Policy

Investments

Our investments primarily consist of equity investments where we hold significant influence over investee actions and which we account for under the equity method of accounting. As of December 31, 2013 and 2012, our investments consisted of the following (in millions):



	December 31,
	2013		2012
Midcontinent Express Pipeline LLC	$	602	$	633
EagleHawk	272		208
Plantation Pipe Line Company	179		181
Red Cedar Gathering Company	176		172
Fort Union Gas Gathering L.L.C.	161		—
Double Eagle Pipeline LLC	144		—
Fayetteville Express Pipeline LLC	144		159
Parkway Pipeline LLC	131		58
Watco Companies, LLC	103		103
Cortez Pipeline Company	12		11
Eagle Ford	n/a		151
All others	301		180
Total equity investments	$	2,225	$	1,856
Bond investments	8		8
Total investments	$	2,233	$	1,864

The overall change in the carrying amount of our equity investments since December 31, 2012 related primarily to the increases and decreases associated with our May 1, 2013 Copano acquisition. As part of this acquisition, we acquired an approximate 37% equity ownership interest in Fort Union Gas Gathering L.L.C., a 50% equity ownership interest in Double Eagle Pipeline LLC and the remaining 50% equity ownership interest in Eagle Ford that we did not already own (we exchanged our status as an owner of an equity investment in Eagle Ford for a full controlling financial interest, and we began accounting for our investment under the full consolidation method).

As shown in the table above, our remaining significant equity investments (excluding the three investments described above) as of December 31, 2013 consisted of the following:


▪	Midcontinent Express Pipeline LLC—we operate and own a 50% ownership interest in MEP, the sole owner of the Midcontinent Express natural gas pipeline system. The remaining 50% ownership interest is owned by subsidiaries of Regency Energy Partners, L.P.;


▪	BHP Billiton Petroleum (Eagle Ford Gathering) LLC, f/k/a EagleHawk Field Services LLC and referred to in this report as EagleHawk—we own a 25% ownership interest in EagleHawk, the sole owner of a natural gas gathering system serving the producers of the Eagle Ford shale formation. A subsidiary of BHP Billiton operates EagleHawk and owns the remaining 75% ownership interest;

▪

Plantation Pipe Line Company—we operate and own a 51.17% ownership interest in Plantation, the sole owner of the Plantation refined petroleum products pipeline system. A subsidiary of Exxon Mobil Corporation owns the remaining interest. Each investor has an equal number of directors on Plantation’s board of directors, and board approval is required for certain corporate actions that are considered participating rights; therefore, we do not control Plantation, and we account for our investment under the equity method;


▪	Red Cedar Gathering Company—we own a 49% ownership interest in Red Cedar, the sole owner of the Red Cedar natural gas gathering, compression and treating system. The remaining 51% interest is owned by the Southern Ute Indian Tribe;


▪	Fayetteville Express Pipeline LLC—we own a 50% ownership interest in Fayetteville Express Pipeline LLC, the sole owner of the Fayetteville Express natural gas pipeline system. Energy Transfer Partners, L.P. owns the remaining 50% interest and serves as operator of Fayetteville Express Pipeline LLC;


▪	Parkway Pipeline LLC—we operate and own a 50% ownership interest in Parkway, the sole owner of the Parkway Pipeline refined petroleum products pipeline system. Valero Energy Corp. owns the remaining 50% interest;

▪

Watco Companies, LLC—we hold a preferred equity investment in Watco Companies, LLC, the largest privately held short line railroad company in the U.S. We own 100,000 Class A preferred shares and pursuant to the terms of our investment, we receive priority, cumulative cash distributions from the preferred shares at a rate of 3.25% per quarter, and we participate partially in additional profit distributions at a rate equal to 0.5%. The preferred shares have no conversion features and hold no voting powers, but do provide us certain approval rights, including the right to appoint one of the members to Watco’s Board of Managers; and


▪	Cortez Pipeline Company—we operate and own a 50% ownership interest in Cortez Pipeline Company, the sole owner of the Cortez carbon dioxide pipeline system. A subsidiary of Exxon Mobil Corporation owns a 37% ownership interest and Cortez Vickers Pipeline Company owns the remaining 13% ownership interest.

Our earnings from equity investments were as follows (in millions):



	Year Ended December 31,
	2013			2012			2011
Plantation Pipe Line Company	$	56		$	51		$	45
Fayetteville Express Pipeline LLC	55			55			24
Midcontinent Express Pipeline LLC	40			42			43
Red Cedar Gathering Company	31			32			32
Cortez Pipeline Company	24			25			24
Eagle Ford(a)	14			34			11
Watco Companies, LLC	13			13			6
Fort Union Gas Gathering L.L.C.	11			—			—
EagleHawk	9			11			3
Parkway Pipeline LLC	1			—			—
Double Eagle Pipeline LLC	1			—			—
KinderHawk(b)	—			—			22
All others	42			32			14
Total	$	297		$	295		$	224
Amortization of excess costs	$	(10	)	$	(7	)	$	(7	)

__________


(a)	Effective May 1, 2013, we acquired the remaining 50% equity ownership interest in Eagle Ford that we did not already own and we changed our method of accounting from the equity method to full consolidation.


(b)	Effective July 1, 2011, we acquired the remaining 50% equity ownership interest in KinderHawk that we did not already own and we changed our method of accounting from the equity method to full consolidation.

Summarized combined financial information for our significant equity investments (listed or described above) is reported below (in millions; amounts represent 100% of investee financial information):



	Year Ended December 31,
Income Statement	2013		2012		2011
Revenues	$	1,655	$	2,199	$	2,313
Costs and expenses	1,186		1,617		1,747
Net income	$	469	$	582	$	566



	December 31,
Balance Sheet	2013		2012
Current assets	$	483	$	440
Non-current assets	$	5,827	$	5,736
Current liabilities	$	895	$	1,009
Non-current liabilities	$	2,053	$	2,015
Partners’/Owners’ equity	$	3,362	$	3,152

KINDER MORGAN ENERGY PARTNERS L P | 2013 | FY |

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