##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period
from                            to
 Commission file number 001-33556
 SPECTRA ENERGY PARTNERS, LP
  
 Delaware
(State or other jurisdiction of incorporation)
    
    41-2232463
(IRS Employer Identification No.)
 
 
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 o þ




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##### 



SPECTRA ENERGY PARTNERS, LP
FORM 10-Q FOR THE QUARTER ENDED
March 31, 2008
  PagePART I.    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements (Unaudited)
    
    
    4Condensed Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007
    
    
    4Condensed Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007
    
    
    5Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007
    
    
    7Condensed Consolidated Statements of Partners Capital / Parent Net Equity for the three months ended March 31, 2008 and 2007
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    22Item 4.
    
    Controls and Procedures
    
    
    22PART II.  OTHER INFORMATIONItem 1A.
    
    Risk Factors
    
    
    22Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    22Item 6.
    
    Exhibits
    
    
    22Signatures
    
    
    23Amendment No. 1 to First Amended and Restated Agreement of Limited PartnershipCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906
  2




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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
  
    
    state and federal legislative and regulatory initiatives that affect cost and
investment recovery, have an effect on rate structure, and affect the speed at and degree
to which competition enters the natural gas industries;
    
    outcomes of litigation and regulatory investigations, proceedings or inquiries;
    
    weather and other natural phenomena, including the economic, operational and other
effects of hurricanes and storms;
    
    the timing and extent of changes in interest rates;
    
    general economic conditions, including any potential effects arising from terrorist
attacks and any consequential hostilities or other hostilities;
    
    changes in environmental, safety and other laws and regulations;
    
    results of financing efforts, including the ability to obtain financing on favorable
terms, which can be affected by various factors, including credit ratings and general
economic conditions;
    
    increases in the cost of goods and services required to complete capital projects;
    
    growth in opportunities, including the timing and success of efforts to develop
domestic pipeline, storage, and other infrastructure projects and the effects of
competition;
    
    the performance of natural gas transmission and storage facilities;
    
    the effect of accounting pronouncements issued periodically by accounting
standard-setting bodies;
    
    conditions of the capital markets during the periods covered by the forward-looking
statements; and
    
    the ability to successfully complete merger, acquisition or divestiture plans;
regulatory or other limitations imposed as a result of a merger, acquisition or
divestiture; and the success of the business following a merger, acquisition or
divestiture.
  3




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
 
 SPECTRA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions, except per-unit amounts)
 Three MonthsEnded March 31,2008
    
    
    2007Operating RevenuesTransportation of natural gas
    
    $
    26.7
    
    
    $
    24.9Storage of liquefied natural gas and other
    
    
    1.3
    
    
    
    1.5Total operating revenues
    
    
    28.0
    
    
    
    26.4Operating ExpensesOperating, maintenance and other
    
    
    8.0
    
    
    
    6.9Depreciation and amortization
    
    
    5.9
    
    
    
    4.9Property and other taxes
    
    
    0.5
    
    
    
    (0.1
    )Total operating expenses
    
    
    14.4
    
    
    
    11.7Operating Income
    
    
    13.6
    
    
    
    14.7Other Income and ExpensesEquity in earnings of unconsolidated affiliates
    
    
    12.6
    
    
    
    11.4Other income and expenses, net
    
    
    0.1
    
    
    
    Total other income and expenses
    
    
    12.7
    
    
    
    11.4Interest Income
    
    
    1.5
    
    
    
    Interest Expense
    
    
    5.0
    
    
    
    2.2Earnings Before Income Taxes
    
    
    22.8
    
    
    
    23.9Income Tax Expense
    
    
    0.3
    
    
    
    4.7Net Income
    
    $
    22.5
    
    
    $
    19.2Calculation of Limited Partners Interest in Net Income:Net income
    
    $
    22.5
    
    
    
    n/a
    (a)Less general partners interest in net income
    
    
    0.4
    
    
    
    n/aLimited partners interest in net income
    
    $
    22.1
    
    
    
    n/aBasic and diluted net income per limited partner unit
    
    $
    0.33
    
    
    
    n/aWeighted average limited partners units outstanding 
basic and diluted
    
    
    66.2
    
    
    
    n/a
 
 (a)
    
    Not applicable  4




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SPECTRA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
 March 31,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent AssetsCash and cash equivalents
    
    $
    25.5
    
    
    $
    14.9Receivables, net
    
    
    16.7
    
    
    
    16.5Other
    
    
    1.9
    
    
    
    5.0Total current assets
    
    
    44.1
    
    
    
    36.4Investments and Other AssetsInvestments in unconsolidated affiliates
    
    
    498.9
    
    
    
    495.1Goodwill
    
    
    118.3
    
    
    
    118.3Other investments
    
    
    135.5
    
    
    
    154.8Total investments and other assets
    
    
    752.7
    
    
    
    768.2Property, Plant and EquipmentCost
    
    
    827.1
    
    
    
    821.4Less accumulated depreciation and amortization
    
    
    134.6
    
    
    
    128.8Net property, plant and equipment
    
    
    692.5
    
    
    
    692.6Regulatory Assets and Deferred Debits
    
    
    10.4
    
    
    
    10.4Total Assets
    
    $
    1,499.7
    
    
    $
    1,507.6
  5




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SPECTRA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions)
 March 31,
    
    
    December 31,2008
    
    
    2007LIABILITIES AND PARTNERS CAPITALCurrent LiabilitiesAccounts payable
    
    $
    5.4
    
    
    $
    7.0Taxes accrued
    
    
    1.6
    
    
    
    2.9Interest accrued
    
    
    3.2
    
    
    
    1.6Natural gas imbalance payables
    
    
    7.7
    
    
    
    4.0Note payable  affiliates
    
    
    50.0
    
    
    
    50.0Other
    
    
    2.8
    
    
    
    5.8Total current liabilities
    
    
    70.7
    
    
    
    71.3Long-term Debt
    
    
    392.0
    
    
    
    400.0Deferred Credits and Other LiabilitiesDeferred income taxes
    
    
    8.5
    
    
    
    8.4Other
    
    
    2.5
    
    
    
    2.6Total deferred credits and other liabilities
    
    
    11.0
    
    
    
    11.0Commitments and ContingenciesPartners CapitalCommon units (44.6 million units issued and
outstanding at March 31, 2008 and December 31,
2007)
    
    
    699.9
    
    
    
    699.3Subordinated units (21.6 million units issued
and outstanding at March 31, 2008 and December
31, 2007)
    
    
    303.7
    
    
    
    303.5General partner units (1.4 million units
issued and outstanding at March 31, 2008 and
December 31, 2007)
    
    
    19.0
    
    
    
    19.0Accumulated other comprehensive income
    
    
    3.4
    
    
    
    3.5Total partners capital
    
    
    1,026.0
    
    
    
    1,025.3Total Liabilities and Partners Capital
    
    $
    1,499.7
    
    
    $
    1,507.6
  6




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SPECTRA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
 Three MonthsEnded March 31,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    22.5
    
    
    $
    19.2Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization
    
    
    5.9
    
    
    
    4.9Deferred income taxes
    
    
    0.1
    
    
    
    1.3Equity in earnings of unconsolidated affiliates
    
    
    (12.6
    )
    
    
    (11.4
    )Distributions received from unconsolidated affiliates
    
    
    20.6
    
    
    
    4.0Other
    
    
    0.6
    
    
    
    4.5Net cash provided by operating activities
    
    
    37.1
    
    
    
    22.5CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    (4.2
    )
    
    
    (1.9
    )Investment expenditures
    
    
    (12.1
    )
    
    
    Purchases of available-for-sale securities
    
    
    (401.6
    )
    
    
    Proceeds from sales and maturities of available-for-sale securities
    
    
    421.1
    
    
    
    Net cash provided by (used in) investing activities
    
    
    3.2
    
    
    
    (1.9
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of long-term debt
    
    
    310.0
    
    
    
    Payments for the redemption of long-term debt
    
    
    (318.0
    )
    
    
    Distributions to partners
    
    
    (21.7
    )
    
    
    Dividends to parent
    
    
    
    
    
    
    (12.5
    )Transfers to parent, net
    
    
    
    
    
    
    (8.1
    )Net cash used in financing activities
    
    
    (29.7
    )
    
    
    (20.6
    )Net increase in cash and cash equivalents
    
    
    10.6
    
    
    
    Cash and cash equivalents at beginning of period
    
    
    14.9
    
    
    
    Cash and cash equivalents at end of period
    
    $
    25.5
    
    
    $
    
  7




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SPECTRA ENERGY PARTNERS, LP
CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL/PARENT NET EQUITY
(Unaudited)
(In millions)
 AccumulatedPartners Capital
    
    
    OtherParent Net
    
    
    Limited Partners
    
    
    General
    
    
    ComprehensiveInvestment
    
    
    Common
    
    
    Subordinated
    
    
    Partner
    
    
    Income
    
    
    TotalDecember 31, 2007
    
    $
    
    
    
    $
    699.3
    
    
    $
    303.5
    
    
    $
    19.0
    
    
    $
    3.5
    
    
    $
    1,025.3Net income
    
    
    
    
    
    
    14.9
    
    
    
    7.2
    
    
    
    0.4
    
    
    
    
    
    
    
    22.5Reclassification of cash
flow hedges
into earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )Distributions to partners
    
    
    
    
    
    
    (14.3
    )
    
    
    (7.0
    )
    
    
    (0.4
    )
    
    
    
    
    
    
    (21.7
    )March 31, 2008
    
    $
    
    
    
    $
    699.9
    
    
    $
    303.7
    
    
    $
    19.0
    
    
    $
    3.4
    
    
    $
    1,026.0December 31, 2006
    
    $
    985.3
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3.8
    
    
    $
    989.1Net income
    
    
    19.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19.2Reclassification of cash
flow hedges into
earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )Dividends to parent
    
    
    (12.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12.5
    )Transfers to parent
    
    
    (8.0
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8.0
    )March 31, 2007
    
    $
    984.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3.7
    
    
    $
    987.7
  8




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SPECTRA ENERGY PARTNERS, LP
 
 Notes to Condensed Consolidated Financial Statements
(Unaudited)
 1. General
 Nature of Operations.
 Initial Public Offering.
  Basis of Presentation.
   Use of Estimates.
 2. Income Taxes
   9




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3. Business Segments
       Business Segment Data
 Three MonthsEnded March 31,2008
    
    
    2007(in millions)Operating revenuesEast Tennessee
    
    $
    28.0
    
    
    $
    26.4Other
    
    
    
    
    
    
    Total operating revenues
    
    $
    28.0
    
    
    $
    26.4Segment EBITEast Tennessee
    
    $
    15.5
    
    
    $
    14.7Other
    
    
    10.8
    
    
    
    11.4Total EBIT
    
    
    26.3
    
    
    
    26.1Interest income
    
    
    1.5
    
    
    
    Interest expense
    
    
    5.0
    
    
    
    2.2Earnings before income taxes
    
    $
    22.8
    
    
    $
    23.9
 4. Comprehensive Income
  Three MonthsEnded March 31,2008
    
    
    2007(in millions)Net income
    
    $
    22.5
    
    
    $
    19.2Reclassification of cash flow hedges into earnings
    
    
    (0.1
    )
    
    
    (0.1
    )Total comprehensive income
    
    $
    22.4
    
    
    $
    19.1
 10




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5. Net Income Per Limited Partner Unit and Cash Distributions
    Three MonthsEnded March 31, 2008(in millions, exceptper-unit amounts)Net income
    
    $
    22.5Less general partners interest in net income
    
    
    0.4Limited partners interest in net income
    
    $
    22.1Net income allocable to common units
    
    $
    14.9Net income allocable to subordinated units
    
    
    7.2Limited partners interest in net income
    
    $
    22.1Weighted average limited partner units outstanding  basic and dilutedCommon units
    
    
    44.6Subordinated units
    
    
    21.6Total
    
    
    66.2Net income per limited partner unit  basic and dilutedCommon units
    
    $
    0.33Subordinated units
    
    $
    0.33
   Available Cash.
 
    
    less the amount of cash reserves established by the general partner to:
 
    
    provide for the proper conduct of business,
    
    comply with applicable law, any debt instrument or other agreement, or
    
    provide funds for distributions to the unitholders and to the general
partner for any one or more of the next four quarters,
 
    
    plus, if the general partner so determines, all or a portion of cash on hand on
the date of determination of Available Cash for the quarter.
 11




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Subordinated Units.
 Incentive Distribution Rights.
 Total Quarterly
    
    Marginal PercentageDistribution
    
    Interest in DistributionsCommon andSubordinatedTarget Amount
    
    Unitholders
    
    General PartnerMinimum Quarterly Distribution
    
    $
    0.30
    
    
    
    98
    %
    
    
    2
    %First Target Distribution
    
    up to $0.345
    
    
    98
    %
    
    
    2
    %Second Target Distribution
    
    above $0.345 up to $0.375
    
    
    85
    %
    
    
    15
    %Third Target Distribution
    
    above $0.375 up to $0.45
    
    
    75
    %
    
    
    25
    %Thereafter
    
    above $0.45
    
    
    50
    %
    
    
    50
    %
  6. Investments in Unconsolidated Affiliates
  Investments in Unconsolidated Affiliates
 March 31,
    
    
    December 31,2008
    
    
    2007(in millions)Gulfstream
    
    $
    217.1
    
    
    $
    211.3Market Hub
    
    
    281.8
    
    
    
    283.8Total
    
    $
    498.9
    
    
    $
    495.1
 Equity in Earnings of Unconsolidated Affiliates
 Three MonthsEnded March 31,2008
    
    
    2007(in millions)Gulfstream
    
    $
    4.8
    
    
    $
    4.2Market Hub
    
    
    7.8
    
    
    
    7.2Total
    
    $
    12.6
    
    
    $
    11.4
 12




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Summarized Financial Information of Unconsolidated Affiliates  (Presented at 100%)
 Three MonthsEnded March 31,2008
    
    2007(in millions)GulfstreamOperating revenues
    
    $
    40.8
    
    
    $
    38.0Operating expenses
    
    
    13.9
    
    
    
    9.3Operating income
    
    
    26.9
    
    
    
    28.7Net income
    
    
    18.9
    
    
    
    17.1Market HubOperating revenues
    
    $
    21.9
    
    
    $
    20.8Operating expenses
    
    
    6.8
    
    
    
    5.6Operating income
    
    
    15.1
    
    
    
    15.2Net income
    
    
    15.7
    
    
    
    14.4
 7. Debt and Credit Facility
 Credit
    
    Outstanding as of March 31, 2008Expiration
    
    Facility
    
    
    
    
    
    RevolvingCredit Facility Summary
    
    Date
    
    Capacity
    
    Term Loan
    
    Loan
    
    Total(in millions)Spectra Energy Partners, LP
    
    
    2012
    
    
    $
    500.0
    
    
    $
    133.0
    
    
    $
    109.0
    
    
    $
    242.0
    8. Fair Value Measurements
  13




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
    
    Level 1  Quoted unadjusted prices for identical instruments in active markets.
    
    Level 2  Quoted prices for similar instruments in active markets; quoted prices for
identical or similar instruments in markets that are not active; and model-derived
valuations in which all significant inputs and significant value drivers are observable in
active markets.
    
    Level 3  Model derived valuations in which one or more significant inputs or
significant value drivers are unobservable.
  Total AtDescription
    
    Balance Sheet Caption
    
    
    March 31, 2008
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(in millions)Available-for-sale securities
    
    Investments and other assets-other
    
    $
    135.2
    
    
    $
    
    
    
    $
    135.2
    
    
    $
    Total Assets
    
    
    
    
    
    $
    135.2
    
    
    $
    
    
    
    $
    135.2
    
    
    $
    
 Level 2 Valuation Techniques
  9. Commitments and Contingencies
 Environmental.
 Litigation.
 10. New Accounting Pronouncements
  SFAS No. 157, Fair Value Measurements.
 SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities.
 14




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SFAS No. 141R, Business Combinations.
 EITF 07-04, Application of the Two-Class Method under FASB Statement No. 128, Earnings per
Share, to Master Limited Partnerships.
 11. Subsequent Event
 .
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 INTRODUCTION
  Executive Overview
    15




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RESULTS OF OPERATIONS
 Three MonthsEnded March 31,2008
    
    
    2007(in millions)Operating revenues
    
    $
    28.0
    
    
    $
    26.4Operating, maintenance and other expense
    
    
    8.5
    
    
    
    6.8Depreciation and amortization
    
    
    5.9
    
    
    
    4.9Operating income
    
    
    13.6
    
    
    
    14.7Equity in earnings of unconsolidated affiliates
    
    
    12.6
    
    
    
    11.4Other income and expenses, net
    
    
    0.1
    
    
    
    Interest income
    
    
    1.5
    
    
    
    Interest expense
    
    
    5.0
    
    
    
    2.2Earnings before income taxes
    
    
    22.8
    
    
    
    23.9Income tax expense
    
    
    0.3
    
    
    
    4.7Net income
    
    $
    22.5
    
    
    $
    19.2Adjusted EBITDA (a)
    
    $
    19.5
    
    
    $
    19.6Cash Available for Distribution (a)
    
    
    33.8
    
    
    
    35.6
 
 (a)
    
    For a reconciliation of this measure to its most directly comparable financial measures
calculated and presented in accordance with GAAP, see Reconciliation of Non-GAAP Measures. Operating Revenues.
 Operating, Maintenance and Other Expense.
 
    
    a $1.1 million increase in general and administrative costs as a result of new
corporate functions associated with managing Spectra Energy Partners post-IPO,
    
    a $0.8 million increase from higher labor and outside services costs related to
pipeline operations,
    
    a $0.6 million increase in project development costs expensed, and
    
    a $0.6 million increase in ad valorem taxes due to a reduction in the first quarter of
2007 as a result of a rate settlement, partially offset by
    
    a $1.6 million net decrease from higher net pipeline fuel recoveries by East Tennessee
in the 2008 period compared to the 2007 period.
 Depreciation and Amortization
 Equity in Earnings of Unconsolidated Affiliates
  Three MonthsEnded March 31,Increase2008
    
    
    2007
    
    
    (Decrease)(in millions)GulfstreamOperating revenues
    
    $
    40.8
    
    
    $
    38.0
    
    
    $
    2.8Operating, maintenance and other expense
    
    
    6.5
    
    
    
    1.7
    
    
    
    4.8Depreciation and amortization
    
    
    7.4
    
    
    
    7.6
    
    
    
    (0.2
    )Other income and expenses, net
    
    
    3.5
    
    
    
    0.5
    
    
    
    3.0Interest expense
    
    
    11.5
    
    
    
    12.1
    
    
    
    (0.6
    )Net income
    
    $
    18.9
    
    
    $
    17.1
    
    
    $
    1.8Spectra Energy Partners 24.5% share
    
    $
    4.8
    
    
    $
    4.2
    
    
    $
    0.6
 16




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Gulfstream  Owned 24.5%
  
    
    a $2.8 million increase in revenues driven by a higher demand for
interruptible and short-term firm transportation from generation customers caused by
unseasonably warm weather compared to the prior period,
    
    a $3.0 million increase in other income and expenses, net driven
primarily by a $1.1 million increase in allowance for funds used during construction
(AFUDC)-equity due to increased spending on expansion projects, and a $1.0 million
increase related to the favorable resolution of a sales and use tax matter during
the first quarter of 2008, and
    
    a $0.6 million decrease in interest expense resulting from an increase in
AFUDC-debt as a result of increased spending on expansion projects, partially offset
by
    
    a $4.8 million increase in operating, maintenance and other expense
primarily resulting from a $6.3 million increase in ad valorem tax expense due to a
reduction in the first quarter 2007 related to a favorable valuation, partially
offset by a $2.0 million reduction in project development expenses compared to the
prior-year period.
 
 Three MonthsEnded March 31,Increase2008
    
    
    2007
    
    
    (Decrease)(in millions)Market HubOperating revenues
    
    $
    21.9
    
    
    $
    20.8
    
    
    $
    1.1Operating, maintenance and other expense
    
    
    4.2
    
    
    
    3.5
    
    
    
    0.7Depreciation and amortization
    
    
    2.6
    
    
    
    2.1
    
    
    
    0.5Other income and expenses, net
    
    
    
    
    
    
    0.2
    
    
    
    (0.2
    )Interest income
    
    
    1.0
    
    
    
    
    
    
    
    1.0Interest expense
    
    
    0.4
    
    
    
    1.0
    
    
    
    (0.6
    )Net income
    
    $
    15.7
    
    
    $
    14.4
    
    
    $
    1.3Spectra Energy Partners 50% share
    
    $
    7.8
    
    
    $
    7.2
    
    
    $
    0.6
 Market Hub   Owned 50%
  
    
    a $1.1 million increase in revenues driven by a
$0.7 million increase in short-term
interruptible revenues and a
$0.4 million increase in firm storage revenues,
    
    a $1.0 million increase in interest income due to notes receivable with
affiliates issued in the third quarter of 2007, and
    
    a $0.6 million decrease in interest expense primarily due to lower interest
rates associated with collateral held from affiliates, partially offset by
    
    a $0.7 million increase in operating, maintenance and other expense resulting
primarily from a $0.4 million increase in ad valorem tax expense due primarily to a
reduction in the first quarter 2007 related to a favorable valuation and a $0.3 million
increase due to lower capitalization of certain corporate expenses as a result
of lower capital spending comparing 2008 to 2007, and
    
    a $0.5 million increase in depreciation expense primarily due to the Egan
expansion.
 Interest Income.
 Interest Expense.
 Income Tax Expense.
 17




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##### Table of Contents



Spectra Energy Partners Adjusted EBITDA and Cash Available for Distribution
 Adjusted EBITDA
   
    
    the financial performance of assets without regard to financing methods, capital
structure or historical cost basis;
    
    the ability to generate cash sufficient to pay interest on indebtedness and to make
distributions to partners; and
    
    operating performance and return on invested capital as compared to those of other
publicly traded limited partnerships that own energy infrastructure assets, without regard
to financing methods and capital structure.
  Cash Available for Distribution
      18




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##### Table of Contents



Spectra Energy Partners
 Reconciliation of Non-GAAP Adjusted EBITDA and Cash Available for Distribution
 Three MonthsEnded March 31,2008
    
    
    2007(in millions)Net income
    
    $
    22.5
    
    
    $
    19.2Add:Interest expense
    
    
    5.0
    
    
    
    2.2Income tax expense
    
    
    0.3
    
    
    
    4.7Depreciation and amortization
    
    
    5.9
    
    
    
    4.9Less:Interest income
    
    
    1.5
    
    
    
    Equity in earnings of Gulfstream
    
    
    4.8
    
    
    
    4.2Equity in earnings of Market Hub
    
    
    7.8
    
    
    
    7.2Other income, net
    
    
    0.1
    
    
    
    Adjusted EBITDA
    
    
    19.5
    
    
    
    19.6Add:Cash Available for Distribution from Gulfstream
    
    
    8.3
    
    
    
    8.8Cash Available for Distribution from Market Hub
    
    
    8.7
    
    
    
    8.1Less:Cash paid for interest expense, net
    
    
    1.7
    
    
    
    Maintenance capital expenditures
    
    
    1.0
    
    
    
    0.9Cash Available for Distribution
    
    $
    33.8
    
    
    $
    35.6
 Spectra Energy Partners
 Reconciliation of Non-GAAP Adjusted EBITDA and Cash Available for Distribution
 Three MonthsEnded March 31,2008
    
    
    2007(in millions)Net cash provided by operating activities
    
    $
    37.1
    
    
    $
    22.5Interest income
    
    
    (1.5
    )
    
    
    Interest expense
    
    
    5.0
    
    
    
    2.2Income tax expense  current
    
    
    0.2
    
    
    
    3.4Distributions received from Gulfstream
    
    
    (8.2
    )
    
    
    (4.0
    )Distributions received from Market Hub
    
    
    (12.4
    )
    
    
    Changes in operating working capital and other
    
    
    (0.7
    )
    
    
    (4.5
    )Adjusted EBITDA
    
    
    19.5
    
    
    
    19.6Add:Cash Available for Distribution from Gulfstream
    
    
    8.3
    
    
    
    8.8Cash Available for Distribution from Market Hub
    
    
    8.7
    
    
    
    8.1Less:Cash paid for interest expense, net
    
    
    1.7
    
    
    
    Maintenance capital expenditures
    
    
    1.0
    
    
    
    0.9Cash Available for Distribution
    
    $
    33.8
    
    
    $
    35.6
 19




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##### Table of Contents



Gulfstream
 Reconciliation of Non-GAAP Adjusted EBITDA and Cash Available for Distribution
 Three MonthsEnded March 31,2008
    
    
    2007(in millions)Net income
    
    $
    18.9
    
    
    $
    17.1Add:Interest expense
    
    
    11.5
    
    
    
    12.1Depreciation and amortization
    
    
    7.4
    
    
    
    7.6Less:Other income, net
    
    
    3.5
    
    
    
    0.5Adjusted EBITDA  100%
    
    
    34.3
    
    
    
    36.3Less:Cash paid for interest expense, net
    
    
    
    
    
    
    0.1Maintenance capital expenditures
    
    
    0.5
    
    
    
    0.2Cash Available for Distribution  100%
    
    $
    33.8
    
    
    $
    36.0Adjusted EBITDA  24.5%
    
    $
    8.4
    
    
    $
    8.9Cash Available for Distribution  24.5%
    
    
    8.3
    
    
    
    8.8
 Market Hub
 Reconciliation of Non-GAAP Adjusted EBITDA and Cash Available for Distribution
 Three MonthsEnded March 31,2008
    
    
    2007(in millions)Net income
    
    $
    15.7
    
    
    $
    14.4Add:Interest expense
    
    
    0.4
    
    
    
    1.0Depreciation and amortization
    
    
    2.6
    
    
    
    2.1Less:Interest income
    
    
    1.0
    
    
    
    Other income, net
    
    
    
    
    
    
    0.2Adjusted EBITDA  100%
    
    
    17.7
    
    
    
    17.3Less:Maintenance capital expenditures
    
    
    0.3
    
    
    
    1.2Cash Available for Distribution  100%
    
    $
    17.4
    
    
    $
    16.1Adjusted EBITDA  50%
    
    $
    8.9
    
    
    $
    8.7Cash Available for Distribution  50%
    
    
    8.7
    
    
    
    8.1
 20




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Operating Cash Flows
   Investing Cash Flows
  
    
    net proceeds totaling $19.5 million in 2008 from the liquidation of available-for-sale
securities that were held as collateral for the term loan. As permitted by the terms of the
credit facility, proceeds were used for capital and investment expenditures, and
    
    a $12.1 million increase in investment expenditures representing capital contributions to
Gulfstream and Market Hub in 2008 used to fund their expansion projects.
     Financing Cash Flows
   Available Credit Facility and Restrictive Debt Covenants.
 Cash Distributions.
 21




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##### Table of Contents



OTHER ISSUES
 New Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk.
  
 Item 4. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
  
 PART II. OTHER INFORMATION
 
 Item 1A. Risk Factors.
  
 Item 4. Submission of Matters to a Vote of Security Holders.
  
 Item 6. Exhibits.
  ExhibitNumber* 10.1
    
    Amendment No. 1 to First Amended and Restated Agreement of Limited Partnership of Spectra Energy
Partners, LP, dated April 11, 2008.* 31.1
    
    Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 31.2
    
    Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.* 32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith 22




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##### Table of Contents



SIGNATURES
  SPECTRA ENERGY PARTNERS, LPBy:
    Spectra Energy Partners (DE) GP, LP,its general partnerBy:
    Spectra Energy Partners GP, LLC,its general partnerDate: May 14, 2008
    /s/ C. Gregory HarperC. Gregory HarperPresident and Chief Executive Officer
Spectra Energy Partners GP, LLCDate: May 14, 2008
    /s/ Lon C. Mitchell, Jr.Lon C. Mitchell, Jr.Vice President and Chief Financial Officer
Spectra Energy Partners GP, LLC 23




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##### Table of Contents



ExhibitNumber* 10.1
    
    Amendment No. 1 to First Amended and Restated Agreement of Limited Partnership of Spectra Energy
Partners, LP, dated April 11, 2008.* 31.1
    
    Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 31.2
    
    Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* 32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.* 32.2
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith