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Partners' Capital and Distributions | 9 Months Ended
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Sep. 30, 2012
Partners' Capital and Distributions |
Partners' Capital and Distributions |
Note 9—Partners’ Capital and Distributions PAA Distributions Our general partner is entitled to receive incentive distributions if the amount we distribute with respect to any quarter exceeds levels specified in our partnership agreement. As a result of the two-for-one unit split that was effected on October 1, 2012, the partnership agreement was amended to adjust the quarterly incentive distribution provisions. Under the provisions of the amended partnership agreement, our general partner is entitled, without duplication, to 15% of amounts we distribute in excess of $0.2250 per unit, 25% of the amounts we distribute in excess of $0.2475 per unit and 50% of amounts we distribute in excess of $0.3375 per unit. The following table details the distributions paid during or pertaining to the first nine 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 (2) |
October 4, 2012 |  | November 14, 2012 (1) |  | $ | 181 |  | $ | 74 |  | $ | 4 |  | $ | 259 |  | $ | 0.5425 |
July 9, 2012 |  | August 14, 2012 |  | $ | 174 |  | $ | 69 |  | $ | 4 |  | $ | 247 |  | $ | 0.5325 |
April 10, 2012 |  | May 15, 2012 |  | $ | 169 |  | $ | 65 |  | $ | 3 |  | $ | 237 |  | $ | 0.5225 |
January 10, 2012 |  | February 14, 2012 |  | $ | 159 |  | $ | 63 |  | $ | 3 |  | $ | 225 |  | $ | 0.5125 |
(1) Payable to unitholders of record at the close of business on November 2, 2012, for the period July 1, 2012 through September 30, 2012. (2) Distributions per limited partner unit are presented as adjusted for the two-for-one unit split effected on October 1, 2012. In order to enhance our distribution coverage ratio and liquidity in connection with a significant acquisition, our general partner has, from time to time, agreed to reduce the amounts due to it as incentive distributions. In connection with the BP NGL Acquisition, our general partner agreed to reduce the amount of its incentive distributions by $3.75 million per quarter through February 2014 and $2.5 million per quarter thereafter. Through September 30, 2012, our general partner’s incentive distributions had been reduced by $7.5 million related to this acquisition. See Note 4 for further discussion of the BP NGL Acquisition. PAA Equity Offerings Continuous Offering Programs. On May 9, 2012, we entered into an equity distribution agreement with respect to the offer and sale, through our sales agent, of common units representing limited partner interests having an aggregate offering price of up to $300 million. The final sales under this equity distribution agreement occurred during September 2012. Under this agreement, we sold an aggregate of approximately 7.2 million common units, as adjusted for the two-for-one unit split, generating proceeds of approximately $302 million, including our general partner’s proportionate capital contribution, net of approximately $4 million of commissions to our sales agent. The net proceeds from sales were used for general partnership purposes. On September 13, 2012, we entered into an additional equity distribution agreement with several financial institutions pursuant to which we may offer and sell, through our sales agents, common units representing limited partner interests having an aggregate offering price of up to $500 million. Sales of such common units will be made by means of ordinary brokers’ transactions on the NYSE at market prices, in block transactions or as otherwise agreed upon by our sales agent and us. Under the terms of the agreement, we have the option to sell common units to any of our sales agents as principal for its own account at a price to be agreed upon at the time of the sale. For any such sales, we will enter into a separate terms agreement with the sales agent. Through September 30, 2012, we sold an aggregate of approximately 1.2 million common units, as adjusted for the two-for-one unit split, under this agreement, generating proceeds of approximately $55 million, including our general partner’s proportionate capital contribution, net of approximately $1 million of commissions to our sales agents. The net proceeds from sales were used for general partnership purposes. Other Equity Offerings. During the first nine months of 2012, we completed an offering of our common units that was not associated with our Continuous Offering Programs, as shown in the table below (in millions, except unit and per unit data):
|  |  |  |  |  |  |  | General |  |  |  |  |
|  |  |  | Gross |  | Proceeds |  | Partner |  |  |  | Net |
Date |  | Units Issued (2) |  | Unit Price (2) |  | from Sale |  | Contribution |  | Costs |  | Proceeds |
March 2012 (1) |  | 11,500,000 |  | $ | 40.015 |  | $ | 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. (2) Units issued and gross unit price are presented as adjusted for the two-for-one unit split that was effected on October 1, 2012. LTIP Vesting In connection with the settlement of vested LTIP awards, we issued approximately 0.9 million common units, as adjusted for the unit split, during the nine months ended September 30, 2012, which resulted in an increase to partners’ capital of approximately $34 million, including the general partner’s contribution. Noncontrolling Interests in Subsidiaries As of September 30, 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 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 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. Any Series B subordinated units that remain outstanding as of December 31, 2018 will automatically be cancelled. The February 2012 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) generate distributable cash flow sufficient to pay a quarterly distribution of at least the annualized distribution benchmark on the weighted average number of common units and Series A subordinated units and all of such Series B subordinated units outstanding during such quarter plus (ii) distribute available cash of at least the annualized distribution benchmark on all of its 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 PNG’s Series B subordinated units. Noncontrolling Interests Rollforward The following table reflects the changes in the noncontrolling interests in partners’ capital (in millions):
|  | Nine Months Ended |
|  | September 30, |
|  | 2012 |  | 2011 |
Beginning balance |  | $ | 524 |  | $ | 231 |
Sale of noncontrolling interests in a subsidiary |  | — |  | 306 |
Net income attributable to noncontrolling interests |  | 23 |  | 18 |
Distributions to noncontrolling interests |  | (36 | ) | (28 | )
Equity compensation expense |  | 3 |  | 2 |
Distribution equivalent right payments |  | (1 | ) | — |
Other comprehensive income/(loss): |  |  |  |  |
Reclassification adjustments |  | (7 | ) | — |
Net deferred loss on cash flow hedges |  | (1 | ) | — |
Ending balance |  | $ | 505 |  | $ | 529 |

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- Definition The entire disclosure for the formation, structure, control and ownership of the partnership. Disclosures related to accounts comprising partners' capital. Includes balances of general partners' capital account, limited partners' capital account, preferred partners' capital account and total partners' capital account and units outstanding; accumulated other comprehensive income; amount and nature of changes to amount of partner's capital and units outstanding by class, rights and privileges for each class of units; distribution policies and distributions paid by unit class; impact of and correction of an error in previously issued financial statements; limitations of partners' liability; redemption, conversion and distribution policies; and deferred compensation related to the issuance of units. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 272 -SubTopic 10 -Section 50 -Paragraph 3 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=6373374&loc=d3e70478-108055 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Practice Bulletin (PB) -Number 14 -Paragraph 10, 15 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 5 -Subparagraph (SAB TOPIC 4.F) -URI http://asc.fasb.org/extlink&oid=6959260&loc=d3e187171-122770 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 272 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6373374&loc=d3e70434-108055 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Emerging Issues Task Force (EITF) -Number 87-21 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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