10-Q 1 tegp201733110q.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
 
 FORM 10-Q
 
 
 
 (Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2017
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-37365
 
 
 
 
 Tallgrass Energy GP, LP
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
 
 
46-3159268
(State or other Jurisdiction of Incorporation or Organization)
 
 
 
(IRS Employer Identification Number)
 
 
 
 
 
4200 W. 115th Street, Suite 350
 
 
 
 
Leawood, Kansas
 
 
 
66211
(Address of Principal Executive Offices)
 
 
 
(Zip Code)
(913) 928-6060
(Registrant's Telephone Number, Including Area Code)
 
 
 
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer", "accelerated filer", "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
x
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨ (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
 
 
 
 
 
 
 
 
 
 
  
Emerging growth company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x
On May 3, 2017, the Registrant had 58,075,000 Class A shares and 99,154,440 Class B shares outstanding.




TALLGRASS ENERGY GP, LP
TABLE OF CONTENTS
 




Glossary of Common Industry and Measurement Terms
Bakken oil production area: Montana and North Dakota in the United States and Saskatchewan and Manitoba in Canada.
Barrel (or bbl): forty-two U.S. gallons.
Base Gas (or Cushion Gas): the volume of gas that is intended as permanent inventory in a storage reservoir to maintain adequate pressure and deliverability rates.
BBtu: one billion British Thermal Units.
Bcf: one billion cubic feet.
British Thermal Units or Btus: the amount of heat energy needed to raise the temperature of one pound of water by one degree Fahrenheit.
Commodity sensitive contracts or arrangements: contracts or other arrangements, including tariff provisions, that are directly tied to increases and decreases in the price of commodities such as crude oil, natural gas and NGLs. Examples are Keep Whole Processing Contracts and Percent of Proceeds Processing Contracts, as well as pipeline loss allowances on our pipelines.
Condensate: an NGL with a low vapor pressure, mainly composed of propane, butane, pentane and heavier hydrocarbon fractions.
Contract barrels: barrels of crude oil that our customers have contractually agreed to ship in exchange for firm service assurance of capacity and deliverability to delivery points.
Delivery point: any point at which product in a pipeline is delivered to or for the account of a customer.
Dry gas: a gas primarily composed of methane and ethane where heavy hydrocarbons and water either do not exist or have been removed through processing.
Dth: a dekatherm, which is a unit of energy equal to 10 therms or one million British thermal units.
End-user markets: the ultimate users and consumers of transported energy products.
EPA: the United States Environmental Protection Agency.
FERC: Federal Energy Regulatory Commission.
Firm fee contracts: contracts or other arrangements, including tariff provisions, that generally obligate our customers to pay a fixed recurring charge to reserve an agreed upon amount of capacity and/or deliverability on our assets, regardless if the contracted capacity is actually used by the customer. Such contracts are also commonly known as "take-or-pay" contracts.
Firm services: services pursuant to which customers receive firm assurances regarding the availability of capacity and/or deliverability of natural gas, crude oil or other hydrocarbons or water on our assets up to a contracted amount.
Fractionation: the process by which NGLs are further separated into individual, typically more valuable components including ethane, propane, butane, isobutane and natural gasoline.
GAAP: generally accepted accounting principles in the United States of America.
GHGs: greenhouse gases.
Header system: networks of medium-to-large-diameter high pressure pipelines that connect local gathering systems to large diameter high pressure long-haul transportation pipelines.
Interruptible services: services pursuant to which customers receive limited, or no, assurances regarding the availability of capacity and deliverability in our assets.
Keep Whole Processing Contracts: natural gas processing contracts in which we are required to replace the Btu content of the NGLs extracted from inlet wet gas processed with purchased dry natural gas.
Line fill: the volume of oil, in barrels, in the pipeline from the origin to the destination.




Liquefied natural gas or LNG: natural gas that has been cooled to minus 161 degrees Celsius for transportation, typically by ship. The cooling process reduces the volume of natural gas by 600 times.
Local distribution company or LDC: LDCs are involved in the delivery of natural gas to end users within a specific geographic area.
Long-term: with respect to any contract, a contract with an initial duration greater than one year.
MMBtu: one million British Thermal Units.
Mcf: one thousand cubic feet.
MDth: one thousand dekatherms.
MMcf: one million cubic feet.
Natural gas liquids or NGLs: those hydrocarbons in natural gas that are separated from the natural gas as liquids through the process of absorption, condensation, adsorption or other methods in natural gas processing or cycling plants. Generally, such liquids consist of propane and heavier hydrocarbons and are commonly referred to as lease condensate, natural gasoline and liquefied petroleum gases. Natural gas liquids include natural gas plant liquids (primarily ethane, propane, butane and isobutane) and lease condensate (primarily pentanes produced from natural gas at lease separators and field facilities).
Natural Gas Processing: the separation of natural gas into pipeline-quality natural gas and a mixed NGL stream.
Non-contract barrels (or walk-up barrels): barrels of crude oil that our customers ship based solely on availability of capacity and deliverability with no assurance of future capacity.
No-notice service: those services pursuant to which customers receive the right to transport or store natural gas on assets outside of the daily nomination cycle without incurring penalties.
NYMEX: New York Mercantile Exchange.
Park and loan services: those services pursuant to which customers receive the right to store natural gas in (park), or borrow gas from (loan), our facilities.
Percent of Proceeds Processing Contracts: natural gas processing contracts in which we process our customer's natural gas, sell the resulting NGLs and residue gas and divide the proceeds of those sales between us and the customer. Some percent of proceeds contracts may also require our customers to pay a monthly reservation fee for processing capacity.
PHMSA: the United States Department of Transportation's Pipeline and Hazardous Materials Safety Administration.
Play: a proven geological formation that contains commercial amounts of hydrocarbons.
Produced water: all water removed from a well as a byproduct of the production of hydrocarbons and water removed from a well in connection with operations being conducted on the well, including naturally occurring water in the recovery formation, flow back water recovered during completion and fracturing operations and water entering the recovery formation through water flooding techniques.
Receipt point: the point where a product is received by or into a gathering system, processing facility, or transportation pipeline.
Reservoir: a porous and permeable underground formation containing an individual and separate natural accumulation of producible hydrocarbons (such as crude oil and/or natural gas) which is confined by impermeable rock or water barriers and is characterized by a single natural pressure system.
Residue gas: the natural gas remaining after being processed or treated.
Shale gas: natural gas produced from organic (black) shale formations.
Tailgate: the point at which processed natural gas and NGLs leave a processing facility for transportation to end-user markets.
TBtu: one trillion British Thermal Units.
Tcf: one trillion cubic feet.




Throughput: the volume of products, such as crude oil, natural gas or water, transported or passing through a pipeline, plant, terminal or other facility during a particular period.
Uncommitted shippers (or walk-up shippers): customers that have not signed long-term shipper contracts and have rights under the FERC tariff as to rates and capacity allocation that are different than long-term committed shippers.
Volumetric fee contracts: contracts or other arrangements, including tariff provisions, that generally obligate a customer to pay fees based upon the extent to which such customer utilizes our assets for midstream energy services. Unlike firm fee contracts, under volumetric fee contracts our customers are not generally required to pay a charge to reserve an agreed upon amount of capacity and/or deliverability.
Wellhead: the equipment at the surface of a well that is used to control the well's pressure; also, the point at which the hydrocarbons and water exit the ground.
Working gas: the volume of gas in the storage reservoir that is in addition to the cushion or base gas. It may or may not be completely withdrawn during any particular withdrawal season. Conditions permitting, the total working capacity could be used more than once during any season.
Working gas storage capacity: the maximum volume of natural gas that can be cost-effectively injected into a storage facility and extracted during the normal operation of the storage facility. Effective working gas storage capacity excludes base gas and non-cycling working gas.
X/d: the applicable measurement metric per day. For example, MMcf/d means one million cubic feet per day.




PART 1—FINANCIAL INFORMATION
Item 1. Financial Statements
TALLGRASS ENERGY GP, LP
CONDENSED CONSOLIDATED BALANCE SHEETS 
(UNAUDITED)
 
March 31, 2017
 
December 31, 2016
 
(in thousands)
ASSETS
 
Current Assets:
 
 
 
Cash and cash equivalents
$
2,053

 
$
2,459

Accounts receivable, net
57,274

 
59,536

Gas imbalances
636

 
1,597

Inventories
15,647

 
13,093

Derivative assets at fair value
304

 
10,967

Prepayments and other current assets
6,785

 
7,628

Total Current Assets
82,699

 
95,280

Property, plant and equipment, net
2,085,670

 
2,079,232

Goodwill
343,288

 
343,288

Intangible asset, net
92,764

 
93,522

Unconsolidated investments
935,918

 
475,625

Deferred tax asset
518,790

 
521,454

Deferred financing costs, net
5,039

 
6,042

Deferred charges and other assets
9,242

 
11,037

Total Assets
$
4,073,410

 
$
3,625,480

LIABILITIES AND EQUITY
 
 
 
Current Liabilities:
 
 
 
Accounts payable
$
22,050

 
$
24,449

Accounts payable to related parties
6,067

 
5,824

Gas imbalances
1,473

 
1,239

Derivative liabilities at fair value

 
556

Accrued taxes
21,857

 
16,996

Accrued liabilities
6,796

 
16,755

Deferred revenue
77,067

 
60,757

Other current liabilities
6,001

 
6,446

Total Current Liabilities
141,311

 
133,022

Long-term debt, net
2,108,232

 
1,555,981

Other long-term liabilities and deferred credits
7,125

 
7,063

Total Long-term Liabilities
2,115,357

 
1,563,044

Commitments and Contingencies

 

Equity:
 
 
 
Class A Shareholders (58,075,000 shares outstanding at March 31, 2017 and December 31, 2016)
244,610

 
250,967

Class B Shareholders (99,154,440 shares outstanding at March 31, 2017 and December 31, 2016)

 

Predecessor Equity

 
82,295

Total Partners' Equity
244,610

 
333,262

Noncontrolling interests
1,572,132

 
1,596,152

Total Equity
1,816,742

 
1,929,414

Total Liabilities and Equity
$
4,073,410

 
$
3,625,480


The accompanying notes are an integral part of these condensed consolidated financial statements.
1



TALLGRASS ENERGY GP, LP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
 
Three Months Ended March 31,
 
2017
 
2016
 
(in thousands, except per share amounts)
Revenues:
 
 
 
Crude oil transportation services
$
84,331

 
$
94,572

Natural gas transportation services
31,685

 
29,280

Sales of natural gas, NGLs, and crude oil
15,381

 
13,926

Processing and other revenues
13,003

 
9,390

Total Revenues
144,400

 
147,168

Operating Costs and Expenses:
 
 
 
Cost of sales (exclusive of depreciation and amortization shown below)
12,370

 
13,568

Cost of transportation services (exclusive of depreciation and amortization shown below)
13,503

 
13,529

Operations and maintenance
12,903

 
12,958

Depreciation and amortization
21,403

 
22,007

General and administrative
14,217

 
14,011

Taxes, other than income taxes
8,226

 
7,650

Gain on disposal of assets
(1,448
)
 

Total Operating Costs and Expenses
81,174

 
83,723

Operating Income
63,226

 
63,445

Other Income (Expense):
 
 
 
Interest expense, net
(16,017
)
 
(8,677
)
Unrealized gain (loss) on derivative instrument
1,885

 
(8,946
)
Equity in earnings of unconsolidated investments
20,738

 
709

Other income, net
70

 
566

Total Other Income (Expense)
6,676

 
(16,348
)
Net income before tax
69,902

 
47,097

Deferred income tax expense
(2,664
)
 
(2,791
)
Net income
67,238

 
44,306

Net income attributable to noncontrolling interests
(55,209
)
 
(33,032
)
Net income attributable to TEGP
$
12,029

 
$
11,274

Allocation of income:
 
 
 
Net income attributable to TEGP
$
12,029

 
$
11,274

Predecessor operations interest in net income

 
(3,685
)
Net income attributable to TEGP, excluding predecessor operations interest
12,029

 
7,589

Basic net income per Class A share
$
0.21

 
$
0.16

Diluted net income per Class A share
$
0.21

 
$
0.16

Basic average number of Class A shares outstanding
58,075

 
47,725

Diluted average number of Class A shares outstanding
58,165

 
47,725


The accompanying notes are an integral part of these condensed consolidated financial statements.
2



TALLGRASS ENERGY GP, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
Three Months Ended March 31,
 
2017
 
2016
 
(in thousands)
Cash Flows from Operating Activities:
 
 
 
Net income
67,238

 
44,306

Adjustments to reconcile net income to net cash flows provided by operating activities:
 
 
 
Depreciation and amortization
23,694

 
23,473

Equity in earnings of unconsolidated investments
(20,738
)
 
(709
)
Distributions from unconsolidated investments
20,740

 
634

Deferred income tax expense
2,664

 
2,791

Noncash change in the fair value of derivative financial instruments
(2,454
)
 
8,990

Changes in components of working capital:
 
 
 
Accounts receivable and other
2,449

 
6,077

Accounts payable and accrued liabilities
(6,055
)
 
(2,225
)
Deferred revenue
16,202

 
7,204

Other current assets and liabilities
(819
)
 
10

Other operating, net
(755
)
 
1,144

Net Cash Provided by Operating Activities
102,166

 
91,695

Cash Flows from Investing Activities:
 
 
 
Acquisition of Rockies Express membership interest
(400,000
)
 

Acquisition of Terminals and NatGas
(140,000
)
 

Capital expenditures
(26,769
)
 
(21,207
)
Distributions from unconsolidated investments in excess of cumulative earnings
10,079

 

Contributions to unconsolidated investments
(6,693
)
 
(63
)
Acquisition of Pony Express membership interest

 
(49,118
)
Other investing, net
1,341

 
25

Net Cash Used in Investing Activities
(562,042
)
 
(70,363
)
Cash Flows from Financing Activities:
 
 
 
Borrowings under revolving credit facilities, net
552,000

 
447,000

Proceeds from public offering of TEP common units, net of offering costs
99,373

 
12,636

Partial exercise of call option
(72,381
)
 

Distributions to noncontrolling interests
(71,426
)
 
(50,919
)
Repurchase of TEP common units from TD
(35,335
)
 

TEGP distributions to Class A shareholders
(16,116
)
 
(8,256
)
Acquisition of Pony Express membership interest

 
(425,882
)
Other financing, net
3,355

 
5,654

Net Cash Provided by (Used in) Financing Activities
459,470

 
(19,767
)
Net Change in Cash and Cash Equivalents
(406
)
 
1,565

Cash and Cash Equivalents, beginning of period
2,459

 
2,234

Cash and Cash Equivalents, end of period
2,053

 
3,799


The accompanying notes are an integral part of these condensed consolidated financial statements.
3



TALLGRASS ENERGY GP, LP
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
 
Predecessor Equity
 
Partners' Capital
 
Noncontrolling Interests
 
Total Equity
 
 
Class A Shares
 
Class B Shares
 
 
 
(in thousands)
Balance at January 1, 2017
$
82,295

 
$
250,967

 
$

 
$
1,596,152

 
$
1,929,414

Net income

 
12,029

 

 
55,209

 
67,238

Issuance of TEP units to public, net of offering costs

 
10,020

 

 
89,353

 
99,373

TEGP distributions to Class A shareholders

 
(16,116
)
 

 

 
(16,116
)
Noncash compensation expense

 
362

 

 
1,882

 
2,244

Issuance of common units under TEP LTIP plan

 
(40
)
 

 
(360
)
 
(400
)
Partial exercise of call option

 
(12,052
)
 

 
(72,890
)
 
(84,942
)
Repurchase of TEP common units from TD

 
(3,618
)
 

 
(31,717
)
 
(35,335
)
Acquisition of Terminals and NatGas
(82,295
)
 
(21,314
)
 

 
(36,391
)
 
(140,000
)
Acquisition of additional 24.99% membership interest in Rockies Express

 
23,522

 

 
40,159

 
63,681

Contributions from TD

 
850

 

 
1,451

 
2,301

Contributions from noncontrolling interest

 

 

 
710

 
710

Distributions to noncontrolling interest

 

 

 
(71,426
)
 
(71,426
)
Balance at March 31, 2017
$

 
$
244,610

 
$

 
$
1,572,132

 
$
1,816,742

 
 
 
 
 
 
 
 
 
 
 
Predecessor Equity
 
Partners' Capital
 
Noncontrolling Interests
 
Total Equity
 
 
Class A Shares
 
Class B Shares
 
 
 
(in thousands)
Balance at January 1, 2016
$
71,564

 
$
422,310

 
$

 
$
1,599,188

 
$
2,093,062

Net income
3,685

 
7,589

 

 
33,032

 
44,306

Issuance of TEP units to the public, net of offering costs

 
1,146

 

 
11,490

 
12,636

TEGP distributions to Class A Shareholders

 
(8,256
)
 

 

 
(8,256
)
Noncash compensation expense

 
295

 

 
1,869

 
2,164

Acquisition of additional 31.3% Pony Express membership interest

 
(255,617
)
 

 
(173,422
)
 
(429,039
)
Contributions from noncontrolling interest

 

 

 
7,152

 
7,152

Distributions to noncontrolling interest

 

 

 
(50,919
)
 
(50,919
)
Distributions to Predecessor Entities, net
(693
)
 

 

 

 
(693
)
Balance at March 31, 2016
$
74,556

 
$
167,467

 
$

 
$
1,428,390

 
$
1,670,413


The accompanying notes are an integral part of these condensed consolidated financial statements.
4



TALLGRASS ENERGY GP, LP
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Description of Business
Tallgrass Energy GP, LP ("TEGP" or the "Partnership") is a limited partnership that has elected to be treated as a corporation for U.S. federal income tax purposes. "We," "us," "our" and similar terms refer to TEGP together with its consolidated subsidiaries. TEGP's sole cash-generating asset as of March 31, 2017 is an approximate 36.94% controlling membership interest in Tallgrass Equity. Tallgrass Equity's sole cash-generating assets consist of direct and indirect partnership interests in Tallgrass Energy Partners, LP ("TEP"), as described below, that were historically owned by entities controlled by Tallgrass Equity, including Tallgrass Development, LP ("TD"):
100% of the outstanding membership interests in Tallgrass MLP GP, LLC ("TEP GP"), which owns the general partner interest in TEP as well as all of the TEP incentive distribution rights ("IDRs"). The general partner interest in TEP is represented by 834,391 general partner units, representing an approximate 1.14% general partner interest in TEP at March 31, 2017.
20,000,000 TEP common units, representing an approximate 27.39% limited partner interest in TEP at March 31, 2017.
TEP is a publicly traded, growth-oriented limited partnership formed to own, operate, acquire and develop midstream energy assets in North America. TEP's operations are located in and provide services to certain key United States hydrocarbon basins, including the Denver-Julesburg, Powder River, Wind River, Permian and Hugoton-Anadarko Basins and the Niobrara, Mississippi Lime, Eagle Ford, Bakken, Marcellus, and Utica shale formations.
Our reportable business segments are:
Crude Oil Transportation & Logistics—the ownership and operation of a FERC-regulated crude oil pipeline system and crude oil storage and terminalling facilities;
Natural Gas Transportation & Logistics—the ownership and operation of FERC-regulated interstate natural gas pipelines and integrated natural gas storage facilities; and
Processing & Logistics—the ownership and operation of natural gas processing, treating and fractionation facilities, the provision of water business services primarily to the oil and gas exploration and production industry and the transportation of NGLs.
Crude Oil Transportation & Logistics. TEP currently provides crude oil transportation to customers in Wyoming, Colorado, and the surrounding regions through Tallgrass Pony Express Pipeline, LLC ("Pony Express"), which owns a FERC-regulated crude oil pipeline commencing in Guernsey, Wyoming and terminating in Cushing, Oklahoma, which includes a lateral in Northeast Colorado commencing in Weld County, Colorado, and interconnecting with the pipeline just east of Sterling, Colorado (the "Pony Express System"). TEP also provides crude oil storage and terminalling services through TEP's 100% membership interest in Tallgrass Terminals, LLC ("Terminals") acquired effective January 1, 2017, which owns and operates crude oil terminals near Sterling, Colorado (the "Sterling Terminal") and in Weld County, Colorado (the "Buckingham Terminal"). Terminals also owns a 20% membership interest in Deeprock Development, LLC ("Deeprock Development"), which owns a crude oil terminal in Cushing, Oklahoma (the "Cushing Terminal").
Natural Gas Transportation & Logistics. TEP provides natural gas transportation and storage services for customers in the Rocky Mountain, Midwest and Appalachian regions of the United States through: (1) its 49.99% membership interest in Rockies Express Pipeline LLC ("Rockies Express"), which owns the Rockies Express Pipeline, a FERC-regulated natural gas pipeline system extending from Opal, Wyoming and Meeker, Colorado to Clarington, Ohio (the "Rockies Express Pipeline"), which includes the additional 24.99% membership interest acquired from TD effective March 31, 2017 as discussed in  Note 4 – Acquisitions, and TEP's 100% membership interest in Tallgrass NatGas Operator, LLC ("NatGas") acquired effective January 1, 2017, which operates the Rockies Express Pipeline, (2) the Tallgrass Interstate Gas Transmission system, a FERC-regulated natural gas transportation and storage system located in Colorado, Kansas, Missouri, Nebraska and Wyoming (the "TIGT System"), and (3) the Trailblazer Pipeline system, a FERC-regulated natural gas pipeline system extending from the Colorado and Wyoming border to Beatrice, Nebraska (the "Trailblazer Pipeline").
Processing & Logistics. TEP also provides services for customers in Wyoming at the Casper and Douglas natural gas processing facilities and the West Frenchie Draw natural gas treating facility (collectively, the "Midstream Facilities"), and NGL transportation services in Northeast Colorado and Wyoming. TEP performs water business services, including freshwater transportation and produced water gathering and disposal, in Colorado and Texas through BNN Water Solutions, LLC ("Water Solutions").

5



The term "Terminals Predecessor" refers to Terminals and the term "NatGas Predecessor" refers to NatGas prior to their acquisition by TEP on January 1, 2017. Terminals Predecessor and NatGas Predecessor are collectively referred to as the Predecessor Entities, as further discussed in Note 2 – Summary of Significant Accounting Policies. Financial results for all prior periods have been recast to reflect the operations of the Predecessor Entities. Predecessor Equity as presented in the condensed consolidated financial statements represents the capital account activity of Terminals Predecessor and NatGas Predecessor prior to January 1, 2017. For additional information regarding these acquisitions, see Note 4 – Acquisitions.
2. Summary of Significant Accounting Policies
Basis of Presentation
These condensed consolidated financial statements and related notes for the three months ended March 31, 2017 and 2016 were prepared in accordance with the accounting principles contained in the Financial Accounting Standards Board's Accounting Standards Codification, the single source of generally accepted accounting principles in the United States of America ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP for annual periods. The condensed consolidated financial statements for the three months ended March 31, 2017 and 2016 include all normal, recurring adjustments and disclosures that we believe are necessary for a fair statement of the results for the interim periods. In this report, the Financial Accounting Standards Board is referred to as the FASB and the FASB Accounting Standards Codification is referred to as the Codification or ASC. Certain prior period amounts have been reclassified to conform to the current presentation.
Our financial results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017. The accompanying condensed consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016 ("2016 Form 10-K") filed with the United States Securities and Exchange Commission (the "SEC") on February 15, 2017.
The condensed consolidated financial statements include the accounts of TEGP and its subsidiaries and controlled affiliates. Significant intra-entity items have been eliminated in the presentation. Net income or loss from consolidated subsidiaries that are not wholly-owned by TEGP is attributed to TEGP and noncontrolling interests in accordance with the respective ownership interests.
As further discussed in Note 4 – Acquisitions, TEP closed the acquisition of Terminals and NatGas on January 1, 2017. As the acquisitions of Terminals and NatGas are considered transactions between entities under common control, and a change in reporting entity, the financial information presented has been recast to include Terminals and NatGas for all periods presented. Net equity distributions of the Predecessor Entities included in the condensed consolidated financial statements represent transfers of cash as a result of TD's centralized cash management system prior to January 1, 2017 for Terminals and NatGas, under which cash balances were swept daily and recorded as loans from the subsidiaries of TD. These loans were then periodically recorded as equity distributions.
The accompanying condensed consolidated financial statements of TEGP include historical cost-basis accounts of the assets and liabilities of the Predecessor Entities for the periods prior to January 1, 2017, the date TEP acquired Terminals and NatGas from TD, and include charges from TD for direct costs and allocations of indirect corporate overhead. Management believes that the allocation methods are reasonable, and that the allocations are representative of costs that would have been incurred on a stand-alone basis. TEGP, TEP, and the Predecessor Entities are all considered "entities under common control" as defined under GAAP and, as such, the transfers between the entities of the assets and liabilities have been recorded by TEGP at historical cost.

6



A variable interest entity ("VIE") is a legal entity that possesses any of the following characteristics: an insufficient amount of equity at risk to finance its activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or equity owners who do not have the obligation to absorb expected losses or the right to receive the expected residual returns of the entity. Companies are required to consolidate a VIE if they are its primary beneficiary, which is the enterprise that has a variable interest that could be significant to the VIE and the power to direct the activities that most significantly impact the entity's economic performance. We have presented separately in our condensed consolidated balance sheets, to the extent material, the liabilities of our consolidated VIEs for which creditors do not have recourse to our general credit. Our consolidated VIEs do not have material assets that can only be used to settle specific obligations of the consolidated VIEs. Tallgrass Equity is considered to be a VIE under the applicable authoritative guidance. Based on a qualitative analysis in accordance with the applicable authoritative guidance, we have determined that we are the primary beneficiary as we have the right to receive benefits of Tallgrass Equity that could potentially be significant to Tallgrass Equity. TEP is also considered to be a VIE under the applicable authoritative guidance. Based on a qualitative analysis, we have determined that TEP GP is the primary beneficiary of TEP and we continue to consolidate TEP accordingly.
Use of Estimates
Certain amounts included in or affecting these condensed consolidated financial statements and related disclosures must be estimated, requiring management to make certain assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. These estimates and assumptions affect the amounts reported for assets, liabilities, revenues, and expenses during the reporting period, and the disclosure of contingent assets and liabilities at the date of the financial statements. Management evaluates these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods it considers reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from these estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.
Accounting Pronouncement Recently Adopted
ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting"
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Among other changes, ASU 2016-09 allows an entity to make an entity-wide accounting policy election to either estimate the number of awards expected to vest (consistent with current GAAP) or account for forfeitures when they occur.
The amendments in ASU 2016-09 are effective for public entities for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is permitted. We adopted the guidance in ASU 2016-09 effective January 1, 2017 and made a policy election to account for forfeitures when they occur. The adoption of ASU 2016-09 did not have a material impact on our consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
Revenue Recognition
In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 provides a comprehensive and converged set of principles-based revenue recognition guidelines which supersede the existing industry and transaction-specific standards. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, entities must apply a five-step process to (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 also mandates disclosure of sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The disclosure requirements include qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract.

7



Throughout 2015 and 2016, the FASB has issued a series of subsequent updates to the revenue recognition guidance in Topic 606, including ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.
The amendments in ASU 2014-09, ASU 2016-08, ASU 2016-10, ASU 2016-12, and ASU 2016-20 are effective for public entities for annual reporting periods beginning after December 15, 2017, and for interim periods within that reporting period. Early application is permitted for annual reporting periods beginning after December 15, 2016.
We are currently evaluating the impact of our pending adoption of the revised guidance. The status of our implementation is as follows:
We have formed an implementation team that meets to discuss implementation challenges, technical interpretations, industry-specific treatment of certain revenue contract types, and project status.
We are currently reviewing contracts for each revenue stream identified within each of our business segments. Through this process, we are determining and documenting expected changes in revenue recognition upon adoption of the revised guidance.
We plan to evaluate the potential information technology and internal control changes that will be required for adoption based on the findings from our contract review process.
We plan to provide internal training and awareness related to the revised guidance to the key stakeholders throughout our organization.
Through the contract review process currently underway, management has identified several areas of potential impact, including the accounting for non-cash consideration, particularly in our Crude Oil Transportation & Logistics and Processing & Logistics segments, and the timing of revenue recognition with respect to deficiency payments received in our Crude Oil Transportation & Logistics segment. We will continue to conduct our contract review process throughout 2017 and, as a result, additional areas of impact may be identified. We are in the process of quantifying the impact of adoption but cannot reasonably estimate such amount at this time. We expect to adopt the new standard on January 1, 2018 using the modified retrospective approach. This approach allows us to apply the new standard to (i) all new contracts entered into after January 1, 2018 and (ii) all existing contracts for which all (or substantially all) of the revenue has not been recognized under legacy revenue guidance as of January 1, 2018 through a cumulative adjustment to equity. Consolidated revenues presented in our comparative financial statements for periods prior to January 1, 2018 would not be revised.
ASU No. 2016-02, "Leases (Topic 842)"
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 provides a comprehensive update to the lease accounting topic in the Codification intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in ASU 2016-02 include a revised definition of a lease as well as certain scope exceptions. The changes primarily impact lessee accounting, while lessor accounting is largely unchanged from previous GAAP.
The amendments in ASU 2016-02 are effective for public entities for annual reporting periods beginning after December 15, 2018, and for interim periods within that reporting period. Early application is permitted. We are currently evaluating the impact of ASU 2016-02.
ASU No. 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business"
In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses by providing a screen to determine when an integrated set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. The ASU also narrows the definition of the term "output" so that the term is consistent with how outputs are described under the revenue recognition guidance in Topic 606.
The amendments in ASU 2017-01 are effective for public entities for annual periods and interim periods within those annual periods beginning after December 15, 2017. Early adoption is permitted in certain circumstances. We are currently evaluating the impact of ASU 2017-01, but do not anticipate a material impact on our consolidated financial statements.

8



ASU No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment"
In January 2017, the FASB issued ASU No. 2017-04, which simplifies the subsequent measurement of goodwill by eliminating "Step 2" from the goodwill impairment test, which involved calculating the implied fair value of goodwill by determining the fair value at the impairment testing date of a reporting unit's assets and liabilities. Instead, under the simplified test approach, an entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.
The amendments in ASU 2017-04 are effective for public entities for annual periods and interim periods within those annual periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact of ASU 2017-04.
3. Variable Interest Entities
TEP is a VIE of which TEP GP, our consolidated subsidiary, is the primary beneficiary. We continue to consolidate TEP accordingly. We have not provided any additional financial support and have no contractual commitments or obligations to provide additional financial support to TEP.
TEGP, as the managing member of Tallgrass Equity, has voting rights disproportionate to its ownership interest. As a result, we have determined that Tallgrass Equity is a VIE of which we are the primary beneficiary and we consolidate Tallgrass Equity accordingly. We have not provided any additional financial support to Tallgrass Equity other than our initial capital contribution to acquire a portion of our controlling interest in Tallgrass Equity and have no contractual commitments or obligations to provide additional financial support to Tallgrass Equity.
Other than TEGP's deferred tax asset of approximately $518.8 million and $521.5 million at March 31, 2017 and December 31, 2016, respectively, the assets and liabilities included in our condensed consolidated balance sheets at March 31, 2017 and December 31, 2016 represent the consolidated assets and liabilities of Tallgrass Equity, including the assets and liabilities of TEP.
4. Acquisitions
TEP Acquisition of an Additional 24.99% Membership Interest in Rockies Express
On March 31, 2017, TEP, TD, and Rockies Express Holdings, LLC, entered into a definitive Purchase and Sale Agreement, pursuant to which TEP acquired an additional 24.99% membership interest in Rockies Express from TD in exchange for cash consideration of $400 million. Together with the 25% membership interest in Rockies Express that TEP acquired from a unit of Sempra U.S. Gas and Power on May 6, 2016, this transaction increases TEP’s aggregate membership interest in Rockies Express to 49.99%.
The transfer of the Rockies Express membership interest between TD and TEP is considered a transaction between entities under common control, but does not represent a change in reporting entity. TEP's investment in Rockies Express is recorded under the equity method of accounting and is reported as "Unconsolidated investments" on our condensed consolidated balance sheets. As a result of the common control nature of the transaction, the 24.99% membership interest in Rockies Express was transferred to TEP at TD's historical carrying amount, including the remaining unamortized basis difference driven by the difference between the fair value of the investment and the book value of the underlying assets and liabilities on November 13, 2012, the date of acquisition by TD. For additional information, see Note 8 – Investments in Unconsolidated Affiliates.
As of March 31, 2017, the negative basis difference carried over from TD was approximately $386.8 million. The amount of the basis difference allocated to property, plant and equipment is accreted over 35 years, which equates to the 2.86% composite depreciation rate utilized by Rockies Express to depreciate the underlying property, plant and equipment. The amount allocated to long-term debt is amortized over the remaining life of the various debt facilities. The basis difference associated with the recently acquired 24.99% membership interest in Rockies Express at March 31, 2017 was allocated as follows:
 
Basis Difference
 
Amortization Period
 
(in thousands)
 
 
Long-term debt
$
19,504

 
2 - 25 years
Property, plant and equipment
(406,301
)
 
35 years
Total basis difference
$
(386,797
)
 
 

9



TEP Acquisition of Tallgrass Terminals, LLC and Tallgrass NatGas Operator, LLC    
Effective January 1, 2017, TEP acquired 100% of the issued and outstanding membership interests in Terminals and 100% of the issued and outstanding membership interests in NatGas from TD for total cash consideration of $140 million. These acquisitions are considered transactions between entities under common control, and a change in reporting entity.
Terminals owns several fully operational assets providing storage capacity and additional injection points for the Pony Express System, including the Sterling Terminal near Sterling, Colorado, the Buckingham Terminal in northeast Colorado, and a 20% interest in the Deeprock Development Terminal in Cushing, Oklahoma. The 20% interest in Deeprock Development is recorded under the equity method of accounting and reported as "Unconsolidated investments" on our condensed consolidated balance sheets. Terminals also owns acreage in Cushing, Oklahoma and Guernsey, Wyoming, which is under development to provide additional storage capacity, and other potential opportunities.
NatGas is the operator of the Rockies Express Pipeline and receives a fee from Rockies Express as compensation for its services.

10



Historical Financial Information
The results of our acquisitions of Terminals and NatGas are included in the condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016. The following table presents our previously reported December 31, 2016 condensed consolidated balance sheet, adjusted for the acquisitions of Terminals and NatGas:
 
December 31, 2016
 
TEGP (As previously reported)
 
Consolidate Terminals
 
Consolidate NatGas
 
TEGP (As currently reported)
 
(in thousands)
ASSETS
 
 
 
 
 
Current Assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
2,459

 
$

 
$

 
$
2,459

Accounts receivable, net
59,469

 
38

 
29

 
59,536

Gas imbalances
1,597

 

 

 
1,597

Inventories
12,805

 
288

 

 
13,093

Derivative assets at fair value
10,967

 

 

 
10,967

Prepayments and other current assets
6,820

 
808

 

 
7,628

Total Current Assets
94,117

 
1,134

 
29

 
95,280

Property, plant and equipment, net
2,012,263

 
66,969

 

 
2,079,232

Goodwill
343,288

 

 

 
343,288

Intangible asset, net
93,522

 

 

 
93,522

Unconsolidated investments
461,915

 
13,710

 

 
475,625

Deferred tax asset
521,454

 

 

 
521,454

Deferred financing costs, net
6,042

 

 

 
6,042

Deferred charges and other assets
9,637

 
1,400

 

 
11,037

Total Assets
$
3,542,238

 
$
83,213

 
$
29

 
$
3,625,480

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
Current Liabilities:
 
 
 
 
 
 
 
Accounts payable
$
24,403

 
$
46

 
$

 
$
24,449

Accounts payable to related parties
5,768

 
56

 

 
5,824

Gas imbalances
1,239

 

 

 
1,239

Derivative liabilities at fair value
556

 

 

 
556

Accrued taxes
16,328

 
668

 

 
16,996

Accrued liabilities
16,578

 
177

 

 
16,755

Deferred revenue
60,757

 

 

 
60,757

Other current liabilities
6,446

 

 

 
6,446

Total Current Liabilities
132,075

 
947

 

 
133,022

Long-term debt, net
1,555,981

 

 

 
1,555,981

Other long-term liabilities and deferred credits
7,063

 

 

 
7,063

Total Long-term Liabilities
1,563,044

 

 

 
1,563,044

Equity:
 
 
 
 
 
 
 
Net Equity
1,847,119

 
82,266

 
29

 
1,929,414

Total Equity
1,847,119

 
82,266

 
29

 
1,929,414

Total Liabilities and Equity
$
3,542,238

 
$
83,213

 
$
29

 
$
3,625,480


11



The results of our acquisitions of Terminals and NatGas are included in the condensed consolidated statements of income for the three months ended March 31, 2017 and 2016. The following tables present the previously reported condensed consolidated statements of income for the three months ended March 31, 2016, adjusted for the acquisitions of Terminals and NatGas:
 
Three Months Ended March 31, 2016
 
TEGP (As previously reported)
 
Consolidate Terminals
 
Consolidate NatGas
 
Elimination (1)
 
TEGP (As currently reported)
 
(in thousands)
Revenues:
 
 
 
 
 
 
 
 
 
Crude oil transportation services
$
94,572

 
$

 
$

 
$

 
$
94,572

Natural gas transportation services
29,280

 

 

 

 
29,280

Sales of natural gas, NGLs, and crude oil
13,926

 

 

 

 
13,926

Processing and other revenues
7,627

 
2,909

 
1,681

 
(2,827
)
 
9,390

Total Revenues
145,405

 
2,909

 
1,681

 
(2,827
)
 
147,168

Operating Costs and Expenses:
 
 
 
 
 
 
 
 
 
Cost of sales (exclusive of depreciation and amortization shown below)
13,568

 

 

 

 
13,568

Cost of transportation services (exclusive of depreciation and amortization shown below)
16,156

 
200

 

 
(2,827
)
 
13,529

Operations and maintenance
12,477

 
481

 

 

 
12,958

Depreciation and amortization
21,692

 
315

 

 

 
22,007

General and administrative
13,537

 
474

 

 

 
14,011

Taxes, other than income taxes
7,506

 
144

 

 

 
7,650

Total Operating Costs and Expenses
84,936

 
1,614

 

 
(2,827
)
 
83,723

Operating Income
60,469

 
1,295

 
1,681

 

 
63,445

Other Income (Expense):
 
 
 
 
 
 
 
 
 
Interest expense, net
(8,677
)
 

 

 

 
(8,677
)
Unrealized loss on derivative instrument
(8,946
)
 

 

 

 
(8,946
)
Equity in earnings of unconsolidated investments

 
709

 

 

 
709

Other income, net
566

 

 

 

 
566

Total Other (Expense) Income
(17,057
)
 
709

 

 

 
(16,348
)
Net income before tax
43,412

 
2,004

 
1,681

 

 
47,097

Deferred income tax expense
(2,791
)
 

 

 

 
(2,791
)
Net income
40,621

 
2,004

 
1,681

 

 
44,306

Net income attributable to noncontrolling interests
(33,032
)
 

 

 

 
(33,032
)
Net income attributable to TEGP
$
7,589

 
$
2,004

 
$
1,681

 
$

 
$
11,274

(1) 
Represents the elimination of revenue and cost of transportation services associated with the lease of the Sterling Terminal facilities by Pony Express.
5. Related Party Transactions
As a result of our relationship with TD and its affiliates, we have entered into a number of related party transactions. The following disclosure includes those related party disclosures which are not otherwise disclosed in these notes to our condensed consolidated financial statements.

12



We have no employees. In connection with the closing of the TEP initial public offering on May 17, 2013, TEP and its general partner entered into an Omnibus Agreement with TD and certain of its affiliates, including Tallgrass Operations, LLC (the "TEP Omnibus Agreement"). The TEP Omnibus Agreement provides that, among other things, TEP will reimburse TD and its affiliates for all expenses they incur and payments they make on TEP's behalf, including the costs of employee and director compensation and benefits as well as the cost of the provision of certain centralized corporate functions performed by TD, including legal, accounting, cash management, insurance administration and claims processing, risk management, health, safety and environmental, information technology and human resources in each case to the extent reasonably allocable to TEP. In addition, in connection with the closing of our initial public offering on May 12, 2015 (the "TEGP IPO"), TEGP entered into an Omnibus Agreement (the "TEGP Omnibus Agreement") with TEGP Management, LLC, Tallgrass Equity and Tallgrass Energy Holdings, LLC (which is the general partner of TD).
Pursuant to the TEGP Omnibus Agreement, Tallgrass Equity pays a reimbursement to TD for costs associated with TEGP being a public company beginning in the second quarter of 2015, which was $500,000 for the first quarter of 2017. This amount will be periodically reviewed and adjusted as necessary to continue to reflect reasonable allocation of costs to TEGP.
Totals of transactions with affiliated companies, excluding transactions disclosed elsewhere in these notes, are as follows:
 
Three Months Ended March 31,
 
2017
 
2016
 
(in thousands)
Cost of transportation services (1)
$
4,507

 
$
4,429

Charges to TEGP: (2)
 
 
 
Property, plant and equipment, net
$
293

 
$
918

Operations and maintenance
$
6,277

 
$
6,184

General and administrative
$
9,573

 
$
9,437

(1) 
Reflects rent expense for the crude oil storage at the Deeprock Terminal.
(2) 
Charges to TEGP, inclusive of Tallgrass Equity and TEP, include directly charged wages and salaries, other compensation and benefits, and shared services.
Details of balances with affiliates included in "Accounts receivable, net" and "Accounts payable to related parties" in the condensed consolidated balance sheets are as follows:
 
March 31, 2017
 
December 31, 2016
 
(in thousands)
Receivable from related parties:
 
 
 
Rockies Express Pipeline LLC
$
1,266

 
$
590

Total receivable from related parties
$
1,266

 
$
590

Accounts payable to related parties:
 
 
 
Tallgrass Operations, LLC
$
6,047

 
$
5,811

Tallgrass Management, LLC
20

 

Deeprock Development, LLC

 
13

Total accounts payable to related parties
$
6,067

 
$
5,824

Gas imbalances with affiliated shippers are as follows:
 
March 31, 2017
 
December 31, 2016
 
(in thousands)
Affiliate gas imbalance receivables
$

 
$
177

Affiliate gas imbalance payables
$
73

 
$


13



6. Inventory
The components of inventory at March 31, 2017 and December 31, 2016 consisted of the following:
 
March 31, 2017
 
December 31, 2016
 
(in thousands)
Crude oil
$
6,903

 
$
5,462

Materials and supplies
6,455

 
6,383

Natural gas liquids
573

 
265

Gas in underground storage
1,716

 
983

Total inventory
$
15,647

 
$
13,093

7. Property, Plant and Equipment
A summary of net property, plant and equipment by classification is as follows:
 
March 31, 2017
 
December 31, 2016
 
(in thousands)
Crude oil pipelines
$
1,207,727

 
$
1,202,125

Natural gas pipelines
575,536

 
572,150

Processing and treating assets
262,447

 
256,901

General and other
225,243

 
223,310

Construction work in progress
29,770

 
20,606

Accumulated depreciation and amortization
(215,053
)
 
(195,860
)
Total property, plant and equipment, net
$
2,085,670

 
$
2,079,232

8. Investments in Unconsolidated Affiliates
Rockies Express
Our investment in Rockies Express is recorded under the equity method of accounting and is reported as "Unconsolidated investments" on our condensed consolidated balance sheets. During the three months ended March 31, 2017, we recognized equity in earnings associated with our previously acquired 25% membership interest in Rockies Express of $20.0 million, inclusive of the amortization of the negative basis difference, and received distributions from and made contributions to Rockies Express of $30.1 million and $6.7 million, respectively. As discussed in Note 4 – Acquisitions, we acquired an additional 24.99% membership interest in Rockies Express from TD on March 31, 2017.
Summarized financial information for Rockies Express is as follows:
 
Three Months Ended March 31, 2017
 
 
Revenue
$
201,338

Operating income
$
107,369

Net income to Members
$
66,250

Deeprock Development
See Note 4 – Acquisitions for additional information regarding our recently acquired 20% membership interest in Deeprock Development.

14



9. Risk Management
We occasionally enter into derivative contracts with third parties for the purpose of hedging exposures that accompany our normal business activities. Our normal business activities directly and indirectly expose us to risks associated with changes in the market price of crude oil and natural gas, among other commodities. For example, the risks associated with changes in the market price of crude oil and natural gas include, among others (i) pre-existing or anticipated physical crude oil and natural gas sales, (ii) natural gas purchases and (iii) natural gas system use and storage. We have elected not to apply hedge accounting and changes in the fair value of all derivative contracts are recorded in earnings in the period in which the change occurs.
Fair Value of Derivative Contracts
The following table summarizes the fair values of our derivative contracts included in the condensed consolidated balance sheets:
 
Balance Sheet
Location
 
March 31, 2017
 
December 31, 2016
 
 
 
(in thousands)
Call option derivative (1)
Current assets
 
$

 
$
10,676

Crude oil derivative contracts (2)
Current assets
 
$
223

 
$

Natural gas derivative contracts (3)
Current assets
 
$
81

 
$
291

Crude oil derivative contracts (2)
Current liabilities
 
$

 
$
440

Natural gas derivative contracts (3)
Current liabilities
 
$

 
$
116

(1) 
As discussed below, in conjunction with TEP's acquisition of an additional 31.3% membership interest in Pony Express effective January 1, 2016, TD granted TEP an 18 month call option covering the 6,518,000 common units issued to TD. As of February 1, 2017, no common units remained subject to the call option.
(2) 
As of March 31, 2017 and December 31, 2016, the fair value shown for crude oil derivative contracts represents the sale of 125,000 barrels of crude oil which will settle throughout 2017.
(3) 
As of March 31, 2017, the fair value shown for natural gas derivative contracts was comprised of derivative volumes for long natural gas fixed-price swaps totaling 0.3 Bcf. As of December 31, 2016, the fair value shown for natural gas derivative contracts was comprised of derivative volumes for short and long natural gas fixed-price swaps totaling 0.3 Bcf and 0.4 Bcf, respectively.
Effect of Derivative Contracts in the Statements of Income
The following table summarizes the impact of derivative contracts for the three months ended March 31, 2017 and 2016:
 
Location of gain (loss) recognized
in income on derivatives
Amount of gain (loss) recognized in income on derivatives
 
 
Three Months Ended March 31,
 
 
2017
 
2016
 
 
(in thousands)
Derivatives not designated as hedging contracts:
 
 
 
 
 
Call option derivative
Unrealized gain (loss) on derivative instrument
 
$
1,885

 
$
(8,946
)
Natural gas derivative contracts
Sales of natural gas, NGLs, and crude oil
 
$
173

 
$
(44
)
Crude oil derivative contracts
Sales of natural gas, NGLs, and crude oil
 
$
663

 
$


15



Call Option Derivative
As part of TEP's acquisition of an additional 31.3% membership interest in Pony Express effective January 1, 2016, TD granted TEP an 18 month call option at an exercise price of $42.50 per TEP common unit covering the 6,518,000 TEP common units issued to TD as a portion of the consideration. In July 2016 and October 2016, TEP partially exercised the call option covering 3,563,146 and 1,251,760 common units, respectively, for cash payments of $151.4 million and $53.2 million, respectively. On February 1, 2017, TEP exercised the remainder of the call option covering an additional 1,703,094 common units for a cash payment of $72.4 million. These common units were deemed canceled upon the exercise of the call option and as of the applicable exercise date were no longer issued and outstanding.
Credit Risk
We have counterparty credit risk as a result of our use of derivative contracts. Counterparties to our crude oil and natural gas derivatives consist of major financial institutions. This concentration of counterparties may impact our overall exposure to credit risk, either positively or negatively, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions. The counterparty to our call option derivative was TD.
Our over-the-counter swaps are entered into with counterparties outside central trading organizations such as futures, options or stock exchanges. These contracts are with financial institutions with investment grade credit ratings. While we enter into derivative transactions principally with investment grade counterparties and actively monitor their credit ratings, it is nevertheless possible that from time to time losses will result from counterparty credit risk in the future. The maximum potential exposure to credit losses on our crude oil and natural gas derivative contracts at March 31, 2017 was:
 
Asset Position
 
(in thousands)
Gross
$
304

Netting agreement impact

Cash collateral held

Net exposure
$
304

As of March 31, 2017 and December 31, 2016, we did not have any outstanding letters of credit or cash in margin accounts in support of our hedging of commodity price risks associated with our commodity derivative contracts nor did we have any margin deposits with counterparties associated with our commodity derivative contracts.
Fair Value
Derivative assets and liabilities are measured and reported at fair value. Derivative contracts can be exchange-traded or over-the-counter ("OTC"). Exchange-traded derivative contracts typically fall within Level 1 of the fair value hierarchy if they are traded in an active market. We value exchange-traded derivative contracts using quoted market prices for identical securities.
OTC commodity derivatives are valued using models utilizing a variety of inputs including contractual terms and commodity and interest rate curves. The selection of a particular model and particular inputs to value an OTC derivative contract depends upon the contractual terms of the instrument as well as the availability of pricing information in the market. We use similar models to value similar instruments. For OTC derivative contracts that trade in liquid markets, such as generic forwards and swaps, model inputs can generally be verified and model selection does not involve significant management judgment. Such contracts are typically classified within Level 2 of the fair value hierarchy. The call option granted by TD was valued using a Black-Scholes option pricing model. Key inputs to the valuation model include the term of the option, risk free rate, the exercise price and current market price, expected volatility and expected distribution yield of the underlying units. The call option valuation was classified within Level 2 of the fair value hierarchy as the value was based on significant observable inputs.
Certain OTC derivative contracts trade in less liquid markets with limited pricing information; as such, the determination of fair value for these derivative contracts is inherently more difficult. Such contracts are classified within Level 3 of the fair value hierarchy. The valuations of these less liquid OTC derivatives are typically impacted by Level 1 and/or Level 2 inputs that can be observed in the market, as well as unobservable Level 3 inputs. Use of a different valuation model or different valuation input values could produce a significantly different estimate of fair value. However, derivative contracts valued using inputs unobservable in active markets are generally not material to our financial statements. When appropriate, valuations are adjusted for various factors including credit considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management's best estimate is used.

16



The following table summarizes the fair value measurements of our derivative contracts as of March 31, 2017 and December 31, 2016 based on the fair value hierarchy established by the Codification:
 
 
 
Asset Fair Value Measurements Using
 
Total
 
Quoted prices in
active markets
for identical
assets
(Level 1)
 
Significant
other observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
(in thousands)
As of March 31, 2017:
 
 
 
 
 
 
 
Crude oil derivative contracts
$
223

 
$

 
$
223

 
$

Natural gas derivative contracts
$
81

 
$

 
$
81

 
$

As of December 31, 2016:
 
 
 
 
 
 
 
Call option derivative
$
10,676

 
$

 
$
10,676

 
$

Natural gas derivative contracts
$
291

 
$

 
$
291

 
$

 
 
 
 
 
 
 
 
 
 
 
Liability Fair Value Measurements Using
 
Total
 
Quoted prices in
active markets
for identical
assets
(Level 1)
 
Significant
other observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
(in thousands)
As of December 31, 2016:
 
 
 
 
 
 
 
Crude oil derivative contracts
$
440

 
$

 
$
440

 
$

Natural gas derivative contracts
$
116

 
$

 
$
116

 
$

10. Long-term Debt
Long-term debt consisted of the following at March 31, 2017 and December 31, 2016:
 
March 31, 2017
 
December 31, 2016
 
(in thousands)
Tallgrass Equity revolving credit facility
$
148,000

 
$
148,000

TEP revolving credit facility
1,567,000

 
1,015,000

TEP 5.50% senior notes due September 15, 2024
400,000

 
400,000

Less: Deferred financing costs, net (1)
(6,768
)
 
(7,019
)
Total long-term debt, net
$
2,108,232

 
$
1,555,981

(1) 
Deferred financing costs, net as presented above relate solely to the 2024 Notes. Deferred financing costs associated with our revolving credit facility are presented in noncurrent assets on our condensed consolidated balance sheets.
TEP Senior Unsecured Notes
On September 1, 2016, TEP and Tallgrass Energy Finance Corp. (the "Co-Issuer" and together with TEP, the "Issuers"), the Guarantors named therein and U.S. Bank, National Association, as trustee, entered into an Indenture dated September 1, 2016 (the "Indenture"), pursuant to which the Issuers issued $400 million in aggregate principal amount of 5.50% senior notes due 2024 (the "2024 Notes"). 
The Indenture contains covenants that, among other things, limit TEP's ability and the ability of its restricted subsidiaries to: (i) incur, assume or guarantee additional indebtedness or issue preferred units; (ii) create liens to secure indebtedness; (iii) pay distributions on equity interests, repurchase equity securities or redeem subordinated securities; (iv) make investments; (v) restrict distributions, loans or other asset transfers from TEP's restricted subsidiaries; (vi) consolidate with or merge with or into, or sell substantially all of TEP's properties to, another person; (vii) sell or otherwise dispose of assets, including equity interests in subsidiaries; and (viii) enter into transactions with affiliates. As of March 31, 2017, TEP was in compliance with the covenants required under the 2024 Notes.

17



Tallgrass Equity Revolving Credit Facility
The following table sets forth the available borrowing capacity under the Tallgrass Equity revolving credit facility as of March 31, 2017 and December 31, 2016:
 
March 31, 2017
 
December 31, 2016
 
(in thousands)
Total capacity under the Tallgrass Equity revolving credit facility
$
150,000

 
$
150,000

Less: Outstanding borrowings under the Tallgrass Equity revolving credit facility
(148,000
)
 
(148,000
)
Available capacity under the Tallgrass Equity revolving credit facility
$
2,000

 
$
2,000

In connection with the TEGP IPO, Tallgrass Equity entered into a $150 million senior secured revolving credit facility with Barclays Bank PLC, as administrative agent, and a syndicate of lenders, which will mature on May 12, 2020. Among various other covenants and restrictive provisions, Tallgrass Equity is required to maintain a total leverage ratio of not more than 3.00 to 1.00. As of March 31, 2017, Tallgrass Equity was in compliance with the covenants required under the revolving credit facility.
The unused portion of the revolving credit facility is subject to a commitment fee of 0.50%. As of March 31, 2017, the weighted average interest rate on outstanding borrowings under the Tallgrass Equity revolving credit facility was 3.48%. During the three months ended March 31, 2017, Tallgrass Equity's weighted average effective interest rate, including the interest on outstanding borrowings, commitment fees, and amortization of deferred financing costs, was 3.61%.
TEP Revolving Credit Facility
The following table sets forth the available borrowing capacity under the TEP revolving credit facility as of March 31, 2017 and December 31, 2016:
 
March 31, 2017
 
December 31, 2016
 
(in thousands)
Total capacity under the TEP revolving credit facility
$
1,750,000

 
$
1,750,000

Less: Outstanding borrowings under the TEP revolving credit facility (1)
(1,567,000
)
 
(1,015,000
)
Available capacity under the TEP revolving credit facility
$
183,000

 
$
735,000

TEP's revolving credit facility contains various covenants and restrictive provisions that, among other things, limit or restrict TEP's ability (as well as the ability of its restricted subsidiaries) to incur or guarantee additional debt, incur certain liens on assets, dispose of assets, make certain distributions (including distributions from available cash, if a default or event of default under the credit agreement then exists or would result from making such a distribution), change the nature of its business, engage in certain mergers or make certain investments and acquisitions, enter into non-arms-length transactions with affiliates and designate certain subsidiaries as "Unrestricted Subsidiaries." In addition, TEP is required to maintain a consolidated leverage ratio of not more than 4.75 to 1.00 (which will be increased to 5.25 to 1.00 for certain measurement periods following the consummation of certain acquisitions) and a consolidated interest coverage ratio of not less than 2.50 to 1.00. As of March 31, 2017, TEP was in compliance with the covenants required under its revolving credit facility.
The unused portion of TEP's revolving credit facility is subject to a commitment fee, which ranges from 0.300% to 0.500%, based on TEP's total leverage ratio. As of March 31, 2017, the weighted average interest rate on outstanding borrowings under the TEP revolving credit facility was 2.95%. During the three months ended March 31, 2017, the weighted average effective interest rate under the TEP revolving credit facility, including the interest on outstanding borrowings, commitment fees, and amortization of deferred financing costs, was 3.12%.

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Fair Value
The following table sets forth the carrying amount and fair value of our long-term debt, which is not measured at fair value in the condensed consolidated balance sheets as of March 31, 2017 and December 31, 2016, but for which fair value is disclosed:
 
Fair Value
 
 
 
Quoted prices
in active markets
for identical 
assets
(Level 1)
 
Significant
other observable
inputs
(Level 2)
 
Significant
unobservable
inputs
(Level 3)
 
Total
 
Carrying
Amount
 
(in thousands)
As of March 31, 2017:
 
 
 
 
 
 
 
 
 
Revolving credit facilities
$

 
$
1,715,000

 
$

 
$
1,715,000

 
$
1,715,000

2024 Notes
$

 
$
403,252

 
$

 
$
403,252

 
$
393,232

As of December 31, 2016:
 
 
 
 
 
 
 
 
 
Revolving credit facilities
$

 
$
1,163,000

 
$

 
$
1,163,000

 
$
1,163,000

2024 Notes
$

 
$
398,000

 
$

 
$
398,000

 
$
392,981

The long-term debt borrowed under the revolving credit facilities is carried at amortized cost. As of March 31, 2017 and December 31, 2016, the fair value of borrowings under the revolving credit facilities approximates the carrying amount of the borrowings using a discounted cash flow analysis. The 2024 Notes are carried at amortized cost, net of deferred financing costs. The estimated fair value of the 2024 Notes is based upon quoted market prices adjusted for illiquid markets. We are not aware of any factors that would significantly affect the estimated fair value subsequent to March 31, 2017.
11. Partnership Equity and Distributions
TEGP Partnership Agreement and Distributions to Holders of Class A Shares
The following table details the distributions for the periods indicated:
Three Months Ended
 
Date Paid
 
Distributions to Class A Shareholders
 
Distributions per Class A Share
 
 
 
 
 
(in thousands)
 
 
 
March 31, 2017
 
May 15, 2017 (1)
 
$
16,697

 
$
0.2875

 
December 31, 2016
 
February 14, 2017
 
16,116

 
0.2775

 
September 30, 2016
 
November 14, 2016
 
12,528

 
0.2625

 
June 30, 2016
 
August 12, 2016
 
11,693

 
0.2450

 
March 31, 2016
 
May 13, 2016
 
10,022

 
0.2100

 
(1) 
The distribution announced on April 17, 2017 for the first quarter of 2017 will be paid on May 15, 2017 to Class A shareholders of record at the close of business on April 28, 2017.

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Subsidiary Distributions    
TEP Distributions. The following table shows the distributions for the periods indicated:
 
 
 
 
Distributions
 
 
  
 
 
 
Limited Partner
Common Units
 
General Partner
 
 
 
Distributions
per Limited
Partner Unit
Three Months Ended
 
Date Paid
 
Incentive Distribution Rights
 
General Partner Units
 
Total
 
 
 
 
 
(in thousands, except per unit amounts)
 
 
March 31, 2017
 
May 15, 2017 (1)
 
$
60,486

 
$
29,840

 
$
1,040

 
$
91,366

 
$
0.8350

December 31, 2016
 
February 14, 2017
 
58,793

 
28,358

 
1,008

 
88,159

 
0.8150

September 30, 2016
 
November 14, 2016
 
57,332

 
26,987

 
976

 
85,295

 
0.7950

June 30, 2016
 
August 12, 2016
 
54,442

 
24,262

 
911

 
79,615

 
0.7550

March 31, 2016
 
May 13, 2016
 
48,238

 
19,816

 
830

 
68,884

 
0.7050

(1) 
The distribution announced on April 17, 2017 for the first quarter of 2017 will be paid on May 15, 2017 to unitholders of record at the close of business on April 28, 2017.
Repurchase of TEP Common Units Owned by TD
Following an offer received from TD with respect to TEP common units owned by TD not subject to the call option, TEP repurchased 736,262 TEP common units from TD at an aggregate price of approximately $35.3 million, or $47.99 per common unit, on February 1, 2017, which was approved by the conflicts committee of the board of directors of TEP's general partner. These common units were deemed canceled upon our purchase and as of such transaction date were no longer issued and outstanding.
TEP Equity Distribution Agreements
As of March 31, 2017, TEP had active equity distribution agreements pursuant to which it may sell from time to time through a group of managers, as its sales agents, TEP common units representing limited partner interests having an aggregate offering price of up to $100.2 million and $657.5 million. Net cash proceeds from any sale of the TEP common units may be used for general partnership purposes, which includes, among other things, TEP's exercise of the call option with respect to the 6,518,000 common units issued to TD in connection with TEP's acquisition of an additional 31.3% of Pony Express in January 2016, repayment or refinancing of debt, funding for acquisitions, capital expenditures and additions to working capital.
During the three months ended March 31, 2017, TEP issued and sold 2,087,647 common units with a weighted average sales price of $48.23 per unit under its equity distribution agreements for net cash proceeds of approximately $99.4 million (net of approximately $1.3 million in commissions and professional service expenses). During the period from April 1, 2017 to May 3, 2017, TEP issued and sold an additional 253,414 common units with a weighted average sales price of $53.65 per unit under its equity distribution agreements for net cash proceeds of approximately $13.5 million (net of approximately $0.1 million in commissions and professional service expenses). TEP used the net cash proceeds for general partnership purposes as described above.
Noncontrolling Interests
As of March 31, 2017, noncontrolling interests in our subsidiaries consisted of a 63.06% interest in Tallgrass Equity held by the Exchange Right Holders, as defined in Note 12Net Income per Class A Share, the 72.29% limited partner interest in TEP held by TD and the public TEP unitholders and the 2.0% membership interest in Pony Express held by TD. During the three months ended March 31, 2017, we recognized contributions from and distributions to noncontrolling interests of $0.7 million and $71.4 million, respectively. Contributions from noncontrolling interests consisted primarily of contributions from TD to Pony Express. Distributions to noncontrolling interests consisted of distributions to TEP unitholders of $42.5 million, Tallgrass Equity distributions to the Exchange Right Holders of $27.5 million, and distributions to Pony Express noncontrolling interests of $1.4 million.
During the three months ended March 31, 2016, we received contributions from and made distributions to noncontrolling interests of $7.2 million and $50.9 million, respectively. Contributions from noncontrolling interest primarily consisted of contributions from TD to Pony Express. Distributions to noncontrolling interests consisted of distributions to TEP unitholders of $30.2 million, Tallgrass Equity distributions to Exchange Right Holders of $18.9 million and distributions to Pony Express noncontrolling interests in the aggregate of $1.8 million.

20



Other Contributions and Distributions
During the three months ended March 31, 2017, TEP received contributions from TD of $2.3 million, primarily to indemnify TEP for costs associated with Trailblazer's Pipeline Integrity Management Program, as discussed in Note 14Legal and Environmental Matters.
12. Net Income per Class A Share
Basic net income per Class A share is determined by dividing net income attributable to TEGP by the weighted average number of outstanding Class A shares during the period. Class B shares do not share in the earnings of the Partnership. Accordingly, basic and diluted net income per Class B share has not been presented.
Diluted net income per Class A share is determined by dividing net income attributable to TEGP by the weighted average number of outstanding diluted Class A shares during the period. For purposes of calculating diluted net income per Class A share, we considered the impact of possible future exercises of the Exchange Right by the Exchange Right Holders on both net income attributable to TEGP and the diluted weighted average number of Class A shares outstanding. The Exchange Right Holders refers to the group of persons who collectively own all of TEGP's outstanding Class B shares and an equivalent number of Tallgrass Equity units. The Exchange Right Holders are entitled to exercise the right to exchange their Tallgrass Equity units (together with an equivalent number of TEGP Class B shares) for TEGP Class A shares at an exchange ratio of one TEGP Class A share for each Tallgrass Equity unit exchanged, which we refer to as the Exchange Right. The Exchange Right Holders primarily consist of Kelso & Company and its affiliated investment funds, The Energy & Minerals Group and its affiliated investment funds, and Tallgrass KC, LLC, which is an entity owned by certain members of TEGP's and TEP's management.
Pursuant to the TEGP partnership agreement and the Tallgrass Equity limited liability company agreement, our capital structure and the capital structure of Tallgrass Equity will generally replicate one another in order to maintain the one-for-one exchange ratio between the Tallgrass Equity units and Class B shares, on the one hand, and our Class A shares, on the other hand. As a result, the exchange of any Class B shares for Class A shares does not have a dilutive effect on basic net income per Class A share. However, for the three months ended March 31, 2017 and 2016, the potential issuance of TEGP Equity Participation Shares would have had a dilutive effect on basic net income per Class A share.
All net income or loss from Terminals and NatGas prior to TEP's acquisition on January 1, 2017 is allocated to predecessor operations in the condensed consolidated statements of income. Historical earnings of transferred businesses for periods prior to the date of those common control transactions are solely those of the general partner, and therefore we have appropriately excluded any allocation to the TEP limited partner units when determining net income available to TEP common unitholders. Accordingly, no net income or loss from Terminals and NatGas is allocated to our Class A shareholders. We present the financial results of any transferred business prior to the transaction date in the line item "Predecessor operations interest in net income" in the table below.

21



The following table illustrates the calculation of basic and diluted net income per Class A share for the three months ended March 31, 2017 and 2016:
 
Three Months Ended March 31,
 
2017
 
2016
 
(in thousands, except per share data)
Basic Net Income per Class A Share
 
 
 
Net income attributable to TEGP, excluding predecessor operations interest
$
12,029

 
$
7,589

Basic weighted average Class A Shares outstanding
58,075

 
47,725

Basic net income per Class A share
$
0.21

 
$
0.16

Diluted Net Income per Class A Share
 
 
 
Net income attributable to TEGP, excluding predecessor operations interest
$
12,029

 
$
7,589

Incremental net income attributable to TEGP including the effect of the assumed issuance of Equity Participation Shares
8

 

Net income attributable to TEGP including incremental net income from assumed issuance of Equity Participation Shares
$
12,037

 
$
7,589

Basic weighted average Class A Shares outstanding
58,075

 
47,725

Equity Participation Shares equivalent shares
90

 

Diluted weighted average Class A Shares outstanding
58,165

 
47,725

Diluted net income per Class A Share
$
0.21

 
$
0.16

13. Regulatory Matters
There are no regulatory proceedings challenging the transportation rates of Pony Express, Rockies Express, Tallgrass Interstate Gas Transmission, LLC ("TIGT") or Trailblazer Pipeline Company LLC ("Trailblazer"). We have certain regulatory filings currently pending with the FERC, including the following:
Rockies Express
Rockies Express Zone 3 Capacity Enhancement Project – FERC Docket No. CP15-137-000
On March 31, 2015 in Docket No. CP15-137-000, Rockies Express filed with the FERC an application for authorization to construct and operate (1) three new mainline compressor stations located in Pickaway and Fayette Counties, Ohio and Decatur County, Indiana; (2) additional compressors at an existing compressor station in Muskingum County, Ohio; and (3) certain ancillary facilities. The facilities increased the Rockies Express Zone 3 east-to-west mainline capacity by 0.8 Bcf/d. Pursuant to the FERC's obligations under the National Environmental Policy Act, FERC staff issued an Environmental Assessment for the project on August 31, 2015. On February 25, 2016, the FERC issued a Certificate of Public Convenience and Necessity authorizing Rockies Express to proceed with the project. On March 14, 2016, Rockies Express commenced construction of the project facilities. The project was placed in-service for the 0.8 Bcf/d on January 6, 2017.
2016 Annual and Interim FERC Fuel Tracking Filings - FERC Docket Nos. RP16-702 and RP17-240
On March 1, 2016, Rockies Express made its annual fuel tracker filing with a proposed effective date of April 1, 2016 in Docket No. RP16-702. The FERC issued an order accepting the filing on March 25, 2016. On December 1, 2016, Rockies Express made an interim fuel tracker filing with a proposed effective date of January 1, 2017 in Docket No. RP17-240. The FERC issued an order accepting the filing on December 29, 2016.
Electric Power Charge Clarification - FERC Docket No. RP17-285
On December 21, 2016, in Docket No. RP17-285, Rockies Express proposed certain revisions to the General Terms and Conditions of its tariff to clarify that the electric power costs associated with the operation of gas coolers installed in association with the Zone 3 Capacity Enhancement Project, at both electric and gas powered stations, will be included in the Power Cost Tracker. Several shippers submitted comments on the proposal. The FERC issued an order on January 19, 2017 accepting the proposed revisions permitting the recovery of electric power costs from the operation of both gas and electric powered compressor stations, subject to certain clarifications.

22



2017 Annual FERC Fuel Tracking Filing - FERC Docket No. RP17-401-000
On February 13, 2017, in Docket No. RP17-401-000, Rockies Express made its annual fuel and power cost tracker filing with a proposed effective date of April 1, 2017. The FERC issued an order accepting the filing, including certain requested waivers, on March 21, 2017.
TIGT
General Rate Case Filing - FERC Docket No. RP16-137-000, et seq.
On October 30, 2015, TIGT filed a general rate case with the FERC pursuant to Section 4 of the National Gas Act ("NGA"). The rate case proposed, among other things, a general system-wide increase in the maximum tariff rates for all firm and interruptible services offered by TIGT, certain changes to the transportation rate design of its system, a fixed fuel and lost and unaccounted for ("FL&U") and power cost tracker, and certain pro forma tariff records reflecting revisions to TIGT's Tariff.
On June 8, 2016, TIGT filed an Offer of Settlement (the "TIGT Rate Case Settlement") with the FERC, which resolved all issues the FERC had set for hearing. Following certification by the Administrative Law Judge and approval by the FERC, TIGT filed revised tariff records to implement the TIGT Rate Case Settlement, which the FERC subsequently approved on December 23, 2016. Per the terms of the TIGT Rate Case Settlement, TIGT is required to file a new general rate case on May 1, 2019 (provided that such rate case is not pre-empted by a pre-filing settlement).
On February 3, 2017, the FERC accepted TIGT’s pro forma tariff records, subject to conditions, and directed TIGT to file the actual tariff records within 30 days. TIGT subsequently submitted a compliance filing to implement the actual tariff records and restate its tariff to be effective April 1, 2017 and also filed to cancel its existing tariff (which was ultimately superseded by the new tariff). On March 16, 2017, the FERC accepted both filings.
2017 Annual Fuel Tracker Filing - FERC Docket No. RP17-428-000
On February 27, 2017, TIGT made its annual fuel tracker filing with a proposed effective date of April 1, 2017 in Docket No. RP17-428-000. The filing incorporated the FL&U tracker and power cost tracker mechanisms agreed to in the TIGT Rate Case Settlement. The FERC accepted the filing on March 21, 2017.
Trailblazer
2017 Annual Fuel Tracker Filing - FERC Docket No. RP17-549-000
On March 22, 2017, Trailblazer made its annual fuel tracker filing with a proposed effective date of May 1, 2017 in Docket No. RP15-549. This filing incorporates the revised fuel tracker and power cost tracker mechanisms agreed to in the Stipulation and Agreement, which resolved all outstanding issues related to Trailblazer fuel recoveries. The FERC accepted the filing on April 19, 2017.
14. Legal and Environmental Matters
Legal
In addition to the matters discussed below, we are a defendant in various lawsuits arising from the day-to-day operations of our business. Although no assurance can be given, we believe, based on our experiences to date, that the ultimate resolution of such routine items will not have a material adverse impact on our business, financial position, results of operations, or cash flows.
We have evaluated claims in accordance with the accounting guidance for contingencies that we deem both probable and reasonably estimable and, accordingly, have recorded no reserve for legal claims as of March 31, 2017 or December 31, 2016.
Rockies Express
Ultra Resources
In early 2016, Ultra Resources, Inc. ("Ultra") defaulted on its firm transportation service agreement for approximately 0.2 Bcf/d through November 11, 2019. In late March 2016, Rockies Express terminated Ultra's service agreement. On April 14, 2016, Rockies Express filed a lawsuit against Ultra for breach of contract and damages in Harris County, Texas, seeking approximately $303 million in damages and other relief. On April 29, 2016, Ultra and certain of its debtor affiliates filed for protection under Chapter 11 of the United States Bankruptcy Code in United States Bankruptcy Court for the Southern District of Texas, which operated as a stay of the Harris County state court proceeding.

23



On January 12, 2017, Rockies Express and Ultra entered into an agreement to settle Rockies Express' approximately $303 million claim against Ultra's bankruptcy estate. In accordance with the settlement agreement, Ultra has agreed to make a cash payment to Rockies Express of $150 million no later than July 12, 2017, and Ultra has entered into a new, seven-year firm transportation agreement with Rockies Express commencing December 1, 2019, for west-to-east service of 0.2 Bcf/d at a rate of approximately $0.37, or approximately $26.8 million annually. The settlement was part of Ultra's Chapter 11 reorganization plan, which was confirmed by the U.S. Bankruptcy Court on March 14, 2017. On April 12, 2017, Ultra announced that it successfully completed its restructuring in the U.S. Bankruptcy Court and emerged from Chapter 11 bankruptcy.
Michels Corporation
On June 17, 2014, Michels Corporation ("Michels") filed a complaint and request for relief against Rockies Express in the Court of Common Pleas, Monroe County, Ohio, as a result of work performed by Michels to construct the Seneca Lateral Pipeline in Ohio. Michels sought unspecified damages from Rockies Express and asserted claims of breach of contract, negligent misrepresentation, unjust enrichment and quantum meruit. Michels also filed notices of Mechanic's Liens in Monroe and Noble Counties, asserting $24.2 million as the amount due.
On February 2, 2017, Rockies Express and Michels agreed to resolve Michels' claims for a $10 million cash payment by Rockies Express. The cash payment was inclusive of approximately $5.9 million that Rockies Express had been withholding from Michels. Subsequently, Rockies Express and Michels entered into a definitive agreement with respect to the settlement and Rockies Express made the $10 million cash payment to Michels on February 16, 2017.
Environmental, Health and Safety
We are subject to a variety of federal, state and local laws that regulate permitted activities relating to air and water quality, waste disposal, and other environmental matters. We believe that compliance with these laws will not have a material adverse impact on our business, cash flows, financial position or results of operations. However, there can be no assurances that future events, such as changes in existing laws, the promulgation of new laws, or the development of new facts or conditions will not cause us to incur significant costs. We had environmental reserves of $3.8 million and $4.0 million at March 31, 2017 and December 31, 2016, respectively.
TMID
Casper Plant, EPA Notice of Violation
In August 2011, the EPA and the Wyoming Department of Environmental Quality ("WDEQ") conducted an inspection of the Leak Detection and Repair ("LDAR") Program at the Casper Gas Plant in Wyoming. In September 2011, Tallgrass Midstream, LLC ("TMID") received a letter from the EPA alleging violations of the Standards of Performance of Equipment Leaks for Onshore Natural Gas Processing Plant requirements under the Clean Air Act. TMID received a letter from the EPA concerning settlement of this matter in April 2013 and received additional settlement communications from the EPA and Department of Justice beginning in July 2014. Settlement negotiations are continuing, including the expected inclusion of TIGT as a party to any possible settlement as a result of TIGT owning a compressor that is located adjacent to the Casper Gas Plant site.
Casper Mystery Bridge Superfund Site
The Casper Gas Plant is part of the Mystery Bridge Road/U.S. Highway 20 Superfund Site also known as Casper Mystery Bridge Superfund Site. Remediation work at the Casper Gas Plant has been completed and we have requested that the portion of the site attributable to us be delisted from the National Priorities List.
Casper Gas Plant
On November 25, 2014, WDEQ issued a Notice of Violation for violations of Part 60 Subpart OOOO related to the Depropanizer project (wv-14388, issued 7/9/13) in Docket No. 5506-14. TMID had discussed the issues in a meeting with WDEQ in Cheyenne on November 17, 2014, and submitted a disclosure on November 20, 2014 detailing the regulatory issues and potential violations. The project triggered a modification of Subpart OOOO for the entire plant. The project equipment as well as plant equipment subjected to Subpart OOOO was not monitored timely, and initial notification was not made timely. Settlement negotiations with WDEQ are currently ongoing.

24



Trailblazer
Pipeline Integrity Management Program
Trailblazer is currently operating at less than its current maximum allowable operating pressure ("MAOP"), public notice of which was first provided in June 2014. As a result of smart tool surveys in 2014, Trailblazer has identified approximately 25 - 35 miles of pipe that will likely need to be repaired or replaced in order for the pipeline to operate at its MAOP of 1,000 pounds per square inch across all segments of the Trailblazer Pipeline. Such repair or replacement will likely occur over a period of years, depending upon the remediation and repair plan implemented by Trailblazer. Segments of the Trailblazer Pipeline that require full replacement could cost as much as $2.7 million per mile and repair costs on sections of the pipeline that do not require full replacement are expected to be less on a per mile basis. The current pressure reduction is not expected to prevent Trailblazer from fulfilling its firm service obligations at existing subscription levels and to date it has not had a material adverse financial impact on us.
With respect to the approximately 25 - 35 miles of pipe that has been identified, Trailblazer completed 32 excavation digs in 2015 at an aggregate cost of approximately $1.3 million. During 2016, Trailblazer completed additional excavation digs and replaced approximately 8 miles of pipe at an aggregate cost of approximately $19.0 million. In 2017, Trailblazer intends to complete final remediation and cleanup of the pipe replacement at an estimated cost of $2.5 million. Trailblazer is currently exploring all possible cost recovery options to recover such out of pocket costs, including recovery through a general rate increase, negotiated rate agreements with its customers, or other FERC-approved recovery mechanisms.
In connection with our acquisition of the Trailblazer Pipeline, TD agreed to contractually indemnify TEP for certain out of pocket costs related to repairing or remediating the Trailblazer Pipeline, to the extent that such actions were necessitated by external corrosion caused by the pipeline's disbonded Hi-Melt CTE coating. The contractual indemnity provided by TD was capped at $20 million and was subject to a $1.5 million deductible. TEP has received $20 million from TD pursuant to the contractual indemnity, as of March 31, 2017.
Pony Express
Pipeline Integrity
In connection with certain crack tool runs on the Pony Express System completed in 2015 and 2016, Pony Express completed approximately $9.8 million of remediation for anomalies identified on the Pony Express System associated with portions of the pipeline converted from natural gas to crude oil service, and expects to complete additional remediation in 2017 on the Pony Express System of approximately $9 million.
Terminals
System Failures
In January 2017, approximately 10,000 bbls of crude oil were released at the Sterling Terminal as the result of a defective roof drain system on a storage tank. The release was restricted to the containment area designed for such purpose and approximately 9,000 bbls were recovered. We currently expect that the total cost to remediate the release will be less than $600,000.
15. Reportable Segments
Our operations are located in the United States. We are organized into three reportable segments: (1) Crude Oil Transportation & Logistics, (2) Natural Gas Transportation & Logistics, and (3) Processing & Logistics.
Crude Oil Transportation & Logistics
The Crude Oil Transportation & Logistics segment is engaged in the ownership and operation of the Pony Express System, which is a FERC-regulated crude oil pipeline serving the Bakken Shale, Denver-Julesburg and Powder River Basins, and other nearby oil producing basins. The mainline portion of the Pony Express System was placed in service in October 2014. The Pony Express System also includes a lateral pipeline in Northeast Colorado, which interconnects with the Pony Express System just east of Sterling, Colorado and was placed in service in the second quarter of 2015. The Crude Oil Transportation & Logistics segment also includes our 100% membership interest in Terminals acquired effective January 1, 2017.
Natural Gas Transportation & Logistics
The Natural Gas Transportation & Logistics segment is engaged in the ownership and operation of FERC-regulated interstate natural gas pipelines and an integrated natural gas storage facility that provide services to on-system customers (such as third-party LDCs), industrial users and other shippers. The Natural Gas Transportation & Logistics segment includes our 100% membership interest in NatGas acquired effective January 1, 2017 and our 49.99% membership interest in Rockies Express, including the additional 24.99% membership interest acquired effective March 31, 2017.

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Processing & Logistics
The Processing & Logistics segment is engaged in the ownership and operation of natural gas processing, treating and fractionation facilities that produce NGLs and residue gas that is sold in local wholesale markets or delivered into pipelines for transportation to additional end markets, as well as water business services provided primarily to the oil and gas exploration and production industry and the transportation of NGLs.
Corporate and Other
Corporate and Other includes corporate overhead costs that are not directly associated with the operations of our reportable segments, such as interest and fees associated with our revolving credit facilities and the 2024 Notes, public company costs, and equity-based compensation expense.
These segments are monitored separately by management for performance and are consistent with internal financial reporting. These segments have been identified based on the differing products and services, regulatory environment and the expertise required for their respective operations.
The following tables set forth our segment information for the periods indicated:
 
Three Months Ended March 31, 2017
 
Three Months Ended March 31, 2016
Revenue:
Total
Revenue
 
Inter-
Segment
 
External
Revenue
 
Total
Revenue
 
Inter-
Segment
 
External
Revenue
 
(in thousands)
Crude Oil Transportation & Logistics
$
85,092

 
$

 
$
85,092

 
$
94,654

 
$

 
$
94,654

Natural Gas Transportation & Logistics
36,428

 
(1,445
)
 
34,983

 
32,668

 
(1,355
)
 
31,313

Processing & Logistics
24,325

 

 
24,325

 
21,201

 

 
21,201

Corporate and Other

 

 

 

 

 

Total revenue
$
145,845

 
$
(1,445
)
 
$
144,400

 
$
148,523

 
$
(1,355
)
 
$
147,168

 
Three Months Ended March 31, 2017
 
Three Months Ended March 31, 2016
Operating Income:
Total
Operating Income
 
Inter-
Segment
 
External
Operating Income
 
Total
Operating Income
 
Inter-
Segment
 
External
Operating Income
 
 (in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Crude Oil Transportation & Logistics
$
44,715

 
$
1,344

 
$
46,059

 
$
53,961

 
$
1,345

 
$
55,306

Natural Gas Transportation & Logistics
18,168

 
(1,445
)
 
16,723

 
12,345

 
(1,355
)
 
10,990

Processing & Logistics
4,116

 
101

 
4,217

 
178

 
10

 
188

Corporate and Other
(3,773
)
 

 
(3,773
)
 
(3,039
)
 

 
(3,039
)
Total Operating Income
$
63,226

 
$

 
$
63,226

 
$
63,445

 
$

 
$
63,445

Reconciliation to Net Income:
 
 
 
 
 
 
 
 
 
 
 
Interest expense, net
 
 
 
 
(16,017
)
 
 
 
 
 
(8,677
)
Unrealized gain (loss) on derivative instruments
 
 
 
 
1,885

 
 
 
 
 
(8,946
)
Equity in earnings of unconsolidated investment
 
 
 
 
20,738

 
 
 
 
 
709

Other income, net
 
 
 
 
70

 
 
 
 
 
566

Net income before tax
 
 
 
 
$
69,902

 
 
 
 
 
$
47,097


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Three Months Ended March 31,
Capital Expenditures:
2017
 
2016
 
(in thousands)
Crude Oil Transportation & Logistics
$
10,436

 
$
15,973

Natural Gas Transportation & Logistics
4,655

 
2,133

Processing & Logistics
11,678

 
3,101

Corporate and Other

 

Total capital expenditures
$
26,769

 
$
21,207

Assets:
March 31, 2017
 
December 31, 2016
 
(in thousands)
Crude Oil Transportation & Logistics
$
1,492,333

 
$
1,493,866

Natural Gas Transportation & Logistics
1,633,358

 
1,176,147

Processing & Logistics
418,479

 
411,999

Corporate and Other
529,240

 
543,468

Total assets
$
4,073,410

 
$
3,625,480


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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The historical financial statements included in this Quarterly Report reflect the consolidated results of operations of Tallgrass Energy GP, LP's ("TEGP") 36.94% interest in Tallgrass Equity, LLC ("Tallgrass Equity"), Tallgrass Equity's 100% membership interest in Tallgrass MLP GP, LLC ("TEP GP"), which owns all of the Incentive Distribution Rights ("IDRs"), and all of the outstanding general partner units in Tallgrass Energy Partners, LP ("TEP"), and Tallgrass Equity's 20 million TEP common units it acquired at the closing of the TEGP IPO. As used in this Quarterly Report, unless the context otherwise requires, "we," "us," "our," the "Partnership," "TEGP" and similar terms refer to Tallgrass Energy GP, LP, together with its consolidated subsidiaries (including Tallgrass Equity, TEP and their respective subsidiaries). The term our "general partner" refers to TEGP Management, LLC. References to "TD" refer to Tallgrass Development, LP. As discussed further in Note 2 – Summary of Significant Accounting Policies to the accompanying condensed consolidated financial statements, our financial statements for historical periods prior to January 1, 2017 have been recast to reflect the operations of Terminals and NatGas, which were acquired by TEP effective January 1, 2017.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report. Additionally, the following discussion and analysis should be read in conjunction with our audited financial statements and notes thereto, the related "Management's Discussion and Analysis of Financial Condition and Results of Operations," the discussion of "Risk Factors" and the discussion of TEGP's "Business" in our Annual Report on Form 10-K for the year ended December 31, 2016 (our "2016 Form 10-K") filed with the United States Securities and Exchange Commission (the "SEC") on February 15, 2017.
A reference to a "Note" herein refers to the accompanying Notes to Condensed Consolidated Financial Statements contained in Item 1.Financial Statements. In addition, please read "Cautionary Statement Regarding Forward-Looking Statements" and "Risk Factors" for information regarding certain risks inherent in our business.
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report and the documents incorporated by reference herein contain forward-looking statements concerning our operations, economic performance and financial condition. Forward-looking statements give our current expectations, contain projections of results of operations or of financial condition, or forecasts of future events. Words such as "could," "will," "may," "assume," "forecast," "position," "predict," "strategy," "expect," "intend," "plan," "estimate," "anticipate," "believe," "project," "budget," "potential," or "continue," and similar expressions are used to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this Quarterly Report include our expectations of plans, strategies, objectives, growth and anticipated financial and operational performance, including guidance regarding our and TD's infrastructure programs, revenue projections, capital expenditures and tax position. Forward-looking statements can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed.
A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, when considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Quarterly Report. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:
our ability to pay distributions to our Class A shareholders;
our expected receipt of, and amounts of, distributions from Tallgrass Equity;
TEP's ability to complete and integrate acquisitions from TD or from third parties, including its acquisition of an additional 24.99% membership interest in Rockies Express from TD that was completed on March 31, 2017 and its acquisition of a 100% membership interest in NatGas and Terminals from TD that was completed in January 2017;
the demand for TEP's services, including crude oil transportation, storage and terminalling services, natural gas transportation, storage and processing services and water business services;
large or multiple customer defaults, including defaults resulting from actual or potential insolvencies;
our ability to successfully implement our business plan;
changes in general economic conditions;
competitive conditions in our industry;

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the effects of existing and future laws and governmental regulations;
actions taken by third-party operators, processors and transporters;
our ability to complete internal growth projects on time and on budget;
the price and availability of debt and equity financing;
the level of production of crude oil, natural gas and other hydrocarbons and the resultant market prices of crude oil, natural gas, natural gas liquids, and other hydrocarbons;
the availability and price of natural gas and crude oil, and fuels derived from both, to the consumer compared to the price of alternative and competing fuels;
competition from the same and alternative energy sources;
energy efficiency and technology trends;
operating hazards and other risks incidental to transporting, storing and terminalling crude oil, transporting, storing and processing natural gas, and transporting, gathering and disposing of water produced in connection with hydrocarbon exploration and production activities;
environmental liabilities or events that are not covered by an indemnity, insurance or existing reserves;
natural disasters, weather-related delays, casualty losses and other matters beyond our control;
interest rates;
labor relations;
changes in tax status;
the effects of future litigation; and
certain factors discussed elsewhere in this Quarterly Report.
Forward-looking statements speak only as of the date on which they are made. While we may update these statements from time to time, we are not required to do so other than pursuant to the securities laws.
Overview
TEGP is a limited partnership that has elected to be treated as a corporation for U.S. federal income tax purposes. We were formed as part of a reorganization involving entities that were previously controlled by Tallgrass Equity to effect the TEGP IPO, which was completed on May 12, 2015.
Our sole cash-generating asset is an approximate 36.94% controlling membership interest in Tallgrass Equity. Tallgrass Equity's sole cash-generating assets consist of the direct and indirect partnership interests in TEP as described below:
100% of the outstanding membership interests in TEP GP, which owns all of the general partner interest in TEP as well as all of the TEP IDRs. The general partner interest in TEP is represented by 834,391 general partner units, representing an approximate 1.14% general partner interest in TEP at May 3, 2017.
20,000,000 TEP common units, representing an approximate 27.30% limited partner interest in TEP at May 3, 2017.
TEP is a publicly traded, growth-oriented limited partnership formed in 2013 to own, operate, acquire and develop midstream energy assets in North America. TEP's operations are located in and provide services to certain key United States hydrocarbon basins, including the Denver-Julesburg, Powder River, Wind River, Permian and Hugoton-Anadarko Basins and the Niobrara, Mississippi Lime, Eagle Ford, Bakken, Marcellus, and Utica shale formations.
TEP intends to continue to leverage its relationship with TD and utilize the significant experience of its management team to execute its growth strategy of acquiring midstream assets from TD and third parties, increasing utilization of its existing assets and expanding its systems through construction of additional assets.
Our reportable business segments are:
Crude Oil Transportation & Logistics—the ownership and operation of a FERC-regulated crude oil pipeline system and crude oil storage and terminalling facilities;
Natural Gas Transportation & Logistics—the ownership and operation of FERC-regulated interstate natural gas pipelines and integrated natural gas storage facilities; and

29



Processing & Logistics—the ownership and operation of natural gas processing, treating and fractionation facilities, the provision of water business services primarily to the oil and gas exploration and production industry and the transportation of NGLs.
Financial Presentation
TEGP has no operations outside of its indirect ownership interests in TEP. TEGP is the managing member of and therefore controls Tallgrass Equity. Tallgrass Equity, in turn, controls TEP through the direct ownership of 100% of TEP GP, TEP's general partner. As a result, under GAAP, TEGP consolidates Tallgrass Equity, TEP GP, TEP, and TEP's subsidiaries. As such, TEGP's results of operations will not differ materially from the results of operations of TEP. The most noteworthy reconciling items between TEGP's condensed consolidated financial statements and TEP's condensed consolidated financial statements primarily relate to (i) the inclusion of the Tallgrass Equity revolving credit facility, (ii) the impact of TEGP's election to be treated as a corporation for U.S. federal income tax purposes and (iii) the presentation of noncontrolling interests in Tallgrass Equity and TEP. The interests in Tallgrass Equity and TEP that are not directly or indirectly owned by TEGP will be reflected as being attributable to noncontrolling interests in TEGP's condensed consolidated financial statements.
Recent Developments
TEGP Distribution Announced
On April 17, 2017, the Board of Directors of our general partner declared a cash distribution for the quarter ended March 31, 2017 of $0.2875 per Class A share. The distribution will be paid on May 15, 2017, to Class A shareholders of record on April 28, 2017.
TEP Distribution Announced
On April 17, 2017, the Board of Directors of TEP's general partner declared a cash distribution for the quarter ended March 31, 2017 of $0.835 per common unit. The distribution will be paid on May 15, 2017, to unitholders of record on April 28, 2017.
How We Evaluate Our Operations
We evaluate our results using, among other measures, cash distributions received from Tallgrass Equity, TEP's contract profile and volumes, and operating costs and expenses of TEGP and its consolidated subsidiaries.