Investments in and Loans to Unconsolidated Affiliates and Related Party Transactions
Investments in affiliates for which we are not the primary beneficiary, but over which we have significant influence, are accounted for using the equity method. As of December 31, 2013 and 2012, the carrying amounts of investments in affiliates approximated the amounts of underlying equity in net assets. We received distributions from our equity investments of $411 million in 2013, $324 million in 2012 and $516 million in 2011. Cumulative undistributed earnings of unconsolidated affiliates totaled $507 million at December 31, 2013 and $352 million at December 31, 2012.
Spectra Energy Partners. As of December 31, 2013, our Spectra Energy Partners segment investments were mostly comprised of a 42% effective interest in Gulfstream, a 21% effective interest in SESH, a 41% effective interest in Steckman Ridge and 28% effective interests in Sand Hills and Southern Hills. Our remaining 25.05% interest in SESH and 1% interest in Steckman Ridge are currently held in "Other." We also own additional 17% effective interests in Sand Hills and Southern Hills through our ownership interest in DCP Midstream, which is held in our Field Services segment. Gulfstream is an interstate natural gas pipeline that extends from Mississippi and Alabama across the Gulf of Mexico to Florida. SESH is an interstate natural gas pipeline that extends from northeast Louisiana to Mobile County, Alabama where it connects to the Gulfstream system. Steckman Ridge is a storage project located in Bedford County, Pennsylvania. The Sand Hills pipeline provides NGL transportation from the Permian Basin and Eagle Ford shale region to the premium NGL markets on the Gulf Coast. The Southern Hills pipeline provides NGL transportation from the Mid-Continent to Mont Belvieu, Texas. The Sand Hills and Southern Hills pipelines were placed in service in the second quarter of 2013.
We have a loan outstanding to Steckman Ridge in connection with the construction of its storage facilities. The loan carries market-based interest rates and is due the earlier of October 1, 2023 or coincident with the closing of any long-term financings by Steckman Ridge. The loan receivable from Steckman Ridge, including accrued interest, totaled $71 million at both December 31, 2013 and 2012. We recorded interest income on the Steckman Ridge loan of $1 million in each of 2013, 2012 and 2011. In conjunction with the U.S. Assets Dropdown in 2013, Steckman Ridge repaid the loan and subsequently borrowed $71 million from SEP. The loan receivable at December 31, 2013 is held in our Spectra Energy Partners segment, and at December 31, 2012 was held in “Other.”
Field Services. Our most significant investment in unconsolidated affiliates is our 50% investment in DCP Midstream, which is accounted for under the equity method of accounting. DCP Midstream also has direct one-third equity investments in Sand Hills and Southern Hills. DCP Midstream is a limited liability company which is a pass-through entity for U.S. income tax purposes. DCP Midstream also owns an entity which files its own federal, foreign and state income tax returns. Income tax expense related to that entity is included in the income tax expense of DCP Midstream. Therefore, DCP Midstream’s net income attributable to members’ interests does not include income taxes for earnings which are passed through to the members based upon their ownership percentage. We recognize the tax effects of our share of DCP Midstream’s pass-through earnings in Income Tax Expense from Continuing Operations in the Consolidated Statements of Operations.
DCP Midstream records gains on additional sales of common units of DCP Partners, its master limited partnership, directly to DCP Midstream's equity. Our proportionate 50% share, totaling $98 million in 2013, $36 million in 2012 and $17 million in 2011, was recorded in Equity in Earnings of Unconsolidated Affiliates in the Consolidated Statements of Operations.
Investments in and Loans to Unconsolidated Affiliates
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2013 | | December 31, 2012 |
| Domestic | | International | | Total | | Domestic | | International | | Total |
| (in millions) |
Spectra Energy Partners | $ | 1,396 |
| | $ | — |
| | $ | 1,396 |
| | $ | 1,136 |
| | $ | — |
| | $ | 1,136 |
|
Distribution | — |
| | 16 |
| | 16 |
| | — |
| | 17 |
| | 17 |
|
Western Canada Transmission & Processing | — |
| | 66 |
| | 66 |
| | — |
| | 28 |
| | 28 |
|
Field Services | 1,365 |
| | — |
| | 1,365 |
| | 1,235 |
| | — |
| | 1,235 |
|
Other | 200 |
| | — |
| | 200 |
| | 276 |
| | — |
| | 276 |
|
Total | $ | 2,961 |
| | $ | 82 |
| | $ | 3,043 |
| | $ | 2,647 |
| | $ | 45 |
| | $ | 2,692 |
|
Equity in Earnings of Unconsolidated Affiliates
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
| Domestic | | International | | Total | | Domestic | | International | | Total | | Domestic | | International | | Total |
| (in millions) |
Spectra Energy Partners | $ | 90 |
| | $ | — |
| | $ | 90 |
| | $ | 89 |
| | $ | — |
| | $ | 89 |
| | $ | 87 |
| | $ | — |
| | $ | 87 |
|
Distribution | — |
| | 1 |
| | 1 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
|
Western Canada Transmission & Processing | — |
| | (1 | ) | | (1 | ) | | — |
| | 1 |
| | 1 |
| | — |
| | 2 |
| | 2 |
|
Field Services | 343 |
| | — |
| | 343 |
| | 279 |
| | — |
| | 279 |
| | 449 |
| | — |
| | 449 |
|
Other | 12 |
| | — |
| | 12 |
| | 13 |
| | — |
| | 13 |
| | 11 |
| | — |
| | 11 |
|
Total | $ | 445 |
| | $ | — |
| | $ | 445 |
| | $ | 381 |
| | $ | 1 |
| | $ | 382 |
| | $ | 547 |
| | $ | 2 |
| | $ | 549 |
|
Summarized Combined Financial Information of Unconsolidated Affiliates (Presented at 100%)
Statements of Operations
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2013 | | 2012 | | 2011 |
| DCP Midstream | | Other | | Total | | DCP Midstream | | Other | | Total | | DCP Midstream | | Other | | Total |
| (in millions) |
Operating revenues | $ | 12,038 |
| | $ | 558 |
| | $ | 12,596 |
| | $ | 10,171 |
| | $ | 511 |
| | $ | 10,682 |
| | $ | 12,982 |
| | $ | 469 |
| | $ | 13,451 |
|
Operating expenses | 11,230 |
| | 261 |
| | 11,491 |
| | 9,427 |
| | 217 |
| | 9,644 |
| | 11,868 |
| | 197 |
| | 12,065 |
|
Operating income | 808 |
| | 297 |
| | 1,105 |
| | 744 |
| | 294 |
| | 1,038 |
| | 1,114 |
| | 272 |
| | 1,386 |
|
Net income | 584 |
| | 206 |
| | 790 |
| | 583 |
| | 203 |
| | 786 |
| | 924 |
| | 188 |
| | 1,112 |
|
Net income attributable to members’ interests | 491 |
| | 206 |
| | 697 |
| | 486 |
| | 203 |
| | 689 |
| | 863 |
| | 188 |
| | 1,051 |
|
Balance Sheets
|
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2013 | | December 31, 2012 |
| DCP Midstream | | Other | | Total | | DCP Midstream | | Other | | Total |
| (in millions) |
Current assets | $ | 1,663 |
| | $ | 248 |
| | $ | 1,911 |
| | $ | 1,289 |
| | $ | 220 |
| | $ | 1,509 |
|
Non-current assets | 11,058 |
| | 5,448 |
| | 16,506 |
| | 9,495 |
| | 4,823 |
| | 14,318 |
|
Current liabilities | (3,114 | ) | | (143 | ) | | (3,257 | ) | | (2,775 | ) | | (117 | ) | | (2,892 | ) |
Non-current liabilities | (5,218 | ) | | (1,670 | ) | | (6,888 | ) | | (4,692 | ) | | (1,669 | ) | | (6,361 | ) |
Equity — total | 4,389 |
| | 3,883 |
| | 8,272 |
| | 3,317 |
| | 3,257 |
| | 6,574 |
|
Equity — noncontrolling interests | (1,725 | ) | | — |
| | (1,725 | ) | | (913 | ) | | — |
| | (913 | ) |
Equity — controlling interests | $ | 2,664 |
| | $ | 3,883 |
| | $ | 6,547 |
| | $ | 2,404 |
| | $ | 3,257 |
| | $ | 5,661 |
|
Related Party Transactions
DCP Midstream. DCP Midstream processes certain of our pipeline customers’ gas to meet gas quality specifications in order to be transported on our Texas Eastern system. DCP Midstream processes the gas and sells the NGLs that are extracted from the gas. A portion of the proceeds from those sales are retained by DCP Midstream and the balance is remitted to us. We received proceeds of $48 million in 2013, $53 million in 2012 and $70 million in 2011 from DCP Midstream related to those sales, classified as Other Operating Revenues in our Consolidated Statements of Operations.
As discussed in Note 7, we entered into a propane sales agreement with an affiliate of DCP Midstream in 2008. We recorded revenues of $99 million in 2012 and $251 million in 2011 associated with this agreement classified within Income From Discontinued Operations, Net of Tax. Sales of propane under this agreement ended in 2012.
In addition to the above, we recorded other revenues from DCP Midstream and its affiliates totaling $9 million in 2013, $12 million in 2012 and $11 million in 2011, primarily within Transportation, Storage and Processing of Natural Gas, and $8 million in 2013 and $14 million in 2012 within Sales of Natural Gas Liquids.
We had accounts receivable from DCP Midstream and its affiliates of $1 million at December 31, 2013 and $3 million at December 31, 2012. Total distributions received from DCP Midstream were $215 million in 2013, $203 million in 2012 and $395 million in 2011, classified as Cash Flows from Operating Activities — Distributions Received From Unconsolidated Affiliates.
In November 2012, we acquired direct one-third ownership interests in Sand Hills and Southern Hills from DCP Midstream for $459 million. See Notes 2 and 3 for further discussion.
Other. We provide certain administrative and other services to our equity investment operating entities. We recorded recoveries of costs from these affiliates of $68 million in 2013, $70 million in 2012 and $28 million in 2011. Outstanding receivables from these affiliates totaled $23 million at December 31, 2013 and $3 million at December 31, 2012.
See also Notes 3, 17 and 19 for additional related party information.
