Partners' Capital and Non-Controlling Partner

12 Months Ended

Dec. 31, 2021

Partners’ Capital and Non-Controlling Partner

Preferred Units

Subject to certain conditions, the holders of the preferred units will have the right to convert preferred units into (i) common units on a 1-for-10 basis, or (ii) a number of common units determined pursuant to a conversion ratio set forth in Crestwood Equity’s partnership agreement upon the occurrence of certain events, such as a change in control. The preferred units have voting rights that are identical to the voting rights of the common units and will vote with the common units as a single class, with each preferred units entitled to one vote for each common unit into which such preferred unit is convertible, except that the preferred units are entitled to vote as a separate class on any matter on which all unitholders are entitled to vote that adversely affects the rights, powers, privileges or preferences of the preferred units in relation to CEQP’s other securities outstanding.

Common and Subordinated Units

In conjunction with the Crestwood Holdings Transactions discussed in Note 1, in March 2021, CEQP acquired approximately 11.5 million CEQP common units and 0.4 million subordinated units of CEQP from Crestwood Holdings for approximately $268 million. CEQP reflected the purchase price as a reduction to its common unitholders’ partners’ capital in its consolidated statement of partners’ capital during the year ended December 31, 2021. The Crestwood Holdings Transactions resulted in CEQP retiring the common and subordinated units acquired from Crestwood Holdings. Transaction costs related to the Crestwood Holdings Transactions of approximately $7.6 million are reflected as a reduction of CEQP’s common unitholders’ partners’ capital in its consolidated statement of partners’ capital during the year ended December 31, 2021.

Distributions

Crestwood Equity

Limited Partners. Crestwood Equity makes quarterly distributions to its partners within approximately 45 days after the end of each quarter in an aggregate amount equal to its available cash for such quarter. Available cash generally means, with respect to each quarter, all cash on hand at the end of the quarter less the amount of cash that the general partner determines in its reasonable discretion is necessary or appropriate to:

•provide for the proper conduct of its business;

•comply with applicable law, any of its debt instruments, or other agreements; or

•provide funds for distributions to unitholders for any one or more of the next four quarters;

plus all cash on hand on the date of determination of available cash for the quarter resulting from working capital borrowings made after the end of the quarter. The amount of cash CEQP has available for distribution depends primarily upon its cash flow (which consists of the cash distributions it receives in connection with its ownership of Crestwood Midstream).

A summary of CEQP’s limited partner quarterly cash distributions for the years ended December 31, 2021, 2020 and 2019 is presented below:


Record Date	Payment Date	Per Unit Rate		Cash Distributions (in millions)
2021
February 5, 2021	February 12, 2021	$	0.625	$	46.4
May 7, 2021	May 14, 2021	$	0.625	39.3
August 6, 2021	August 13, 2021	$	0.625	39.3
November 5, 2021	November 12, 2021	$	0.625	39.3
				$	164.3
2020
February 7, 2020	February 14, 2020	$	0.625	$	45.3
May 8, 2020	May 15, 2020	$	0.625	45.7
August 7, 2020	August 14, 2020	$	0.625	45.7
November 6, 2020	November 13, 2020	$	0.625	46.0
				$	182.7
2019
February 7, 2019	February 14, 2019	$	0.60	$	43.1
May 8, 2019	May 15, 2019	$	0.60	43.1
August 7, 2019	August 14, 2019	$	0.60	43.1
November 7, 2019	November 14, 2019	$	0.60	43.1
				$	172.4

On February 14, 2022, we paid a distribution of $0.625 per limited partner unit to unitholders of record on February 7, 2022 with respect to the fourth quarter of 2021.

Preferred Unitholders. The holders of our preferred units are entitled to receive fixed quarterly distributions of $0.2111 per unit. Distributions on the preferred units are paid in cash unless, subject to certain exceptions, (i) there is no distribution being paid on our common units; and (ii) our available cash (as defined in our partnership agreement) is insufficient to make a cash distribution to our preferred unitholders. If we fail to pay the full amount payable to our preferred unitholders in cash, then (x) the fixed quarterly distribution on the preferred units will increase to $0.2567 per unit, and (y) we will not be permitted to declare or make any distributions to our common unitholders until such time as all accrued and unpaid distributions on the preferred units have been paid in full in cash. In addition, if we fail to pay in full any preferred distribution (as defined in our partnership agreement), the amount of such unpaid distribution will accrue and accumulate from the last day of the quarter for which such distribution is due until paid in full, and any accrued and unpaid distributions will be increased at a rate of 2.8125% per quarter.

During each of the years ended December 31, 2021, 2020 and 2019, we paid cash distributions to our preferred unitholders of approximately $60.1 million. On February 14, 2022, we made a cash distribution of approximately $15.0 million to our preferred unitholders with respect to the fourth quarter of 2021.

Crestwood Midstream

In accordance with the partnership agreement, Crestwood Midstream’s general partner may, from time to time, cause Crestwood Midstream to make cash distributions at the sole discretion of the general partner. During the years ended December 31, 2021, 2020 and 2019, Crestwood Midstream paid cash distributions of $509.7 million, $242.6 million and $235.8 million, which represented net amounts due to Crestwood Midstream related to cash advances to CEQP for its general corporate activities.

Non-Controlling Partner

Crestwood Niobrara issued $175 million of Series A-2 Preferred Interests to CN Jackalope Holdings LLC (Jackalope Holdings) in conjunction with its equity interest in Jackalope. In April 2019, Crestwood Niobrara issued $235 million in new Series A-3

Preferred Units (collectively with the Series A-2 Preferred Units defined as the Crestwood Niobrara Preferred Units) to Jackalope Holdings in conjunction with Crestwood Niobrara’s acquisition of the remaining 50% equity interest in Jackalope from Williams. In connection with the issuance of the Series A-3 Preferred Units, we entered into a Third Amended and Restated Limited Liability Company Agreement (Crestwood Niobrara Amended Agreement) with Jackalope Holdings, pursuant to which we serve as managing member of Crestwood Niobrara. The Crestwood Niobrara Amended Agreement modified certain provisions under the previous limited liability company agreement related to the conversion and redemption of the Series A-2 Preferred Units, as follows:

•The Crestwood Niobrara Preferred Units are convertible by the preferred interest holder starting on January 1, 2021 into Crestwood Niobrara common units. The preferred interest holder has the option to contribute additional capital to Crestwood Niobrara to increase their common ownership percentage in Crestwood Niobrara to 50% upon the conversion.

•The Crestwood Niobrara Preferred Units are redeemable by the preferred interest holder starting on December 31, 2023 for an amount equal to the Liquidation Preference (as defined in the Crestwood Niobrara Amended Agreement). If redemption is elected by the preferred interest holder, we have the option to elect to give consideration equal to the Liquidation Preference in either (i) unregistered CEQP common units (subject to a Registration Rights Agreement) with a total value of up to $100 million and/or cash; or (ii) proceeds from a full liquidation of Crestwood Niobrara’s assets and unregistered CEQP common units (subject to a Registration Rights Agreement).

•The Crestwood Niobrara Preferred Units are redeemable by us starting on January 1, 2023 for either (i) unregistered CEQP common units (subject to a Registration Rights Agreement) with a total value of up to $100 million and/or cash; or (ii) proceeds from a full liquidation of Crestwood Niobrara’s assets and registered CEQP common units (subject to a Registration Rights Agreement).

As a result of the modification of the conversion and redemption provisions of the Crestwood Niobrara Preferred Units, we continue to consolidate Crestwood Niobrara and have reflected the preferred interests as a non-controlling interest in subsidiary apart from partners’ capital (i.e., temporary equity) on our consolidated balance sheets at December 31, 2021 and 2020. We adjust the carrying amount of the non-controlling interest to its redemption value each period through net income attributable to non-controlling partner.

The following table shows the change in the interest of our non-controlling partner in subsidiary at December 31, 2021, 2020 and 2019 (in millions):


Balance at December 31, 2018	$	—
Reclassification of Series A-2 Preferred Units	178.8
Issuance of Series A-3 Preferred Units	235.0
Distributions to non-controlling partner	(18.4)
Net income attributable to non-controlling partner	30.8
Balance at December 31, 2019	426.2
Contributions from non-controlling partner	2.8
Distributions to non-controlling partner	(37.1)
Net income attributable to non-controlling partner	40.8
Balance at December 31, 2020	432.7
Contributions from non-controlling partner	1.0
Distributions to non-controlling partner	(40.2)
Net income attributable to non-controlling partner	41.1
Balance at December 31, 2021	$	434.6

Crestwood Niobrara is required to make quarterly cash distributions on its preferred interests within 30 days after the end of each quarter. During the years ended December 31, 2021, 2020 and 2019, Crestwood Niobrara paid cash distributions of $40.2 million, $37.1 million and $25.0 million to Jackalope Holdings. In January 2022, Crestwood Niobrara paid a cash distribution of $10.3 million to Jackalope Holdings with respect to the fourth quarter of 2021.