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 June 30, 2000
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 17
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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 June 30, 2000 and 1999
and Six Months Ended June 30, 2000 and 1999 3
Consolidated Balance Sheet - June 30, 2000
and December 31, 1999 4
Consolidated Statement of Cash Flows -
Six Months Ended June 30, 2000 and 1999 5
Consolidated Statement of Changes in Partners'
Capital - Six Months Ended June 30, 2000 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk 15
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 16
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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 Six Months Ended
June 30, June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
OPERATING REVENUES, NET $82,536 $78,012 $164,053 $156,907
OPERATING EXPENSES
Operations and maintenance 14,684 12,564 27,558 25,327
Depreciation and amortization 15,203 13,559 30,705 27,008
Taxes other than income 7,815 7,547 15,698 15,182
Operating expenses 37,702 33,670 73,961 67,517
OPERATING INCOME 44,834 44,342 90,092 89,390
INTEREST EXPENSE 19,249 16,326 37,940 32,570
OTHER INCOME 1,281 1,226 1,303 3,147
MINORITY INTERESTS IN NET INCOME 8,824 8,681 17,447 17,775
NET INCOME TO PARTNERS $18,042 $20,561 $ 36,008 $ 42,192
NET INCOME PER UNIT $ 0.60 $ 0.69 $ 1.19 $ 1.41
NUMBER OF UNITS USED IN COMPUTATION 29,347 29,347 29,347 29,347
<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 BALANCE SHEET
(In Thousands)
(Unaudited)
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 53,945 $ 22,927
Accounts receivable 35,495 30,238
Materials and supplies, at cost 6,032 4,410
Under recovered cost of service -- 3,068
Total current assets 95,472 60,643
TRANSMISSION PLANT
Property, plant and equipment 2,409,926 2,410,133
Less: Accumulated provision for
depreciation and amortization 694,277 664,777
Property, plant and equipment, net 1,715,649 1,745,356
INVESTMENTS AND OTHER ASSETS
Investment in unconsolidated affiliate 54,537 31,895
Other 26,041 25,543
Total investments and other assets 80,578 57,438
Total assets $1,891,699 $1,863,437
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES
Current maturities of long-term debt $ 69,285 $ 183,617
Accounts payable 4,709 8,279
Accrued taxes other than income 25,450 26,608
Accrued interest 18,360 17,608
Over recovered cost of service 674 --
Accumulated provision for rate refunds 16,090 2,317
Total current liabilities 134,568 238,429
LONG-TERM DEBT, NET OF CURRENT MATURITIES 985,870 848,369
MINORITY INTERESTS IN PARTNERS' CAPITAL 248,601 250,450
RESERVES AND DEFERRED CREDITS 10,725 10,920
PARTNERS' CAPITAL
General Partners 10,239 10,305
Common Units 501,696 504,964
Total partners' capital 511,935 515,269
Total liabilities and partners' capital $1,891,699 $1,863,437
<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>
Six Months Ended
June 30,
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income to partners $ 36,008 $ 42,192
Adjustments to reconcile net income to partners
to net cash provided by operating activities:
Depreciation and amortization 30,837 27,014
Minority interests in net income 17,447 17,775
Provision for rate refunds 13,773 --
Changes in components of working capital (3,590) (2,490)
Other 283 1,078
Total adjustments 58,750 43,377
Net cash provided by operating activities 94,758 85,569
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in unconsolidated affiliate (23,299) --
Capital expenditures for property, plant
and equipment (4,094) (77,460)
Net cash used in investing activities (27,393) (77,460)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to Unitholders and
General Partners (39,342) (36,580)
Distributions to Minority Interests (19,296) (20,332)
Issuance of long-term debt 169,783 65,000
Retirement of long-term debt (146,018) (21,366)
Long-term debt financing costs (1,474) --
Net cash used in financing activities (36,347) (13,278)
NET CHANGE IN CASH AND CASH EQUIVALENTS 31,018 (5,169)
Cash and cash equivalents-beginning of period 22,927 41,042
Cash and cash equivalents-end of period $ 53,945 $ 35,873
Supplemental Disclosures of Cash Flow Information:
Cash paid for:
Interest (net of amount capitalized) $ 37,436 $ 32,159
Changes in components of working capital:
Accounts receivable $ (5,257) $ (7,650)
Materials and supplies (1,622) 494
Over/under recovered cost of service 3,742 6,904
Accounts payable (47) (1,970)
Accrued taxes other than income (1,158) (430)
Accrued interest 752 162
Total $ (3,590) $ (2,490)
<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 Partners'
Partners Units Capital
<S> <C> <C> <C>
Partners' Capital at December 31, 1999 $10,305 $504,964 $515,269
Net income to partners 1,124 34,884 36,008
Distributions to partners (1,190) (38,152) (39,342)
Partners' Capital at June 30, 2000 $10,239 $501,696 $511,935
<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, 1999.
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").
Black Mesa Holdings, Inc., Black Mesa Pipeline Operations, L.L.C.
and NBP Energy Pipelines, L.L.C. ("NBP Energy") are wholly-owned
subsidiaries of the Partnership. NBP Energy owns a 39% common
membership interest and 80% of the non-voting class A shares in
Bighorn Gas Gathering, L.L.C. ("Bighorn"), which is reflected as
an investment in unconsolidated affiliate on the consolidated
balance sheet. The common membership interest was acquired in
December 1999 and the class A shares were acquired in June 2000.
2. In October 1998, Northern Border Pipeline filed a certificate
application with the Federal Energy Regulatory Commission
("FERC") to seek approval to expand and extend its pipeline
system into Indiana ("Project 2000"). When completed, Project
2000 would afford shippers on the expanded and extended pipeline
system access to industrial gas consumers in northern Indiana.
The certificate application was subsequently amended by Northern
Border Pipeline in March and December 1999. On March 16, 2000,
the FERC issued an order granting Northern Border Pipeline's
application for a certificate to construct and operate the
proposed facilities. The FERC approved Northern Border
Pipeline's request for rolled-in rate treatment based upon the
proposed project costs. The project has a targeted in-service
date of November 2001. The capital expenditures for the project
are estimated to be approximately $94 million.
3. Northern Border Pipeline filed a rate proceeding with the FERC
in May 1999 for, among other things, a redetermination of its
allowed equity rate of return. The total annual cost of service
increase due to Northern Border Pipeline's proposed changes is
approximately $30 million. A number of Northern Border
Pipeline's shippers and competing pipelines have filed
interventions and protests. In June 1999, the FERC issued an
order in which the proposed changes were suspended until December
1, 1999, after which the proposed changes were implemented with
subsequent billings subject to refund. The June order and a
subsequent clarification issued by the FERC in August 1999 set
for hearing not only Northern Border Pipeline's proposed changes
but also several issues raised by intervenors including the
appropriateness of Northern Border Pipeline's cost of service
tariff; rolled-in rate treatment of The Chicago Project, which
was Northern Border Pipeline's expansion and extension project
placed in service in December 1998; capital project cost
containment mechanism ("PCCM") amount recorded for The Chicago
Project; depreciation schedule and creditworthiness standards.
As agreed to in a prior rate case settlement, the PCCM was
implemented to limit Northern Border Pipeline's ability to
include cost overruns on The Chicago Project in rate base and to
provide incentives for cost underruns. The PCCM amount is
computed by comparing the final cost of The Chicago Project to
the budgeted cost, adjusted for the effects of inflation and
project scope changes as defined in the prior rate case
settlement. Testimony filed by the FERC staff and intervenors in
the current rate case proceeding has proposed changes to the PCCM
computation, which would result in rate base reductions ranging
from $32 million to $43 million.
In June 2000, Northern Border Pipeline reached an agreement in
principle with a majority of its customers and the FERC staff to
settle the issues in the rate case. Terms of the settlement are
confidential until a stipulation and agreement is finalized by
the parties and filed with the FERC for approval. For the three
month and six month periods ending June 30, 2000, respectively,
Northern Border Pipeline recorded a $6.7 million and $13.5
million provision for rate refunds, which reflects the
anticipated refund obligation to its customers. The provision
for rate refunds is netted against operating revenues on the
consolidated statement of income. Based upon the agreement in
principle, the procedural schedule in the rate case proceeding
has been suspended until October 2000. While the parties in the
rate case are meeting to finalize the stipulation and agreement,
the Partnership can give no assurance whether it will be filed
and subsequently approved by the FERC.
4. In June 2000, the Partnership completed a private offering of
$150 million of 8 7/8% Senior Notes due 2010 ("Partnership Senior
Notes"). The proceeds from the private offering, net of debt
discounts and issuance costs, were primarily used to reduce
existing indebtedness under a November 1997 credit agreement
and to acquire the class A shares in Bighorn (see Note 1).
The indenture under which the Partnership Senior Notes were
issued does not limit the amount of indebtedness or other
obligations that the Partnership may incur, but does contain
material financial covenants, including restrictions on the
incurrence of secured indebtedness. The Partnership also entered
into a registration rights agreement with the initial purchasers
in the private offering in which the Partnership agreed, among
other things, to use its reasonable best efforts to exchange the
Partnership Senior Notes in a registered offering for notes with
substantially identical terms.
In June 2000, the Partnership entered into interest rate swap
agreements with an aggregate notional principal amount of $150
million. The interest rate swap agreements are scheduled to
terminate in June 2010. Under the agreements, the Partnership
makes payments to counterparties at variable rates based on the
London Interbank Offered Rate (6.86% at June 30, 2000) and in
return receives payments based on an average fixed rate of 7.64%.
In June 2000, the Partnership entered into two credit
agreements with certain financial institutions, a $75 million 364-
day credit agreement and a $75 million three-year revolving
credit agreement (collectively, "Partnership Credit Agreements").
The Partnership Credit Agreements are to be used for capital
expenditures, working capital and general business purposes.
Upon proper notification to the financial institutions, the
maturity date of the Partnership Credit Agreements may be
extended to June 2005. The Partnership Credit Agreements permit
the Partnership 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.
The Partnership is required to pay a fee on the principal
commitment amount of $150 million. At June 30, 2000, no funds
had been borrowed under the Partnership Credit Agreements.
5. Net income per unit is computed by dividing net income, after
deduction of the general partners' allocation, by the weighted
average number of outstanding common units. The general
partners' allocation is equal to an amount based upon their
collective 2% general partner interest adjusted for incentive
distributions. The distribution to partners amount shown on the
accompanying consolidated statement of changes in partners'
capital includes incentive distributions to the general partners
of approximately $0.4 million.
On July 19, 2000, the Partnership declared a cash distribution
of $0.65 per unit ($2.60 per unit on an annualized basis) for the
quarter ended June 30, 2000. The distribution is payable August
14, 2000, to unitholders of record at July 31, 2000.
<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. Billings for the firm transportation agreements
are based on contracted volumes to determine the allocable share
of the cost of service and are not dependent upon the percentage
of available capacity actually used.
Northern Border Pipeline filed a rate proceeding with the FERC
in May 1999 for, among other things, a redetermination of its
allowed equity rate of return. The total annual cost of service
increase due to Northern Border Pipeline's proposed changes is
approximately $30 million. In June 1999, the FERC issued an
order in which the proposed changes were suspended until December
1, 1999, after which the proposed changes were implemented with
subsequent billings subject to refund. In June 2000, Northern
Border Pipeline reached an agreement in principle with a majority
of its customers and the FERC staff to settle the issues in the
rate case. Terms of the settlement are confidential until a
stipulation and agreement is finalized by the parties and filed
with the FERC for approval. For the three month and six month
periods ending June 30, 2000, respectively, Northern Border
Pipeline recorded a $6.7 million and $13.5 million provision for
rate refunds, which reflects the anticipated refund obligation to
its customers. The provision for rate refunds is netted against
operating revenues on the consolidated statement of income.
While the parties in the rate case are meeting to finalize the
stipulation and agreement, the Partnership can give no assurance
whether it will be filed and subsequently approved by the FERC.
Second Quarter 2000 Compared With Second Quarter 1999
Operating revenues, net increased $4.5 million (6%) for the
second quarter of 2000, as compared to the same period in 1999,
due primarily to recovery of increased operations and maintenance
expense, depreciation and amortization expense and interest
expense by Northern Border Pipeline.
Operations and maintenance expense increased $2.1 million (17%)
for the second quarter of 2000, as compared to the same period in
1999, due primarily to expenses incurred in connection with
Northern Border Pipeline's pending rate case as well as increased
administrative expenses for the pipeline.
Depreciation and amortization expense increased $1.6 million
(12%) for the second quarter of 2000, as compared to the same
period in 1999, due primarily to an increase in the depreciation
rate applied to Northern Border Pipeline's transmission plant
from 2.0% to 2.3%. The increase in the depreciation rate was
approved as part of a previous rate case settlement.
Interest expense increased $2.9 million (18%) for the second
quarter of 2000, as compared to the same period in 1999.
Interest expense for Northern Border Pipeline increased
approximately $1.8 million, due primarily to an increase in
interest rates between 1999 and 2000. Interest expense for the
Partnership increased approximately $1.2 million, due to
additional borrowings and an increase in interest rates. The
additional borrowings were made primarily for the acquisition of
a 39% common membership interest and 80% of the non-voting class
A shares in Bighorn Gas Gathering, L.L.C. ("Bighorn") (see Note 1 -
Notes to Consolidated Financial Statements).
Six Months June 30, 2000 Compared With Six Months Ended June 30,
1999
Operating revenues, net increased $7.1 million (5%) for the
first half of 2000, as compared to the same period in 1999, due
primarily to recovery of increased operations and maintenance
expense, depreciation and amortization expense and interest
expense by Northern Border Pipeline.
Operations and maintenance expense increased $2.2 million (9%)
for the first half of 2000, as compared to the same period in
1999, due primarily to expenses incurred in connection with
Northern Border Pipeline's pending rate case as well as increased
administrative expenses for the pipeline.
Depreciation and amortization expense increased $3.7 million
(14%) for the first half of 2000, as compared to the same period
in 1999, due primarily to an increase in the depreciation rate
applied to Northern Border Pipeline's transmission plant from
2.0% to 2.3%. The increase in the depreciation rate was approved
as part of a previous rate case settlement.
Interest expense increased $5.4 million (16%) for the first
half of 2000, as compared to the same period in 1999. Interest
expense for Northern Border Pipeline increased approximately $3.7
million, due primarily to an increase in interest rates between
1999 and 2000. Interest expense for the Partnership increased
approximately $1.8 million, due to additional borrowings and an
increase in interest rates. The additional borrowings were made
primarily for the acquisition of a 39% common membership interest
and 80% of the non-voting class A shares in Bighorn (see Note 1 -
Notes to Consolidated Financial Statements).
Other income decreased $1.8 million (59%) for the first half
of 2000, as compared to the same period in 1999. The 2000
results include $1.2 million of income earned from third-party
usage of capacity on Northern Border Pipeline's microwave system.
The 1999 results included $3.0 million of other non-operating
income.
Liquidity and Capital Resources
General
In August 1999, Northern Border Pipeline completed a private
offering of $200 million of 7.75% Senior Notes due 2009, which
notes were subsequently exchanged in a registered offering for
notes with substantially identical terms ("Pipeline Senior
Notes"). The proceeds from the Pipeline Senior Notes were used
to reduce indebtedness under a June 1997 credit agreement.
In June 1997, Northern Border Pipeline entered into a credit
agreement ("Pipeline Credit Agreement") with certain financial
institutions. The Pipeline Credit Agreement is comprised of a
term loan and a $200 million five-year revolving credit facility,
both maturing in June 2002. At June 30, 2000, $429.0 million was
outstanding under the term loan. No funds were outstanding under
the revolving credit facility.
At June 30, 2000, Northern Border Pipeline also had
outstanding $250 million of senior notes issued in a private
placement under a July 1992 note purchase agreement. The note
purchase agreement provides for four series of notes, Series A
through D, maturing between August 2000 and August 2003. The
Series A Notes with a principal amount of $66 million mature in
August 2000. Northern Border Pipeline anticipates borrowing on
the revolving credit facility to repay the Series A Notes.
In June 2000, the Partnership completed a private offering of
$150 million of 8 7/8% Senior Notes due 2010 ("Partnership Senior
Notes"). The Partnership also entered into a registration rights
agreement with the initial purchasers in the private offering in
which the Partnership agreed, among other things, to use its
reasonable best efforts to exchange the Partnership Senior Notes
in a registered offering for notes with substantially identical
terms.
In June 2000, the Partnership entered into interest rate swap
agreements with an aggregate notional principal amount of $150
million. The interest rate swap agreements are scheduled to
terminate in June 2010. Under the agreements, the Partnership
makes payments to counterparties at variable rates based on the
London Interbank Offered Rate (6.86% at June 30, 2000) and in
return receives payments based on an average fixed rate of 7.64%.
In June 2000, the Partnership entered into two credit
agreements with certain financial institutions, a $75 million 364-
day credit agreement and a $75 million three-year revolving
credit agreement (collectively, "Partnership Credit Agreements").
The Partnership Credit Agreements are to be used for capital
expenditures, working capital and general business purposes.
Upon proper notification to and consent of the financial
institutions, the maturity date of the Partnership Credit
Agreements may be extended to June 2005. Prior to the
termination of the Partnership Credit Agreements, the Partnership
may request an increase in the commitment level to a maximum $200
million in the aggregate for both agreements. At June 30, 2000,
no funds had been borrowed under the Partnership Credit
Agreements.
Short-term liquidity needs will be met by internal sources and
through the credit facilities discussed above. Long-term capital
needs may be met through the ability to issue long-term
indebtedness as well as additional limited partner interests of
the Partnership.
Cash Flows From Operating Activities
Cash flows provided by operating activities increased $9.2
million to $94.8 million for the first half of 2000, as compared
to the same period in 1999, primarily due to recovery of
increased depreciation and amortization expense by Northern
Border Pipeline and the billings collected subject to refund
related to Northern Border Pipeline's current rate proceeding
(see Note 3 - Notes to Consolidated Financial Statements).
Cash Flows From Investing Activities
The investment in unconsolidated affiliate of $23.3 million
for the first half of 2000 reflects capital contributions of $2.5
million to Bighorn for construction of gas gathering facilities
and the acquisition of 80% of the non-voting class A shares in
Bighorn for $20.8 million. The Partnership has agreed to make
additional capital contributions to Bighorn for construction of
gas gathering facilities. The Partnership's capital
contributions to Bighorn are estimated to be approximately $12
million in 2000. The Partnership anticipates financing its
obligations using the Partnership Credit Agreements.
Capital expenditures of $4.1 million for the first half of
2000 include $2.3 million for Project 2000 (see Note 2 - Notes to
Consolidated Financial Statements). For the comparable period in
1999, capital expenditures were $77.5 million and included $70.4
for The Chicago Project, which was Northern Border Pipeline's
expansion and extension project placed in service in December
1998. The remaining capital expenditures for 2000 and 1999 were
primarily related to renewals and replacements of Northern Border
Pipeline's existing facilities.
Total capital expenditures for 2000 are estimated to be $21
million, including $10 million for Project 2000. The remaining
capital expenditures planned for 2000 are primarily for renewals
and replacements of Northern Border Pipeline's existing
facilities. Northern Border Pipeline currently anticipates
funding its 2000 capital expenditures primarily by using internal
sources and borrowing on its revolving credit facility.
Cash Flows From Financing Activities
Cash flows used in financing activities was $36.3 million for
the first half of 2000 as compared to $13.3 million for the same
period in 1999. Cash distributions to the unitholders and the
general partners increased $2.8 million to $39.3 million
reflecting an increase in the quarterly distribution from $0.61
per Unit to $0.65 per Unit. The proceeds from the private
offering of the Partnership Senior Notes, net of associated debt
discounts and issuance costs, totaled approximately $148.8
million. The net proceeds were used to repay the Partnership's
existing indebtedness of $119.5 million and to fund the
acquisition of the Bighorn class A shares of $20.8 million
discussed previously. Borrowings under the Pipeline Credit
Agreement decreased $50 million to $15 million for the first half
of 2000 as compared to the same period in 1999. Borrowings in
1999 were used to finance a portion of the capital expenditures
for The Chicago Project.
Information Regarding Forward Looking Statements
The statements in this Quarterly Report that are not
historical information 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"
and in "Notes to Consolidated Financial Statements" regarding
Northern Border Pipeline's efforts to pursue opportunities to
further increase its capacity and Northern Border Pipeline's
efforts to finalize settlement of its rate case. 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 industry results,
future demand for natural gas, availability of supplies of
Canadian natural gas, political and regulatory developments that
impact FERC proceedings involving Northern Border Pipeline,
Northern Border Pipeline's success in sustaining its positions in
such proceedings or the success of intervenors in opposing
Northern Border Pipeline's positions, Northern Border Pipeline's
ability to replace its rate base as it is depreciated and
amortized, 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.
<PAGE>
PART I. FINANCIAL INFORMATION - (Concluded)
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
The Partnership's interest rate exposure results from the
portion of its consolidated debt portfolio subject to variable
rates. To mitigate potential fluctuations in interest rates, the
Partnership maintains a significant portion of its consolidated
debt portfolio in fixed rate debt. The Partnership also uses
interest rate swap agreements to manage its level of exposure to
interest rate changes. Since December 31, 1999, there has not
been any material change in the Partnership's interest rate
exposure.
<PAGE>
PART II. OTHER INFORMATION
NORTHERN BORDER PARTNERS, L.P. AND SUBSIDIARIES
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
4.1 Indenture, dated as of June 2, 2000, between the
registrants and Bank One Trust Company, N.A., as
trustee.
4.2 Registration Rights Agreement, dated June 2, 2000, by
and among the registrants and Banc of America Securities
LLC, Banc One Capital Markets, Inc. and SunTrust
Equitable Securities, as Initial Purchasers.
10.1 364-Day Credit Agreement dated as of June 28, 2000
between Northern Border Partners, L.P., Bank Of America,
N.A., Administrative Agent, SunTrust Bank, Syndication
Agent, Bank One, NA, Documentation Agent, Banc of
America Securities LLC, Lead Arranger and Lenders (as
defined therein).
10.2 Revolving Credit Agreement dated as of June 28, 2000
between Northern Border Partners, L.P., Bank Of America,
N.A., Administrative Agent, SunTrust Bank, Syndication
Agent, Bank One, NA, Documentation Agent, Banc of
America Securities LLC, Lead Arranger and Lenders (as
defined therein).
(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: August 11, 2000 By: JERRY L. PETERS
Jerry L. Peters
Chief Financial and Accounting
Officer
<PAGE>
