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Partners' Capital and Distributions
 3 Months Ended
Mar. 31, 2012
Partners' Capital and Distributions  
Partners' Capital and Distributions

Note 9—Partners’ Capital and Distributions

 

PAA Distributions

 

The following table details the distributions paid during or pertaining to the first three months of 2012, net of reductions to the general partner’s incentive distributions (in millions, except per unit amounts):

 

 

 

 

 

Distributions Paid

 

Distributions

 

 

 

 

 

Common

 

General Partner

 

 

 

per limited

 

Date Declared

 

Date Paid or To Be Paid

 

Units

 

Incentive

 

2%

 

Total

 

partner unit

 

April 10, 2012

 

May 15, 2012 (1)

 

$

169

 

$

65

 

$

3

 

$

237

 

$

1.0450

 

January 10, 2012

 

February 14, 2012

 

$

159

 

$

63

 

$

3

 

$

225

 

$

1.0250

 

 

 

(1)                         Payable to unitholders of record at the close of business on May 4, 2012, for the period January 1, 2012 through March 31, 2012.

 

In order to enhance our distribution coverage ratio and liquidity following a significant acquisition, our general partner has, from time to time, agreed to reduce the amounts due to it as incentive distributions. As such, beginning with the first distribution declared and paid after closing the BP NGL Acquisition, which occurred on April 1, 2012, our general partner agreed to reduce the amount of its incentive distributions by $15 million per year for two years and $10 million per year thereafter. The first incentive distribution reduction related to this acquisition of approximately $4 million will be applied to the May 2012 distribution. See Note 4 for further discussion of the BP NGL Acquisition.

 

PAA Equity Offerings

 

During the three months ended March 31, 2012, we completed an equity offering of our common units as shown in the table below (in millions, except unit and per unit data):

 

 

 

 

 

Gross

 

Proceeds

 

General Partner

 

 

 

Net

 

Date

 

Units Issued

 

Unit Price

 

from Sale

 

Contribution

 

Costs

 

Proceeds

 

March 2012 (1)

 

5,750,000

 

$

80.03

 

$

460

 

$

9

 

$

(14

)

$

455

 

 

 

(1)                         This offering of common units was an underwritten transaction that required us to pay a gross spread. The net proceeds from this offering were used to fund a portion of the BP NGL acquisition, to reduce outstanding borrowings under our credit facilities and for general partnership purposes.

 

LTIP Vesting

 

In connection with the settlement of vested LTIP awards, we issued 191,812 common units during the three months ended March 31, 2012 with a fair value of approximately $16 million.

 

Noncontrolling Interests in Subsidiaries

 

As of March 31, 2012, noncontrolling interests in subsidiaries consisted of the following: (i) an approximate 36 % interest in PNG and (ii) a 25% interest in SLC Pipeline LLC.

 

Modification of Conversion of PNG Subordinated Units

 

In February 2012, PNG modified the terms of the first three tranches of the PNG Series B subordinated units held by PAA. The Series B subordinated units do not participate in quarterly distributions. Instead, the Series B subordinated units convert into Series A subordinated units or common units in five distinct tranches upon the achievement of defined benchmarks tied to the amount of capacity in service at Pine Prairie and increases in PNG’s quarterly distributions. The modification increased the quarterly distribution benchmark for Tranche 1, 2 and 3 from annualized levels of $1.44 per unit, $1.53 per unit and $1.63 per unit, respectively, to an annualized level of $1.71 per unit. The following table presents the operational and financial benchmarks, as modified, for conversion of the Series B subordinated units into Series A subordinated units for each tranche (units in millions):

 

 

 

Series B Subordinated Units to Convert into
Series A Subordinated Units

 

Working Gas Storage Capacity (Bcf)

 

Annualized
Distribution Level (1)

 

Tranche 1

 

2.6

 

29.6

 

$

1.71

 

Tranche 2

 

2.8

 

35.6

 

$

1.71

 

Tranche 3

 

2.1

 

41.6

 

$

1.71

 

Tranche 4

 

3.0

 

48.0

 

$

1.71

 

Tranche 5

 

3.0

 

48.0

 

$

1.80

 

 

 

(1)                         For satisfaction of this benchmark, PNG must, for two consecutive quarters, (i) maintain distributable cash flow sufficient to pay a quarterly distribution of at least the annualized distribution benchmark on the weighted average number of outstanding common units and Series A subordinated units and all of such Series B subordinated units and (ii) distribute available cash of at least the annualized distribution benchmark on all outstanding common units and Series A subordinated units and the corresponding distributions on PNG’s general partner’s 2% interest and the related distributions on the incentive distribution rights. See Note 5 to our Consolidated Financial Statements included in Part IV of our 2011 Annual Report on Form 10-K for a complete discussion of our Series B subordinated units.

 

Noncontrolling Interests Rollforward

 

The following table reflects the changes in the noncontrolling interests in partners’ capital (in millions):

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

 

2012

 

2011

 

Beginning balance

 

$

524

 

$

231

 

Sale of noncontrolling interests in a subsidiary

 

—

 

306

 

Net income attributable to noncontrolling interests

 

7

 

3

 

Distributions to noncontrolling interests

 

(12

)

(5

)

Equity compensation expense

 

1

 

1

 

Other comprehensive income/(loss):

 

 

 

 

 

Reclassification adjustments

 

(6

)

—

 

Deferred gain/(loss) on cash flow hedges, net

 

2

 

—

 

Ending Balance

 

$

516

 

$

536