Carefully combing through its financial records for last year, like so many other energy companies these days, Northern Border Partners LP found a discrepancy related to some gathering and processing hedges. The company said it will have to revise downward previously estimated results for the fourth quarter and full year 2001.

Its fourth quarter and full year 2001 net income is being changed to $20.3 million, or $0.45 per unit, and $87.8 million, or $2.12 per unit, respectively, from the previously announced $25.5 million, or $0.57 per unit, and $97.9 million, or $2.38 per unit. The revisions relate to noncash adjustments in accounting for certain commodity hedges of Bear Paw Energy, the partnership’s U.S. gathering and processing segment.

In 2001, Bear Paw Energy entered into swap agreements with Enron North America (ENA), a subsidiary of Enron Corp., to hedge a portion of its share of the natural gas and natural gas liquids expected to be received as processing fees in 2001 to 2005. During the fourth quarter of 2001, the hedging relationships were discontinued due to concerns over the liquidity of ENA. Previously, the partnership believed that the change in the market value of the swaps due to the ENA bankruptcy would result in a reduction in future income recognition over the term of the swaps. However, under generally accepted accounting principles, income from these agreements will continue to be recognized over their original term and the $5.3 million loss in the value of the hedge will be charged to net income in 2001.

“The rules regarding accounting for these financial instruments are complex and evolving,” said CEO Bill Cordes. “This does not change the estimate of our exposure to ENA, which has been fully reserved to-date. The overall effect of this revision is to move $5.3 million of income from 2001 or $0.12 per unit to the years 2002 through 2005, with just over $4.6 million related to the year 2002. Cash flow is not impacted. It is also important to note this is a change in the preliminary earnings information released in January only and not a restatement of financial statements previously filed with the SEC. We continue to expect to file our Form 10-K on a timely basis.”

Northern Border Partners LP owns a 70% general partner interest in Northern Border Pipeline Co., which owns a 1,249-mile interstate pipeline system that transports natural gas from the Montana-Saskatchewan border to markets in the Midwestern United States. Additionally, the partnership owns the 350-mile long Midwestern Gas Transmission system, which stretches from Portland, TN, to Joliet, IL. It also has gathering and processing facilities plants in the Powder River, Wind River and Williston Basins.

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