UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission File Number 1-12202
NORTHERN BORDER PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 93-1120873
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Enron Building
1400 Smith Street
Houston, Texas 77002
(Address of principal executive (Zip Code)
Offices)
(713) 853-6161
(Registrant's telephone number, including area code)
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 [X] No [ ]
1 of 16
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NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statement of Income -
Three Months Ended September 30, 1997 and 1996
and Nine Months Ended September 30, 1997 and 1996 3
Consolidated Balance Sheet - September 30, 1997
and December 31, 1996 4
Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 5
Consolidated Statement of Changes in Partners'
Capital - Nine Months Ended September 30, 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 15
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Unit Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
OPERATING REVENUE $52,738 $52,863 $147,453 $158,734
OPERATING EXPENSES
Operations and maintenance 10,625 7,215 26,266 20,988
Depreciation and amortization 10,369 13,479 29,832 40,713
Taxes other than income 6,007 6,178 18,045 18,774
Operating expenses 27,001 26,872 74,143 80,475
OPERATING INCOME 25,737 25,991 73,310 78,259
INTEREST EXPENSE 8,951 8,316 25,002 25,113
OTHER INCOME
Other income, net 936 632 6,081 2,267
Allowance for equity funds used
during construction 369 101 801 237
Other income 1,305 733 6,882 2,504
MINORITY INTERESTS IN NET INCOME 5,362 5,466 16,237 17,124
NET INCOME TO PARTNERS $12,729 $12,942 $ 38,953 $ 38,526
NET INCOME PER UNIT $ .47 $ .48 $ 1.45 $ 1.44
NUMBER OF UNITS USED IN COMPUTATION 26,325 26,200 26,256 26,200
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION (Continued)
ITEM 1. FINANCIAL STATEMENTS (Continued)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands)
(Unaudited)
<CAPTION>
September 30, December 31,
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 58,322 $ 41,390
Accounts receivable 16,592 16,907
Related party receivables 1,641 2,364
Materials and supplies, at cost 4,821 4,128
Total current assets 81,376 64,789
TRANSMISSION PLANT
Property, plant and equipment 1,639,835 1,513,116
Less: Accumulated provision for
depreciation and amortization 623,855 575,257
Net property, plant and equipment 1,015,980 937,859
OTHER ASSETS 16,378 13,836
Total assets $1,113,734 $1,016,484
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,457 $ 17,500
Note payable -- 10,000
Accounts payable 20,320 3,463
Accrued taxes other than income 21,908 20,968
Accrued interest 5,332 10,353
Over recovered cost of service 5,063 4,236
Accumulated provision for rate refunds 52,630 12,227
Total current liabilities 107,710 78,747
LONG-TERM DEBT, net of current maturities 430,488 360,000
MINORITY INTERESTS IN PARTNERS' CAPITAL 156,770 158,089
RESERVES AND DEFERRED CREDITS 9,850 9,062
COMMITMENTS AND CONTINGENCIES
PARTNERS' CAPITAL
General Partners 8,178 8,212
Common Units 303,399 303,777
Subordinated Units 97,339 98,597
Total partners' capital 408,916 410,586
Total liabilities and partners' capital $1,113,734 $1,016,484
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION (Continued)
ITEM 1. FINANCIAL STATEMENTS (Continued)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income to partners $ 38,953 $ 38,526
Adjustments to reconcile net income to partners
to net cash provided by operating activities:
Depreciation and amortization 29,835 40,736
Minority interests in net income 16,237 17,124
Provision for rate refunds 40,403 2,279
Changes in other current assets and liabilities 14,689 (1,408)
Other (316) (1,739)
Total adjustments 100,848 56,992
Net cash provided by operating activities 139,801 95,518
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant, and equipment, net (85,902) (8,771)
Acquisition and consolidation of businesses 3,374 --
Other 465 (4,820)
Net cash used in investing activities (82,063) (13,591)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions
Common Units (32,705) (32,637)
Subordinated Units (10,593) (10,593)
General Partners (884) (882)
Minority Interests (29,938) (23,298)
Contributions
Minority Interests 12,000 --
General Partners 71 --
Issuance of long-term debt 160,000 --
Retirement of long-term debt (128,075) (15,000)
Repayment of note payable (10,000) --
Long-term debt financing costs (682) --
Net cash used in financing activities (40,806) (82,410)
NET CHANGE IN CASH AND CASH EQUIVALENTS 16,932 (483)
Cash and cash equivalents-beginning of period 41,390 39,418
Cash and cash equivalents-end of period $ 58,322 $ 38,935
Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Interest (net of amount capitalized) $ 29,449 $ 29,353
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION (Continued)
ITEM 1. FINANCIAL STATEMENTS (Continued)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL
(In Thousands)
(Unaudited)
<CAPTION>
Total
General Common Subordinated Partners'
Partners Units Units Capital
<S> <C> <C> <C> <C>
Partners' Capital at December 31, 1996 $8,212 $303,777 $98,597 $410,586
Net income to partners 779 28,839 9,335 38,953
General Partners' contribution and
issuance of Common Units for
acquisition 71 3,488 -- 3,559
Distributions to partners (884) (32,705) (10,593) (44,182)
Partners' Capital at September 30, 1997 $8,178 $303,399 $97,339 $408,916
<FN>
The accompanying notes are an integral part of this consolidated
financial statement.
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 1. FINANCIAL STATEMENTS - (Continued)
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have
been prepared by Northern Border Partners, L.P. (the
"Partnership") without audit pursuant to the rules and
regulations of the Securities and Exchange Commission.
Accordingly, they reflect all adjustments which are, in the
opinion of management, necessary for a fair presentation of the
financial results for the interim periods. Certain information
and notes normally included in financial statements prepared in
accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such rules and regulations.
However, the Partnership believes that the disclosures are
adequate to make the information presented not misleading. These
consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto
included in the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1996.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The Partnership owns a 70% general partner interest in
Northern Border Pipeline Company ("Northern Border Pipeline").
As discussed in Note 4, the Partnership increased its effective
ownership in Black Mesa Pipeline Holdings, Inc. ("Black Mesa")
from 60.5% to 71.75% through the acquisition of Williams
Technologies, Inc. ("WTI") on May 31, 1997.
2. In August 1997, Northern Border Pipeline received Federal
Energy Regulatory Commission ("FERC") approval of the Stipulation
and Agreement ("Stipulation") filed on October 15, 1996 to settle
its November 1995 rate case. Northern Border Pipeline filed the
rate case, in compliance with its FERC tariff, for the
determination of its allowed equity rate of return and was
permitted, pursuant to a December 1995 FERC order, to begin
collecting the requested increase in the equity rate of return
effective June 1, 1996, subject to refund. In accordance with
the terms of the Stipulation, Northern Border Pipeline's allowed
equity rate of return is reduced from the requested 14.25% to
12.75% for the period June 1, 1996 to October 1, 1996 and to 12%
thereafter. Additionally, the Stipulation reduces the effective
depreciation rate applied to Northern Border Pipeline's gross
transmission plant from 3.6% to 2.7% for the period June 1, 1996
to December 31, 1996, resulting in an average effective
depreciation rate of 3.1% for the year ended December 31, 1996.
Beginning January 1, 1997, the depreciation rate is reduced to
2.5%. The accumulated provision for rate refunds of $52.6
million shown on the consolidated balance sheet at September 30,
1997, represents the refunds made to Northern Border Pipeline's
shippers in October 1997. Northern Border Pipeline used a
combination of cash on hand and borrowings on a revolving credit
facility to pay these refunds.
In August 1997, the FERC issued a certificate of public
convenience and necessity authorizing Northern Border Pipeline to
construct and operate facilities, as filed for in a September
1996 application with the FERC, for an expansion of its existing
pipeline and extension from its current terminus near Harper,
Iowa to a point near Manhattan, Illinois ("The Chicago Project").
Northern Border Pipeline has accepted the certificate and
construction is proceeding. Natural Gas Pipeline Company of
America, a competitor, has filed in the United States Court of
Appeals for the District of Columbia a petition for review of the
August order issued by the FERC.
The Chicago Project pipeline facilities consist of 243 miles
of pipeline and 147 miles of pipeline loop. Compression
facilities for The Chicago Project involve the installation of
228,500 compressor horsepower at eight new compressor stations
and upgrades at five existing compressor stations by the removal
from service of units producing 100,000 compressor horsepower
with the installation of replacement units producing 175,000
compressor horsepower. Project to date expenditures on The
Chicago Project, which are included on the consolidated balance
sheet in property, plant and equipment at September 30, 1997 and
December 31, 1996, are $90.7 million and $16.8 million,
respectively. The project is expected to cost approximately $839
million and be ready for service in November 1998.
3. In June 1997, Northern Border Pipeline entered into a credit
agreement ("1997 Credit Agreement") with certain financial
institutions to borrow up to an aggregate principal amount of
$750 million. The 1997 Credit Agreement is comprised of a $200
million five-year revolving credit facility to be used for the
retirement of Northern Border Pipeline's existing bank loan and
credit agreements and for general business purposes, and a $550
million three-year revolving credit facility to be used for the
construction of The Chicago Project. The three-year revolving
credit facility may be converted to a term loan maturing in June
2002 once The Chicago Project has been placed in service and
certain other conditions are met. The 1997 Credit Agreement
permits Northern Border Pipeline to choose among various interest
rate options, to specify the portion of the borrowings to be
covered by specific interest rate options and to specify the
interest rate period, subject to certain parameters. Northern
Border Pipeline is required to pay a facility fee on the
aggregate principal amount of $750 million. At September 30,
1997, $160 million had been borrowed on the 1997 Credit Agreement
at an average interest rate of 7.24%, after taking into
consideration Northern Border Pipeline's existing interest rate
swap agreements. The 1997 Credit Agreement restricts the
incurrence of senior indebtedness by Northern Border Pipeline and
requires Northern Border Pipeline to maintain a ratio of debt to
total capital of no more than 65 percent. The carrying value of
the 1997 Credit Agreement approximates its fair value since the
interest rates are periodically adjusted to current market
conditions.
Northern Border Pipeline has senior notes in the aggregate
principal amount of $250 million at both September 30, 1997 and
December 31, 1996. The senior notes place certain restrictions
on distributions to the partners of Northern Border Pipeline. As
of September 30, 1997, $76 million of partners' capital of
Northern Border Pipeline could be distributed.
4. On May 31, 1997, the Partnership exchanged 125,357 Common
Units valued at approximately $3.5 million for all of the
outstanding common stock of WTI, a leading consultant in slurry
pipeline technology. WTI has an 11.25% ownership position in
Black Mesa and is the operator of Black Mesa Pipeline, a wholly-
owned subsidiary of Black Mesa. Black Mesa Pipeline owns a 273-
mile, 18-inch diameter coal slurry pipeline, which is the sole
source of fuel to the 1,500 megawatt Mohave Power Station located
in Laughlin, Nevada. With the issuance of the additional Common
Units, the Partnership's general partners collectively
contributed $71 thousand to the Partnership to maintain a 2%
general partner interest in accordance with the partnership
agreements.
Effective with the acquisition of WTI, which was recorded
using the purchase method of accounting, the Partnership has
increased its ownership position in Black Mesa from 60.5% to
71.75% and began to reflect Black Mesa, including Black Mesa's
minority ownership interests, in the Partnership's consolidated
financial statements. Prior to this time, the Partnership's
investment in Black Mesa was accounted for using the equity
method. The following is a summary of the effects of the
acquisition of WTI and consolidation of Black Mesa on the
Partnership's consolidated financial position (amounts in
thousands):
<TABLE>
<S> <C>
Cash $ 3,374
Net property, plant and equipment 18,350
Other current and noncurrent assets 8,756
Long-term debt, including
current maturities (23,520)
Other liabilities (3,090)
Minority interests (382)
Common Units $ 3,488
</TABLE>
5. On October 16, 1997, the Partnership declared a cash
distribution of $0.55 per unit for the third quarter ended
September 30, 1997. The distribution is payable November 14,
1997, to unitholders of record as of October 31, 1997. This
quarterly distribution is consistent with the previously
announced indicated annual rate of $2.20 per unit.
6. In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128 -
"Earnings per Share" ("SFAS No. 128"), which specifies the
computation, presentation and disclosure requirements for
earnings per share ("EPS"). SFAS No. 128 is effective for
interim and annual periods ending after December 15, 1997 and
requires retroactive restatement of prior periods' EPS. Adoption
of the statement is not expected to have any effect on the
Partnership's reported net income per unit.
<PAGE>
PART I. FINANCIAL INFORMATION - (Continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
Results of Operations
Northern Border Partners, L.P. (the "Partnership") owns a 70%
general partner interest in Northern Border Pipeline Company
("Northern Border Pipeline"). Northern Border Pipeline's revenue
is derived from agreements with various shippers for the
transportation of natural gas. It transports gas under a Federal
Energy Regulatory Commission ("FERC") regulated tariff that
provides an opportunity to recover all of the operations and
maintenance costs of the pipeline, taxes other than income taxes,
interest, depreciation and amortization, an allowance for income
taxes and a regulated return on equity. Northern Border Pipeline
is generally allowed to collect from its shippers a return on
regulated rate base as well as recover that rate base through
depreciation and amortization. The return amount Northern Border
Pipeline may collect from its shippers declines as the rate base
is recovered. The firm transportation contract shippers are
obligated to pay their allocable share of the cost of service
regardless of the volumes actually transported. Based on
existing contracts and capacity, 100% of the pipeline system's
capacity is contractually committed through October 2001.
On May 31, 1997, the Partnership acquired all of the
outstanding common stock of Williams Technologies, Inc. ("WTI"),
a leading consultant in slurry pipeline technology (See Note 4 -
Notes to Consolidated Financial Statements). WTI has an 11.25%
ownership position in Black Mesa Pipeline Holdings, Inc. ("Black
Mesa") and is the operator of Black Mesa Pipeline, a wholly-owned
subsidiary of Black Mesa. Effective with the acquisition of WTI,
the Partnership increased its ownership position in Black Mesa to
71.75% and began to reflect Black Mesa in the Partnership's
consolidated financial statements. Black Mesa Pipeline
transports coal-water slurry through a 273-mile, 18-inch diameter
pipeline that originates at a coal mine in Kayenta, Arizona and
ends at the 1,500 megawatt Mohave Power Station located in
Laughlin, Nevada. Black Mesa Pipeline is the sole source of fuel
for the Mohave plant. The capacity of Black Mesa Pipeline is
fully contracted to the Mohave Power Station coal supplier
through the year 2005.
Third Quarter 1997 Compared With Third Quarter 1996
Operating revenue decreased $0.1 million for the third quarter
of 1997 as compared to the same period in 1996. Operating
revenue attributable to Northern Border Pipeline decreased $5.4
million (10%) due primarily to lower depreciation and
amortization expense and lower returns on a lower rate base.
Operating revenue included in the consolidated statement of
income from the combined operations of Black Mesa and WTI was
$5.3 million for the third quarter of 1997.
Operations and maintenance expense increased $3.4 million in
the third quarter of 1997, as compared to the same period in
1996, primarily due to $3.3 million of expense from the combined
operations of Black Mesa and WTI.
Depreciation and amortization expense decreased $3.1 million
for the third quarter of 1997, as compared to the same period in
1996. Depreciation and amortization expense attributable to
Northern Border Pipeline decreased $3.7 million (28%). In
accordance with the terms of the Stipulation and Agreement
("Stipulation") approved by the FERC to settle its rate case, the
depreciation rate applied to Northern Border Pipeline's gross
transmission plant is 2.5% for 1997 (see Note 2 - Notes to
Consolidated Financial Statements). The depreciation rate
applied to gross transmission plant for the third quarter of 1996
was 3.6%. Depreciation and amortization expense included in the
consolidated statement of income from the combined operations of
Black Mesa and WTI was $0.6 million for the third quarter of
1997.
Interest expense increased $0.6 million in the third quarter
of 1997, as compared to the same period in 1996, primarily due to
interest expense from the combined operations of Black Mesa and
WTI.
Other income increased $0.6 million for the third quarter of
1997, as compared to the same period in 1996. The increase was
primarily due to $1.2 million in additional allowance for funds
used during construction. The increase in the allowance for
funds used during construction primarily relates to Northern
Border Pipeline's expenditures for the expansion of its existing
pipeline and extension from its current terminus near Harper,
Iowa to a point near Manhattan, Illinois ("The Chicago Project")
(See "Cash Flows From Investing Activities").
Nine Months September 30, 1997 Compared With Nine Months Ended
September 30, 1996
Operating revenue decreased $11.3 million for the nine months
ended September 30, 1997, as compared to the same period in 1996.
Operating revenue attributable to Northern Border Pipeline
decreased $18.4 million (12%) due primarily to lower depreciation
and amortization expense and lower returns on a lower rate base.
Operating revenue included in the consolidated statement of
income from the combined operations of Black Mesa and WTI was
$7.1 million for the nine months ended September 30, 1997.
Operations and maintenance expense increased $5.3 million for
the nine months ended September 30, 1997, as compared to the same
period in 1996, primarily due to $4.4 million of expense from the
combined operations of Black Mesa and WTI.
Depreciation and amortization expense decreased $10.9 million
for the nine months ended September 30, 1997, as compared to the
same period in 1996. Depreciation and amortization expense
attributable to Northern Border Pipeline decreased $11.7 million
(29%). In accordance with the terms of the Stipulation, the
depreciation rate applied to Northern Border Pipeline's gross
transmission plant is 2.5% for 1997. The depreciation rate
applied to gross transmission plant for the nine months ended
September 30, 1996 was 3.6%. Depreciation and amortization
expense included in the consolidated statement of income from the
combined operations of Black Mesa and WTI was $0.8 million for
the nine months ended September 30, 1997.
Interest expense decreased $0.1 million for the nine months
ended September 30, 1997, as compared to the same period in 1996.
Interest expense for Northern Border Pipeline decreased $0.9
million (4%) primarily due to a decrease in average debt
outstanding. Interest expense of $0.8 million is included on the
consolidated statement of income for the nine months ended
September 30, 1997, from the combined operations of Black Mesa
and WTI.
Other income increased $4.4 million for the nine months ended
September 30, 1997, as compared to the same period in 1996. The
increase was primarily due to $2.8 million of compensation
received by Northern Border Pipeline for vacating certain
microwave frequency bands and a $2.2 million increase in the
allowance for funds used during construction. The increase in
the allowance for funds used during construction primarily
relates to Northern Border Pipeline's expenditures for The
Chicago Project (See "Cash Flows From Investing Activities").
Liquidity and Capital Resources
General
In June 1997, Northern Border Pipeline entered into a credit
agreement ("1997 Credit Agreement") with certain financial
institutions to borrow up to an aggregate principal amount of
$750 million. The 1997 Credit Agreement is comprised of a $200
million five-year revolving credit facility to be used for the
retirement of Northern Border Pipeline's bank loan and credit
agreements and for general business purposes, and a $550 million
three-year revolving credit facility to be used for the
construction of The Chicago Project (See "Cash Flows From
Investing Activities"). The three-year revolving credit facility
may, if certain conditions are met, be converted to a term loan
maturing in June 2002. At September 30, 1997, $160 million had
been borrowed on the 1997 Credit Agreement primarily to retire
amounts related to Northern Border Pipeline's existing bank loan
and credit agreements.
In November 1997, the Partnership entered into a credit
agreement ("Partnership Credit Agreement") with certain financial
institutions to borrow up to an aggregate principal amount of
$175 million under a revolving credit facility. The Partnership
Credit Agreement is to be used for interim funding of the
Partnership's required capital contributions to Northern Border
Pipeline for construction of The Chicago Project. After The
Chicago Project construction has been completed and placed in
service, the Partnership Credit Agreement allows the Partnership
to borrow any undrawn amounts up to an aggregate principal amount
of $40 million for general business purposes. The maturity date
of the Partnership Credit Agreement will be November 2000 if
Northern Border Pipeline converts its $550 million three-year
revolving credit facility to a term loan; otherwise the maturity
date is June 2000. The Partnership Credit Agreement restricts
incurrence of senior indebtedness by the Partnership and requires
the maintenance of a ratio of debt to total capital, excluding
the debt of consolidated subsidiaries, of no more than 35
percent.
Short-term liquidity needs will be met by internal sources and
through lines of credit. Long-term capital needs can be met by
the ability to issue long-term indebtedness and additional
limited partner interests in the Partnership.
Cash Flows From Operating Activities
Cash flow provided by operating activities increased $44.3
million to $139.8 million for the nine month period ended
September 30, 1997 as compared to the same period in 1996
primarily related to revenues which had been collected and were
refunded in October 1997 in accordance with the Stipulation (See
Note 2 - Notes to Consolidated Financial Statements). Northern
Border Pipeline used a combination of cash on hand and borrowings
on a revolving credit facility to pay these refunds.
Cash Flows From Investing Activities
In August 1997, the FERC issued a certificate of public
convenience and necessity authorizing Northern Border Pipeline to
construct and operate The Chicago Project facilities (See Note 2 -
Notes to Consolidated Financial Statements). The Chicago
Project is expected to cost approximately $839 million and be
ready for service in November 1998.
Net plant additions of $85.9 million for the nine months ended
September 30, 1997 include $73.2 million for The Chicago Project.
The remaining $12.7 million of net plant additions in 1997 are
primarily related to renewals and replacements of Northern Border
Pipeline's existing facilities. For the comparable period in
1996, net plant additions were $8.8 million which included $4.6
million for The Chicago Project.
Total capital expenditures for 1997 are estimated to be $200
million for The Chicago Project and $19 million for renewals and
replacements of the existing facilities. Funds required for
construction of The Chicago Project and for other capital
expenditures for 1997 and 1998 are expected to be provided
primarily by Northern Border Pipeline's $550 million three-year
revolving credit facility, the $175 million Partnership Credit
Agreement, internal sources and equity contributions from
minority interest holders.
The $3.4 million of cash flows provided by acquisition and
consolidation of businesses is related primarily to the
consolidation of Black Mesa's cash balance (See Note 4 - Notes to
Consolidated Financial Statements).
Cash Flows From Financing Activities
Cash flows used in financing activities decreased $41.6
million to $40.8 million for the nine month period ended
September 30, 1997, as compared to the same period in 1996. In
1997, borrowings under Northern Border Pipeline's 1997 Credit
Agreement of $160 million were used primarily to retire amounts
related to Northern Border Pipeline's existing bank loan and
credit agreements of $137.5 million. In 1996, payments of $15.0
million were made on Northern Border Pipeline's bank loan
agreement. Financing activities for 1997 also reflect a $12.0
million equity contribution from minority interest holders to
Northern Border Pipeline.
Information Regarding Forward Looking Statements
The statements in this Quarterly Report that are not
historical are forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such forward looking statements
include the discussions in "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and
Capital Resources" and in "Notes to Consolidated Financial
Statements" on The Chicago Project. Although the Partnership
believes that its expectations regarding future events are based
on reasonable assumptions within the bounds of its knowledge of
its business, it can give no assurance that its goals will be
achieved or that its expectations regarding future developments
will be realized. Important factors that could cause actual
results to differ materially from those in the forward looking
statements herein include political and regulatory developments
that impact FERC and state utility commission proceedings,
Northern Border Pipeline's success in sustaining its positions in
such proceedings or the success of intervenors in opposing
Northern Border Pipeline's positions, competitive developments by
Canadian and U.S. natural gas transmission peers, political and
regulatory developments in Canada and conditions of the capital
markets and equity markets during the periods covered by the
forward looking statements.
<PAGE>
PART II. OTHER INFORMATION
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
NORTHERN BORDER PARTNERS, L.P.
(A Delaware Limited Partnership)
Date: November 13, 1997 By: JERRY L. PETERS
Jerry L. Peters
Chief Financial and Accounting
Officer
<PAGE>
<TABLE> <S> <C>
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