Boardwalk Pipeline Partners L.P. (BWP)

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Boardwalk Pipeline Partners, LP (BWP)

Q4 2010 Earnings Call

February 07, 2011 9:00 am ET

Executives

Allison McLean - Director of Investor Relations

Jamie Buskill - Chief Financial Officer of Boardwalk GP LLC, Senior Vice President of Boardwalk GP LLC and Treasurer of Boardwalk GP LLC

Rolf Gafvert - Chief Executive Officer of Boardwalk GP LLC, President of Boardwalk GP LLC and Director of Boardwalk GP LLC

Analysts

Ross Haberman - Harberman Funds

Xin Liu - JP Morgan Chase & Co

John Tysseland - Citigroup Inc

Darren Horowitz - Raymond James & Associates

John Edwards - Morgan Keegan & Company, Inc.

Garland Buchanan - Babson Capital

Barrett Blaschke - RBC Capital Markets, LLC

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2010 Boardwalk Pipeline Partners, LP Earnings Conference Call. My name is Alicia, and I'll be your operator for today. [Operator Instructions] I would now like to turn the presentation over to your host for today's call, Ms. Allison McLean. Please proceed.

Allison McLean

Thank you, Alicia. Good morning, everyone, and welcome to the Fourth Quarter 2010 Earnings Call for Boardwalk Pipeline Partners, LP. I’m Allison McLean, and I’m pleased to be joined today by Mr. Rolf Gafvert, our CEO; and Mr. Jamie Buskill, our CFO.

If you'd like a copy of the earnings release associated with this call, please download it from our website at www.bwpmlp.com. Following our prepared remarks this morning, we'll turn the call over for your questions.

We would like to remind you that this conference call will include the use of statements that are forward looking in nature. Statements in this earnings call related to matters that are not historical facts are forward-looking statements. These statements are based on management’s beliefs and assumptions using currently available information and expectations. Actual results achieved by the company may differ materially from those projected in any forward-looking statements. The company expressly disclaims any obligation to update or revise any forward-looking statements made during this call.

I’d also like to remind you that during this call today, we may discuss certain non-GAAP financial measures such as EBITDA and distributable cash flow. With regard to such financial measures, please refer to our earnings release for reconciliation to the most comparable GAAP measures.

Now I'd like to turn the call over to Mr. Rolf Gafvert.

Rolf Gafvert

Thank you, Allison. Good morning, everyone, and thank you for joining us today. I hope all of you have had a chance to review the press release we issued this morning. For the fourth quarter, our distributable cash flow increased 19% over comparable quarter last year, and we also announced a quarterly distribution to unit holders of $0.52 per unit, a $0.005 increase over last quarter.

I will now provide an update on our business and then Jamie will discuss our financial performance in greater detail. First, I'd like to provide an update on the remaining portion of our firm capacity that was up for renewal in the fourth quarter. I'm pleased to announce that our systems are essentially sold out this winter season, primarily due to two contracts with power generators.

Power generators located on the northern end of our Texas gas system purchase firm services to meet their winter demand. These customers utilize capacity that had historically been used to make deliveries to Lebanon. In addition, we saw some improvement in basis spreads from what we experienced earlier in 2010. We ended 2010 with a weighted average life for our firm transportation contracts remaining unchanged from previous years at approximately six years.

Each year, Boardwalk, like other pipelines, will have a certain number of expiring contracts. As a result of re-contracting, risk will continue exist just as it had previously, but we believe the location, integration and flexibility of our pipeline systems provides our customers with the services and markets they want, including a growing power generation market.

Boardwalk's system currently serves approximately 40 power generation facilities and we are optimistic about our opportunities to serve this market. In the short term, many industry experts are forecasting increased natural gas utilization for power generation, as operators switch from coal to gas in order to take advantage of favorable natural gas pricing caused by abundant natural gas supply.

And over the next five years, we believe that the location of our pipeline footprint provides us an opportunity to capture additional power generation load as operators look to replace older coal fired facilities. As we have pointed out before, there are approximately 100 coal fired electric generation units that are over 40 years old located within 20 miles of our pipeline systems.

Turning to our expansion projects. We ended 2010 with all of our major expansions in service and operating at their designed capacity. The Haynesville expansion went into service this quarter, adding approximately 0.6 Bcf a day of capacity to our system.

Looking forward, we continue to pursue opportunities to leverage our existing assets. In addition to the power generation opportunities I've just discussed, we continue to explore opportunities to capitalize on the development of new production areas. For example, we are pursuing opportunities, such as gathering and processing, that complement our business strategy.

Finally, we believe storage presents further growth opportunities. Boardwalk has completed several storage expansion projects over the last few years and we are continuing to explore new opportunities. Additional storage capacity located near our footprint can help support integrated transportation and storage services that are utilized by power generation companies and local distribution companies in order to meet peak demand.

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