Note 8 - Non-Wholly Owned Entities

9 Months Ended

Sep. 30, 2013

Noncontrolling Interest [Abstract]

Noncontrolling Interest Disclosure [Text Block]

Note 8 - Non-Wholly Owned Entities

Variable Interest Entities

On a quarterly basis, we evaluate all of our ownership 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 85% by us and 15% by Piedmont, is our 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 2012 Form 10-K. Earnings from SouthStar in 2013 and 2012 were allocated entirely in accordance with the ownership interests.

On September 1, 2013 we contributed to SouthStar our Illinois retail energy businesses with approximately 108,000 customers. Additionally, Piedmont contributed to SouthStar $22.5 million in cash to maintain its 15% ownership in the joint venture. In connection with the contribution of our Illinois retail energy businesses, we provided certain limited protections to Piedmont regarding the value of the contributed businesses related to goodwill and other intangible assets. Piedmont’s contribution is reflected as an increase to noncontrolling interest on our unaudited Condensed Consolidated Statements of Financial Position and a financing activity on our unaudited Condensed Consolidated Statements of Cash Flows. These funds were used to reduce our commercial paper borrowings.

SouthStar markets natural gas and related services under the trade name Georgia Natural Gas to retail customers primarily in Georgia, under various other trade names to retail customers in Illinois, Ohio, Florida, Maryland and New York, and to commercial and industrial customers in the southeastern United States.

There have been no significant changes to the primary risks associated with SouthStar beyond those discussed in our risk factors included in Item 1A of our 2012 Form 10-K.

SouthStar’s financial results are seasonal in nature, with the majority of its earnings occurring during 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 inventories. SouthStar’s restricted assets consist of customer deposits and were immaterial as of September 30, 2013 and 2012. SouthStar’s current liabilities consist primarily of accounts payable for natural gas purchases, 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. SouthStar’s creditors have no recourse to our general credit beyond our corporate guarantees that 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 to SouthStar’s working capital 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 also impact our operating cash flow.

Cash flows used in our investing activities include capital expenditures for SouthStar of $2 million for the nine months ended September 30, 2013 and 2012. 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 quarter of each fiscal year. For the nine months ended September 30, 2013 SouthStar distributed $17 million to Piedmont and $14 million during the same period last year. The increase was primarily the result of increased earnings year-over-year and a distribution of excess working capital from the joint venture.

The following table provides additional information on all of SouthStar’s assets and liabilities as of the dates presented, which are consolidated within our unaudited Condensed Consolidated Statements of Financial Position.

	September 30, 2013						December 31, 2012						September 30, 2012
In millions	Consolidated		SouthStar				Consolidated		SouthStar				Consolidated		SouthStar
Current assets	$	2,091	$	192	9	%	$	2,668	$	201	8	%	$	2,135	$	152	7	%
Goodwill and other intangible assets		2,063		141	7	%		1,933		-	-			1,913		-	-
Long-term assets and other deferred debits		9,750		11	-			9,540		10	-			9,455		10	-
Total assets	$	13,904	$	344	2	%	$	14,141	$	211	1	%	$	13,503	$	162	1	%
Current liabilities	$	2,407	$	73	3	%	$	3,338	$	62	2	%	$	2,764	$	42	2	%
Long-term liabilities and other deferred credits		7,934		-	-			7,368		-	-			7,341		-	-
Total Liabilities		10,341		73	1	%		10,706		62	1			10,105		42	-
Equity		3,563		271	8	%		3,435		149	4			3,398		120	4
Total liabilities and equity	$	13,904	$	344	2	%	$	14,141	$	211	1	%		13,503	$	162	1	%

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

	Three months ended September 30,				Nine months ended September 30,
In millions	2013		2012		2013		2012
Operating revenues	$	98	$	87	$	464	$	401
Operating expenses
Cost of goods sold		81		73		340		286
Operation and maintenance		16		13		49		44
Depreciation and amortization		1		1		2		2
Taxes other than income taxes		-		-		1		2
Total operating expenses		98		87		392		334
Operating income	$	-	$	-	$	72	$	67

Equity Method Investments

Income from our equity method investments is classified as other income in our unaudited Condensed Consolidated Statements of Income. The following table provides the income from our 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 2012 Form 10-K.

	Three months ended September 30,				Nine months ended September 30,
In millions	2013		2012		2013		2012
Triton	$	3	$	2	$	7	$	8
Other		-		-		1		2