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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NO. 1-4456
TEXAS EASTERN TRANSMISSION CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 72-0378240
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
5400 WESTHEIMER COURT
P.O. BOX 1642
HOUSTON, TEXAS 77251-1642
(Address, including zip code, of principal executive offices)
(713) 627-5400
(Telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<S> <C>
10 1/8% Debentures Due 2011 The New York Stock Exchange, Inc.
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
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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
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 any 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'
The Registrant meets the conditions set forth in General Instructions
(J)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the
reduced disclosure format. Items 4, 10, 11, 12 and 13 have been omitted and Item
7 has been reduced in accordance with such Instruction J.
The Registrant's parent, Panhandle Eastern Corporation (File No. 1-8157),
files reports and proxy materials pursuant to the Securities Exchange Act of
1934.
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State the aggregate market value of the voting stock held by non-affiliates
of the Registrant.
NONE
Indicate number of shares outstanding of each of the Registrant's classes
of Common Stock, as of the latest practicable date.
<TABLE>
<CAPTION>
NUMBER OF SHARES OUTSTANDING
TITLE OF EACH CLASS AS OF FEBRUARY 29, 1996
------------------- ----------------------------
<S> <C>
Common Stock, $1.00 par value 1,000
</TABLE>
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TABLE OF CONTENTS
PART I
<TABLE>
<S> <C> <C>
Item 1. Business....................................................................... 1
General...................................................................... 1
Natural Gas Transmission..................................................... 2
Regulation................................................................... 3
Rates and Regulatory Proceedings............................................. 4
Competition.................................................................. 4
Capital Expenditures For Clean Air Act Amendments............................ 4
General Matters.............................................................. 4
Item 2. Properties..................................................................... 5
Item 3. Legal Proceedings.............................................................. 5
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.......... 7
Item 6. Selected Financial Data........................................................ 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 7
Item 8. Financial Statements and Supplementary Data.................................... 9
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure..................................................................... 9
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................ 10
Index to Financial Statements and Schedules.............................................. 11
</TABLE>
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All gas volumes used herein are stated at 14.73 pounds per square inch, on
a dry basis, at 60 degrees Fahrenheit.
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Texas Eastern Transmission Corporation ("TETCO" or the "Company"), a
subsidiary of Panhandle Eastern Corporation, d/b/a PanEnergy Corp ("PanEnergy"),
was incorporated in Delaware in 1947 and is primarily engaged in the interstate
transportation and storage of natural gas.
Information concerning components of consolidated operating revenues,
including revenues attributable to transportation, storage and sales of natural
gas, for the years 1995, 1994 and 1993 is contained in the Consolidated
Statement of Income on page F-2, which is incorporated herein by reference.
Executive offices of TETCO are located at 5400 Westheimer Court, Houston,
Texas 77056-5310, and the telephone number is (713) 627-5400.
Certain Terms
Certain terms used in the description of the Company's business are
explained below.
Federal Energy Regulatory Commission ("FERC"): The agency that regulates
the transportation of natural gas in interstate commerce under the Natural Gas
Act of 1938 (the "NGA") and the Natural Gas Policy Act of 1978 (the "NGPA").
FERC's jurisdiction includes rate-making, construction of facilities and
authorization to provide service.
Firm Service: Transportation or storage of third-party gas, for which
customers pay a charge to reserve pipeline or storage capacity.
Gathering Systems: Pipeline, processing and related facilities that access
production and other sources of natural gas supplies for delivery to mainline
transportation systems.
Local Distribution Company ("LDC"): A municipal or investor-owned utility
that sells or transports gas to local commercial, industrial and residential
consumers.
Merchant Service: Prior to FERC Order 636, traditional service volumes
aggregated by pipelines, under purchase contracts with producers, and
transported and resold to natural gas utilities and other customers at
FERC-approved rates.
Order 636: The FERC pipeline service restructuring rule that guided the
industry's transition to unbundled, open-access pipeline contract transportation
and related services, creating a more market-responsive environment.
Straight Fixed-Variable ("SFV"): A rate design that assigns return on
equity, related taxes and other fixed costs to the reservation component of
rates.
Transition Costs: Those costs incurred as a result of the pipelines'
transition to unbundled services under Order 636. The disposition of natural gas
contracts tied to the former merchant function comprises the majority of such
costs.
Units of Measure:
<TABLE>
<S> <C>
MMcf/d: Million cubic feet per day
Bcf: Billion cubic feet
Tcf: Trillion cubic feet
</TABLE>
1
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NATURAL GAS TRANSMISSION
General
TETCO, together with Algonquin Gas Transmission Company ("Algonquin"),
Panhandle Eastern Pipe Line Company ("PEPL") and Trunkline Gas Company
("Trunkline"), all subsidiaries of PanEnergy, owns and operates one of the
nation's largest gas transmission networks. This fully interconnected
22,000-mile system can receive natural gas from most major North American
producing regions for delivery to markets in the Mid-Atlantic, New England and
Midwest states. During 1995, PanEnergy's interstate pipelines delivered 2.63 Tcf
of natural gas, equal to approximately 12% of U.S. consumption.
Market and Supply Area Deliveries
As used herein, "market area" refers to those portions of the pipeline that
include primarily delivery points for natural gas leaving the pipeline, and
"supply area" refers to those portions of the pipeline that include primarily
receipt points for gas entering the pipeline. Market-area deliveries represent
volumes of gas delivered to the market area, while supply-area deliveries
represent volumes of gas delivered to the supply area. Generally, rates for
supply-area service have lower margins than rates for market-area service.
Set forth below is information concerning throughput volumes for TETCO for
1995, 1994 and 1993 (volumes in Bcf).
<TABLE>
<CAPTION>
1995 % TOTAL 1994 % TOTAL 1993 % TOTAL
----- ------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Market Area............................... 1,069 90 1,014 88 960 89
Supply Area............................... 123 10 141 12 118 11
----- --- ----- --- ----- ---
Total*.......................... 1,192 100 1,155 100 1,078 100
===== === ===== === ===== ===
</TABLE>
- ---------------
(*) Includes 6 Bcf in deliveries to Algonquin during 1993.
During 1995, total billings for transportation and storage services
provided by TETCO to Public Service Electric and Gas Company ("Public")
accounted for approximately 15% of the Company's consolidated revenues. Public
was the only customer of the Company accounting for 10% or more of consolidated
revenues in 1995.
Demand for gas transmission on TETCO's pipeline system is seasonal, with
the highest throughput occurring during the colder periods in the first and
fourth quarters -- the winter heating season. However, the SFV rate design
required by Order 636 has resulted in pipeline earnings generally being more
evenly distributed throughout the year.
TETCO's major customers are located in Pennsylvania, New Jersey and New
York, and include LDCs serving the Pittsburgh, Philadelphia, Newark and New York
City metropolitan areas. Total throughput increased 3% in 1995 as a result of
new expansion projects, including the Integrated Transportation Program ("ITP")
and Flex-X, as well as more efficient utilization of the pipeline system.
In the fall of 1995, the second portion of the ITP consisting of 45 MMcf/d
was placed in service. ITP utilizes the transportation services of all four of
PanEnergy's interstate natural gas pipeline systems, with ultimate delivery by
TETCO and Algonquin. The final phase of this 200 MMcf/d project is scheduled to
be completed in 1996 with the addition of 25 MMcf/d of service. ITP provides
firm transportation service for five Northeast customers.
TETCO initiated 33 MMcf/d of firm service in November 1995 for PECO Energy
Company and UGI Utilities, Inc. under 20-year contracts pursuant to the
Company's Flex-X program.
Negotiations are proceeding with customers for 69 MMcf/d of winter-seasonal
natural gas service through the WinterNet project. WinterNet, a proposed venture
by TETCO and Consolidated Natural Gas Company, would phase in new services for
Mid-Atlantic markets over four years beginning in 1997. The project is expected
to be filed with FERC in the second quarter of 1996.
2
<PAGE> 5
Storage
TETCO provides firm and interruptible open-access storage services. Since
the implementation of the Order 636 restructuring, storage is offered as a
stand-alone unbundled service or as part of a no-notice bundled service. TETCO's
storage services utilize two joint venture storage projects in Pennsylvania and
one wholly-owned and operated storage field in Maryland. TETCO also leases
storage capacity. TETCO's certificated working capacity in these three fields is
70 Bcf, and on December 31, 1995, the combined working gas in storage was 46
Bcf.
REGULATION
TETCO is a "natural gas company" under the NGA and NGPA and, as such, is
subject to the jurisdiction of FERC.
The NGA grants to FERC authority over the construction and operation of
pipeline and related facilities utilized in the transportation and sale of
natural gas in interstate commerce, including the extension, enlargement or
abandonment of such facilities. TETCO holds required certificates of public
convenience and necessity issued by FERC, authorizing it to construct and
operate the pipelines, facilities and properties now in operation for which
certificates are required, and to transport and store natural gas in interstate
commerce.
FERC also has authority to regulate rates and charges for natural gas
transported in or stored for interstate commerce or sold by a natural gas
company in interstate commerce for resale. TETCO files with FERC applications
for changes in transportation and storage rates and charges. These changes are
normally allowed to become effective after a suspension period, subject to
refund, until such time as FERC authorizes the actual level of rates and
charges.
TETCO operates as an open-access transporter of natural gas. In 1992, FERC
issued Order 636, which requires open-access pipelines to provide firm and
interruptible transportation services on an equal basis for all gas supplies,
whether purchased from the pipeline or from another gas supplier. To implement
this requirement, Order 636 provides, among other things, for mandatory
unbundling of services that have historically been provided by pipelines into
separate open-access transportation, sales and storage services.
Order 636, which is on appeal to the courts, provides for the use of the
SFV rate design, which assigns return on equity, related taxes and other fixed
costs to the reservation component of rates. In addition, Order 636 allows
pipelines to recover eligible costs resulting from implementation of Order 636.
Recoverable transition costs include gas supply realignment costs, unrecovered
deferred gas purchase costs, other existing costs incurred in connection with
bundled sales services that cannot be assigned to customers of unbundled
services, and capital costs attributable to the restructuring.
On August 1, 1994, TETCO implemented a FERC-approved settlement that
resolved regulatory issues related primarily to Order 636 transition costs and a
number of other issues related to services prior to Order 636. TETCO's final and
nonappealable settlement provides for the recovery of certain transition costs
through volumetric and reservation charges through 2002 and beyond, if
necessary. Pursuant to the settlement, TETCO will absorb a certain portion of
the transition costs, the amount of which continues to be subject to change
dependent upon natural gas prices and deliverability levels. The Company has
established provisions to reflect the impact of the settlement.
Regulation of the importation and exportation of natural gas is vested in
the Secretary of Energy, who has delegated various aspects of this jurisdiction
to FERC and the Office of Fossil Fuels of the Department of Energy.
TETCO is subject to the Natural Gas Pipeline Safety Act of 1968, which
regulates gas pipeline safety requirements, and to federal and state
environmental legislation.
3
<PAGE> 6
RATES AND REGULATORY PROCEEDINGS
When rate cases are pending final FERC approval, a portion of the revenues
collected by TETCO is subject to possible refunds. A summary of the status of
significant regulatory matters involving TETCO is contained in Note 3 of the
Notes to Consolidated Financial Statements, which is incorporated herein by
reference.
COMPETITION
In the Mid-Atlantic and Northeast markets, TETCO competes with other
interstate and intrastate pipeline companies in the transportation and storage
of natural gas. The principal elements of competition among pipelines are rates,
terms of service, and flexibility and reliability of service. TETCO continues to
offer selective discounting to maximize revenues from existing capacity.
TETCO competes directly with Transcontinental Gas Pipe Line Corporation,
Tennessee Gas Pipeline Company, Iroquois Gas Transmission System, CNG
Transmission Corporation and Columbia Gas Transmission Corporation.
Natural gas competes with other forms of energy available to the Company's
customers and end users, including electricity, coal and fuel oils. The primary
competitive factor is price. Changes in the availability or price of natural gas
and other forms of energy, the level of business activity, conservation,
legislation and governmental regulations, the capability to convert to
alternative fuels, and other factors, including weather, affect the demand for
natural gas in the areas served by TETCO.
CAPITAL EXPENDITURES FOR CLEAN AIR ACT AMENDMENTS
The Company has submitted plans to the appropriate state agencies in order
to fully comply with the Clean Air Act Amendments of 1990 (the "Amendments").
Agency review of these plans is currently underway. In 1995, the Company made
capital expenditures of approximately $17 million related to the requirements of
the Amendments and associated state regulations, and further expenditures of
$1.5 million are projected for 1996. Management believes that the expenditures
related to compliance with the Amendments and the associated regulations will be
eligible for recovery in rates. The Company recently determined that no further
material expenditures are anticipated in connection with the present
requirements of the Amendments or the associated regulations.
For a discussion of other environmental matters involving TETCO, see Note
10 of the Notes to Consolidated Financial Statements, which is incorporated
herein by reference.
GENERAL MATTERS
While the Company does engage in some research and development activities,
no such activities conducted during the past three years have been material to
the Company's business, nor have there been any material customer-sponsored
research activities during that period relating to the Company's business
activities.
TETCO is a member of and provides support to the Gas Research Institute
("GRI"), which plans and manages research and development efforts for the gas
industry. The funds used to support GRI are derived from a surcharge on the
pipelines' rates pursuant to FERC authorization. Payments amounted to
approximately $5.7 million, $8.3 million and $7.2 million in 1995, 1994 and
1993, respectively.
Foreign operations and export sales are not material to the Company's
business as a whole.
As of January 1, 1996, the Company had approximately 1,200 employees.
4
<PAGE> 7
ITEM 2. PROPERTIES
TETCO's gas transmission system extends approximately 1,700 miles from
producing fields in the Gulf Coast region of Texas and Louisiana to Ohio,
Pennsylvania, New Jersey and New York. It consists of two parallel systems, one
consisting of three large-diameter parallel pipelines and the other consisting
of from one to three large-diameter pipelines over its length. TETCO's system,
including the gathering systems, has 73 compressor stations. The TETCO system
connects with the PEPL and Trunkline systems through the Lebanon Lateral.
The Lebanon Lateral is located between Grant County, Indiana, and Lebanon,
Ohio. TETCO owns the Indiana portion and a small segment of the Ohio portion of
this pipeline, while the rest of this pipeline in Ohio is jointly owned by TETCO
and another interstate gas pipeline company. The Indiana portion of the Lebanon
Lateral extends approximately 53 miles, while the Ohio portion of this pipeline
is 61 miles long.
TETCO owns and operates two offshore Louisiana gas supply systems, which
extend over 100 miles into the Gulf of Mexico and consist of 490 miles of
pipeline.
For information concerning natural gas storage properties, see "Natural Gas
Transmission -- Storage" under Item 1, which is incorporated herein by
reference.
ITEM 3. LEGAL PROCEEDINGS
For information concerning material legal proceedings, see Notes 3, 10 and
11 of the Notes to Consolidated Financial Statements, which are incorporated
herein by reference.
5
<PAGE> 8
[Map of Panhandle Eastern Corporation
Showing Pipelines, Storage Facilities,
Principal Supply Areas and Proposed Pipelines.]
6
<PAGE> 9
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
All of the outstanding common stock, $1.00 par value per share, of TETCO is
owned by PanEnergy. In December 1995, TETCO declared and paid a $355 million
dividend on common stock in the form of a promissory note due PanEnergy bearing
interest at prime and maturing on June 30, 1996. In December 1994, TETCO
declared and paid a cash dividend on common stock of $180 million.
ITEM 6. SELECTED FINANCIAL DATA
Selected consolidated financial data is presented on Page F-18, which is
incorporated herein by reference.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information is provided to facilitate increased understanding
of the 1995 and 1994 consolidated financial statements and accompanying notes of
the Company, and should be read in conjunction therewith and with the
information set forth under Item 1. Because all of the outstanding capital stock
of TETCO is owned by PanEnergy, the following discussion has been prepared in
accordance with the reduced disclosure format permitted by Form 10-K for issuers
that are wholly-owned subsidiaries of reporting companies under the Securities
Exchange Act of 1934.
OPERATING ENVIRONMENT
TETCO's traditional pipeline sales services ceased in 1993 and all services
are now offered on an unbundled basis. Order 636 requires use of the straight
fixed-variable rate design which makes earnings less sensitive to throughput
changes. The new rate design has caused the percentage of throughput related to
firm transportation contracts for TETCO to rise from 68% in 1993 to 86% in 1995.
TETCO has not experienced any significant reductions in firm capacity sold;
however, TETCO continues to offer selective discounting to maximize revenues
from existing capacity.
As the new environment has evolved, industry participants have indicated a
desire for greater standardization of pipeline tariffs. Responding to these
concerns, TETCO, along with affiliates Algonquin, PEPL and Trunkline, filed with
FERC in 1995 to increase the level of standardization of their gas tariffs to
enhance the nationwide transportation of natural gas.
Order 636 Transition Costs. With implementation of Order 636 and the
elimination of TETCO's pipeline merchant services, the Company is incurring
certain costs related to the transition, primarily TETCO's gas purchase contract
commitments. At December 31, 1995, TETCO's gross commitments under gas purchase
contracts that do not contain market-sensitive pricing provisions were
approximately $160 million, $115 million, $60 million and $25 million for the
years 1996 through 1999, respectively, with no significant amounts thereafter.
These estimates reflect significant assumptions regarding deliverability and
natural gas prices.
On August 1, 1994, TETCO implemented a FERC-approved settlement that
resolved regulatory issues related primarily to Order 636 transition costs and a
number of other issues related to services prior to Order 636. In 1994, TETCO
refunded $84 million to customers pursuant to the settlement. TETCO's final and
nonappealable settlement provides for the recovery of certain transition costs
through volumetric and reservation charges through 2002 and beyond, if
necessary. Pursuant to the settlement, TETCO will absorb a certain portion of
the transition costs, the amount of which continues to be subject to change
dependent upon natural gas prices and deliverability levels. In 1993, the
Company established an additional provision of $100 million ($60.2 million after
tax) to reflect the impact of the settlement. In the fourth quarter 1995, based
upon producers' discoveries of additional natural gas reserves, TETCO increased
its estimated liabilities for transition costs by $125.8 million. Under the
terms of the existing settlement, regulatory assets were increased by $85.8
million and TETCO recognized a $40 million charge to operating expenses ($26
million after tax).
7
<PAGE> 10
At December 31, 1995 and 1994, the Company had recorded approximately $65
million and $310 million (1995), and $30 million and $290 million (1994) of
current and long-term regulatory assets, respectively, representing transition
costs incurred or estimated to be incurred that will be recovered. At December
31, 1995 and 1994, the Company had recorded estimated current and long-term
liabilities related to Order 636 transition costs of approximately $125 million
and $165 million (1995), and $125 million and $105 million (1994), respectively.
During the next two years, above-market gas purchase contract payments by
TETCO are expected to exceed transition cost collections from customers. Net
cash receipts related to transition costs are expected to occur in periods
thereafter. Cash requirements related to transition costs will be funded by cash
from operations and/or collection of intercompany advances receivable.
The Company believes the exposure associated with gas purchase contract
commitments and the termination of TETCO's pipeline merchant services is
substantially mitigated by transition cost recoveries pursuant to TETCO's
settlement, Order 636 and other mechanisms, and further believes that these
matters will not have a material adverse effect on future consolidated result of
operations, financial position or liquidity.
RESULTS OF OPERATIONS
The Company reported consolidated net income of $126.2 million for 1995
compared with $126.1 million for 1994.
OPERATING INCOME ANALYSIS
<TABLE>
<CAPTION>
Millions 1995 1994
------------------------------------------------------------------- ------ ------
<S> <C> <C>
Transportation Revenue............................................. $774.2 $719.2
Storage Revenue.................................................... 69.0 69.5
Other Revenue...................................................... 31.2 38.0
------ ------
TOTAL REVENUES..................................................... 874.4 826.7
Operating Expenses................................................. 436.4 420.9
Depreciation and Amortization...................................... 143.9 141.1
------ ------
OPERATING INCOME................................................... $294.1 $264.7
====== ======
VOLUMES (BCF)
Market-area Transports............................................. 1,069 1,014
Supply-area Transports............................................. 123 141
------ ------
Total Deliveries................................................... 1,192 1,155
====== ======
</TABLE>
Operating income for TETCO increased $29.4 million in 1995 as compared with
1994. Transportation revenue increased $55 million, or 8%, reflecting new
expansion projects, including ITP, FTS-7 and FTS-8, which were placed in service
in late 1994. Also contributing to the increase were $43 million of higher
transition costs recoveries, partially offset by $16 million of lower PCB
(polychlorinated biphenyl) cost recoveries. These higher net cost recoveries of
$27 million were offset by a corresponding increase in operating expenses.
Operating expenses in 1995 also included a $40 million charge for higher
transition cost estimates, as well as a $33 million reduction for
lower-than-projected PCB cleanup costs incurred. Operating expenses, excluding
transition and PCB costs, declined primarily due to a $5 million charge to
income in 1994 related to the Edison, New Jersey pipeline rupture and
cost-management initiatives in 1995.
OTHER INCOME AND DEDUCTIONS
Net other income decreased $32.2 million in 1995 compared with 1994. This
reduction was primarily the result of the elimination of interest income from
parent, as receivables for intercompany advances no longer bear interest
effective January 1, 1995. Decreased interest income was partially offset by the
1994 write-off of $3.8 million of costs related to the Liberty Pipeline Project.
8
<PAGE> 11
INTEREST EXPENSE
Interest expense increased $2.9 million in 1995 compared with 1994. This
increase reflects higher average balances of long-term debt and short-term notes
payable, partially offset by lower interest expense for rate refund provisions.
INCOME TAX
The effective tax rates for 1995 and 1994 differed from the statutory
federal income tax rates primarily because of the effects of state income taxes
and amortization of goodwill.
CAPITAL EXPENDITURES
Capital expenditures totaled $135.3 million in 1995, compared with $160.5
million in 1994. Market-expansion projects represented approximately 45% of 1995
total expenditures, which included expenditures related to the ITP and Flex-X
programs.
The Company currently expects to invest approximately $135 million in 1996
capital expenditures. The Company's expenditure plans include approximately $55
million for market-expansion projects. Funding for 1996 capital expenditures is
expected to be provided by cash from operations, debt issuances and/or repayment
of intercompany advances receivable.
The Company has submitted plans to the appropriate state agencies in order
to fully comply with the Clean Air Act Amendments of 1990. Agency review of
these plans is currently underway. In 1995, the Company made capital
expenditures of approximately $17 million related to the requirements of the
Amendments and associated state regulations, and further expenditures of $1.5
million are projected for 1996. Management believes that the expenditures
related to compliance with the Amendments and the associated regulations will be
eligible for recovery in rates. The Company recently determined that no further
material expenditures are anticipated in connection with the present
requirements of the Amendments or the associated regulations.
INTERCOMPANY ADVANCES
Net intercompany advances are carried as open accounts, are not segregated
between current and non-current amounts and, during 1994, bore interest at
variable rates based on the LIBOR (London Interbank Offered Rates). Effective
January 1, 1995, intercompany advances do not bear interest. Increases and
decreases in advances result from the movement of funds to provide for
operations, capital expenditures and debt payments of PanEnergy and its
subsidiaries. The collection of advances receivable is subject to the
availability of funds to PanEnergy, whose major sources of internally-generated
funds include dividends and advances from subsidiaries. Net advances receivable
aggregated $686.1 million and $553.8 million at December 31, 1995 and 1994,
respectively.
DIVIDENDS
In December 1995, TETCO declared and paid a $355 million dividend on common
stock in the form of a promissory note due PanEnergy bearing interest at prime
and maturing on June 30, 1996. In December 1994, TETCO declared and paid a cash
dividend on common stock of $180 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to "Index -- Financial Statements" under Item 14(a)(1).
See the consolidated quarterly financial data on page F-17, which is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
9
<PAGE> 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report or
incorporated herein by reference:
(1) The Consolidated Financial Statements and Financial Statement
Schedules of Texas Eastern Transmission Corporation and Subsidiaries are
listed on the Index, page 11.
(2) Exhibits filed herewith are designated by an asterisk(*); all
exhibits not so designated are incorporated herein by reference to a prior
filing as indicated.
<TABLE>
<CAPTION>
EXHIBIT FILE
NUMBER DESCRIPTION ORIGINALLY FILED AS EXHIBIT NUMBER
------- ----------- --------------------------- ------
<S> <C> <C> <C>
3.01 Restated Certificate of 3.1 to Form 10-Q of TETCO for 1-4456
Incorporation of Texas Eastern quarter ended September 30,
Transmission Corporation dated 1993
October 25, 1993
3.02 By-Laws of Texas Eastern 3.2 to Form 10-Q of TETCO for 1-4456
Transmission Corporation as quarter ended September 30,
adopted on August 17, 1993 1993
*23 Consent of KPMG Peat Marwick
LLP
*24 Powers of Attorney
*27 Financial Data Schedule for
December 31, 1995
</TABLE>
The total amount of securities of the Registrant or its subsidiaries
authorized under any instrument with respect to long-term debt not filed as an
Exhibit does not exceed 10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis. The Registrant agrees, upon request of the
Securities and Exchange Commission, to furnish copies of any or all of such
instruments.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of 1995.
10
<PAGE> 13
TEXAS EASTERN TRANSMISSION CORPORATION AND SUBSIDIARIES
INDEX
FINANCIAL STATEMENTS AND SCHEDULES
---------------------
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-1
Consolidated Statement of Income...................................................... F-2
Consolidated Balance Sheet............................................................ F-3
Consolidated Statement of Common Stockholder's Equity................................. F-5
Consolidated Statement of Cash Flows.................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
All Schedules are omitted because they are not applicable, not required or
the information is included in the Consolidated Financial Statements or the
Notes thereto.
11
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Texas Eastern Transmission Corporation:
We have audited the accompanying consolidated balance sheets of Texas
Eastern Transmission Corporation and Subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of income, common stockholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements 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 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Texas
Eastern Transmission Corporation and Subsidiaries at December 31, 1995 and 1994,
and the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1995 in conformity with generally
accepted accounting principles.
KPMG PEAT MARWICK LLP
Houston, Texas
January 23, 1996
F-1
<PAGE> 15
TEXAS EASTERN TRANSMISSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------
Millions 1995 1994 1993
- ----------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
OPERATING REVENUES
Transportation and storage of natural gas...................... $843.2 $788.7 $662.2
Sales of natural gas........................................... -- -- 225.8
Other.......................................................... 31.2 38.0 17.6
------ ------ ------
Total (Notes 2, 3 and 5)............................... 874.4 826.7 905.6
------ ------ ------
COSTS AND EXPENSES
Natural gas purchased.......................................... -- -- 96.2
Operating and maintenance (Note 3)............................. 306.3 272.9 346.3
General and administrative (Note 11)........................... 92.0 109.2 102.5
Depreciation and amortization (Note 6)......................... 143.9 141.1 140.8
Miscellaneous taxes............................................ 38.1 38.8 37.9
------ ------ ------
Total (Note 2)......................................... 580.3 562.0 723.7
------ ------ ------
Operating Income................................................. 294.1 264.7 181.9
------ ------ ------
OTHER INCOME AND DEDUCTIONS
Interest income -- parent (Note 2)............................. -- 34.5 33.2
Other interest and miscellaneous income........................ 9.4 10.2 9.0
Miscellaneous deductions....................................... (4.0) (7.1) (4.5)
------ ------ ------
Total.................................................. 5.4 37.6 37.7
------ ------ ------
Gross Income..................................................... 299.5 302.3 219.6
------ ------ ------
INTEREST EXPENSE
Long-term debt (Note 7)........................................ 89.9 80.4 113.0
Rate refund provisions (Note 3)................................ 1.3 7.5 3.2
Other (Note 7)................................................. 1.1 1.5 2.3
------ ------ ------
Total.................................................. 92.3 89.4 118.5
------ ------ ------
Income Before Income Tax......................................... 207.2 212.9 101.1
INCOME TAX (Note 4).............................................. 81.0 86.8 46.4
------ ------ ------
NET INCOME....................................................... $126.2 $126.1 $ 54.7
====== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE> 16
TEXAS EASTERN TRANSMISSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
Millions 1995 1994
- -------- ------- -------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents............................................. $ 0.1 $ 11.0
Accounts receivable
Customers (Note 5)................................................. 15.3 20.5
Affiliates (Note 2)................................................ 4.9 8.3
Other.............................................................. 2.6 3.1
Inventory and supplies................................................ 19.1 20.1
Current deferred income tax (Note 4).................................. 45.1 47.9
Other (Notes 3 and 10)................................................ 114.2 85.6
-------- --------
Total......................................................... 201.3 196.5
-------- --------
INVESTMENTS
Advances receivable -- parent (Note 2)................................ 686.1 553.8
Other................................................................. 16.6 19.5
-------- --------
Total......................................................... 702.7 573.3
-------- --------
PLANT, PROPERTY AND EQUIPMENT
Cost (Note 6)......................................................... 3,218.9 3,122.8
Accumulated depreciation and amortization............................. (681.9) (584.6)
-------- --------
Net plant, property and equipment............................. 2,537.0 2,538.2
-------- --------
DEFERRED CHARGES
Goodwill, net (Notes 1 and 4)......................................... 173.4 281.2
Other (Notes 1, 3 and 10)............................................. 537.4 609.7
-------- --------
Total......................................................... 710.8 890.9
-------- --------
TOTAL ASSETS............................................................ $4,151.8 $4,198.9
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE> 17
TEXAS EASTERN TRANSMISSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
Millions 1995 1994
- -------- ------- -------
<S> <C> <C>
CURRENT LIABILITIES
Note payable -- parent................................................ $ 355.0 $ --
Accounts payable
Trade.............................................................. 28.3 23.5
Affiliates (Note 2)................................................ 16.0 16.3
Accrued income tax -- parent (Note 4)................................. 41.9 37.6
Accrued interest...................................................... 21.3 21.1
Other (Notes 3 and 10)................................................ 281.9 285.4
-------- --------
Total......................................................... 744.4 383.9
-------- --------
DEFERRED LIABILITIES AND CREDITS
Deferred income tax (Note 4).......................................... 586.0 552.3
Other (Notes 3 and 10)................................................ 444.2 557.0
-------- --------
Total......................................................... 1,030.2 1,109.3
-------- --------
LONG-TERM DEBT (Note 7)................................................. 820.5 818.4
-------- --------
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 3, 5, 8, 10, 11 and 12)
COMMON STOCKHOLDER'S EQUITY
Common stock, one thousand shares authorized,
issued and outstanding, $1 par value per share..................... -- --
Paid-in capital....................................................... 1,470.7 1,572.5
Retained earnings..................................................... 86.0 314.8
-------- --------
Total (Note 9)................................................ 1,556.7 1,887.3
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY.............................. $4,151.8 $4,198.9
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 18
TEXAS EASTERN TRANSMISSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
Millions 1995 1994 1993
- -------- ------- ------- -------
<S> <C> <C> <C>
COMMON STOCK................................................. $ -- $ -- $ --
-------- -------- --------
PAID-IN CAPITAL
Balance at beginning of year............................... 1,572.5 1,768.3 1,770.8
Goodwill adjustments (Note 4).............................. (101.8) (195.8) --
Other...................................................... -- -- (2.5)
-------- -------- --------
Balance at end of year..................................... 1,470.7 1,572.5 1,768.3
-------- -------- --------
RETAINED EARNINGS
Balance at beginning of year............................... 314.8 368.7 314.1
Net income................................................. 126.2 126.1 54.7
Common stock dividends paid................................ (355.0) (180.0) --
Preferred stock dividends paid............................. -- -- (0.1)
-------- -------- --------
Balance at end of year..................................... 86.0 314.8 368.7
-------- -------- --------
TOTAL COMMON STOCKHOLDER'S EQUITY (Note 9)................... $1,556.7 $1,887.3 $2,137.0
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 19
TEXAS EASTERN TRANSMISSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------
Millions 1995 1994 1993
- -------------------------------------------------------------- ------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 126.2 $ 126.1 $ 54.7
Adjustments to reconcile net income to operating cash
flows --
Depreciation and amortization............................ 143.9 141.1 140.8
Deferred income tax expense (benefit).................... 36.4 48.0 (18.7)
Order 636 settlement provision........................... -- -- 100.0
Interest income -- parent................................ -- (34.5) (33.2)
Other non-cash items in net income....................... 9.6 4.0 16.5
Net change in operating assets and liabilities (detail
below)................................................. (56.5) (95.7) (29.3)
------- ------- -------
Net Cash Flows Provided by Operating Activities............. 259.6 189.0 230.8
------- ------- -------
INVESTING ACTIVITIES
Capital expenditures........................................ (135.3) (160.5) (216.4)
Net decrease (increase) in advances -- affiliates........... (132.3) 79.8 457.6
Property retirements and other.............................. 2.2 (5.6) 4.8
------- ------- -------
Net Cash Flows Provided by (Used in) Investing Activities... (265.4) (86.3) 246.0
------- ------- -------
FINANCING ACTIVITIES
Retirement of debt.......................................... -- -- (465.9)
Issuance of debt............................................ -- 99.2 --
Net increase (decrease) in note payable..................... -- (18.4) 1.4
Dividends paid.............................................. -- (180.0) (0.1)
Other....................................................... (5.1) (0.7) (4.1)
------- ------- -------
Net Cash Flows Used in Financing Activities................. (5.1) (99.9) (468.7)
------- ------- -------
NET CHANGE IN CASH
Increase (decrease) in cash and cash equivalents............ (10.9) 2.8 8.1
Cash and cash equivalents, beginning of year................ 11.0 8.2 0.1
------- ------- -------
Cash and Cash Equivalents, End of Year...................... $ 0.1 $ 11.0 $ 8.2
======= ======= =======
NET CHANGE IN OPERATING ASSETS AND LIABILITIES
Accounts receivable......................................... $ 6.7 $ 19.8 $ 19.3
Inventory and supplies...................................... 1.0 (0.9) 43.7
Unrecovered purchased gas and related costs................. -- -- (38.6)
Other current assets........................................ 47.0 108.3 36.4
Rate refund provisions...................................... 0.9 4.4 (31.7)
Accounts payable............................................ 9.6 7.6 (61.7)
Other current liabilities................................... (31.7) (102.8) (5.8)
Transition cost recoveries (payments), net.................. (81.9) (118.7) 56.6
Other deferred charges and liabilities, net................. (8.1) (13.4) (47.5)
------- ------- -------
Total....................................................... $ (56.5) $ (95.7) (29.3)
======= ======= =======
SUPPLEMENTAL DISCLOSURES
Cash paid for interest (net of amount capitalized).......... $ 85.0 $ 81.2 $ 107.0
Cash paid for income tax (including intercompany amounts)... 45.2 56.8 6.5
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 20
TEXAS EASTERN TRANSMISSION CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
INDEX PAGE
- -------------------------------------------------------------------------------------- ----
<S> <C>
1. Accounting Policies Summary...................................................... F-7
2. Transactions with Affiliates..................................................... F-8
3. Natural Gas Revenues and Regulatory Matters...................................... F-9
4. Income Tax....................................................................... F-10
5. Financial Instruments and Credit Risk............................................ F-11
6. Plant, Property and Equipment.................................................... F-12
7. Debt and Credit Facilities....................................................... F-12
8. Leases........................................................................... F-13
9. Common Stockholder's Equity...................................................... F-13
10. Environmental Matters............................................................ F-13
11. Litigation....................................................................... F-14
12. Pension and Other Benefits....................................................... F-14
</TABLE>
1. ACCOUNTING POLICIES SUMMARY
The accounting policies are presented to assist the reader in evaluating
the consolidated financial statements of Texas Eastern Transmission Corporation
(TETCO) and its subsidiaries (the Company). TETCO is a wholly-owned subsidiary
of PanEnergy Corp (PanEnergy), formerly Panhandle Eastern Corporation. Certain
amounts for prior years have been reclassified in the consolidated financial
statements to conform to the current presentation.
The Company is involved in the interstate transportation and storage of
natural gas. The interstate gas transmission operations of TETCO are subject to
the rules, regulations and accounting procedures of the Federal Energy
Regulatory Commission (FERC). TETCO meets the criteria and, accordingly, follows
the reporting and accounting requirements of Statement of Financial Accounting
Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation."
Principles of Consolidation. The consolidated financial statements include
the accounts of TETCO and all subsidiaries. All significant intercompany items
have been eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements.
Certain amounts of reported revenues and expenses are also affected by these
estimates and assumptions. Actual results could differ from those estimates.
Revenue Recognition. The Company recognizes transportation and storage
revenues in the period service is provided. When rate cases are pending final
FERC approval, a portion of revenues collected by TETCO is subject to possible
refunds. The Company has established adequate reserves where required for such
cases. See Note 3 for a summary of regulatory matters.
Gas Supply Costs. Provisions are made in the consolidated statement of
income for all estimated future losses associated with gas supply contracts
which were established prior to implementation of FERC Order 636, including
take-or-pay payments, contract settlements, and buyout and buydown costs. See
Note 3 for a discussion of gas supply contracts and other costs related to the
Order 636 transition.
Cash and Cash Equivalents. All liquid investments with maturities at date
of purchase of three months or less are considered cash equivalents.
Inventory Valuation. Inventory, which consists of materials and supplies,
is recorded using the average cost method.
F-7
<PAGE> 21
Plant, Property and Equipment. Plant, property and equipment is stated at
cost, which does not purport to represent replacement or realizable value. The
Company in 1995 adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," with no impact
to the Company's consolidated financial statements. Assets are grouped and
evaluated based on the ability to identify separate cash flows generated
therefrom.
At the time FERC-regulated properties are retired, the cost plus the cost
of retirement, less salvage, is charged to accumulated depreciation and
amortization. When entire FERC-regulated operating units are sold or
non-regulated properties are retired or sold, the plant and related accumulated
depreciation and amortization accounts are reduced and any gain or loss is
credited or charged to income, unless otherwise permitted by FERC. Depreciation
of plant, property and equipment is computed using the straight-line method. See
Note 6.
Amortization of Goodwill. The Company amortizes goodwill relating to
PanEnergy's purchase of Texas Eastern Corporation (TEC) and its subsidiaries in
1989 on a straight-line basis over 40 years. Accumulated amortization of
goodwill at December 31, 1995 and 1994 was $78.5 million and $72.5 million,
respectively. See Note 4.
Early Retirement of Debt. The Company defers certain costs and losses
related to the early retirement of long-term debt and amortizes such amounts as
they are recovered through rates. At December 31, 1995 and 1994, other deferred
charges included $39.4 million and $43.8 million, respectively, of such costs.
Interest Cost Capitalization. The Company capitalizes interest on major
projects during construction. The rates used by TETCO are calculated pursuant to
FERC rules and include an allowance for equity funds.
Deferred Income Tax. The Company follows the asset and liability method of
accounting for income tax as prescribed by SFAS No. 109, "Accounting for Income
Taxes." Under this method, the effect of a change in tax rates on deferred tax
assets and liabilities is recognized in income in the period the rate change is
enacted. See Note 4.
2. TRANSACTIONS WITH AFFILIATES
The following table summarizes transactions with affiliates included in the
consolidated statement of income:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------
Millions 1995 1994 1993
-------------------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Transportation and storage of natural gas..................... $18.0 $11.1 $28.5
Sales of natural gas.......................................... -- -- 25.1
Other operating revenues...................................... 16.3 17.2 16.2
Transportation expense........................................ 19.8 21.3 27.5
Operating expenses
Billed to affiliates........................................ 0.9 0.9 1.3
Billed from affiliates...................................... 5.1 4.3 3.2
General and administrative expenses
Billed to affiliates........................................ -- -- 0.4
Billed from affiliates...................................... 66.0 67.5 67.3
Interest income............................................... -- 34.5 33.2
</TABLE>
During 1994 and 1993, net intercompany advances bore interest at variable
rates based on LIBOR (London Interbank Offered Rates). Effective January 1,
1995, intercompany advances do not bear interest. Advances are carried as open
accounts and are not segregated between current and non-current amounts.
Increases and decreases in advances result from the movement of funds to provide
for operations, capital expenditures and debt payments of PanEnergy and its
subsidiaries. The collection of advances receivable is subject to the
availability of funds to PanEnergy, whose major sources of funds include
dividends and advances from subsidiaries.
See also Notes 4, 5 and 12 for discussion of other specific transactions
with affiliates.
F-8
<PAGE> 22
3. NATURAL GAS REVENUES AND REGULATORY MATTERS
FERC Order 636 and Transition Costs. During 1993, TETCO began providing
restructured services pursuant to FERC Order 636. This order, which is on appeal
to the courts, requires pipeline service restructuring that unbundles sales,
transportation and storage services. Order 636 allows pipelines to recover
eligible costs resulting from implementation of the order (transition costs).
On August 1, 1994, TETCO implemented a FERC-approved settlement that
resolved regulatory issues related primarily to Order 636 transition costs and a
number of other issues related to services prior to Order 636. In 1994, TETCO
refunded $84 million to customers pursuant to the settlement. TETCO's final and
nonappealable settlement provides for the recovery of certain transition costs
through volumetric and reservation charges through 2002 and beyond, if
necessary. Pursuant to the settlement, TETCO will absorb a certain portion of
the transition costs, the amount of which continues to be subject to change
dependent upon natural gas prices and deliverability levels. In 1993, the
Company established an additional provision of $100 million ($60.2 million after
tax) to reflect the impact of the settlement. In the fourth quarter 1995, based
upon producers' discoveries of additional natural gas reserves, the Company
increased its estimated liabilities for transition costs by $125.8 million.
Under the terms of the existing settlement, regulatory assets were increased by
$85.8 million and the Company recognized a $40 million charge to operating
expenses ($26 million after tax).
At December 31, 1995 and 1994, the Company had recorded approximately $65
million and $310 million (1995), and $30 million and $290 million (1994) of
current and long-term regulatory assets, respectively, representing transition
costs incurred or estimated to be incurred that will be recovered. At December
31, 1995 and 1994, the Company had recorded estimated current and long-term
liabilities related to Order 636 transition costs of approximately $125 million
and $165 million (1995), and $125 million and $105 million (1994), respectively.
The U.S. Department of the Interior announced its intention to seek
additional royalties from gas producers as a result of payments received by such
producers in connection with past take-or-pay settlements, and buyouts and
buydowns of gas sales contracts with natural gas pipelines. TETCO, with respect
to certain producer contract settlements, may be contractually required to
reimburse or, in some instances, to indemnify producers against such royalty
claims. The potential liability of the producers to the government and of TETCO
to the producers involves complex issues of law and fact which are likely to
take a substantial period of time to resolve. If TETCO ultimately has to
reimburse or indemnify the producers, TETCO will file with FERC to recover these
costs from pipeline customers.
In the past, during the normal course of business, TETCO entered into
certain gas purchase contracts containing take-or-pay provisions, which may
expose the Company to financial risk. The Company believes the exposure
associated with gas purchase contract commitments and the termination of TETCO's
merchant services is substantially mitigated by transition cost recoveries
pursuant to TETCO's settlement, Order 636 and other mechanisms. As a result, the
Company believes that Order 636 transition cost issues and take-or-pay
settlement matters will not have a material adverse effect on future
consolidated results of operations or financial position.
Other. TETCO has, pursuant to FERC requirements, requested FERC approval to
record the impact of adopting SFAS No. 109, including the recognition of a
portion of the impact as an increase to stockholder's equity. FERC has not
issued a response to this request. While it is not known when FERC will address
this issue, the Company believes the ultimate resolution of this matter will not
have a material adverse effect on consolidated financial position.
F-9
<PAGE> 23
4. INCOME TAX
The Company's taxable income is included in a consolidated federal income
tax return with PanEnergy. Therefore, income tax has been provided in accordance
with PanEnergy's tax allocation policy, which requires subsidiaries to calculate
federal income tax as if separate taxable income, as defined, was reported.
Income tax recognized in the consolidated statement of income is summarized
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------
Millions 1995 1994 1993
-------- ----- ----- -----
<S> <C> <C> <C>
Current
Federal................................................. $40.2 $31.3 $56.2
State................................................... 4.4 7.5 8.9
----- ----- -----
Total current................................... 44.6 38.8 65.1
----- ----- -----
Deferred
Federal................................................. 31.4 41.2 (15.6)
State................................................... 5.0 6.8 (3.1)
----- ----- -----
Total deferred.................................. 36.4 48.0 (18.7)
----- ----- -----
Total income tax.......................................... $81.0 $86.8 $46.4
===== ===== =====
</TABLE>
Deferred income tax in 1993 included charges of $3.8 million for enacted
changes in federal and state tax laws and rates.
Total income tax differs from the amount computed by applying the federal
income tax rate to income before income tax. The reasons for this difference are
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------
Millions 1995 1994 1993
-------- ----- ----- -----
<S> <C> <C> <C>
Federal income tax rate................................... 35% 35% 35%
===== ===== =====
Income tax, computed at the statutory rate................ $72.5 $74.5 $35.4
Adjustments resulting from --
State income tax, net of federal income tax effect...... 6.1 9.3 3.8
Goodwill amortization................................... 2.1 2.9 4.8
Cumulative effect of federal rate change................ -- -- 3.3
Other................................................... 0.3 0.1 (0.9)
----- ----- -----
Total income tax................................ $81.0 $86.8 $46.4
===== ===== =====
Effective tax rate........................................ 39.1% 40.8% 45.9%
===== ===== =====
</TABLE>
F-10
<PAGE> 24
The tax effects of temporary differences that resulted in deferred income
tax assets and liabilities and a description of the significant financial
statement items that created these differences are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
Millions 1995 1994
-------- ------- -------
<S> <C> <C>
Deferred liabilities and credits................................. $ 150.0 $ 200.9
Other accrued liabilities........................................ 75.2 70.8
Other............................................................ 2.7 1.8
------- -------
Total deferred income tax assets....................... 227.9 273.5
------- -------
Plant, property and equipment.................................... (487.6) (482.7)
Deferred charges................................................. (184.2) (210.2)
State deferred income tax, net of federal tax effect............. (52.3) (49.0)
Other............................................................ (44.7) (36.0)
------- -------
Total deferred income tax liabilities.................. (768.8) (777.9)
------- -------
Net deferred income tax liability, inclusive of current
amounts........................................................ $(540.9) $(504.4)
======= =======
</TABLE>
In 1990, the Internal Revenue Service (IRS) issued regulations which
disallow for tax purposes losses incurred in PanEnergy's 1989 sales of certain
assets that were acquired in the purchase of TEC. Consequently, PanEnergy
established a provision in 1990 for this and certain other issues, resulting in
increases in TETCO's goodwill and paid-in capital. Following further discussions
with the IRS, PanEnergy in 1994 revised its estimates with respect to the
disallowed loss issue and in 1995 with respect to other issues. As a result,
PanEnergy reduced its provision and TETCO's related goodwill and paid-in capital
by approximately $200 million and $100 million in 1994 and 1995, respectively.
5. FINANCIAL INSTRUMENTS AND CREDIT RISK
Financial Instruments
<TABLE>
<CAPTION>
APPROXIMATE
Millions BOOK VALUE FAIR VALUE
-------- ---------- -----------
ASSETS (LIABILITIES)
<S> <C> <C> <C>
December 31, 1995
Cash............................................. Note 1 $ 0.1 $ 0.1
Other current receivables........................ 2.6 2.6
Other investments................................ 11.6 11.6 (1)
Note payable -- parent........................... Note 7 (355.0) (355.0)(2)
Long-term debt................................... Note 7 (820.5) (951.8)(2)
December 31, 1994
Cash............................................. Note 1 $ 11.0 $ 11.0
Other current receivables........................ 3.1 3.1
Other investments................................ 13.9 13.9 (1)
Long-term debt................................... Note 7 (818.4) (878.1)(2)
</TABLE>
---------------
(1) The fair value of these financial instruments, which are insurance
contracts, is based on determinations by insurance companies.
(2) Based on quoted market prices for the same or similar issues,
discounted cash flows and/or rates currently available to the Company
for debt with similar terms and remaining maturities.
PanEnergy's four interstate natural gas pipelines have implemented an
agreement to sell with limited recourse, on a continuing basis, current accounts
receivable at a discount. TETCO received $55 million for accounts receivable
sold that remained outstanding at December 31, 1995. In the opinion of
management, the probability that the Company will be required to perform under
the recourse provisions is remote.
F-11
<PAGE> 25
The recourse provisions of the trade receivable sales agreement have no
book value associated with them and there are no fair values readily
determinable since quoted market prices are not available. The fair values of
net advances receivable are not readily determinable since such amounts are
carried as open accounts. See Note 2.
Significant Customers and Concentrations. Customer billings that exceeded
10% of consolidated revenues during the years ended December 31, 1995, 1994 or
1993 were those to Public Service Electric and Gas Company totaling $130.4
million, $112.3 million and $105.7 million, respectively.
The Company's primary market area is located in the Northeast region of the
United States. The Company has a concentration of receivables due from gas and
electric utilities in this area, which may affect the Company's overall credit
risk in that certain customers may be similarly affected by changes in economic,
regulatory or other factors. Trade receivables are generally not collateralized;
however, the Company analyzes customers' credit positions prior to extending
credit.
6. PLANT, PROPERTY AND EQUIPMENT
A summary of plant, property and equipment by classification follows:
<TABLE>
<CAPTION>
DECEMBER 31
DEPRECIATION -------------------
Millions % RATES 1995 1994
----------------------------------------------------- ------------ -------- --------
<S> <C> <C> <C>
Transmission......................................... 2.76-3.25 $3,024.1 $2,923.5
Underground storage.................................. 1.87 96.7 93.9
General plant........................................ 2.53-20.00 56.1 58.4
Construction work in progress........................ -- 42.0 47.0
-------- --------
Total plant, property and equipment........ $3,218.9 $3,122.8
======== ========
</TABLE>
7. DEBT AND CREDIT FACILITIES
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
Millions 1995 1994
------------------------------------------------------------------ ------ ------
<S> <C> <C>
Debentures
10 1/8% maturing 2011........................................... $100.0 $100.0
10% maturing 2011............................................... 150.0 150.0
Notes
10 3/8% maturing 2000........................................... 200.0 200.0
10% maturing 2001............................................... 100.0 100.0
8% maturing 2002................................................ 100.0 100.0
8 1/4% maturing 2004............................................ 100.0 100.0
Medium Term, Series A, 7.64-9.07% maturing 1999-2012............ 100.0 100.0
Unamortized Discount.............................................. (29.5) (31.6)
------ ------
Total Long-term Debt.................................... $820.5 $818.4
====== ======
</TABLE>
The interest rates indicated were in effect on principal balances
outstanding at December 31, 1995. Interest costs capitalized in 1995, 1994 and
1993 were $1.4 million, $2.8 million and $1.7 million, respectively.
Required sinking fund and installment payments applicable to long-term debt
for the years 1997 through 2000 are $16.2 million, $16.3 million, $65.3 million
and $216.2 million, respectively. There are no required payments in 1996.
In December 1995, TETCO declared and paid a $355 million dividend on common
stock in the form of a promissory note due PanEnergy. This promissory note bears
interest at prime and matures on June 30, 1996.
F-12
<PAGE> 26
TETCO has an effective shelf registration statement with the Securities and
Exchange Commission for the issuance of $100 million of unsecured debt
securities.
Credit Agreement. On January 31, 1996, TETCO canceled its variable-rate,
$200 million bank credit agreement.
8. LEASES
The Company utilizes assets under operating leases in several areas of
operations. Consolidated rental expense for these leases and for lease expenses
billed from affiliates amounted to $10.5 million in 1995 and $10 million in both
1994 and 1993. Minimum rental payments under the Company's various operating
leases for the years 1996 through 2000 are $2.5 million, $2.1 million, $1.8
million, $1.5 million and $0.9 million, respectively. Thereafter, payments
aggregate $1.1 million through 2004.
9. COMMON STOCKHOLDER'S EQUITY
Under the most restrictive covenants contained in TETCO's debt agreements,
$1.4 billion of the Company's consolidated common stockholder's equity was
available for the payment of dividends at December 31, 1995.
10. ENVIRONMENTAL MATTERS
TETCO is currently conducting PCB (polychlorinated biphenyl) assessment and
cleanup programs at certain of its compressor station sites under conditions
stipulated by a U.S. Consent Decree. The programs include on- and off-site
assessment, installation of on-site source control equipment and groundwater
monitoring wells, and on- and off-site cleanup work. TETCO expects to complete
the cleanup programs at up to 89 sites in as many as 14 states by 1998.
Groundwater monitoring activities will continue beyond 1998.
In addition, TETCO has been conducting PCB cleanup work at certain on- and
off-site areas pursuant to separate agreements with the states of Pennsylvania
and New Jersey. These agreements generally impose cleanup levels that are more
stringent than those required by the U.S. Consent Decree.
In 1987, the Commonwealth of Kentucky instituted suit in state court
against TETCO, alleging improper disposal of PCBs at TETCO's three compressor
station sites in Kentucky. This suit, which is still pending, seeks penalties
for violations of Kentucky environmental statutes. The Company previously
established a reserve for potential fines and penalties. In 1991, TETCO and the
Commonwealth executed a consent order in which TETCO agreed to perform site
assessments at its sites in Kentucky, and this work has been substantially
completed. TETCO completed cleanup of one of its Kentucky sites in 1994, another
in 1995 and intends to complete the final site in 1996.
At December 31, 1995 and 1994, the Company had current and long-term
liabilities recorded of $44.9 million and $168.3 million (1995) and $56.4
million and $289.1 million (1994), respectively, for remaining estimated cleanup
costs. These cost estimates represent gross cleanup costs expected to be
incurred by TETCO, have not been discounted or reduced by customer recoveries
and do not include fines, penalties or third-party claims. Estimated liabilities
for remaining PCB cleanup costs were reduced by $77.6 million in the fourth
quarter 1995 as a result of lower-than-projected cleanup costs incurred on
completed sites. TETCO is recovering 57.5% of cleanup costs in rates pursuant to
a stipulation and agreement approved by FERC in 1992. As a result of the
reduction in estimated cleanup costs, the related regulatory assets were reduced
$44.6 million. TETCO's share of the cleanup estimate was lowered which resulted
in a $33 million decrease to operating expenses ($21.5 million after tax). At
December 31, 1995 and 1994, the Company had current and long-term regulatory
assets recorded of $17 million and $101.7 million (1995) and $18.6 million and
$177.1 million (1994), respectively, representing costs to be recovered from
customers.
The federal and state cleanup programs are not expected to interrupt or
diminish TETCO's ability to deliver natural gas to customers. The Company
believes the ultimate resolution of matters relating to the environmental issues
discussed above will not have a material adverse effect on consolidated results
of operations or financial position.
F-13
<PAGE> 27
11. LITIGATION
In connection with a rupture and fire that occurred on TETCO's 36-inch
natural gas pipeline on March 23, 1994 in Edison, New Jersey, claims have been
made and numerous lawsuits have been filed in the Superior Court of New Jersey,
Middlesex County against TETCO and other private and governmental entities by or
on behalf of hundreds of individuals and general businesses. These claimants
seek compensatory damages for personal injuries and/or property losses, as well
as punitive damages. The property insurers of an apartment complex adjacent to
the asphalt plant where the rupture occurred also have filed suits against TETCO
and other defendants in Superior Court seeking to recover amounts paid under
pertinent policies of insurance. Quality Materials, Inc., the owner of the
asphalt plant, has filed suit in the U.S. District Court for the District of New
Jersey against TETCO seeking to recover unspecified property damages, lost
income and punitive damages. TETCO has filed a counterclaim against Quality
Materials, Inc.
The findings of an investigation of the incident by the Company and the
National Transportation Safety Board (NTSB) indicate third-party damage to be
the cause of the rupture. Additionally, an NTSB report found that TETCO's
pipeline operations met or exceeded federal safety regulations. The Company
recorded a $5 million after-tax charge in 1994 for costs related to this
incident that are not recoverable under the Company's insurance policies.
On August 30, 1995, two plaintiffs filed a lawsuit with class action
allegations in the 58th Judicial District Court, Jefferson County, Texas,
against PanEnergy, TEC and TETCO, among other defendants. Plaintiffs seek
recovery of compensatory and punitive damages, in unspecified amounts, for
personal injuries and property damage resulting from alleged exposure to PCBs.
Additionally, TETCO, as well as certain other PanEnergy subsidiaries in some of
the cases, is a defendant in several other private plaintiff suits in various
courts. These suits seek relief for actual and punitive damages that allegedly
resulted from the release of PCBs and other hazardous substances in violation of
federal and state laws.
The Company expects the resolution of all the above matters will not have a
material adverse effect on consolidated results of operations or financial
position.
The Company is also involved in various other legal actions and claims
arising in the normal course of business. Based upon its current assessment of
the facts and the law, management does not believe that the outcome of any such
action or claim will have a material adverse effect upon the consolidated
financial position of the Company. However, these actions and claims in the
aggregate seek substantial damages against the Company and are subject to the
uncertainties inherent in any litigation. The Company is defending itself
vigorously in all the above suits.
12. PENSION AND OTHER BENEFITS
Pension Benefits. PanEnergy has, and the Company participates in, a
non-contributory trusteed pension plan covering eligible employees with a
minimum of one year vesting service. The plan provides pension benefits for
eligible employees of TETCO that are generally based on an employee's years of
benefit accrual service and highest average eligible earnings. PanEnergy's
policy is to fund amounts, as necessary, on an actuarial basis to provide assets
sufficient to meet benefits to be paid to plan members.
The components of the Company's net pension benefit, allocated by
PanEnergy, are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------
Millions 1995 1994 1993
--------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Actual return on plan assets............................. $ 48.3 $ (0.7) $ 23.6
Amount deferred.......................................... (28.4) 21.0 (4.4)
------ ------ ------
Expected return on plan assets........................... 19.9 20.3 19.2
Service cost benefits earned during the period........... (3.0) (3.5) (3.0)
Interest cost on projected benefit obligations........... (14.7) (14.4) (14.6)
Net amortization......................................... -- -- (0.1)
------ ------ ------
Net pension benefit............................ $ 2.2 $ 2.4 $ 1.5
====== ====== ======
</TABLE>
F-14
<PAGE> 28
Assumptions used in the Company's pension accounting are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Discount rate................................................... 7.5% 8.5% 7.5%
Rate of increase in compensation levels......................... 5.0 5.0 5.0
Expected long-term rate of return on plan assets................ 9.5 9.5 9.5
</TABLE>
PanEnergy also sponsors, and the Company participates in, an employee
savings plan which covers substantially all employees. The Company expensed plan
contributions of $3.6 million in both 1995 and 1994, and $3.4 million in 1993.
Other Postretirement Benefits. The Company's postretirement benefits, in
conjunction with PanEnergy, consist of certain health care and life insurance
benefits. Substantially all of the Company's employees may become eligible for
these benefits when they reach retirement age while working for the Company and
have attained 10 years of specified service. The benefits are provided through
contributory and noncontributory trusteed benefit plans.
The Company accrues such benefit costs over the active service period of
employees to the date of full eligibility for the benefits. The net unrecognized
transition obligation, resulting from implementation of accrual accounting, is
being amortized over approximately 20 years commencing with 1993.
It is the Company's and PanEnergy's general policy to fund accrued
postretirement health care costs. PanEnergy's retiree life insurance plan is
fully funded based on actuarially-determined requirements. FERC policy generally
allows, subject to individual pipeline proceedings, for current rate recovery of
funded accrued postretirement benefit costs including amortization of the
transition obligation. Pending FERC approval for recovery, TETCO has deferred
certain postretirement benefit costs.
The Company's net postretirement benefit cost, allocated by PanEnergy, is
summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------
Millions 1995 1994 1993
------------------------------------------------------------ ----- ----- -----
<S> <C> <C> <C>
Actual return on plan assets................................ $ 0.6 $ 0.2 $ 0.1
Amount deferred............................................. (0.3) -- (0.1)
----- ----- -----
Expected return on plan assets.............................. 0.3 0.2 --
Service cost benefits earned during the period.............. (0.5) (0.6) (0.5)
Interest cost on accumulated obligations.................... (6.3) (6.2) (5.9)
Net amortization and deferral............................... (0.7) (0.7) (1.2)
----- ----- -----
Net postretirement benefits cost.................. $(7.2) $(7.3) $(7.6)
===== ===== =====
</TABLE>
The assumed health care cost trend rate used to estimate postretirement
benefits was 9% for 1996. The health care cost trend rate is expected to
decrease, with a 5.5% ultimate trend rate expected to be achieved by 1999. The
effect of a 1% increase in the assumed health care cost trend rate for each
future year is $0.3 million on the annual aggregate of the service and interest
cost components of net periodic postretirement benefit cost and $4.1 million on
PanEnergy's accumulated postretirement benefit obligation attributable to the
Company at December 31, 1995. Other assumptions used in postretirement benefit
accounting are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Discount rate.................................................. 7.5% 8.5% 7.5%
Rate of increase in compensation levels........................ 5.0 5.0 5.0
Expected long-term rate of return on plan assets............... 9.5 9.5 9.5
Assumed tax rate, health care portion only..................... 39.6 39.6 39.6
</TABLE>
F-15
<PAGE> 29
Other Postemployment Benefits. The Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," effective January 1, 1994.
This standard requires accruals for benefits provided by the Company to certain
former or inactive employees. TETCO has received permission from FERC to defer
such costs, pending future rate filings requesting recovery. The earnings impact
of this change in accounting policy was not significant.
F-16
<PAGE> 30
TEXAS EASTERN TRANSMISSION CORPORATION AND SUBSIDIARIES
CONSOLIDATED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------
Millions MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C>
1995
Operating revenues.................................. $227.6 $ 212.8 $209.7 $ 224.3
Operating expenses.................................. 148.8 136.3 142.9 152.3
------ ------- ------ -------
Operating income.................................... 78.8 76.5 66.8 72.0
Other income, net of deductions..................... 0.7 2.0 1.9 0.8
Interest expense.................................... 23.9 23.6 22.2 22.6
------ ------- ------ -------
Income before income tax............................ 55.6 54.9 46.5 50.2
Income tax.......................................... 22.2 21.9 18.7 18.2
------ ------- ------ -------
Net Income.......................................... $ 33.4 $ 33.0 $ 27.8 $ 32.0
====== ======= ====== =======
1994
Operating revenues.................................. $203.1 $ 199.1 $204.7 $ 219.8
Operating expenses.................................. 144.3 133.7 133.2 150.8
------ ------- ------ -------
Operating income.................................... 58.8 65.4 71.5 69.0
Other income, net of deductions..................... 6.4 8.0 6.7 16.5
Interest expense.................................... 21.1 21.6 22.0 24.7
------ ------- ------ -------
Income before income tax............................ 44.1 51.8 56.2 60.8
Income tax.......................................... 18.5 21.8 21.3 25.2
------ ------- ------ -------
Net Income.......................................... $ 25.6 $ 30.0 $ 34.9 $ 35.6
====== ======= ====== =======
</TABLE>
F-17
<PAGE> 31
TEXAS EASTERN TRANSMISSION CORPORATION AND SUBSIDIARIES
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------------
Millions 1995 1994 1993 1992 1991
- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES....................... $ 874.4 $ 826.7 $ 905.6 $1,083.5 $1,265.6
COSTS AND EXPENSES
Natural gas purchased.................. -- -- 96.2 214.5 440.4
Operating and maintenance.............. 306.3 272.9 346.3(1) 317.7 305.5
Depreciation and amortization.......... 143.9 141.1 140.8 136.1 132.5
Other costs and expenses............... 130.1 148.0 140.4 137.4 145.8
-------- -------- -------- -------- --------
OPERATING INCOME......................... 294.1 264.7 181.9 277.8 241.4
INTEREST EXPENSE......................... 92.3 89.4 118.5 121.9 103.6
NET INCOME............................... $ 126.2 $ 126.1 $ 54.7(1) $ 123.3 $ 92.4
PLANT, PROPERTY AND EQUIPMENT............ $3,218.9 $3,122.8 $2,982.1 $2,774.0 $2,686.8
Accumulated depreciation and
amortization........................... (681.9) (584.6) (478.5) (359.6) (249.1)
-------- -------- -------- -------- --------
Net plant, property and equipment........ $2,537.0 $2,538.2 $2,503.6 $2,414.4 $2,437.7
TOTAL ASSETS............................. $4,151.8 $4,198.9 $4,590.6 $4,714.1 $4,584.4
CAPITAL STRUCTURE
Long-term debt due within one year..... $ -- $ -- $ -- $ 65.0 $ --
Notes payable.......................... 355.0 -- 18.4 17.0 --
Long-term debt........................ . 820.5 818.4 717.2 1,093.5 872.0
Common stockholder's equity............ 1,556.7 1,887.3 2,137.0 2,084.9 1,962.2
-------- -------- -------- -------- -------
TOTAL CAPITALIZATION..................... $2,732.2 $2,705.7 $2,872.6 $3,260.4 $2,834.2
OPERATING CASH FLOW...................... $ 259.6 $ 189.0 $ 230.8 $ 12.6 $ 377.6
CAPITAL EXPENDITURES..................... $ 135.3 $ 160.5 $ 216.4 $ 107.5 $ 114.3
VOLUMES, BCF(2)
Transports............................. 1,192 1,155 1,045 924 778
Sales.................................. -- -- 33 97 196
-------- -------- -------- -------- -------
Total.................................. 1,192 1,155 1,078 1,021 974
======== ======== ======== ======== =======
</TABLE>
- ---------------
(1) Includes a $100 million charge ($60.2 million after tax) reflecting TETCO's
settlement of Order 636 implementation and other issues.
(2) Billion cubic feet at 14.73 pounds per square inch atmospheric pressure.
See the Notes to Consolidated Financial Statements for a discussion of material
contingencies
F-18
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
TEXAS EASTERN TRANSMISSION CORPORATION
By /s/ ROBERT W. REED
--------------------------------------
Robert W. Reed
Secretary
Date: March 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities indicated on March 28, 1996.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- -----------------------------------------------
<C> <S>
(i) Principal executive officer:*
/s/ PAUL M. ANDERSON
--------------------------------------
Paul M. Anderson Chairman and Chief Executive Officer
(ii) Principal financial officer:*
/s/ PAUL F. FERGUSON, JR.
--------------------------------------
Paul F. Ferguson, Jr. Senior Vice President and Chief Financial Officer
(iii) Principal accounting officer:*
/s/ SANDRA P. MEYER
--------------------------------------
Sandra P. Meyer Vice President
(iv) Directors:*
PAUL M. ANDERSON
FRED J. FOWLER
DENNIS R. HENDRIX
G. L. MAZANEC
---------------
* Signed on behalf of each of these persons:
By /s/ ROBERT W. REED
--------------------------------------
Robert W. Reed
Attorney-in-Fact
</TABLE>
<PAGE> 1
Exhibit 23
ACCOUNTANTS' CONSENT
The Board of Directors
Texas Eastern Transmission Corporation:
We consent to incorporation by reference in the registration statement
(No. 33-67690) on Form S-3 of Texas Eastern Transmission Corporation of our
report dated January 23, 1996, relating to the consolidated balance sheets of
Texas Eastern Transmission Corporation and Subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income, common
stockholder's equity, and cash flows for each of the years in the three-year
period ended December 31, 1995, which report appears in the December 31, 1995
annual report on Form 10-K of Texas Eastern Transmission Corporation.
KPMG PEAT MARWICK LLP
Houston, Texas
March 28, 1996
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Officers and/or
Directors of TEXAS EASTERN TRANSMISSION CORPORATION (the "Company"), a Delaware
corporation, do hereby constitute and appoint PAUL F. FERGUSON, JR., CARL B.
KING and ROBERT W. REED, and each of them, their true and lawful attorney and
agent to do any and all acts and things, and execute any and all instruments
which, with the advice of Counsel, said attorney and agent may deem necessary
or advisable to enable the Company to comply with the Securities Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing under said Act of the Form
10-K Annual Report with the Securities and Exchange Commission, including
specifically, but without limitation thereof, to sign their names as Officers
and/or Directors of the Company to the Form 10-K Report, and to any instrument
or document filed as a part of, or in connection with, said Form 10-K Report or
Amendment thereto; and the undersigned do hereby ratify and confirm all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have subscribed these presents this
28th day of March, 1996
/s/ DENNIS HENDRIX /s/ GEORGE L. MAZANEC
- ------------------------------------- -------------------------------------
Dennis Hendrix George L. Mazanec
/s/ FRED J. FOWLER /s/ PAUL M. ANDERSON
- ------------------------------------- -------------------------------------
Fred J. Fowler Paul M. Anderson
/s/ PAUL F. FERGUSON, JR. /s/ SANDRA P. MEYER
- ------------------------------------- -------------------------------------
Paul F. Ferguson, Jr. Sandra P. Meyer
Senior Vice President and Vice President
Chief Financial Officer (Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Texas
Eastern Transmission Corporation Annual Report on Form 10-K for the year ended
December 31, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 100
<SECURITIES> 0
<RECEIVABLES> 22,800
<ALLOWANCES> 0
<INVENTORY> 19,100
<CURRENT-ASSETS> 201,300
<PP&E> 3,218,900
<DEPRECIATION> 681,900
<TOTAL-ASSETS> 4,151,800
<CURRENT-LIABILITIES> 744,400
<BONDS> 820,500
<COMMON> 0
0
0
<OTHER-SE> 1,556,700
<TOTAL-LIABILITY-AND-EQUITY> 4,151,800
<SALES> 0
<TOTAL-REVENUES> 874,400
<CGS> 0
<TOTAL-COSTS> 306,300
<OTHER-EXPENSES> 182,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,300
<INCOME-PRETAX> 207,200
<INCOME-TAX> 81,000
<INCOME-CONTINUING> 126,200
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 126,200
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1>Not meaningful since Texas Eastern Transmission Corporation is a wholly-owned
subsidiary.
</FN>
</TABLE>
