SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report March 31, 1999
KINDER MORGAN ENERGY PARTNERS, L.P.
KINDER MORGAN OPERATING L.P. "A"
KINDER MORGAN OPERATING L.P. "B"
KINDER MORGAN OPERATING L.P. "C"
KINDER MORGAN OPERATING L.P. "D"
KINDER MORGAN NATURAL GAS LIQUIDS CORPORATION
KINDER MORGAN CO2, LLC
KINDER MORGAN BULK TERMINALS, INC.
(Exact name of registrants as specified in their charters)
Delaware 1-11234 76-0380342
Delaware 333-66931-01 76-0380015
Delaware 333-66931-02 76-0414819
Delaware 333-66931-03 76-0547319
Delaware 333-66931-04 76-0561780
Delaware 333-66931-05 76-0256928
Delaware 333-66931-06 76-0563308
Louisiana 333-66931-07 72-1073113
(State or other (Commission (I.R.S. Employer
jurisdiction File Identification
of incorporation or Number) Number)
organization)
1301 McKinney Street, Ste. 3400, Houston, Texas 77010
(Address of principal executive offices)(zip code)
Telephone number of registrants, including area code: 713-844-9500
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Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits
(c) Exhibits
23.1 Consent of PriceWaterhouseCoopers LLP
99.1 Balance Sheet of Kinder Morgan G.P., Inc., as of December 31, 1998.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrants have duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
KINDER MORGAN ENERGY PARTNERS, L.P.
(A Delaware Limited Partnership)
By: KINDER MORGAN G.P., INC.
as General Partner
By: /s/ David G. Dehaemers, Jr.
----------------------------------------
David G. Dehaemers, Jr.
Vice President, CFO, Treasurer
and Assistant Secretary
KINDER MORGAN OPERATING L.P. "A"
(A Delaware Limited Partnership)
By: KINDER MORGAN G.P., INC.
as General Partner
By: /s/ David G. Dehaemers, Jr.
---------------------------------------
David G. Dehaemers, Jr.
Vice President, CFO, Treasurer
and Assistant Secretary
KINDER MORGAN OPERATING L.P. "B"
(A Delaware Limited Partnership)
By: KINDER MORGAN G.P., INC.
as General Partner
By: /s/ David G. Dehaemers, Jr.
---------------------------------------
David G. Dehaemers, Jr.
Vice President, CFO, Treasurer
and Assistant Secretary
KINDER MORGAN OPERATING L.P. "C"
(A Delaware Limited Partnership)
By: KINDER MORGAN G.P., INC.
as General Partner
By: /s/ David G. Dehaemers, Jr.
---------------------------------------
David G. Dehaemers, Jr.
Vice President, CFO, Treasurer
and Assistant Secretary
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<PAGE>
KINDER MORGAN OPERATING L.P. "D"
(A Delaware Limited Partnership)
By: KINDER MORGAN G.P., INC.
as General Partner
By: /s/ David G. Dehaemers, Jr.
---------------------------------------
David G. Dehaemers, Jr.
Vice President, CFO, Treasurer
and Assistant Secretary
KINDER MORGAN NATURAL GAS LIQUIDS
CORPORATION
(A Delaware Corporation)
By: /s/ David G. Dehaemers, Jr.
---------------------------------------
David G. Dehaemers, Jr.
Vice President, CFO, Treasurer
and Assistant Secretary
KINDER MORGAN CO2, LLC
(A Delaware Limited Liability Company)
By: KINDER MORGAN OPERATING L.P. "A"
as sole Member
By: KINDER MORGAN G.P., INC.
as General Partner
By: /s/ David G. Dehaemers, Jr.
---------------------------------------
David G. Dehaemers, Jr.
Vice President, CFO, Treasurer
and Assistant Secretary
KINDER MORGAN BULK TERMINALS, INC.
(A Louisiana Corporation)
By: /s/ David G. Dehaemers, Jr.
---------------------------------------
David G. Dehaemers, Jr.
Vice President, CFO and
Treasurer
Date: March 31, 1999
4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference of our report dated March
30, 1999 on the December 31, 1998 balance sheet of Kinder Morgan G.P., Inc.
included in the Current Report on Form 8-K dated March 31, 1999 of Kinder Morgan
Energy Partners, L.P. in the Prospectus constituting part of the Registration
Statement on Form S-3 (Nos. 333-25995, 333-62155, and 333-66931) of Kinder
Morgan Energy Partners, L.P. and the incorporation by reference in the
Registration Statement on Form S-8 (No. 333-56343) of Kinder Morgan Energy
Partners, L.P.
/s/ PRICEWATERHOUSECOOPERS L.L.P.
Houston, Texas
March 31, 1999
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Report of Independent Accountants
March 30, 1999
To the Board of Directors and Stockholder
of Kinder Morgan G.P., Inc.
In our opinion, the accompanying balance sheet presents fairly, in all material
respects, the financial position of Kinder Morgan G.P., Inc. (the General
Partner), a wholly-owned subsidiary of Kinder Morgan Inc., at December 31, 1998,
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the General Partner's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS L.L.P.
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Kinder Morgan G.P., Inc.
(a wholly-owned subsidiary of Kinder Morgan, Inc.)
Balance Sheet
December 31, 1998
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(in thousands, except for per share amounts) 1998
Assets
Current assets:
Cash and cash equivalents $ 13,767
Receivable from Partnership 13,645
Prepaid Expenses 1,126
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28,538
Investment in Partnership 41,959
Deferred taxes and other 106
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Total assets $ 70,603
========
Liabilities and Stockholder's Equity
Current liabilities:
Accounts payable:
Trade $ 1,387
Related party 2,709
Payable to Kinder Morgan, Inc. 4,332
Accrued liabilities 12,682
Accrued Taxes 1,556
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Total current liabilities 22,666
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Commitments and contingencies (Note 4)
Stockholder's Equity
Common stock, $10 par value, authorized,
issued and outstanding 1,000,000 shares 10,000
Additional Paid in Capital 20,021
Accumulated earnings 17,916
Total stockholder's equity 47,937
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Total liabilities and stockholder's
equity $ 70,603
========
The accompanying notes are an integral part of these financial statements.
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Kinder Morgan G.P., Inc.
(a wholly-owned subsidiary of Kinder Morgan, Inc.)
Notes to Balance Sheets
December 31, 1998
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1. Organization
Effective February 14, 1997, Kinder Morgan Inc. (KMI) acquired all of the
issued and outstanding stock of Enron Liquids Pipeline Company (ELPC), and
ELPC was renamed Kinder Morgan G.P., Inc. (the General Partner). The
General Partner owns approximately 3.8% of Kinder Morgan Energy Partners,
LP (the Partnership) as of December 31, 1998. The ownership interest
consists of a 2% General Partner interest and 862,000 common units of the
Partnership.
KMI's acquisition of the General Partner was accounted for under the
purchase method of accounting and reflects the pushdown of the debt
incurred in connection with the acquisition of the General Partner. The
purchase price of the General Partner was approximately $21,745,000. The
collateral on the debt incurred in connection with the acquisition consists
of pledges of the stock of the General Partner and the General Partner's
assets. Accordingly, the accompanying balance sheet reflects KMI's basis in
the assets acquired and the debt incurred in the acquisition (Note 3).
The General Partner's equity in the earnings of the Partnership is recorded
beginning February 14, 1997.
2. Summary of Significant Accounting Policies
The following significant accounting policies are followed by the General
Partner in the preparation of the financial statements.
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 certain assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements. Actual results could differ from those
estimates.
Cash and Cash Equivalents
Cash equivalents consist of highly liquid investments that are readily
convertible into cash and have an original maturity of three months or less
at date of acquisition.
Debt Issue Costs
Debt issue costs are amortized using the interest method over the term of
the financing for which they were incurred.
Investment in Partnership
The General Partner's investment in the Partnership is accounted for under
the equity method. At December 31, 1998, the General Partner's investment
in the Partnership exceeded its share of the underlying equity in the net
assets of the Partnership by approximately $9,210,000. This excess is being
amortized on a straight-line basis over 25 years, which approximates the
useful lives of the Partnership's assets ranging from 2.0% to 12.5%.
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Kinder Morgan G.P., Inc.
(a wholly-owned subsidiary of Kinder Morgan, Inc.)
Notes to Balance Sheets
December 31, 1998
- - -------------------------------------------------------------------------------
Income Taxes
The General Partner files a separate federal income tax return and accounts
for income taxes under the liability method prescribed by Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes."
Deferred income taxes are determined based on temporary differences between
the financial reporting and tax basis of the General Partner's assets and
liabilities using enacted tax rates in effect during the years in which the
differences are expected to reverse.
3. Long-Term Debt
On February 14, 1997, KMI entered into a borrowing agreement with First
Union National Bank (First Union) in connection with the acquisition of the
common stock of the General Partner. Pursuant to this agreement, KMI issued
two notes in the aggregate amount of $15,000,000, bearing interest, at
KMI's option, at either First Union's Base Rate plus one-half of 1% or
LIBOR plus 2.5%. The notes are payable August 31, 1999. Effective December
31, 1997, the borrowing agreement was amended to provide a $15,000,000
facility note in place of the two notes issued February 14, 1997. The
interest rate and maturity date remained unchanged.
The borrowing agreement was amended in 1998 to provide a term loan
commitment for an additional $85 million. Along with the increased
borrowing, the interest rate and maturity date were changed to First
Union's Base Rate plus one-half of one percent or LIBOR plus three percent
and to a maturity date of May 31, 2000. KMI has pledged the stock of the
General Partner and the General Partner's assets as collateral for this
term loan commitment. At December 31, 1998, KMI had principal amounts
outstanding of $100 million.
4. Litigation, Commitments and Other Contingencies
Litigation
The General Partner, in the ordinary course of business, is a defendant in
various lawsuits relating to the Partnership's assets. The Partnership made
certain acquisitions during 1998 and assumed potential and existing claims
associated with those acquisitions. Although no assurance can be given, the
General Partner believes, based on its experience to date, that the
ultimate resolution of such items will not have a material adverse impact
on the General Partner's financial position. It is expected that the
Partnership will reimburse the General Partner for any liability or
expenses incurred in connection with these legal proceeding.
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Kinder Morgan G.P., Inc.
(a wholly-owned subsidiary of Kinder Morgan, Inc.)
Notes to Balance Sheets
December 31, 1998
- - -------------------------------------------------------------------------------
FERC
The Partnership and certain of its subsidiaries are defendants in several
actions in which the plaintiffs protest pipeline transportation rates with
the Federal Energy Regulatory Commission ("FERC"). These actions are
currently pending. The Plaintiffs seek to recover transportation
overpayments and interests and in some cases treble and punitive damages.
The General Partner is not able to predict with certainty whether
settlement agreements will be completed with some or all of the
complainants, the final terms of any such settlement agreements that may be
consummated, or the final outcome of the FERC proceedings should they be
carried through to their conclusion, and it is possible that current or
future proceedings could be resolved in a manner adverse to the Partnership
which could affect future cash distributions to the General Partner.
Environmental
The General Partner is a defendant in two proceedings (one by the State of
Illinois and one by the Department of Transportation) relating to alleged
environmental violations for events relating to a fire that occurred at the
Morris storage field in September, 1994. Although no assurance can be
given, the General Partner believes the ultimate resolution of these
matters will not have a material adverse effect on the Partnership's
financial position, results of operations, or its ability to pay cash
distributions to the General Partner.
The Partnership is subject to environmental cleanup and enforcement actions
from time to time. In particular, the federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA" or "Superfund" law)
generally imposes joint and several liability for cleanup and enforcement
costs, without regard to fault or the legality of the original conduct, on
current or predecessor owners and operators of a site. The operations of
the Partnership are also subject to Federal, state and local laws and
regulations relating to protection of the environment. Although the
Partnership believes its operations are in general compliance with
applicable environmental regulations, risks of additional costs and
liabilities are inherent in pipeline and terminal operations, and there can
be no assurance significant costs and liabilities will not be incurred by
the Partnership. Moreover, it is possible that other developments, such as
increasingly stringent environmental laws, regulations and enforcement
policies thereunder, and claims for damages to property or persons
resulting from the operations of the Partnership, could result in
substantial costs and liabilities to the Partnership which could affect
future cash distributions to the General Partner.
The Partnership, along with several other respondents, has been involved in
one cleanup in connection with an acquisition made by the Partnership in
1998. This cleanup, ordered by the United States Environmental Protection
Agency ("EPA"), related to ground water contamination in the vicinity of
the Partnership's storage facilities and truck loading terminal at Sparks,
Nevada. The EPA approved the respondents' remediation plan in September
1992 and the remediation system began operation in 1995. In addition, the
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Kinder Morgan G.P., Inc.
(a wholly-owned subsidiary of Kinder Morgan, Inc.)
Notes to Balance Sheets
December 31, 1998
- - -------------------------------------------------------------------------------
Partnership is presently involved in 18 ground water hydrocarbon
remediation efforts under administrative orders issued by the California
Regional Water Quality Control Board and two other state agencies. Although
no assurance can be given, the General Partner believes the ultimate
resolutions of these matters will not have a material adverse effect on the
Partnership's financial position, result of operations, or its ability to
pay cash distributions to the General Partner.
Other
The Partnership, in the ordinary course of business, is a defendant in
various lawsuits relating to the Partnership's assets. Although no
assurance can be given, the General Partner believes, based on its
experience to date, the ultimate resolution of such items will not have a
material adverse impact on the Partnership's financial position, results of
operations, or its ability to pay cash distributions to the General
Partner.
5. Related Party Transactions
Receivable from Partnership
The receivable from Partnership represents primarily general and
administrative expenses paid by the General Partner on behalf of the
Partnership.
Payable to KMI
The payable to KMI is the result of KMI's payment of costs associated with
debt, such as interest and debt issue costs incurred by KMI. The payable to
KMI also includes approximately $1,759,000 related to income taxes paid by
KMI on behalf of the General Partner as of December 31, 1998.
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