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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 June 30, 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
    
    41-2232463(State or other jurisdiction of incorporation)
    
    (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
June 30, 2008
  PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)
    
    
    4Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007
    
    
    4Condensed Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007
    
    
    5Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007
    
    
    7Condensed Consolidated Statements of Partners Capital for the six months ended June 30, 2008 and 2007
    
    
    8Notes to Condensed Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    28Item 4. Controls and Procedures
    
    
    28PART II. OTHER INFORMATIONItem 1A. Risk Factors
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28Item 6. Exhibits
    
    
    29Signatures
    
    
    29
  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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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 Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Operating RevenuesTransportation of natural gas
    
    $
    25.8
    
    
    $
    24.2
    
    
    $
    53.0
    
    
    $
    49.7Storage of natural gas and other
    
    
    3.9
    
    
    
    5.2
    
    
    
    9.2
    
    
    
    12.1Total operating revenues
    
    
    29.7
    
    
    
    29.4
    
    
    
    62.2
    
    
    
    61.8Operating ExpensesOperating, maintenance and other
    
    
    8.4
    
    
    
    2.1
    
    
    
    18.4
    
    
    
    11.6Depreciation and amortization
    
    
    6.5
    
    
    
    5.6
    
    
    
    13.1
    
    
    
    11.2Property and other taxes
    
    
    1.8
    
    
    
    1.5
    
    
    
    2.0
    
    
    
    1.7Total operating expenses
    
    
    16.7
    
    
    
    9.2
    
    
    
    33.5
    
    
    
    24.5Operating Income
    
    
    13.0
    
    
    
    20.2
    
    
    
    28.7
    
    
    
    37.3Other Income and ExpensesEquity in earnings of unconsolidated affiliates
    
    
    15.0
    
    
    
    11.6
    
    
    
    27.6
    
    
    
    23.0Other income and expenses, net
    
    
    0.3
    
    
    
    0.4
    
    
    
    0.4
    
    
    
    0.4Total other income and expenses
    
    
    15.3
    
    
    
    12.0
    
    
    
    28.0
    
    
    
    23.4Interest Income
    
    
    0.8
    
    
    
    
    
    
    
    2.3
    
    
    
    Interest Expense
    
    
    3.8
    
    
    
    2.1
    
    
    
    8.8
    
    
    
    4.3Earnings Before Income Taxes
    
    
    25.3
    
    
    
    30.1
    
    
    
    50.2
    
    
    
    56.4Income Tax Expense (Benefit)
    
    
    (2.2
    )
    
    
    6.2
    
    
    
    (1.4
    )
    
    
    11.4Net Income
    
    $
    27.5
    
    
    $
    23.9
    
    
    $
    51.6
    
    
    $
    45.0Calculation of Limited Partners Interest in Net Income:Net income
    
    $
    27.5
    
    
    $
    23.9
    
    
    $
    51.6
    
    
    $
    45.0Less:Net income attributable to predecessor operations
    
    
    
    
    
    
    23.9
    
    
    
    1.6
    
    
    
    45.0General partners interest in net income
    
    
    1.1
    
    
    
    
    
    
    
    1.5
    
    
    
    Limited partners interest in net income
    
    $
    26.4
    
    
    $
    
    
    
    $
    48.5
    
    
    $
    Basic and diluted net income per limited partner unit
    
    $
    0.38
    
    
    $
    
    
    
    $
    0.71
    
    
    $
    Weighted average limited partners units outstanding  basic and diluted
    
    
    70.4
    
    
    
    
    
    
    
    68.3
    
    
    
    
  4




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SPECTRA ENERGY PARTNERS, LP
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 (In millions)
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent AssetsCash and cash equivalents
    
    $
    30.4
    
    
    $
    14.9Receivables, net
    
    
    13.2
    
    
    
    16.3Other
    
    
    6.4
    
    
    
    5.1Total current assets
    
    
    50.0
    
    
    
    36.3Investments and Other AssetsInvestments in unconsolidated affiliates
    
    
    525.8
    
    
    
    495.1Goodwill
    
    
    118.3
    
    
    
    118.3Other investments
    
    
    94.9
    
    
    
    154.8Total investments and other assets
    
    
    739.0
    
    
    
    768.2Property, Plant and EquipmentCost
    
    
    951.2
    
    
    
    930.0Less accumulated depreciation and amortization
    
    
    146.2
    
    
    
    133.7Net property, plant and equipment
    
    
    805.0
    
    
    
    796.3Regulatory Assets and Deferred Debits
    
    
    10.2
    
    
    
    10.5Total Assets
    
    $
    1,604.2
    
    
    $
    1,611.3
  5




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SPECTRA ENERGY PARTNERS, LP
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 (In millions)
 June 30,
    
    
    December 31,2008
    
    
    2007LIABILITIES AND PARTNERS CAPITALCurrent LiabilitiesAccounts payable
    
    $
    12.1
    
    
    $
    7.6Taxes accrued
    
    
    3.0
    
    
    
    3.5Interest accrued
    
    
    0.9
    
    
    
    1.6Natural gas imbalance payables
    
    
    8.7
    
    
    
    3.4Note payable  affiliates
    
    
    50.0
    
    
    
    50.0Other
    
    
    4.1
    
    
    
    7.5Total current liabilities
    
    
    78.8
    
    
    
    73.6Long-term Debt
    
    
    390.0
    
    
    
    400.0Deferred Credits and Other LiabilitiesDeferred income taxes
    
    
    8.8
    
    
    
    10.7Other
    
    
    2.3
    
    
    
    3.3Total deferred credits and other liabilities
    
    
    11.1
    
    
    
    14.0Commitments and ContingenciesPartners CapitalPredecessor equity
    
    
    
    
    
    
    98.4Common units
(48.9 million and 44.6 million units outstanding
at June 30, 2008
and December 31, 2007, respectively)
    
    
    794.4
    
    
    
    699.3Subordinated
units (21.6 million units outstanding)
    
    
    304.7
    
    
    
    303.5General
partner units (1.4 million units outstanding)
    
    
    21.5
    
    
    
    19.0Accumulated other comprehensive income
    
    
    3.7
    
    
    
    3.5Total partners capital
    
    
    1,124.3
    
    
    
    1,123.7Total Liabilities and Partners Capital
    
    $
    1,604.2
    
    
    $
    1,611.3
  6




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SPECTRA ENERGY PARTNERS, LP
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited)
 (In millions)
 Six MonthsEnded June 30,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    51.6
    
    
    $
    45.0Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    13.1
    
    
    
    11.2Deferred income tax expense (benefit)
    
    
    (2.1
    )
    
    
    6.1Equity in earnings of unconsolidated affiliates
    
    
    (27.6
    )
    
    
    (23.0
    )Distributions received from unconsolidated affiliates
    
    
    35.8
    
    
    
    3.7Other
    
    
    3.2
    
    
    
    (5.1
    )Net cash provided by operating activities
    
    
    74.0
    
    
    
    37.9CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    (18.0
    )
    
    
    (13.2
    )Investment expenditures
    
    
    (39.3
    )
    
    
    (0.8
    )Acquisition of Saltville and P-25 pipeline
    
    
    (4.7
    )
    
    
    Proceeds from sales of assets
    
    
    
    
    
    
    8.3Purchases of available-for-sale securities
    
    
    (700.4
    )
    
    
    Proceeds from sales and maturities of available-for-sale securities
    
    
    760.1
    
    
    
    Other
    
    
    
    
    
    
    (0.1
    )Net cash used in investing activities
    
    
    (2.3
    )
    
    
    (5.8
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issuance of long-term debt
    
    
    702.0
    
    
    
    Payments for the redemption of long-term debt
    
    
    (712.0
    )
    
    
    Distributions to partners
    
    
    (45.4
    )
    
    
    Dividends to parent
    
    
    
    
    
    
    (12.5
    )Transfers to parent, net
    
    
    (0.8
    )
    
    
    (19.6
    )Net cash used in financing activities
    
    
    (56.2
    )
    
    
    (32.1
    )Net increase in cash and cash equivalents
    
    
    15.5
    
    
    
    Cash and cash equivalents at beginning of period
    
    
    14.9
    
    
    
    Cash and cash equivalents at end of period
    
    $
    30.4
    
    
    $
    
  7




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SPECTRA ENERGY PARTNERS, LP
 
 CONDENSED CONSOLIDATED STATEMENTS OF PARTNERS CAPITAL
(Unaudited)
(In millions)
 AccumulatedPartners Capital
    
    
    OtherPredecessor
    
    
    Limited Partners
    
    
    General
    
    
    ComprehensiveEquity
    
    
    Common
    
    
    Subordinated
    
    
    Partner
    
    
    Income
    
    
    TotalDecember 31, 2007
    
    $
    98.4
    
    
    $
    699.3
    
    
    $
    303.5
    
    
    $
    19.0
    
    
    $
    3.5
    
    
    $
    1,123.7Net income
    
    
    1.6
    
    
    
    33.2
    
    
    
    15.3
    
    
    
    1.5
    
    
    
    
    
    
    
    51.6Net change in parent advances
    
    
    (0.8
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.8
    )Acquisition of Saltville and
P-25 pipeline
    
    
    (99.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (99.2
    )Excess purchase price over net
acquired assets
    
    
    
    
    
    
    (7.6
    )
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    (7.8
    )Issuance of units
    
    
    
    
    
    
    100.2
    
    
    
    
    
    
    
    2.1
    
    
    
    
    
    
    
    102.3Attributed deferred tax expense
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )Unrealized
mark-to-market net gain on hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.4
    
    
    
    0.4Reclassification of cash flow
hedges into earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.2
    )Distributions to partners
    
    
    
    
    
    
    (30.4
    )
    
    
    (14.1
    )
    
    
    (0.9
    )
    
    
    
    
    
    
    (45.4
    )June 30, 2008
    
    $
    
    
    
    $
    794.4
    
    
    $
    304.7
    
    
    $
    21.5
    
    
    $
    3.7
    
    
    $
    1,124.3December 31, 2006
    
    $
    1,093.3
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3.8
    
    
    $
    1,097.1Net income attributable to
predecessor operations
    
    
    45.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45.0Reclassification of cash flow
hedges into earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )
    
    
    (0.2
    )Net change in parent advances
    
    
    (19.9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19.9
    )Dividends to parent
    
    
    (12.5
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12.5
    )June 30, 2007
    
    $
    1,105.9
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    3.6
    
    
    $
    1,109.5
  8




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




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2. Acquisitions
  .
  Condensed Consolidated Statements of Operations.
 Three Months Ended
    
    
    Six Months EndedJune 30, 2007
    
    
    June 30, 2007Previously
    
    
    
    
    
    
    
    
    
    
    As
    
    
    Previously
    
    
    
    
    
    
    
    
    
    AsReported
    
    
    Saltville
    
    
    Eliminations
    
    
    Recast
    
    
    Reported
    
    
    Saltville
    
    
    Eliminations
    
    
    Recast(in millions)Operating RevenuesTransportation of natural gas
    
    $
    23.7
    
    
    $
    0.5
    
    
    $
    
    
    
    $
    24.2
    
    
    $
    48.6
    
    
    $
    1.4
    
    
    $
    (0.3
    )
    
    $
    49.7Storage of natural gas and other
    
    
    
    
    
    
    6.0
    
    
    
    (0.8
    )
    
    
    5.2
    
    
    
    1.5
    
    
    
    11.7
    
    
    
    (1.1
    )
    
    
    12.1Total operating revenues
    
    
    23.7
    
    
    
    6.5
    
    
    
    (0.8
    )
    
    
    29.4
    
    
    
    50.1
    
    
    
    13.1
    
    
    
    (1.4
    )
    
    
    61.8Operating ExpensesOperating, maintenance and other
    
    
    (0.1
    )
    
    
    3.0
    
    
    
    (0.8
    )
    
    
    2.1
    
    
    
    6.8
    
    
    
    6.2
    
    
    
    (1.4
    )
    
    
    11.6Depreciation and amortization
    
    
    5.1
    
    
    
    0.5
    
    
    
    
    
    
    
    5.6
    
    
    
    10.0
    
    
    
    1.2
    
    
    
    
    
    
    
    11.2Property and other taxes
    
    
    1.0
    
    
    
    0.5
    
    
    
    
    
    
    
    1.5
    
    
    
    0.9
    
    
    
    0.8
    
    
    
    
    
    
    
    1.7Total operating expenses
    
    
    6.0
    
    
    
    4.0
    
    
    
    (0.8
    )
    
    
    9.2
    
    
    
    17.7
    
    
    
    8.2
    
    
    
    (1.4
    )
    
    
    24.5Operating Income
    
    
    17.7
    
    
    
    2.5
    
    
    
    
    
    
    
    20.2
    
    
    
    32.4
    
    
    
    4.9
    
    
    
    
    
    
    
    37.3Other Income and ExpensesEquity in earnings of
unconsolidated affiliates
    
    
    11.6
    
    
    
    
    
    
    
    
    
    
    
    11.6
    
    
    
    23.0
    
    
    
    
    
    
    
    
    
    
    
    23.0Other income and expenses, net
    
    
    0.3
    
    
    
    0.1
    
    
    
    
    
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.1
    
    
    
    
    
    
    
    0.4Total other income and expenses
    
    
    11.9
    
    
    
    0.1
    
    
    
    
    
    
    
    12.0
    
    
    
    23.3
    
    
    
    0.1
    
    
    
    
    
    
    
    23.4Interest Expense
    
    
    2.1
    
    
    
    
    
    
    
    
    
    
    
    2.1
    
    
    
    4.3
    
    
    
    
    
    
    
    
    
    
    
    4.3Earnings Before Income Taxes
    
    
    27.5
    
    
    
    2.6
    
    
    
    
    
    
    
    30.1
    
    
    
    51.4
    
    
    
    5.0
    
    
    
    
    
    
    
    56.4Income Tax Expense
    
    
    5.9
    
    
    
    0.3
    
    
    
    
    
    
    
    6.2
    
    
    
    10.6
    
    
    
    0.8
    
    
    
    
    
    
    
    11.4Net Income
    
    $
    21.6
    
    
    $
    2.3
    
    
    $
    
    
    
    $
    23.9
    
    
    $
    40.8
    
    
    $
    4.2
    
    
    $
    
    
    
    $
    45.0
 10




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Condensed Consolidated Balance Sheet
 December 31, 2007Previously
    
    
    
    
    
    
    
    
    
    
    AsReported
    
    
    Saltville
    
    
    Eliminations
    
    
    Recast(in millions)ASSETSCurrent AssetsCash and cash equivalents
    
    $
    14.9
    
    
    $
    
    
    
    $
    
    
    
    $
    14.9Receivables, net
    
    
    16.5
    
    
    
    3.2
    
    
    
    (3.4
    )
    
    
    16.3Other
    
    
    5.0
    
    
    
    0.1
    
    
    
    
    
    
    
    5.1Total current assets
    
    
    36.4
    
    
    
    3.3
    
    
    
    (3.4
    )
    
    
    36.3Investments and Other AssetsInvestments in unconsolidated affiliates
    
    
    495.1
    
    
    
    
    
    
    
    
    
    
    
    495.1Goodwill
    
    
    118.3
    
    
    
    
    
    
    
    
    
    
    
    118.3Other investments
    
    
    154.8
    
    
    
    
    
    
    
    
    
    
    
    154.8Total investments and other assets
    
    
    768.2
    
    
    
    
    
    
    
    
    
    
    
    768.2Property, Plant and EquipmentCost
    
    
    821.4
    
    
    
    108.6
    
    
    
    
    
    
    
    930.0Less accumulated depreciation and amortization
    
    
    128.8
    
    
    
    4.9
    
    
    
    
    
    
    
    133.7Net property, plant and equipment
    
    
    692.6
    
    
    
    103.7
    
    
    
    
    
    
    
    796.3Regulatory Assets and Deferred Debits
    
    
    10.4
    
    
    
    0.1
    
    
    
    
    
    
    
    10.5Total Assets
    
    $
    1,507.6
    
    
    $
    107.1
    
    
    $
    (3.4
    )
    
    $
    1,611.3LIABILITIES AND PARTNERS CAPITALCurrent LiabilitiesAccounts payable
    
    $
    7.0
    
    
    $
    0.6
    
    
    $
    
    
    
    $
    7.6Taxes accrued
    
    
    2.9
    
    
    
    0.6
    
    
    
    
    
    
    
    3.5Interest accrued
    
    
    1.6
    
    
    
    
    
    
    
    
    
    
    
    1.6Natural gas imbalance payables
    
    
    4.0
    
    
    
    2.8
    
    
    
    (3.4
    )
    
    
    3.4Note payable  affiliates
    
    
    50.0
    
    
    
    
    
    
    
    
    
    
    
    50.0Other
    
    
    5.8
    
    
    
    1.7
    
    
    
    
    
    
    
    7.5Total current liabilities
    
    
    71.3
    
    
    
    5.7
    
    
    
    (3.4
    )
    
    
    73.6Long-term Debt
    
    
    400.0
    
    
    
    
    
    
    
    
    
    
    
    400.0Deferred Credit and Other LiabilitiesDeferred income taxes
    
    
    8.4
    
    
    
    2.3
    
    
    
    
    
    
    
    10.7Other
    
    
    2.6
    
    
    
    0.7
    
    
    
    
    
    
    
    3.3Total deferred credits and other liabilities
    
    
    11.0
    
    
    
    3.0
    
    
    
    
    
    
    
    14.0Partners CapitalPredecessor equity
    
    
    
    
    
    
    98.4
    
    
    
    
    
    
    
    98.4Common units
    
    
    699.3
    
    
    
    
    
    
    
    
    
    
    
    699.3Subordinated units
    
    
    303.5
    
    
    
    
    
    
    
    
    
    
    
    303.5General partner units
    
    
    19.0
    
    
    
    
    
    
    
    
    
    
    
    19.0Accumulated other comprehensive income
    
    
    3.5
    
    
    
    
    
    
    
    
    
    
    
    3.5Total partners capital
    
    
    1,025.3
    
    
    
    98.4
    
    
    
    
    
    
    
    1,123.7Total Liabilities and Partners Capital
    
    $
    1,507.6
    
    
    $
    107.1
    
    
    $
    (3.4
    )
    
    $
    1,611.3
 11




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Condensed Consolidated Statement of Cash Flows.
 Six Months EndedJune 30, 2007Previously
    
    
    
    
    
    
    AsReported
    
    
    Saltville
    
    
    Recast(in millions)CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    40.8
    
    
    $
    4.2
    
    
    $
    45.0Adjustments to reconcile net income to net cash provided
by operating activities:Depreciation and amortization
    
    
    10.0
    
    
    
    1.2
    
    
    
    11.2Deferred
income tax expense
    
    
    5.7
    
    
    
    0.4
    
    
    
    6.1Equity in earnings of unconsolidated affiliates
    
    
    (23.0
    )
    
    
    
    
    
    
    (23.0
    )Distributions received from unconsolidated affiliates
    
    
    3.7
    
    
    
    
    
    
    
    3.7Other
    
    
    (3.0
    )
    
    
    (2.1
    )
    
    
    (5.1
    )Net cash provided by operating activities
    
    
    34.2
    
    
    
    3.7
    
    
    
    37.9CASH FLOWS FROM INVESTING ACTIVITIESCapital expenditures
    
    
    (13.1
    )
    
    
    (0.1
    )
    
    
    (13.2
    )Investment expenditures
    
    
    (0.8
    )
    
    
    
    
    
    
    (0.8
    )Proceeds from sales of assets
    
    
    
    
    
    
    8.3
    
    
    
    8.3Other
    
    
    
    
    
    
    (0.1
    )
    
    
    (0.1
    )Net cash provided by (used in) investing activities
    
    
    (13.9
    )
    
    
    8.1
    
    
    
    (5.8
    )CASH FLOWS FROM FINANCING ACTIVITIESDividends to parent
    
    
    (12.5
    )
    
    
    
    
    
    
    (12.5
    )Transfers to parent, net
    
    
    (7.8
    )
    
    
    (11.8
    )
    
    
    (19.6
    )Net cash used in financing activities
    
    
    (20.3
    )
    
    
    (11.8
    )
    
    
    (32.1
    )Net change in cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    
    
    
    
    Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    
    
    
    $
    
 Condensed Consolidated Statement of Partners Capital.
 Previously
    
    
    
    
    
    
    AsReported
    
    
    Saltville
    
    
    Recast(in millions)December 31, 2006
    
    $
    989.1
    
    
    $
    108.0
    
    
    $
    1,097.1Net income attributable to predecessor operations
    
    
    40.8
    
    
    
    4.2
    
    
    
    45.0Reclassification of cash flow hedges into earnings
    
    
    (0.2
    )
    
    
    
    
    
    
    (0.2
    )Net change in parent advances
    
    
    (8.1
    )
    
    
    (11.8
    )
    
    
    (19.9
    )Dividends to parent
    
    
    (12.5
    )
    
    
    
    
    
    
    (12.5
    )June 30, 2007
    
    $
    1,009.1
    
    
    $
    100.4
    
    
    $
    1,109.5
 12




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##### Table of Contents



3. Income Taxes
    4. Business Segments
      13




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##### Table of Contents



Business Segment Data
 Three Months Ended
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in millions)Operating revenuesGas Transportation and Storage
    
    $
    29.7
    
    
    $
    29.4
    
    
    $
    62.2
    
    
    $
    61.8Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating revenues
    
    $
    29.7
    
    
    $
    29.4
    
    
    $
    62.2
    
    
    $
    61.8Segment EBITGas Transportation and Storage
    
    $
    15.2
    
    
    $
    20.5
    
    
    $
    32.8
    
    
    $
    37.6Other
    
    
    13.1
    
    
    
    11.7
    
    
    
    23.9
    
    
    
    23.1Total EBIT
    
    
    28.3
    
    
    
    32.2
    
    
    
    56.7
    
    
    
    60.7Interest income
    
    
    0.8
    
    
    
    
    
    
    
    2.3
    
    
    
    Interest expense
    
    
    3.8
    
    
    
    2.1
    
    
    
    8.8
    
    
    
    4.3Earnings before income taxes
    
    $
    25.3
    
    
    $
    30.1
    
    
    $
    50.2
    
    
    $
    56.4
 June 30,
    
    
    December 31,2008
    
    
    2007(in millions)Segment AssetsGas Transportation and Storage
    
    $
    975.9
    
    
    $
    968.1Other
    
    
    628.3
    
    
    
    643.2Total assets
    
    $
    1,604.2
    
    
    $
    1,611.3
 5. Regulatory Matters
 Saltville.
 6. Comprehensive Income
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in millions)Net income
    
    $
    27.5
    
    
    $
    23.9
    
    
    $
    51.6
    
    
    $
    45.0Unrealized
mark-to-market net gain on hedges
    
    
    0.4
    
    
    
    
    
    
    
    0.4
    
    
    
    Reclassification of cash flow hedges into earnings
    
    
    (0.1
    )
    
    
    (0.1
    )
    
    
    (0.2
    )
    
    
    (0.2
    )Total comprehensive income
    
    $
    27.8
    
    
    $
    23.8
    
    
    $
    51.8
    
    
    $
    44.8
 14




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##### Table of Contents



7. Net Income Per Limited Partner Unit and Cash Distributions
    Three Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30, 2008
    
    
    June 30, 2008(in millions, except per-unit amounts)Net income
    
    $
    27.5
    
    
    $
    51.6Less:Net income attributable to predecessor operations
    
    
    
    
    
    
    1.6General partners interest in net income  2%
    
    
    0.6
    
    
    
    1.0General partners interest in net income
attributable to incentive distribution rights
    
    
    0.5
    
    
    
    0.5Limited partners interest in net income
    
    $
    26.4
    
    
    $
    48.5Net income allocable to common units
    
    $
    18.3
    
    
    $
    33.2Net income allocable to subordinated units
    
    
    8.1
    
    
    
    15.3Limited partners interest in net income
    
    $
    26.4
    
    
    $
    48.5Weighted average limited partner units outstanding 
basic and dilutedCommon units
    
    
    48.8
    
    
    
    46.7Subordinated units
    
    
    21.6
    
    
    
    21.6Total
    
    
    70.4
    
    
    
    68.3Net income per limited partner unit  basic and dilutedCommon units
    
    $
    0.38
    
    
    $
    0.71Subordinated units
    
    $
    0.38
    
    
    $
    0.71
   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.
 15




---



##### Table of Contents



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
    %
  8. Investments in Unconsolidated Affiliates
  Investments in Unconsolidated Affiliates
 June 30,
    
    
    December 31,2008
    
    
    2007(in millions)Gulfstream
    
    $
    230.9
    
    
    $
    211.3Market Hub
    
    
    294.9
    
    
    
    283.8Total
    
    $
    525.8
    
    
    $
    495.1
 Equity in Earnings of Unconsolidated Affiliates
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in millions)Gulfstream
    
    $
    7.0
    
    
    $
    4.3
    
    
    $
    11.8
    
    
    $
    8.5Market Hub
    
    
    8.0
    
    
    
    7.3
    
    
    
    15.8
    
    
    
    14.5Total
    
    $
    15.0
    
    
    $
    11.6
    
    
    $
    27.6
    
    
    $
    23.0
 16




---



##### Table of Contents



Summarized Financial Information of Unconsolidated Affiliates (Presented at 100%)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007(in millions)GulfstreamOperating revenues
    
    $
    51.6
    
    
    $
    46.2
    
    
    $
    92.4
    
    
    $
    84.2Operating expenses
    
    
    15.8
    
    
    
    17.3
    
    
    
    29.7
    
    
    
    26.6Operating income
    
    
    35.8
    
    
    
    28.9
    
    
    
    62.7
    
    
    
    57.6Net income
    
    
    27.3
    
    
    
    17.5
    
    
    
    46.2
    
    
    
    34.6Market HubOperating revenues
    
    $
    25.2
    
    
    $
    23.5
    
    
    $
    47.1
    
    
    $
    44.3Operating expenses
    
    
    8.8
    
    
    
    7.7
    
    
    
    15.6
    
    
    
    13.3Operating income
    
    
    16.4
    
    
    
    15.8
    
    
    
    31.5
    
    
    
    31.0Net income
    
    
    16.8
    
    
    
    14.7
    
    
    
    32.5
    
    
    
    29.1
 9. Debt and Credit Facility
 Outstanding as of June 30, 2008CreditExpiration
    
    Facility
    
    
    
    
    
    RevolvingCredit Facility Summary
    
    Date
    
    Capacity
    
    Term Loan
    
    Loan
    
    Total(in millions)Spectra Energy Partners, LP
    
    
    2012
    
    
    $
    500.0
    
    
    $
    94.0
    
    
    $
    146.0
    
    
    $
    240.0
   17




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##### Table of Contents



10. Fair Value Measurements
    
    
    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

    
    June 30, 2008
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3(in millions)Available-for-sale securities
    
    Cash and cash equivalents
    
    $
    15.0
    
    
    $
    
    
    
    $
    15.0
    
    
    $
    Available-for-sale securities
    
    Investments and other assets-other
    
    
    94.9
    
    
    
    
    
    
    
    94.9
    
    
    
    Total Assets
    
    
    
    
    
    $
    109.9
    
    
    $
    
    
    
    $
    109.9
    
    
    $
    
 Level 2 Valuation Techniques
  11. Commitments and Contingencies
 Environmental.
 Litigation.
 12. Interest Rate Hedges
   18




---



##### Table of Contents



13. New Accounting Pronouncements
  SFAS No. 157, Fair Value Measurements.
 SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities.
  SFAS No. 141R, Business Combinations.
 SFAS
No. 161 Disclosures about Derivative Instruments and Hedging
Activities  an amendment of FASB Statement No. 133.
 EITF 07-04, Application of the Two-Class Method under FASB Statement No. 128, Earnings per
Share, to Master Limited Partnerships.
 FSP No. FAS 142-3, Determination of the Useful Life of Intangible Assets.
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 INTRODUCTION
  Executive Overview
   19




---



##### Table of Contents



RESULTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,Increase
    
    
    
    
    
    
    
    
    
    
    Increase2008
    
    
    2007
    
    
    (Decrease)
    
    
    2008
    
    
    2007
    
    
    (Decrease)(in millions)Operating revenues
    
    $
    29.7
    
    
    $
    29.4
    
    
    $
    0.3
    
    
    $
    62.2
    
    
    $
    61.8
    
    
    $
    0.4Operating, maintenance and other expense
    
    
    10.2
    
    
    
    3.6
    
    
    
    6.6
    
    
    
    20.4
    
    
    
    13.3
    
    
    
    7.1Depreciation and amortization
    
    
    6.5
    
    
    
    5.6
    
    
    
    0.9
    
    
    
    13.1
    
    
    
    11.2
    
    
    
    1.9Operating income
    
    
    13.0
    
    
    
    20.2
    
    
    
    (7.2
    )
    
    
    28.7
    
    
    
    37.3
    
    
    
    (8.6
    )Equity in earnings of unconsolidated affiliates
    
    
    15.0
    
    
    
    11.6
    
    
    
    3.4
    
    
    
    27.6
    
    
    
    23.0
    
    
    
    4.6Other income and expenses, net
    
    
    0.3
    
    
    
    0.4
    
    
    
    (0.1
    )
    
    
    0.4
    
    
    
    0.4
    
    
    
    Interest income
    
    
    0.8
    
    
    
    
    
    
    
    0.8
    
    
    
    2.3
    
    
    
    
    
    
    
    2.3Interest expense
    
    
    3.8
    
    
    
    2.1
    
    
    
    1.7
    
    
    
    8.8
    
    
    
    4.3
    
    
    
    4.5Earnings before income taxes
    
    
    25.3
    
    
    
    30.1
    
    
    
    (4.8
    )
    
    
    50.2
    
    
    
    56.4
    
    
    
    (6.2
    )Income tax expense (benefit)
    
    
    (2.2
    )
    
    
    6.2
    
    
    
    (8.4
    )
    
    
    (1.4
    )
    
    
    11.4
    
    
    
    (12.8
    )Net income
    
    $
    27.5
    
    
    $
    23.9
    
    
    $
    3.6
    
    
    $
    51.6
    
    
    $
    45.0
    
    
    $
    6.6Adjusted EBITDA (a)
    
    $
    19.5
    
    
    $
    25.8
    
    
    $
    (6.3
    )
    
    $
    41.8
    
    
    $
    48.5
    
    
    $
    (6.7
    )Cash Available for Distribution (a)
    
    
    21.8
    
    
    
    27.4
    
    
    
    (5.6
    )
    
    
    58.3
    
    
    
    66.1
    
    
    
    (7.8
    )
 
 (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. Three Months Ended June 30, 2008 Compared to June 30, 2007
 Operating
Revenues.
 Operating, Maintenance and Other Expense.
 
    
    a $6.3 million net increase from lower net pipeline fuel recoveries recognized by East
Tennessee in the 2008 period compared to the 2007 period which included an
adjustment of estimated fuel recoveries, and
    
    a $1.5 million increase in general and administrative costs as a result of new
corporate functions associated with managing Spectra Energy Partners post-IPO, partially
offset by,
    
    an $0.8 million decrease from lower labor and outside services costs related to the
timing of various pipeline operations activities, and
    
    a $0.6 million decrease due to the capitalization of previously expensed project
development costs.
 20




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##### Table of Contents



Depreciation and Amortization
 Equity in Earnings of Unconsolidated Affiliates
  Three Months EndedJune 30,Increase2008
    
    
    2007
    
    
    (Decrease)(in millions)GulfstreamOperating revenues
    
    $
    51.6
    
    
    $
    46.2
    
    
    $
    5.4Operating, maintenance and other expense
    
    
    8.5
    
    
    
    9.7
    
    
    
    (1.2
    )Depreciation and amortization
    
    
    7.3
    
    
    
    7.6
    
    
    
    (0.3
    )Other income and expenses, net
    
    
    2.7
    
    
    
    0.7
    
    
    
    2.0Interest expense
    
    
    11.2
    
    
    
    12.1
    
    
    
    (0.9
    )Net income
    
    $
    27.3
    
    
    $
    17.5
    
    
    $
    9.8Spectra Energy Partners 24.5% share
    
    $
    7.0
    
    
    $
    4.3
    
    
    $
    2.7
 Gulfstream  Owned 24.5%
  
    
    a $5.4 million increase in revenues driven by a higher demand for interruptible and
short-term firm transportation from generation customers caused by warmer weather and the
favorable gas-to-fuel-oil price differential compared to the prior period,
    
    a $2.0 million increase in other income and expenses, net driven primarily by a $1.9
million increase in allowance for funds used during construction
(AFUDC) as a result of capital expenditures for Gulfstreams Phase III and Phase IV expansion projects,
    
    a $1.2 million decrease in operating, maintenance and other expense due primarily to a
$1.8 million reduction in project development expenses compared to the prior-year period,
partially offset by higher pipeline operations costs associated with overhauls in 2008, and
    
    a $0.9 million decrease in interest expense resulting from higher interest costs
capitalized as a result of capital expenditures for Gulfstreams Phase III and Phase IV
expansion projects.
 Three Months EndedJune 30,Increase2008
    
    
    2007
    
    
    (Decrease)(in millions)Market HubOperating revenues
    
    $
    25.2
    
    
    $
    23.5
    
    
    $
    1.7Operating, maintenance and other expense
    
    
    6.2
    
    
    
    5.7
    
    
    
    0.5Depreciation and amortization
    
    
    2.6
    
    
    
    2.1
    
    
    
    0.5Interest income
    
    
    0.7
    
    
    
    
    
    
    
    0.7Interest expense
    
    
    0.3
    
    
    
    1.0
    
    
    
    (0.7
    )Net income
    
    $
    16.8
    
    
    $
    14.7
    
    
    $
    2.1Spectra Energy Partners 50% share
    
    $
    8.0
    
    
    $
    7.3
    
    
    $
    0.7
 Market Hub  Owned 50%
  
    
    a $1.7 million increase in revenues driven by an increase of $3.6 million in firm
storage revenues due to the completion of the Egan Cavern 4 expansion, partially offset by
a decrease in interruptible services of $1.9 million driven by market demand,
    
    a $0.7 million increase in interest income due to notes receivable with affiliates
issued in the third quarter of 2007, and
 21




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##### Table of Contents




    
    a $0.7 million decrease in interest expense primarily due to lower interest rates
associated with collateral held from affiliates, partially offset by
    
    a $0.5 million increase in operating, maintenance and other expense due primarily to
lower fuel recoveries 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 (Benefit).
 Six Months Ended June 30, 2008 Compared to June 30, 2007
 Operating
Revenues.
 Operating, Maintenance and Other Expense.
 
    
    a $4.7 million increase from lower net pipeline fuel recoveries recognized by East
Tennessee in the 2008 period compared to the 2007 period, and
    
    a $2.6 million increase in general and administrative costs as a result of new
corporate functions associated with managing Spectra Energy Partners post-IPO.
 Depreciation and Amortization
 Equity in Earnings of Unconsolidated Affiliates
  Six Months EndedJune 30,Increase2008
    
    
    2007
    
    
    (Decrease)(in millions)GulfstreamOperating revenues
    
    $
    92.4
    
    
    $
    84.2
    
    
    $
    8.2Operating, maintenance and other expense
    
    
    15.0
    
    
    
    11.4
    
    
    
    3.6Depreciation and amortization
    
    
    14.7
    
    
    
    15.2
    
    
    
    (0.5
    )Other income and expenses, net
    
    
    6.2
    
    
    
    1.2
    
    
    
    5.0Interest expense
    
    
    22.7
    
    
    
    24.2
    
    
    
    (1.5
    )Net income
    
    $
    46.2
    
    
    $
    34.6
    
    
    $
    11.6Spectra Energy Partners 24.5% share
    
    $
    11.8
    
    
    $
    8.5
    
    
    $
    3.3
 22




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##### Table of Contents



Gulfstream  Owned 24.5%
  
    
    an $8.2 million increase in revenues driven by a higher demand for interruptible and
short-term firm transportation from generation customers caused by warmer weather and the
favorable gas-to-fuel-oil price differential compared to the prior period,
    
    a $5.0 million increase in other income and expenses, net driven primarily by a $3.1
million increase in AFUDC as a result of capital expenditures for Gulfstreams
Phase III and Phase IV expansion projects, and a $1.0 million
increase related to the favorable resolution of a sales and use tax matter during the
second quarter of 2008, and
    
    a $1.5 million decrease in interest expense resulting from higher interest costs
capitalized as a result of capital expenditures for Gulfstreams Phase III and Phase IV
expansion projects, partially offset by
    
    a $3.6 million increase in operating, maintenance and other expense primarily resulting
from a $6.0 million increase in ad valorem tax expense due to the impact of a favorable
valuation in the first quarter of 2007 and $1.8 million of higher pipeline operations costs
associated with overhauls in 2008, partially offset by a $3.8 million reduction in project
development expenses compared to the prior-year period.
 Six Months EndedJune 30,Increase2008
    
    
    2007
    
    
    (Decrease)(in millions)Market HubOperating revenues
    
    $
    47.1
    
    
    $
    44.3
    
    
    $
    2.8Operating, maintenance and other expense
    
    
    10.4
    
    
    
    9.2
    
    
    
    1.2Depreciation and amortization
    
    
    5.2
    
    
    
    4.2
    
    
    
    1.0Other income and expenses, net
    
    
    
    
    
    
    0.2
    
    
    
    (0.2
    )Interest income
    
    
    1.7
    
    
    
    
    
    
    
    1.7Interest expense
    
    
    0.7
    
    
    
    2.0
    
    
    
    (1.3
    )Net income
    
    $
    32.5
    
    
    $
    29.1
    
    
    $
    3.4Spectra Energy Partners 50% share
    
    $
    15.8
    
    
    $
    14.5
    
    
    $
    1.3
 Market Hub  Owned 50%
  
    
    a $2.8 million increase in revenues driven by an increase of $4.2 million in firm
storage revenues due to the completion of the Egan Cavern 4 expansion, partially offset by
a decrease in interruptible services of $1.5 million driven by
market demand,
    
    a $1.7 million increase in interest income due to notes receivable with affiliates
issued in the third quarter of 2007, and
    
    a $1.3 million decrease in interest expense primarily due to lower interest rates
associated with collateral held from affiliates, partially offset by
    
    a $1.2 million increase in operating, maintenance and other expense resulting primarily
from $0.7 million of lower fuel recoveries and a $0.4 million increase in ad valorem tax
expense primarily due to a reduction in the first quarter 2007 related to a favorable
valuation, and
    
    a $1.0 million increase in depreciation expense primarily due to the Egan expansion.
 Interest
Income.
 Interest Expense.
 Income
Tax Expense (Benefit).
 23




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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
      24




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##### Table of Contents



Spectra Energy Partners  Reconciliation of Non-GAAP Adjusted EBITDA and Cash Available for Distribution
 Three Months
    
    
    Six MonthsEnded June 30,
    
    

Ended June 30,2008
    
    

2007
    
    
    2008
    
    
    2007(in millions)Net income
    
    $
    27.5
    
    
    $
    23.9
    
    
    $
    51.6
    
    
    $
    45.0Add:Interest expense
    
    
    3.8
    
    
    
    2.1
    
    
    
    8.8
    
    
    
    4.3Income tax expense (benefit)
    
    
    (2.2
    )
    
    
    6.2
    
    
    
    (1.4
    )
    
    
    11.4Depreciation and amortization
    
    
    6.5
    
    
    
    5.6
    
    
    
    13.1
    
    
    
    11.2Less:Interest income
    
    
    0.8
    
    
    
    
    
    
    
    2.3
    
    
    
    Equity in earnings of Gulfstream
    
    
    7.0
    
    
    
    4.3
    
    
    
    11.8
    
    
    
    8.5Equity in earnings of Market Hub
    
    
    8.0
    
    
    
    7.3
    
    
    
    15.8
    
    
    
    14.5Other income, net
    
    
    0.3
    
    
    
    0.4
    
    
    
    0.4
    
    
    
    0.4Adjusted EBITDA
    
    
    19.5
    
    
    
    25.8
    
    
    
    41.8
    
    
    
    48.5Add:Cash Available for Distribution from Gulfstream
    
    
    4.4
    
    
    
    3.0
    
    
    
    12.7
    
    
    
    11.8Cash Available for Distribution from Market Hub
    
    
    9.4
    
    
    
    8.2
    
    
    
    18.1
    
    
    
    16.3Less:Cash paid for interest expense, net
    
    
    5.5
    
    
    
    4.2
    
    
    
    7.2
    
    
    
    4.2Maintenance capital expenditures
    
    
    6.0
    
    
    
    5.4
    
    
    
    7.1
    
    
    
    6.3Cash Available for Distribution
    
    $
    21.8
    
    
    $
    27.4
    
    
    $
    58.3
    
    
    $
    66.1
 Spectra Energy Partners
Reconciliation of Non-GAAP Adjusted EBITDA and Cash Available for Distribution
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in millions)Net cash provided by operating activities
    
    $
    36.0
    
    
    $
    15.9
    
    
    $
    74.0
    
    
    $
    37.9Interest income
    
    
    (0.8
    )
    
    
    
    
    
    
    (2.3
    )
    
    
    Interest expense
    
    
    3.8
    
    
    
    2.1
    
    
    
    8.8
    
    
    
    4.3Income tax expense  current
    
    
    0.1
    
    
    
    1.5
    
    
    
    0.7
    
    
    
    5.2Distributions received from Gulfstream and
Market Hub
    
    
    (15.2
    )
    
    
    
    
    
    
    (35.8
    )
    
    
    (3.7
    )Changes in operating working capital and other
    
    
    (4.4
    )
    
    
    6.3
    
    
    
    (3.6
    )
    
    
    4.8Adjusted EBITDA
    
    
    19.5
    
    
    
    25.8
    
    
    
    41.8
    
    
    
    48.5Add:Cash Available for Distribution from Gulfstream
    
    
    4.4
    
    
    
    3.0
    
    
    
    12.7
    
    
    
    11.8Cash Available for Distribution from Market Hub
    
    
    9.4
    
    
    
    8.2
    
    
    
    18.1
    
    
    
    16.3Less:Cash paid for interest expense, net
    
    
    5.5
    
    
    
    4.2
    
    
    
    7.2
    
    
    
    4.2Maintenance capital expenditures
    
    
    6.0
    
    
    
    5.4
    
    
    
    7.1
    
    
    
    6.3Cash Available for Distribution
    
    $
    21.8
    
    
    $
    27.4
    
    
    $
    58.3
    
    
    $
    66.1
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##### Table of Contents



Gulfstream
Reconciliation of Non-GAAP Adjusted EBITDA and Cash Available for Distribution
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in millions)Net income
    
    $
    27.3
    
    
    $
    17.5
    
    
    $
    46.2
    
    
    $
    34.6Add:Interest expense
    
    
    11.2
    
    
    
    12.1
    
    
    
    22.7
    
    
    
    24.2Depreciation and amortization
    
    
    7.3
    
    
    
    7.6
    
    
    
    14.7
    
    
    
    15.2Less:Other income, net
    
    
    2.7
    
    
    
    0.7
    
    
    
    6.2
    
    
    
    1.2Adjusted EBITDA  100%
    
    
    43.1
    
    
    
    36.5
    
    
    
    77.4
    
    
    
    72.8Less:Cash paid for interest expense, net
    
    
    24.7
    
    
    
    24.3
    
    
    
    24.7
    
    
    
    24.3Maintenance capital expenditures
    
    
    0.3
    
    
    
    (0.1
    )
    
    
    0.7
    
    
    
    0.2Cash Available for Distribution  100%
    
    $
    18.1
    
    
    $
    12.3
    
    
    $
    52.0
    
    
    $
    48.3Adjusted EBITDA  24.5%
    
    $
    10.6
    
    
    $
    8.9
    
    
    $
    19.0
    
    
    $
    17.8Cash Available for Distribution  24.5%
    
    
    4.4
    
    
    
    3.0
    
    
    
    12.7
    
    
    
    11.8
 Market Hub
Reconciliation of Non-GAAP Adjusted EBITDA and Cash Available for Distribution
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(in millions)Net income
    
    $
    16.8
    
    
    $
    14.7
    
    
    $
    32.5
    
    
    $
    29.1Add:Interest expense
    
    
    0.3
    
    
    
    1.0
    
    
    
    0.7
    
    
    
    2.0Depreciation and amortization
    
    
    2.6
    
    
    
    2.1
    
    
    
    5.2
    
    
    
    4.2Less:Interest income
    
    
    0.7
    
    
    
    
    
    
    
    1.7
    
    
    
    Other income, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2Adjusted EBITDA  100%
    
    
    19.0
    
    
    
    17.8
    
    
    
    36.7
    
    
    
    35.1Less:Maintenance capital expenditures
    
    
    0.2
    
    
    
    1.4
    
    
    
    0.5
    
    
    
    2.6Cash Available for Distribution  100%
    
    $
    18.8
    
    
    $
    16.4
    
    
    $
    36.2
    
    
    $
    32.5Adjusted EBITDA  50%
    
    $
    9.5
    
    
    $
    8.9
    
    
    $
    18.4
    
    
    $
    17.6Cash Available for Distribution  50%
    
    
    9.4
    
    
    
    8.2
    
    
    
    18.1
    
    
    
    16.3
 26




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 Operating Cash Flows
   Investing Cash Flows
  
    
    net proceeds totaling $59.7 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;
    
    a $38.5 million increase in investment expenditures representing capital contributions to
Gulfstream and Market Hub in 2008 used to fund their expansion projects,
    
    the $4.7 million cash portion of the acquisition of Saltville in the 2008 second quarter,
and
    
    proceeds from sales of assets in 2007 of $8.3 million.
    Financing Cash Flows
   Available Credit Facility and Restrictive Debt Covenants.
 Cash Distributions.
 27




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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.
  28




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##### Table of Contents



Item 6. Exhibits.
  ExhibitNumber* 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 
 SIGNATURES
  SPECTRA ENERGY PARTNERS, LPBy:
    
    Spectra Energy Partners (DE) GP, LP,its general partnerBy:
    
    Spectra Energy Partners GP, LLC,its general partnerDate: August 12, 2008
    
    /s/ C. Gregory HarperC. Gregory HarperPresident and Chief Executive OfficerSpectra Energy Partners GP, LLCDate: August 12, 2008
    
    /s/ Laura Buss SayavedraLaura Buss SayavedraVice President and Chief Financial OfficerSpectra Energy Partners GP, LLC
 29




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##### Table of Contents



ExhibitNumber* 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