Investments in Unconsolidated Affiliates

3 Months Ended

Mar. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Affiliates

Variable Interest Entity

Crestwood Permian is a joint venture owned by Crestwood Infrastructure Holdings LLC (Crestwood Infrastructure), our wholly-owned subsidiary, and an affiliate of First Reserve Management, L.P. (First Reserve). We manage and account for our 50% ownership interest in Crestwood Permian, which is a variable interest entity, under the equity method of accounting as we

exercise significant influence, but do not control Crestwood Permian and we are not its primary beneficiary due to First Reserve’s rights to exercise control over the entity.

Net Investments and Earnings

Our net investments in and earnings from our unconsolidated affiliates are as follows (in millions):



	Investment				Earnings (Loss) from Unconsolidated Affiliates
	March 31,		December 31,		Three Months Ended March 31,
	2020		2019		2020			2019
Stagecoach Gas Services LLC⁽¹⁾	$	808.0	$	814.4	$	9.2		$	7.0
Crestwood Permian Basin Holdings LLC⁽²⁾	118.6		121.8		0.8			(3.4		)
Tres Palacios Holdings LLC⁽³⁾	41.9		35.9		—			0.2
Powder River Basin Industrial Complex, LLC⁽⁴⁾	3.7		8.3		(4.5		)	(0.1		)
Jackalope Gas Gathering Services, L.L.C.⁽⁵⁾	—		—		—			3.2
Total	$	972.2	$	980.4	$	5.5		$	6.9


(1)	As of March 31, 2020, our equity in the underlying net assets of Stagecoach Gas Services LLC (Stagecoach Gas) exceeded our investment balance by approximately $51.3 million. This excess amount is entirely attributable to goodwill and, as such, is not subject to amortization. Our Stagecoach Gas investment is included in our storage and transportation segment.


(2)	As of March 31, 2020, our equity in the underlying net assets of Crestwood Permian exceeded our investment balance by $10.8 million, and this excess amount is not subject to amortization. Our Crestwood Permian investment is included in our gathering and processing segment.


(3)	As of March 31, 2020, our equity in the underlying net assets of Tres Palacios Holdings LLC (Tres Holdings) exceeded our investment balance by approximately $23.7 million. Our Tres Holdings investment is included in our storage and transportation segment.

(4)

As of March 31, 2020, our equity in the underlying net assets of Powder River Basin Industrial Complex, LLC (PRBIC) approximates our investment balance. During the three months ended March 31, 2020, we recorded our share of a long-lived asset impairment recorded by our PRBIC equity investment, which eliminated our $5.5 million historical basis difference between our investment balance and the equity in the underlying net assets of PRBIC, and also resulted in a $4.5 million reduction in our earnings from unconsolidated affiliates during the three months ended March 31, 2020. Our PRBIC investment is included in our storage and transportation segment.

(5)

On April 9, 2019, Crestwood Niobrara LLC (Crestwood Niobrara) acquired Williams Partners LP’s (Williams) 50% equity interest in Jackalope Gas Gathering Services, L.L.C. (Jackalope), and as a result, Crestwood Niobrara controls and owns 100% of the equity interests in Jackalope. As a result of this transaction, we eliminated our historical equity investment in Jackalope and began consolidating Jackalope’s operations. Our Jackalope investment was included in our gathering and processing segment.

Summarized Financial Information of Unconsolidated Affiliates

Below is the summarized operating results for our significant unconsolidated affiliates (in millions; amounts represent 100% of unconsolidated affiliate information):



	Three Months Ended March 31,
	2020							2019
	Operating Revenues		Operating Expenses		Net Income (Loss)			Operating Revenues		Operating Expenses		Net Income (Loss)
Stagecoach Gas	$	37.7	$	19.4	$	18.4		$	40.3	$	20.2	$	20.2
Other⁽¹⁾	28.3		48.5		(19.5		)	41.8		42.2		(1.1		)
Total	$	66.0	$	67.9	$	(1.1	)	$	82.1	$	62.4	$	19.1

(1)

Includes our Crestwood Permian, Tres Holdings and PRBIC equity investments during the three months ended March 31, 2020 and 2019, and our Jackalope equity investment during the three months ended March 31, 2019 (prior to the acquisition of the remaining 50% equity interest from Williams in April 2019). We amortize the excess basis in certain of our equity investments as an increase in our earnings from unconsolidated affiliates. We recorded amortization of the excess basis in our Tres Holdings equity investment of $0.3 million during both the three months ended March 31, 2020 and 2019. We recorded amortization of the excess basis in our PRBIC equity investment of $0.1 million during the three months ended March 31, 2019. We recorded amortization of the excess basis in the Jackalope equity investment of less than $0.1 million during the three months ended March 31, 2019.

Distributions and Contributions

The following table summarizes our distributions from and contributions to our unconsolidated affiliates (in millions):



	Distributions⁽¹⁾				Contributions
	Three Months Ended March 31,				Three Months Ended March 31,
	2020		2019		2020		2019
Stagecoach Gas	$	15.6	$	13.0	$	—	$	—
Crestwood Permian	3.8		2.3		—		7.5
Tres Holdings	—		—		6.0		6.3
PRBIC	0.1		—		—		—
Jackalope	—		11.6		—		24.4
Total	$	19.5	$	26.9	$	6.0	$	38.2


(1)	In April 2020, we received cash distributions from Stagecoach Gas, Crestwood Permian and Tres Holdings of approximately $14.4 million, $2.9 million and $1.4 million, respectively.

Other

Contingent Consideration. Pursuant to the Stagecoach Gas limited liability company agreement, we may be required to make payments of up to $57 million to Con Edison Gas Pipeline and Storage Northeast, LLC after December 31, 2020 if certain criteria are not met by Stagecoach Gas by December 31, 2020, including achieving certain performance targets on growth capital projects. These growth capital projects depend on the construction of third-party expansion projects, and those third-party projects experienced regulatory and other delays that caused Stagecoach Gas to delay its growth capital projects. As a result, our consolidated balance sheet at March 31, 2020 reflects a $19 million current liability included in accrued expenses and other liabilities and a $38 million other long-term liability related to the anticipated settlement of this obligation.

Guarantee. CEQP issued a guarantee under which CEQP would be required to pay up to $10 million if Crestwood Permian fails to honor its obligations to Crestwood Permian Basin LLC, a 50% equity investment of Crestwood Permian, in the event Crestwood Permian Basin LLC fails to satisfy its obligations under its gas gathering agreement. We do not believe that it is probable that this guarantee will result in future losses based on our assessment of the nature of the guarantee, the financial condition of the guaranteed party and the period of time that the guarantee has been outstanding, and as a result, we have not recorded a liability on our consolidated balance sheets at March 31, 2020 and December 31, 2019.