Note 8 - Non-Wholly Owned Entities

9 Months Ended

Sep. 30, 2012

Noncontrolling Interest Disclosure [Text Block]

Note 8 - Non-Wholly Owned Entities

As of September 30, 2012, we had ownership interests in SouthStar, Triton, Horizon Pipeline and Sawgrass Storage.

Variable Interest Entities

On a quarterly basis we evaluate all of our owner interests to determine if they represent a VIE as defined by the authoritative accounting guidance on consolidation, and if so, which party is the primary beneficiary. We have determined that SouthStar, a joint venture owned by us and Piedmont, is the only VIE for which we are the primary beneficiary, which requires us to consolidate its assets, liabilities and Statements of Income. See Note 10 to our Consolidated Financial Statements and related notes included in Item 8 of our 2011 Form 10-K. Earnings from SouthStar in 2012 and 2011 were allocated entirely in accordance with the ownership interests.

SouthStar’s financial results are seasonal in nature, with earnings depending to a great extent on the first and fourth quarters of each year. SouthStar’s current assets consist primarily of natural gas inventory, derivative instruments and receivables from its customers. SouthStar also has receivables from us due to its participation in AGL Capital’s commercial paper program. See Note 2 for additional discussions of SouthStar’s inventories. SouthStar’s restricted assets consist of customer deposits and were immaterial as of September 30, 2012 and 2011. SouthStar’s current liabilities consist primarily of accrued natural gas costs, other accrued expenses, customer deposits, derivative instruments and payables to us from its participation in AGL Capital’s commercial paper program.

SouthStar’s other contractual commitments and obligations, including operating leases and agreements with third party providers, do not contain terms that would trigger material financial obligations in the event that such contracts were terminated. As a result, our maximum exposure to a loss at SouthStar is considered to be immaterial. SouthStar’s creditors have no recourse to our general credit beyond our corporate guarantees we have provided to SouthStar’s counterparties and natural gas suppliers. We have provided no financial or other support that was not previously contractually required. With the exception of our corporate guarantees, we have not entered into any arrangements that could require us to provide financial support to SouthStar.

Price and volume fluctuations of SouthStar’s natural gas inventories can cause significant variations in our working capital and cash flow from operations. Changes in our operating cash flows are also attributable to SouthStar’s working capital changes resulting from the impact of weather, the timing of customer collections, payments for natural gas purchases and cash collateral amounts that SouthStar maintains to facilitate its derivative instruments.

Cash flows used in our investing activities include capital expenditures for SouthStar of $2 million for the nine months ended September 30, 2012 and 2011. Cash flows used in our financing activities include SouthStar’s distribution to Piedmont for its portion of SouthStar’s annual earnings from the previous year. Generally, this distribution occurs in the first or second quarter of each fiscal year. For the nine months ended September 30, 2012, SouthStar distributed $14 million to Piedmont and $16 million during the same period last year. The decrease of $2 million was primarily the result of decreased earnings year-over-year. The following table provides additional information for the dates presented, which are consolidated within our unaudited Condensed Consolidated Statements of Financial Position:

	September 30, 2012							December 31, 2011							September 30, 2011
In millions	Consolidated		SouthStar (1)		% (2)			Consolidated		SouthStar (1)		% (2)			Consolidated		SouthStar (1)		% (2)
Current assets	$	2,135	$	152		7	%	$	2,746	$	210		8	%	$	1,801	$	164		9	%
Long-term assets and other deferred debits		11,460		10		0			11,167		9		0			5,658		9		0
Total assets	$	13,595	$	162		1	%	$	13,913	$	219		2	%	$	7,459	$	173		2	%
Current liabilities	$	2,764	$	42		2	%	$	3,084	$	77		2	%	$	1,140	$	57		5	%
Long-term liabilities and other deferred credits		7,433		0		0			7,490		0		0			4,438		0		0
Total Liabilities		10,197		42		0			10,574		77		1			5,578		57		1
Equity		3,398		120		4			3,339		142		4			1,881		116		6
Total liabilities and equity	$	13,595	$	162		1	%	$	13,913	$	219		2	%	$	7,459	$	173		2	%

(1)  These amounts reflect information for SouthStar and do not include intercompany eliminations or the balances of our wholly owned subsidiary with an 85% ownership interest in SouthStar.

(2)  SouthStar’s percentage of the amount on our unaudited Condensed Consolidated Statements of Financial Position.

The following table provides additional information on SouthStar’s revenues and expenses for the periods presented, which are consolidated within our unaudited Condensed Consolidated Statements of Income:

	Three months ended					Nine months ended
	September 30,					September 30,
In millions	2012		2011			2012		2011
Operating revenues	$	87	$	99		$	401	$	505
Operating expenses
Cost of goods sold		73		88			286		388
Operation and maintenance		13		15			44		49
Depreciation and amortization		1		0			2		1
Taxes other than income taxes		0		0			2		1
Total operating expenses		87		103			334		439
Operating income	$	0	$	(4	)	$	67	$	66

Equity Method Investments

Income from our equity method investments is classified as other income on our unaudited Condensed Consolidated Statements of Income. For the three and nine months ended September 30, 2012, this included investment income from Triton of $2 million and $8 million, investment income from Horizon Pipeline of less than $1 million and $1 million, and an immaterial amount of investment income from our other equity method investments. For more information about our equity method investments, see Note 10 to our Consolidated Financial Statements under Item 8 included in our 2011 Form 10-K.