of new
facilities, the extension or modification of existing facilities and the
commencement and cessation of sales or transportation services by interstate
pipeline companies generally have required prior FERC authorization. Such
authorizations can be denied or conditioned to include public interest
protections that may be unfavorable to the interstate pipeline.

Commencing in 1985, the FERC adopted regulatory changes that have
significantly altered the transportation, sale and marketing of natural gas.
These changes were intended to foster competition in the natural gas industry
by, among other things, transforming the primary role of the interstate pipeline
companies from that of wholesale marketers to that of natural gas transporters
and by mandating that interstate pipeline companies provide open and
nondiscriminatory transportation services to all producers, distributors,
marketers and other shippers seeking such services (so-called "open access"
requirements). To provide interstate pipeline companies with the incentive to
revamp their services, the FERC also sought to expedite, for pipeline companies
providing "open access" services, the certification process for new services,
facilities and operations. Throughout the early years of this process, the
FERC's action in these areas were subject to extensive judicial review and
generated significant industry comment and proposals for modification of
existing regulations.

In April 1992, the FERC issued its latest and most comprehensive
restructuring ruling, Order No. 636, a complex regulation that has had a major
impact on natural gas pipeline operations, services and rates. Among other
things, Order No. 636 generally required each interstate pipeline company to
unbundle its traditional wholesale services and make available on an open and
nondiscriminatory basis numerous constituent services (such as gathering
services, storage services and firm and interruptible transportation services)
and to adopt a new rate-marketing methodology to determine appropriate rates for
those services. To the extent the pipeline company or its sales affiliates made
natural gas sales as a merchant in the future, it would do so pursuant to a
blanket sales certificate that placed such entity in direct competition with all
other sellers pursuant to private contracts. However, pipeline companies were
not required by Order No. 636 to remain merchants of natural gas, and many of
the interstate pipeline companies have elected to become transporters only. The
FERC required that each interstate pipeline company, in an individual
restructuring proceeding, set forth in detail its new terms of service in a
filing with the FERC. The FERC and the federal appellate courts have largely
affirmed the significant features of Order No. 636 and the numerous related
orders pertaining to the individual interstate pipeline companies. Nevertheless,
because the FERC continues to review and modify its open access regulations, the
outcome of any such later proceedings and their ultimate impact on the Company's
business is uncertain.

In addition, the FERC has announced its intention to reexamine certain of
its transportation related policies, including the appropriate manner in which
interstate pipelines release transportation capacity under Order No. 636 and,
more recently, the price that firm service shippers can charge for released
capacity. The FERC has also recently requested comments on the financial outlook
of the gas pipeline industry, including, among other matters, whether the FERC's
current ratemaking policies are suitable in the current industry environment.
Finally, the FERC has recently issued a notice of proposed rulemaking to further
standardize pipeline transportation tariffs which, if implemented as proposed,
would adversely affect the reliability of scheduled interruptible service.

REGULATION OF THE COMPANY'S FACILITIES

MOSS BLUFF FACILITY. Certain of the operations of the Moss Bluff facility
are subject to FERC regulation and other of its activities are subject to
regulation by the Texas Railroad Commission ("TRC"). The Moss Bluff facility

10
<PAGE>
is classified by the FERC as a so-called "Hinshaw pipeline", exempt from the
FERC's interstate pipeline rates and service jurisdiction under the NGA. The
Moss Bluff facility is subject to regulation under the utility statutes of Texas
as to its intrastate activity. Under regulations promulgated by the FERC,
Hinshaw pipelines can engage in other interstate transactions by complying with
certain reporting and other regulations applicable to such transactions. In this
regard, the FERC has issued a limited-jurisdiction certificate to Moss Bluff
under Section 7 of the NGA authorizing Moss Bluff to engage in the sale,
transportation (including storage) or assignment of natural gas that is subject
to the FERC's jurisdiction under the NGA to the same extent that intrastate
pipelines are authorized to engage in such activities pursuant to Section 311 of
the NGPA. The FERC has authorized Moss Bluff to charge market-based rates for
its interstate storage and interruptible hub services. Such market-based rate
authorization does not apply to stand-alone transportation service, for which
Moss Bluff would require additional authorization. Further, it is based upon the
FERC's determination, in light of Moss Bluff's and its affiliates' activities
described in its rate application, that Moss Bluff is not able to exercise
market power in the provision of its storage and interruptible hub services.
Such authorization is subject to reexamination in the event there is a
significant future change to Moss Bluff's market power status. Such a change
could include, for example, the addition by Moss Bluff or its affiliates of
significant additional storage capacity or access to significant market area
storage or transportation. Moss Bluff is required to report to the FERC
circumstances that could significantly affect its market power status. Such
market-based rate authorization could be limited or revoked prospectively in the
event of any such change. Pursuant to the Texas Gas Utility Regulatory Act,
intrastate rates are deemed to be just and reasonable and approved by the TRC if
they have been negotiated at arm's length with pipeline companies or large
industrial customers, which is the case with respect to Moss Bluff's rates for
wholly interstate services.

EGAN FACILITY. Egan is an interstate pipeline and storer of natural gas
subject to FERC regulation under the NGA and NGPA. In October 1996, Egan
received a certificate of public convenience and necessity from the FERC for its
storage facility. This certificate grants Egan the authority under Section 7 of
the NGA to own and operate its then-existing facilities and to build a second
salt cavern storage facility at the Egan site. The FERC subsequently authorized
Egan to expand its originally certified facilities. Egan's natural gas storage
and hub services are offered at market-based rates. Egan is the first hub in the
United States with FERC authorization to charge market-based rates for natural
gas hub services. Such market-based rate authorization is, however, based upon
the FERC's determination, in light of Egan's and its affiliates' activities
described in the certificate applications, that Egan is not able to exercise
market power in the provision of its services. Such authorization is subject to
reexamination in the event a significant change occurs to Egan's market power
status; for example, if Egan adds storage capacity or storage caverns beyond the
two caverns contemplated, or an affiliate enters the interstate storage or
transportation business, and Egan is required to report to the FERC any such
future circumstances that could significantly affect its market power status.
Such market-based rate authorization could be limited or revoked prospectively
in the event of any such change.

ENVIRONMENTAL AND SAFETY MATTERS

The Company is subject to environmental risks normally incident to the
operation and construction of pipelines and other facilities for processing,
storing and transporting natural gas and other products, including, but not
limited to, uncontrollable flows of natural gas, fluids and other substances
into the environment, fires, pollution and other environmental and safety risks.
The following is a discussion of certain environmental safety concerns related
to the Company. It is not intended to constitute a complete discussion of the
various federal, state and local statutes, rules, regulations or orders to which
the Company's operations may be subject. For example, the Company, without
regard to fault, could incur liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or state
counterparts, in connection with the disposal or other releases of hazardous
substances. Further, the recent trend in environmental legislation and
regulations is toward stricter standards, and this will likely continue in the
future.

The Company's activities in connection with the operation and construction
of pipelines, injection wells, storage caverns and other facilities for storing
and transporting natural gas and other products are subject to environmental and
safety regulation by federal and state authorities, including, without
limitation, the Texas Natural Resource Conservation Commission ("TNRCC"), the
Louisiana Office of Conservation, the TRC and the Federal Environmental
Protection Agency ("EPA"), which can increase the costs of designing, installing
and operating such facilities. In most instances, the regulatory requirements
relate to the discharge of substances into the environment and include measures
to control water and air pollution.

Environmental law and regulations may require the acquisition of a permit
before certain activities may be conducted by the Company. Further, these laws
and regulations may limit or prohibit activities on certain lands lying within
wilderness areas, wetlands, areas providing habitat for certain species or other
protected areas. The

11
<PAGE>
Company is also subject to other federal, state and local laws covering the
handling, storage or discharge of materials used by the Company, or otherwise
relating to protection of the environment, safety and health.

An example of state environmental regulations affecting the Company is the
Texas Clean Air Act ("TCA Act"), as administered by the TNRCC. The TCA Act
restricts emission of air pollutants from natural gas pipeline facilities, and
the TNRCC may curtail operations not meeting applicable standards. Additionally,
the TRC has the authority to take steps necessary to ensure compliance with
applicable safety regulations through pipeline construction standards and to
issue permits and regulations necessary to prevent environmental pollution by
pipeline operations. These regulations are subject to change from time to time.
The design, construction, operation and maintenance of the Company's natural gas
pipeline facilities are subject to the safety regulations established by the
Secretary of the Department of Transportation pursuant to the Natural Gas
Pipeline Safety Act of 1968, as amended ("1968 Act"), or by state agency
regulations meeting the requirements of the 1968 Act. The Moss Bluff facility is
subject to environmental regulations monitored by the TRC that pertain to
natural gas storage, disposal of salt water, brine pit operations and noxious
emissions.

Management believes the Company has obtained and is in current compliance
with all necessary and material permits and that the Company is in substantial
compliance with applicable material environmental and safety regulations.

INSURANCE

Although it is not fully insured against all environmental, safety and
other risks, the Company maintains insurance coverages it considers appropriate,
including replacement insurance for surface equipment, gas inventory insurance,
business interruption insurance, leaching insurance and general liability
insurance.

EMPLOYEES

As of December 31, 1998, the Company had 38 full-time employees. The
Company is not a party to any collective bargaining agreement and has not
experienced work stoppages or strikes as a result of labor disputes. The Company
considers relations with its employees to be excellent.

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The management structure of the Company is the same as that of MHP and of
its sole general partner, Market Hub Partners, Inc., a Delaware corporation
("MHP GP"). Subsidiaries of PacifiCorp, NIPSCO, DPL and PSEG, each a limited
partner of MHP, own percentages of MHP GP equal to their interests in MHP and
have the right under the Certificate of Incorporation of MHP GP to appoint
representatives to its Board of Directors. MHP GP, through its Board of
Directors and executive officers, controls the management and affairs of MHP.

The management structure for MHP GP, MHP and each of MHP's wholly owned
subsidiaries, including Market Hub Partners Finance, Inc. and Market Hub
Partners Storage, L.P., Moss Bluff Hub Partners, L.P., Egan Hub Partners, L.P.,
and their respective general partners (collectively the "MHP Entities") is
substantially identical, and the directors and executive officers of MHP GP
serve in the same or substantially identical capacities for each of the MHP
Entities.

The following table sets forth certain information with respect to the
managers, directors and executive officers of the MHP Entities:

NAME AGE POSITION
- ---- --- --------
Donald B. Russell.. 51 President and Chief Executive Officer*
David W. Hooker.... 43 Executive Vice President and Chief Operating Officer
Anthony J. Clark... 44 Vice President and Chief Financial Officer
Patrick B. Lorio... 38 Vice President, Business Development
Jack Gatewood...... 48 Vice President, Engineering
Mark Cook.......... 39 Vice President, Sales

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<PAGE>
NAME AGE POSITION
- ---- --- --------
Donald N. Furman..... 41 Director and Chairman of the Board
James K. Abcouwer.... 45 Director
Eileen A. Moran...... 43 Director
M. Scott Jones....... 44 Director
Lon C. Mitchell...... 45 Director
Beth E. Mooney....... 43 Director
Stephen F. Koziar.... 54 Director

* Mr. Russell's employment with the Company ended on December 31, 1998.

DONALD B. RUSSELL served as President and Chief Executive Officer of the
MHP Entities since MHP's inception in December 1994. Mr. Russell's employment
agreement expired on December 31, 1998 and he is no longer an employee of the
Company. Prior to joining MHP, Mr. Russell was the President and Chief Executive
Officer of Vanir Construction Management, Inc., a company he founded in 1981. In
addition, from 1983 through 1993, Mr. Russell served as Executive Vice President
of the Vanir Group Companies, Inc. Mr. Russell has spent 25 years in the field
of construction.

DAVID W. HOOKER is the Executive Vice President and Chief Operating
Officer of the MHP Entities. He has held those positions since November 1997.
Prior to this, Mr. Hooker was Vice President of Operations of MHP. From 1992
through 1994, he worked for TPC in various marketing and business development
capacities. From 1987 to 1992, Mr. Hooker was employed by NICOR, Inc. in various
positions involving natural gas marketing, sales and governmental relations.
Prior to joining NICOR, Inc., he practiced law in Denver, Colorado. Mr. Hooker
has spent 18 years in the energy sector.

ANTHONY J. CLARK is Vice President and Chief Financial Officer of the MHP
Entities. He has held these positions since joining MHP in September 1997. From
1992 to 1996, Mr. Clark was employed by Transfuel, Inc., a wholly owned
subsidiary of Mitsubishi, Inc., serving as Senior Vice President from 1992 to
1993 and as President and Chief Operating Officer from 1993 to 1996. He came to
Transfuel from Norfolk Holdings, Inc., where he held the positions of Senior
Vice President and Chief Financial Officer from 1984 to 1991. Mr. Clark has
spent 23 years in the energy sector.

PATRICK B. LORIO is Vice President of Business Development of the MHP
Entities and has held this position since February 1998. Mr. Lorio came to MHP
from Amoco Exploration and Production Company where he served as Manager of the
Commercial Gas Group in the UK from 1996 to 1998 and Director of Gas Trading
East Region from 1994 to 1996. Mr. Lorio has over 16 years in the energy sector
and has worked in all areas of the natural gas value chain.

JACK GATEWOOD is Vice President of Engineering of the MHP Entities and has
held this position since July 1996. From 1989 through 1996, Mr. Gatewood worked
for TPC, developing and expanding the Moss Bluff and Egan facilities. Prior to
joining TPC, he was project manager for CBS Engineering, where he led design
teams developing offshore oil and gas production in the Gulf of Mexico, the Gulf
of Suez and the South China Sea. Mr. Gatewood has spent 24 years in the energy
sector.

MARK COOK is Vice President of Sales of the MHP Entities and is
responsible for marketing storage services and directing the daily commercial
operations of the Moss Bluff and Egan facilities. He has held this position
since August 1997. He came to MHP in 1995 from TPC, where he worked to develop
interruptible hub services. From 1987 through 1994, Mr. Cook was employed by NGC
Corporation, where he served in various capacities, including as Director of Gas
Accounting. Mr. Cook has spent 15 years in the energy sector.

DONALD N. FURMAN is a director and the Chairman of the Board of the MHP
Entities. He has served in this capacity since May 1997 and is an appointee of
TPC, a subsidiary of PacifiCorp. Since July 1995, Mr. Furman has been President
of PacifiCorp Power Marketing, Inc., PacifiCorp's unregulated marketing
subsidiary, and Vice President of PacifiCorp. Prior to joining PacifiCorp, he
was Senior Vice President of Operations of Citizens Lehman Power L.P. A former
practicing attorney, Mr. Furman has extensive experience in the utility
industry, particularly in bulk power markets and transactions.

JAMES K. ABCOUWER is director of the MHP Entities. He has served in this
capacity since November 1998 and is an appointee of NI Energy Services, Inc., a
subsidiary of NIPSCO Industries, Inc. Mr. Abcouwer is President of NESI and a
senior vice president of NIPSCO Industries.

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<PAGE>
EILEEN A. MORAN is a director of the MHP Entities. She has served in this
capacity since the formation of MHP in 1994 and is an appointee of PSRC Del.,
Inc. ("PSRC"), a subsidiary of PSEG. Ms. Moran has served as President and Chief
Executive Officer of PSRC, which is a subsidiary of New Jersey public utility,
Public Service Electric & Gas Company, since May 1990.

M. SCOTT JONES is a director of the MHP Entities. He has served in this
capacity since November 1997 and is an appointee of TPC, a subsidiary of
PacifiCorp. Mr. Jones is TPC's Vice President of Financial Restructuring. He
joined TPC in 1992 as Vice President, General Counsel and Secretary. Prior to
joining TPC, he was a shareholder of the Houston law firm of Dickerson,
Carmouche & Jones.

LON C. MITCHELL is a director of the MHP Entities. He has served in this
capacity since March 1998 and is an appointee of TPC, a subsidiary of
PacifiCorp. Mr. Mitchell has been the Assistant Controller of PacifiCorp since
1996. In 1994 and 1995, he served as a financial consultant. From 1990 through
1993, Mr. Mitchell served as the Vice President and Controller of NERCO Oil &
Gas, a former subsidiary of PacifiCorp. Prior to joining PacifiCorp in 1990, Mr.
Mitchell held various finance and accounting positions with Pennzoil Company.

BETH E. MOONEY is a director of the MHP Entities. She has served in this
capacity since December 1998 and is an appointee of DPL. Ms. Mooney was
appointed Executive Vice President and Chief Operating Officer of DPL Inc. in
May 1998. Prior to joining DPL Inc., Ms. Mooney served as President and CEO of
Bank One, Dayton, Ohio and Bank One, Akron, Ohio.

STEPHEN F. KOZIAR is a director of the MHP Entities. He has served in this
capacity since December 1998 and is an appointee of DPL. Mr. Koziar has been the
Group Vice President of DPL Inc. and the Dayton Power and Light Company since
1986.

14
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
MARKET HUB PARTNERS STORAGE, L.P
Report of Independent Auditors (Deloitte & Touche, L.L.P.).......................... 24
Report of Independent Auditors (Arthur Andersen, L.L.P.)............................ 25
Consolidated Balance Sheets as of December 31, 1998 and 1997........................ 26
Consolidated Statements of Operations for the three years ended December 31, 1998... 27
Consolidated Statements of Cash Flows for the three years ended December 31, 1998... 28
Statement of Partners' Capital for the three years ended December 31, 1998.......... 29
Notes to Consolidated Financial Statements.......................................... 30

MARKET HUB PARTNERS FINANCE, INC.
Report of Independent Auditors (Deloitte & Touche, L.L.P.).......................... 38
Balance Sheet as of December 31, 1998............................................... 39

MARKET HUB PARTNERS STORAGE, L.L.C.
Report of Independent Auditors (Deloitte & Touche, L.L.P.).......................... 40
Balance Sheet as of December 31, 1998............................................... 41
</TABLE>

15
<PAGE>
INDEPENDENT AUDITORS' REPORT

Market Hub Partners Storage, L.P.

We have audited the accompanying consolidated balance sheets of Market Hub
Partners Storage, L.P. and subsidiaries (the "Company"), a Delaware Limited
Partnership, as of December 31, 1998 and 1997 and the related consolidated
statement of operations, partners' capital and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The consolidated financial statements give
retroactive effect to the formation of Market Hub Partners Storage, L.P., which
has been accounted for in a manner similar to a pooling of interests as
described in Note 1 to the consolidated financial statements. For the year ended
December 31, 1996, the combined statements were audited by other auditors whose
report, dated February 5, 1998, expressed an unqualified opinion on these
combined financial statements.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 1998 and 1997 financial statements present fairly, in all
material respects, the consolidated financial position of the Company at
December 31, 1998 and December 31, 1997, and the results of its consolidated
operations and its consolidated cash flows for the years then ended in
conformity with generally accepted accounting principles.

As described in Note 1, the financial statements of the Company as of December
31, 1998 and 1997 and for each of the three years in the period ended December
31, 1998 have been restated as if the formation of the Company had occurred at
the beginning of the earliest period presented. In our opinion, such restatement
is appropriate and has been properly reflected in the accompanying financial
statements.

DELOITTE & TOUCHE LLP

Houston, Texas
January 29, 1999

16
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and Partners of Market Hub Partners, L.P.:

We have audited the accompanying combined statements of operations, capital and
cash flows of Moss Bluff Hub Partners, L.P. (Moss Bluff) and Egan Hub Partners,
L.P. (Egan) (see Note 1) for the year ended December 31, 1996. These combined
financial statements are the responsibility of the management of Market Hub
Partners. Our responsibility is to express an opinion on these combined
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the combined financial statements. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall combined financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects the combined results of operations, capital and
cash flows of Moss Bluff and Egan for the year ended December 31, 1996 in
conformity with generally accepted accounting principles.

ARTHUR ANDERSEN LLP

Houston, Texas
February 5, 1998

17
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
ASSETS 1998 1997
--------- ---------
<S> <C> <C>
Current Assets:
Cash and cash equivalents ............................ $ 19,592 $ 2,153
Accounts and notes receivable .................... 12,453 3,418
Other current assets ................................ 74 5
--------- ---------
Total Current Assets ..................... 32,119 5,576
--------- ---------
Property and Equipment:
Natural gas storage facilities ..................... 173,692 138,617
Construction in progress ........................... 12,290 21,778
Less accumulated depreciation ............. (16,148) (10,391)
--------- ---------
Net Property and Equipment ............. 169,834 150,004
Other assets and restricted cash ................... 4,287 4,307
--------- ---------
Total Assets .......................... $ 206,240 $ 159,887
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Current portion of long-term debt ................... $ -- $ 4,449
Accounts payable:
Trade and other ................................ 1,483 406
Partners and affiliates ........................ -- 943
Accrued liabilities ................................. 8,644 5,133
--------- ---------
Total Current Liabilities ................ 10,127 10,931
--------- ---------
Long - term debt, net of current portion ............. 115,000 49,043
Commitments and Contingencies (see Note 8)
Partners' Capital ...................................... 81,113 99,913
--------- ---------
Total Liabilities and Partner's Capital $ 206,240 $ 159,887
========= =========
</TABLE>

See Notes to Consolidated Financial Statements

18
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)

CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
1998 1997 1996
-------- ------- --------
<S> <C> <C> <C>
Revenues:
Salt cavern storage revenues ........................ $ 29,008 $23,743 $ 15,539
Hub services revenues ............................... 3,146 3,743 3,047
-------- ------- --------
Total revenues .............................. 32,154 27,486 18,586
-------- ------- --------
Operating expenses:
Operations and maintenance .......................... 2,549 2,196 1,812
Plant administrative ................................ 353 2,829 1,833
Property taxes ...................................... 950 810 344
Royalty payments .................................... 136 203 138
General and administrative .......................... 3,237 2,798 2,094
Depreciation and amortization ....................... 6,020 5,095 3,950
-------- ------- --------
Total operating expenses ............... 13,245 13,931 10,171
-------- ------- --------
Operating income ............... 18,909 13,555 8,415

Interest expense ...................................... 7,557 3,605 2,544
Interest income ....................................... 1,667 99 139
-------- ------- --------
Net income before extraordinary item .................. 13,019 10,049 6,010

Extraordinary loss on early extinguishment of debt (6,702) -- (452)
-------- ------- --------
Net income ........................................... $ 6,317 $10,049 $ 5,558
======== ======= ========
</TABLE>

See Notes to Consolidated Financial Statements

19
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income ......................................................... $ 6,317 $ 10,049 $ 5,558

Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization ................................ 6,020 5,095 3,950
Extraordinary loss on early extinguishment of debt ........... 6,702 -- 452

Change in assets and liabilities:
Increase in accounts receivable ................................ (4,035) (324) (1,604)
Decrease (increase) in other current assets .................... (69) 236 130
Decrease (increase) in other assets and restricted cash ........ 90 (1,366) 1,011
Increase (decrease) in trade payables and accrued liabilities .. 4,588 3,959 (4,208)
Increase (decrease) in payable to partners, affiliates and other (943) 419 (489)
Other .......................................................... -- -- 649
--------- -------- --------
Net cash provided by operating activities ...................... 18,670 18,068 5,449
--------- -------- --------
Cash Flows from Investing Activities:
Capital expenditures ............................................... (26,950) (29,785) (37,855)
Proceeds from the sale of property, plant and equipment ............ 1,362 -- --
Issuance note to Tioga Project ..................................... (5,000) -- --
--------- -------- --------
Net cash used in investing activities .............................. (30,588) (29,785) (37,855)
--------- -------- --------
Cash Flows from Financing Activities:
Issuance of long-term debt (net of expenses of $4,061 and $1,141
in 1998 and 1996, respectively) .................................. 110,939 -- 58,859
Repayments of long-term debt ........................................ (53,492) (4,200) (20,455)
Extraordinary loss on early extinguishment of debt .................. (5,057) -- (452)
Receipt of restricted cash .......................................... 2,084 -- --
Capital contribution from partners .................................. -- 17,744 --
Capital distribution to partners .................................... (25,117) -- (6,065)
--------- -------- --------
Net cash provided by financing activities ................ 29,357 13,544 31,887
--------- -------- --------
Net increase (decrease) in cash and cash equivalents ................ 17,439 1,827 (519)
Cash and cash equivalents at beginning of period .................... 2,153 326 845
--------- -------- --------
Cash and cash equivalents at end of period .......................... $ 19,592 $ 2,153 $ 326
========= ======== ========

Supplementary Non-Cash Investing and Financing Activities:
Non-Cash Capital Contribution ....................................... $ -- $ 3,633 $ --

Non-cash effect of acquisition (see Note 1)
Current assets ...................................................... $ -- $ -- $ 2,250
Other assets ........................................................ -- -- 706
Property, plant and equipment ....................................... -- -- 6,435
Current liabilities (excluding current maturities of long-term debt) -- -- (1,058)
Current portion of long term debt ................................... -- -- (1,500)
Long term debt ...................................................... -- -- (6,833)
</TABLE>

See Notes to Consolidated Financial Statements

20
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)

STATEMENT OF PARTNERS' CAPITAL
(IN THOUSANDS)

Year Ended December 31,
1998 1997 1996
-------- ------- --------
Partner Contributions (Distributions) ........ $(25,117) $21,377 $ (6,065)
Net Income ................................... 6,317 10,049 5,558
-------- ------- --------
Net Increase (Decrease) in Capital ........... (18,800) 31,426 (507)
Partners' Capital Balance, Beginning of Period 99,913 68,487 68,994
-------- ------- --------
Partners' Capital Balance, End of Period ..... $ 81,113 $99,913 $ 68,487
======== ======= ========

See Notes to Consolidated Financial Statements

21
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
(A DELAWARE LIMITED PARTNERSHIP)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS, UNLESS OTHERWISE NOTED)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Market Hub Partners Storage, L.P. (the "Company") was formed on December
31, 1997 as a Delaware limited partnership. The Company is wholly owned by
Market Hub Partners, L.P. ("MHP") through its direct 99.99% limited partner
interest and its subsidiary's, Market Hub Partners Storage, L.L.C., .01% general
partner interest. MHP is owned by TPC Corporation ("TPC"), a wholly owned
subsidiary of PacifiCorp, and subsidiaries of NIPSCO Industries, Inc.
("NIPSCO"), DPL Inc. ("DPL"), and Public Service Enterprise Group, Inc. The
Company conducts operations through its wholly owned subsidiaries, Moss Bluff
Hub Partners, L.P. ("Moss Bluff") and Egan Hub Partners, L.P. ("Egan"). On
January 30, 1998, the Company formed Market Hub Partners Finance, Inc. as a
wholly owned subsidiary.

Prior to formation of the Company, Moss Bluff and Egan were owned by MHP.
Upon formation of the Company, MHP contributed its ownership of Moss Bluff and
Egan to the Company as a capital contribution. The consolidated financial
statements give retroactive effect to the formation of Market Hub Partners
Storage, L.P., which has been accounted for in a manner similar to a pooling of
interests.

The Company owns and operates natural gas market hubs near Houston, Texas
and in Acadia Parish, Louisiana, which provide producers, end-users, local
distribution companies, pipelines and natural gas marketers with "unbundled"
high deliverability storage services, cash market trading, real time title
tracking and other hub services. The Company's revenue, profitability and future
rate of growth are substantially dependent upon the supply and demand for
natural gas, the pace of natural gas industry deregulation at both the federal
and state levels, and the current and future positions regarding expiration of
customer contractual commitments for both firm transportation and storage
services. Such factors are largely beyond the Company's control.

The Moss Bluff facility, which is located in Liberty and Chambers Counties
near Houston, Texas, began operations in 1990, prior to TPC's formation of MHP
in December 1994. Through July 3, 1996, Moss Bluff Gas Storage Systems ("MBGSS")
was the partnership that owned the facility, with MHP having a 50% partnership
interest in MBGSS. On July 3, 1996, MHP was transferred the 50% remaining
partnership interest in MBGSS owned by CMS Energy Corporation ("CMS") for,
principally, a net cash payment of approximately $26.6 million and the
assumption of liabilities of approximately $6.4 million. Financing for this
transaction was provided through the issuance of $60 million of senior secured
notes by MHP in a private placement offering (see Note 6). MBGSS was effectively
dissolved upon the transfer of CMS's partnership interest to MHP. CMS had
acquired its interest in MBGSS in March of 1994. Due to certain options
associated with that arrangement, the transaction was accounted for by TPC as a
financing. TPC and CMS canceled their respective options to facilitate
completion of the transfer. Upon formation of the Company in December 1997, MHP
contributed its ownership of Moss Bluff to the Company as a capital
contribution.

The results of operations related to the additional 50% interest
transferred are reflected in the accompanying statements of operations since
July 3, 1996. As part of the transaction, the Company assumed net liabilities
totaling approximately $6.4 million. Had the transfer occurred on January 1,
1996, the Company would have had revenues of approximately $21.2 million and net
income of $6.4 million for 1996.

22
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRESENTATION AND PRINCIPLES OF CONSOLIDATION - The accompanying financial
statements include the consolidated financial statements of the Company and its
wholly owned subsidiaries. All intercompany transactions and balances among such
subsidiaries have been eliminated.

CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of demand
deposits and highly liquid investments purchased with an original maturity of
three months or less.

CONCENTRATION OF CREDIT RISK - Financial instruments that potentially
subject the Company to concentration of credit risk consist primarily of
temporary cash investments and trade receivables derived principally from
uncollateralized sales to customers in the pipeline and natural gas utility
industries. The concentration of credit risk in these industries affects the
Company's overall exposure to credit risk because customers may be similarly
affected by changes in economic and other conditions.

PROPERTY AND EQUIPMENT - Depreciation of storage facilities and equipment
is provided using the straight-line method over estimated useful lives of the
assets ranging from fifteen to thirty years. Additions, renewals, and
betterments that materially add to productive capacity or extend the life of an
asset are capitalized. Construction in progress represents costs related to the
ongoing expansion of natural gas storage facilities and are transferred to
natural gas storage facilities and depreciation commenced once such expansion
projects are complete and operational. Expenditures for routine maintenance,
repairs and renewal costs are expensed as incurred.

Interest is capitalized during the construction period of major facilities
and amounted to approximately $1.4 million, $1.1 million and $0.4 million in the
years ended December 31, 1998, 1997 and 1996, respectively.

In 1996, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of". Since adoption, SFAS No.
121 has had no impact on the Company's financial statements.

OTHER ASSETS - Other assets consist primarily of deferred financing fees
and restricted cash. The deferred financing fees include legal, placement agency
and other services and are being amortized on a straight-line basis over the
lives of the underlying loan. Restricted cash represents a cash balance that was
required to be maintained under the terms of the Company's secured notes which
were repaid using the proceeds from the Senior Unsecured Notes (see Note 6).

REVENUE RECOGNITION - Salt cavern storage revenues consist of demand
charges for the reservation of storage space or the use of injection and
withdrawal facilities and usage fees for the actual use of storage space or
injection and withdrawal facilities. Demand fees are recognized as revenue over
the term of the related storage agreement while usage fees and hub services
revenues, which consist of a variety of other storage injection and withdrawal
services, are recognized as the services are performed.

INCOME TAXES - The Company is a limited partnership and the applicable tax
liability or benefit is the responsibility of the individual general or limited
partners. The Company's wholly owned subsidiary, Market Hub Partners Finance,
Inc., had no tax liability at the end of 1998 or 1997.

USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and disclosure of contingent
assets and liabilities and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Significant estimates with regard to these financial statements relate primarily
to the depreciable lives of property and equipment.

RECLASSIFICATIONS - Certain amounts from the previous years have been
reclassified to conform to the current year presentation of the financial
statements. Such reclassifications did not affect earnings.

NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 130, "REPORTING COMPREHENSIVE INCOME",
which establishes standards for reporting and

23
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

displaying comprehensive income and its components. SFAS No. 130 was effective
for periods beginning after December 15, 1997. The adoption of SFAS No. 130 did
not impact the Company's financial statements.

In June 1998, the FASB issued SFAS No. 133, "ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES", which is effective for the Company's year
ending December 31, 2000. This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The Company will be
analyzing SFAS No. 133 to determine what, if any, impact or additional
disclosure requirements this pronouncement will have.

NOTE 3. NOTES RECEIVABLE

Included in the accounts and notes receivable balance at December 31,
1998, is a $5.0 million loan, payable upon demand, bearing interest at prime
plus 2%, issued by the Company during 1998 to a wholly-owned subsidiary of MHP.
The loan was used to fund a portion of the pre-construction expenditures
associated with a development project in Tioga County, Pennsylvania. The Company
expects that the loan will be repaid when financing is secured for the Tioga
project.

NOTE 4. FINANCIAL INSTRUMENTS AND OFF BALANCE SHEET RISK

The carrying value of the Company's financial instruments, consisting of
cash and cash equivalents, and trade receivables and payables, approximates the
fair value of these instruments at December 31, 1998 and 1997.

The fair value of long-term debt is estimated using discounted cash flow
analysis, based on the borrowing rate currently available to the Company for
loans with similar terms and maturities. The fair value of such debt was
approximately $104.1 million and $52.6 million at December 31, 1998 and 1997,
respectively, the carrying value of which was $ 115.0 million and $53.5 million,
respectively.

NOTE 5. PROPERTY, PLANT & EQUIPMENT

A summary of property, plant and equipment is provided in the chart below:

1998 1997
-------- --------
Natural gas storage
facilities ................................ $171,219 $136,144
Land ....................................... 2,473 2,473
Construction in progress ................... 12,290 21,778
-------- --------
Total ................................ $185,982 $160,395
======== ========

Depreciation expense was approximately $5.8 million, $4.9 million and $3.9
million for the years ended December 31, 1998, 1997 and 1996, respectively.

NOTE 6. LONG-TERM AND OTHER DEBT

The following chart sets forth certain terms with respect to long-term
obligations owed by the Company, which are also discussed in the paragraphs
following the chart:

December 31,
-------------------
1998 1997
-------- --------
Senior Unsecured Notes, 8.25%, due March 2008 ........... $115,000 $ --
New Credit Facility, $20.0 million, at prime rate or
the London Interbank Rate + 2%, expires December 2000 .. -- --
Secured Notes, $60.0 million, 8.10% ..................... -- 53,492
-------- --------
115,000 53,492
-------- --------
Less current portion .................................... -- (4,449)
-------- --------
Long-term debt, net of current portion .................. $115,000 $ 49,043
======== ========

24
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

SENIOR UNSECURED NOTES - In March 1998, the Company completed the sale of
$115 million in 8.25% senior unsecured notes due 2008 (the "Senior Unsecured
Notes"). The net proceeds from the sale were approximately $110.9 million.
Proceeds of the placement have been used by the Company to repay the outstanding
principal amount, $53.5 million, of 8.10% secured indebtedness, with accrued
interest of $758,000 and prepayment penalties of $5.1 million, and to pay a
distribution to MHP in the amount of $17.6 million, which was subsequently used
by MHP to repay debt owed by MHP to its partners. In addition, the Company
loaned approximately $5.0 million of the net proceeds, at a rate of prime plus
2%, to a subsidiary of MHP to develop another project (see Note 3).

As a result of the repayment of the Secured Notes, the Company recorded a
$6.7 million extraordinary loss. Approximately $5.1 million of the extraordinary
loss was a prepayment penalty made to holders of the Secured Notes and $1.6
million was a write-off on unamortized deferred financing costs associated with
the Secured Notes. In addition, $2.1 million of restricted cash was made
available to the Company. Subsequent to the Senior Unsecured Notes issuance, the
Company completed an offering to exchange all of the outstanding Senior
Unsecured Notes for newly issued notes. The new notes have been registered with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, but are otherwise substantially the same in all material respects to
the Senior Unsecured Notes surrendered for exchange.

If various conditions are met under the indenture governing the Senior
Unsecured Notes (the "Indenture"), the Company may make certain distributions.
As permitted by the Indenture, the Company distributed $2.5 million to MHP in
1998. In addition, the Indenture allows the Company to make permitted
distributions not to exceed, in the aggregate, 35% of net income before
extraordinary item for any period, as well as restricted payments not to exceed,
in the aggregate, 50% of the difference between net income for the period
beginning on January 1, 1998 and ending on the last day of the Company's last
fiscal quarter for which quarterly or annual consolidated financial statements
are available next preceding the date the restricted payment is made and the
permitted distribution amount for that same period. In December 1998, the
Company paid a $2.9 million permitted distribution and a restricted payment of
$2.1 million to MHP.

REVOLVING CREDIT FACILITY. Pursuant to the indenture in the Senior
Unsecured Notes, the Company is allowed to execute a revolving credit facility.
In April 1998, the Company executed a credit facility (the "Credit Facility")
with Bank One, Texas, N.A. that expires December 2000. The Credit Facility
provides for revolving credit borrowings up to $20.0 million in the aggregate at
any time. Borrowings under the credit facility will bear interest at a rate per
annum, at the Company's option, equal to: (i) the bank's prime rate or (ii) the
London Interbank Offered Rate plus 2%. The Credit Facility is secured by
substantially all the assets of the Company and includes certain covenants
applicable to the Company, including requirements that the Company comply with
certain financial ratios. The Company has not made any Credit Facility
borrowings as of December 31, 1998, and was in compliance with the terms of the
Credit Facility at the end of 1998.

During the years ended December 31, 1998, 1997 and 1996, the Company paid
interest, net of amounts capitalized, of approximately $4.1 million, $3.4
million and $2.8 million, respectively.

NOTE 7. RELATED PARTY TRANSACTIONS

STORAGE SERVICE CONTRACTS

The Company is party to storage service contracts with several of MHP's
limited partners and their affiliates. Certain summary information with respect
to these contracts is provided below:

TPC CORPORATION. Pursuant to two contracts for gas storage services at
each of the Moss Bluff and Egan facilities, TPC paid the Company an aggregate of
approximately $3,618, $3,733 and $2,914 in 1998, 1997 and 1996, respectively.
The contracts related to services at the Moss Bluff facility both terminate in
April 2002. At Egan, one of the contracts for services terminated in April 1998,
while the other will expire in April 2006. Included in accounts receivable are
balances due from TPC of $550 and $300 at December 31, 1998 and 1997,
respectively.

25
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NORTHERN INDIANA PUBLIC SERVICE COMPANY ("NIPSCO"). The Company performs
storage services under long-term demand contracts as well as various other hub
services for NIPSCO. Under the provisions of the contracts, NIPSCO reimburses
the Company for a portion of the property taxes incurred by the Company, which
totaled approximately $297, $265 and $345 for the years ended December 31, 1998,
1997 and 1996, respectively. Revenues recognized by the Company in relation to
the services performed for NIPSCO pursuant to storage contracts, as well as
revenue from hub services, at both the Moss Bluff and Egan facilities totaled
$8,711, $8,769 and $7,179 in 1998, 1997 and 1996, respectively. NIPSCO's
contract with Moss Bluff terminates in April 2013. The agreement for services at
the Egan facility has a primary term expiring in April 2016 but may be
terminated by NIPSCO effective April 2006 with 12 months notice. Included in
accounts receivable are balances due from NIPSCO of $725 and $988 at December
31, 1998 and 1997, respectively.

DAYTON POWER AND LIGHT. The Company performs storage services under
long-term demand contracts as well as various other hub services for DPL and its
subsidiaries. Revenues recognized by the Company in relation to such services
were approximately $1,008, $406 and $218 in 1998, 1997 and 1996, respectively.
There are two long-term demand contracts for DPL and its subsidiaries at the
Company's Egan facility with termination dates of March 1999 and September 2000.
Included in accounts receivable are balances due from DPL and its subsidiaries
of approximately $97 and $63 at December 31, 1998 and 1997, respectively.

The following chart sets forth terms with respect to firm storage capacity
based on the Company's agreements with its related-party customers at December
31, 1998:

MOSS BLUFF FACILITY

CAPACITY LEASED
CUSTOMER (FIRM DEMAND CONTRACTS ONLY) TERMINATION DATE (IN MMCF)
- ------------------------------------ ---------------- ---------
NIPSCO ......................................... April 2014 4,000
TPC (PacifiCorp) ............................... April 2002 600
TPC (PacifiCorp) ............................... April 2002 500
---------
MOSS BLUFF TOTAL ......................... 5,100
=========

EGAN FACILITY

CAPACITY LEASED
CUSTOMER (FIRM DEMAND CONTRACTS ONLY) TERMINATION DATE (IN MMCF)
- ------------------------------------ ---------------- ---------
NIPSCO (1) ..................................... April 2016 1,500
The Dayton Power & Light Company (DPL, Inc.) ... September 2000 565
TPC (PacifiCorp) ............................... April 2006 500
Miami Valley Resources, Inc. (a DPL subsidiary) March 1999 100
---------
EGAN TOTAL ............................... 2,665
=========
CONSOLIDATED RELATED-PARTY LEASED CAPACITY
(FIRM DEMAND CONTRACTS ONLY) ............. 7,765
=========

(1) This contract has a primary term expiring April 1, 2016 but may be
terminated by the customer effective April 1, 2006 on 12 months' notice.

SERVICE AGREEMENTS

TPC administered the payroll and related benefits on MHP's behalf from its
formation through December 31, 1997. These charges were directly charged to MHP
based on actual time, salaries of such personnel responsible for field
operations and day-to-day management of the Company. Other indirect general and
administrative expenses incurred by the Company related to legal, office rent,
supplies and other miscellaneous indirect charges were paid by the Company.
Salaries and related benefits for the Company were $3,485 and $2,668

26
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

for 1997 and 1996 , respectively. In addition, TPC under management services
agreements provided administrative services (financial, human resources and
support) for the Company. Management services agreements charges were $796, and
$461 for 1997 and 1996, respectively. Management of the Company believes the
allocation methods used were reasonable, and such costs of the Company, on a
stand alone basis, would not have been materially different from those allocated
by TPC. Contracts covering a portion of such services were cancelled by mutual
agreement between TPC and MHP effective July 1, 1996, and the TPC employees who
were previously involved in providing these services to the Company became
employees of the Company at that date. As of December 31, 1997 and 1996, the
Company had an outstanding accounts payable balance to TPC of $943 and $524,
respectively, which primarily relates to the cancelled agreements. All services
provided by TPC to MHP have been allocated to the Company as it is the only
operating subsidiary, of MHP. These amounts are included in operating and
general and administrative expenses in the consolidated statements of
operations. All of the contracts for services rendered by TPC were terminated as
of December 31,1997.

During the years ended December 31, 1997 and 1996, substantially all
employees of the Company were eligible to participate in TPC's defined
contribution 401(k) plan. The Company's matching contributions to the plan for
all such years are included in the aggregate charges for contractual services
provided by TPC.

NOTE 8. COMMITMENTS AND CONTINGENCIES

LEASES - Effective December 1, 1997, MHP began leasing its main office
space in Houston, Texas from a third party. Prior to this time, the Company
occupied office space in Houston, Texas leased by a TPC subsidiary from a third
party. MHP's total office lease expenses for the years ended December 31, 1998,
1997 and 1996 were $176, $128 and $62, respectively. All such lease expense
costs for MHP are included in the financial statements of the Company because it
is the only operating subsidiary of MHP. Future minimum rental payments required
to be made by MHP under the Houston, Texas office are as follows:

AMOUNT
------
1999 ....................................... $ 123
2000 ....................................... 124
2001 ....................................... 131
2002 ....................................... 120
2003 ....................................... 0
Thereafter ................................. 0
------
Total minimum payments required ...... $ 498
======

NOTE 9. SIGNIFICANT CUSTOMERS

SIGNIFICANT CUSTOMERS - Significant customers are those which individually
account for more than 10% of the Company's combined revenues. For the year ended
December 31, 1998, NIPSCO, TPC and Aquila accounted for approximately 27%, 11%
and 10%, respectively, of the Company's total revenues. For the year ended
December 31, 1997, NIPSCO, TPC and Channel Industries Gas Company ("Channel")
accounted for approximately 32%, 14% and 10%, respectively, of the Company's
total revenues. For the year ended December 31, 1996, NIPSCO, TPC, East Ohio Gas
Company and Channel accounted for approximately 39%, 15%, 12% and 11%,
respectively, of the Company's total revenues.

27
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

NOTE 10. EMPLOYEE BENEFITS PLAN

The Company has adopted a 401(k) savings plan (the "Plan") for all of its
employees effective January 1, 1998. Participation in the Plan is optional.
Employees are immediately eligible for participation in the Plan on the date
they are hired. Employer contributions are equal to 50% of employee
contributions up to 6% of participant's elected annual salary deferral
contributions subject to certain limitations. Participants vest in Company
contributions over a four year period, 0% in the first year, and 33% in each of
the three years thereafter. In 1998, the Company contributed $58 on behalf of
Plan participants.

NOTE 11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Results of operations by quarters for the years ended December 31, 1998
and 1997 are set forth in the following table:
<TABLE>
<CAPTION>
QUARTER ENDED
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
----------- ------------ ------- --------
<S> <C> <C> <C> <C>
1998
Revenues ......................... $ 9,719 $ 7,925 $ 6,862 $ 7,648
Operating income ................. 6,010 4,775 3,588 4,536
Income before extraordinary
item ............................ 4,163 3,099 2,047 3,710
Net Income (loss) ................ 4,163 3,099 2,047 (2,992)
=========== ============ ======= ========
Working gas capacity (Bcf) ...... 19.7 19.6 17.9 17.2
Leased gas capacity (Bcf)
(excludes secondary firm) ....... 19.2 19.0 17.4 14.9
1997
Revenues ......................... $ 8,792 $ 6,550 $ 6,118 $ 6,026
Operating income ................. 3,856 3,552 3,096 3,051
Net income ....................... 3,246 2,732 2,100 1,971
=========== ============ ======= ========
Working gas capacity (Bcf) ...... 16.0 15.3 14.2 12.9
Leased gas capacity (Bcf)
(excludes secondary firm) ....... 14.9 14.7 13.5 12.5
</TABLE>

NOTE 12. SUBSEQUENT EVENTS

In February 1999, NIPSCO announced that its subsidiary, NI Energy
Services, Inc., had agreed to purchase TPC, including TPC's 66% interest in MHP,
from PacifiCorp. If the purchase is consummated, subsidiaries of NIPSCO will own
approximately 77.3% of MHP. NIPSCO has indicated that it expects to close the
transaction with PacifiCorp in the first or second quarter of 1999. In addition,
the sale may constitute a "change of control" of the Company under the Company's
employment agreements with its executive officers and certain other key
employees (the "Executive Employment Agreements").

Upon a change of control under the Executive Employment Agreements,
Messrs. Hooker, Clark, Cook, Lorio and Gatewood shall receive an amount equal to
2.0%, 1.25%, 1.25%, 1.0% and 1.0%, respectively, of the increase in value of the
Company from January 1, 1998 to the date the change of control occurs,
calculated pursuant to the Executive Employment Agreements.

LITIGATION

In November 1998, the Company's Board of Directors elected not to renew
the employment contract of Donald B. Russell, President and Chief Executive
Officer of the MHP, which expired December 31, 1998. On December 22, 1998, Mr.
Russell filed a lawsuit against the Company, TPC, PacifiCorp, and two of the
Company's directors, Donald N. Furman and M. Scott Jones, in the 165th Judicial
District Court, Harris County, Texas. Mr. Russell alleges he is due additional
compensation under the terms of his one-year 1998 Employment

28
<PAGE>
MARKET HUB PARTNERS STORAGE, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Agreement and his 1998 Contingency Payment Agreement, which, along with an
additional agreement (collectively, the "1998 Agreements"), Mr. Russell had
entered to resolve disputes relating to incentive compensation allegedly due him
under the terms of his 1995 Employment Agreement. Mr. Russell seeks incentive
compensation of $9 million he alleges he was due under his 1995 Employment
Agreement, prejudgment interest and punitive damages. The Company intends to
vigorously defend Mr. Russell's claims to additional compensation under the 1998
and 1995 Agreements. The Company is unable to assess the likelihood of an
unfavorable outcome or to estimate the amount or range of any possible loss to
the Company. The Company believes an adverse outcome of this litigation will not
have a material adverse effect on the financial position or cash flow of the
Company.

29
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Market Hub Partners Finance, Inc.

We have audited the accompanying balance sheets of Market Hub Partners Finance,
Inc. (a wholly owned subsidiary of Market Hub Partners Storage, L.P.) as of
December 31 and March 31, 1998. These balance sheets are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
balance sheets based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheets are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheets. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for an opinion.

In our opinion, the balance sheets referred to above present fairly, in all
material respects, the financial position of Market Hub Partners Finance, Inc.
as of December 31 and March 31, 1998 in conformity with generally accepted
accounting principles.

DELOITTE & TOUCHE, L.L.P.

Houston, Texas
January 29, 1999

30
<PAGE>
MARKET HUB PARTNERS FINANCE, INC.
(A WHOLLY OWNED SUBSIDIARY OF MARKET HUB PARTNERS STORAGE, L.P.)

BALANCE SHEET

December 31, March 31,
1998 1998
------------ ---------
Assets ............................................ $ 0 $ 0
============ =========

Stockholder's Equity
Common stock, $.01 par value; 1,000 shares
authorized, issued and outstanding ........ $ 10 $ 10
Additional paid-in capital .................. 990 990
Contributions receivable from Market Hub
Partners, L.P. ............................ (1,000) (1,000)
------------ ---------
Total Stockholder's Equity ............ $ 0 $ 0
============ =========

Note:

Market Hub Partners Finance, Inc. ("Finance") was formed on January 30,
1998 as a wholly-owned subsidiary of Market Hub Partners Storage, L.P. ("the
Company") and was co-issuer with the Company of the $115.0 million in senior
unsecured notes issued in March 1998. The statements of operations, cash flows
and changes in stockholder's equity have not been presented because Finance has
not conducted any operations since its formation.

31
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Market Hub Partners Storage, L.L.C.

We have audited the accompanying balance sheets of Market Hub Partners Storage,
L.L.C. (a wholly owned subsidiary of Market Hub Partners Storage, L.P.) as of
December 31 and March 31, 1998. These balance sheets are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
balance sheets based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheets are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheets. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for an opinion.

In our opinion, the balance sheets referred to above present fairly, in all
material respects, the financial position of Market Hub Partners Storage, L.L.C.
as of December 31 and March, 1998 in conformity with generally accepted
accounting principles.

DELOITTE & TOUCHE, L.L.P.

Houston, Texas
January 29, 1999

32
<PAGE>
MARKET HUB PARTNERS STORAGE, L.L.C.
(A WHOLLY OWNED SUBSIDIARY OF MARKET HUB PARTNERS, L.P.)

BALANCE SHEET

December 31, March 31,
1998 1998
------------ ---------
Assets- General partner investment in Market Hub
Partners Storage, L.P. ............ $ 10,000 $ 10,000
============ =========

Member's Equity ................................ $ 10,000 $ 10,000
============ =========

Note:

Market Hub Partners Storage, L.L.C. ("Storage L.L.C."), formed on December
31, 1997, is a wholly-owned subsidiary of Market Hub Partners, L.P. and owns a
.01% general partner interest in Market Hub Partners Storage, L.P. ("the
Company"). The statements of operations, cash flow and changes in member's
equity have not been presented because Storage L.L.C. has not had operations
other than the equity earnings of the Company, which were deemed immaterial for
the year ended December 31, 1998.

33
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth certain summary information concerning the
compensation paid during the two years ended December 31, 1998 and 1997, to the
Company's five most highly compensated executive officers whose combined salary
and bonus for services rendered to MHP Storage and its subsidiaries for such
period exceeded $100,000, or would have exceeded such amount if paid during the
full fiscal year.

SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
- --------------------------- ---- -------- ---------
<S> <C> <C> <C>
Donald B. Russell .............................. 1998 $160,000 $ -- (1)
President and Chief Executive Officer 1997 $164,920 $ 594,900 (2)
David W. Hooker ................................ 1998 $160,000 $ 158,715
Executive Vice President and Chief 1997 $123,692 $ 319,388 (2)
Operating Officer
Anthony J. Clark ............................... 1998 $140,000 $ 132,250
Vice President and Chief Financial Officer 1997 $ 46,668 (3) $ 36,332 (3)
Patrick Lorio .................................. 1998 $ 97,300 $ 105,810 (4)
Vice President, Business Development
Jack Gatewood .................................. 1998 $120,000 $ 105,810
Vice President, Engineering 1997 $ 86,587 $ 75,000
Mark Cook ...................................... 1998 $120,000 $ 440,314 (5)
Vice President, Sales 1997 $ 99,712 $ 365,903 (5)
</TABLE>
(1) Mr. Russell's employment contract expired on December 31, 1998 and he is
no longer employed by the Company.

(2) Includes a special bonus payment of $360,000 to Mr. Russell and $240,000
to Mr. Hooker paid in connection with the Moss Bluff and Egan facilities.

(3) Salary and bonus information reflects compensation from September 1997,
when Mr. Clark joined the Company, through December 31, 1997.

(4) Mr. Lorio joined the Company in February 1998.

(5) Includes sales commissions of $440,314 and $365,903 for 1998 and 1997,
respectively.

EMPLOYMENT AGREEMENTS

Each of Messrs. Hooker, Clark, Lorio, Cook and Gatewood (collectively, the
"Executives") has entered into employment agreements (collectively, the
"Agreements") with MHP, MHP Storage and Market Hub Partners Storage, L.L.C.
("MHP Storage GP" and collectively with MHP and MHP Storage, the "Employers").
The Agreements provide for an annual base salary of approximately $160,000,
$140,000, $120,000, $120,000 and $120,000 for Messrs. Hooker, Clark, Lorio, Cook
and Gatewood, respectively. In addition, on an annual basis, Messrs. Hooker,
Clark, Lorio and Gatewood shall receive between 65% and 135% of a Target Bonus
equal to 1.5%, 1.25%, 1.0% and 1.0%, respectively, of the before-tax net income
of MHP and its subsidiaries, including the Company. Mr. Cook shall receive 7.5%
of net income associated with hub services and 2% of the present value total
lease payments under firm storage contracts discounted at 10%.

34
<PAGE>
Each Agreement may be terminated at any time by the Employers, with or
without Cause (as defined therein), or by the Executive, for any reason. In the
event of termination without Cause or a resignation for Good Reason (as defined
therein), the Company shall pay the Executives 65% of the Target Bonus for the
calendar year, pro rated for the number of days in the year prior to the
termination date. If such termination or resignation is involuntary, the
Executive shall receive, in addition to the aforementioned amount, a lump sum of
cash payment equal to two years' base salary. In addition, the Agreements
provide that, in the event of a Change of Control (as defined therein), Messrs.
Hooker, Clark, Lorio, Cook and Gatewood shall receive incentive bonuses equal to
2.0%, 1.25%, 1.0%, 1.25% and 1.0%, respectively, of the increase in value of MHP
after January 1, 1998, as calculated pursuant to the Employment Agreements. Each
Agreement expires on December 31, 2000. The contemplated sale by PacifiCorp of
TPC (including TPC's 66% ownership interest in MHP) to NIPSCO, which is
discussed herein in Note 12 to the Consolidated Financial Statements -
"Subsequent Events", may trigger these Change of Control incentive payments.

35
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Market Hub Partners Storage, L.P. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
on July 13, 1999.

MARKET HUB PARTNERS STORAGE, L.P.

By: MARKET HUB PARTNERS STORAGE, LLC

/s/ JAMES K. ABCOUWER
James K. Abcouwer
Director