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SEC Filings
10-Q
NUSTAR ENERGY L.P. filed this Form 10-Q on 05/15/2002
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Distributions
Valero L.P.'s partnership  agreement,  as amended, sets forth the calculation to
be used to  determine  the amount and  priority of cash  distributions  that the
common unitholders,  subordinated  unitholders and general partner will receive.
During the subordination  period,  the holders of Valero L.P.'s common units are
entitled to receive each quarter a minimum  quarterly  distribution of $0.60 per
unit ($2.40  annualized)  prior to any distribution of available cash to holders
of Valero  L.P.'s  subordinated  units.  The  subordination  period  is  defined
generally as the period that will end on the first day of any quarter  beginning
after  December 31, 2005 if (1) the  Partnership  has  distributed  at least the
minimum quarterly  distribution on all outstanding units with respect to each of
the  immediately  preceding  three  consecutive,   non-overlapping  four-quarter
periods and (2) the Partnership's  adjusted operating surplus, as defined in the
partnership  agreement,  during such  periods  equals or exceeds the amount that
would have been  sufficient to enable the  Partnership to distribute the minimum
quarterly distribution on all outstanding units on a fully diluted basis and the
related distribution on the 2% general partner interest during those periods.

In  addition,  all of the  subordinated  units may convert to common  units on a
one-for-one  basis on the first day following the record date for  distributions
for the quarter ending December 31, 2005, if the Partnership meets the tests set
forth in the partnership agreement. If the subordination period ends, the rights
of the  holders  of  subordinated  units will no longer be  subordinated  to the
rights  of the  holders  of  common  units  and the  subordinated  units  may be
converted into common units.

On February 14, 2002, the  Partnership  paid a distribution of $0.60 per unit or
$11,552,000  to  unitholders  representing  the  distribution  of available cash
generated in the fourth quarter of 2001. The general partner's cash distribution
applicable to the fourth quarter of 2001 was $236,000.

On April 19, 2002, the Partnership  declared a distribution of $0.65 per unit or
$12,515,000,   payable  on  May  15,  2002,  to  unitholders   representing  the
distribution  of  available  cash  generated in the first  quarter of 2002.  The
general partner's cash distribution  applicable to the first quarter of 2002 was
$343,000, of which $107,000 represented an incentive distribution.

Capital Requirements
The petroleum  pipeline  industry is  capital-intensive,  requiring  significant
investments to upgrade or enhance existing  operations and to meet environmental
regulations. The Partnership's capital expenditures consist primarily of:
o    maintenance  capital  expenditures,  such as  those  required  to  maintain
     equipment reliability and safety and to address environmental  regulations;
     and
o    expansion  capital  expenditures,  such as  those  to  expand  and  upgrade
     pipeline  capacity and to construct  new  pipelines,  terminals and storage
     facilities to meet Valero Energy's needs.  In addition,  expansion  capital
     expenditures will include  acquisitions of pipelines,  terminals or storage
     assets owned by Valero Energy or other parties.
The Partnership  expects to fund its capital  expenditures from cash provided by
operations and, to the extent  necessary,  from proceeds of borrowings under the
revolving credit facility or debt and equity offerings.

During  the  three  months  ended  March  31,  2002,  the  Partnership  incurred
maintenance  capital  expenditures  of  $789,000  primarily  related to tank and
automation  upgrades at the refined product  terminals and cathodic  (corrosion)
protection  and  automation  upgrades  for both  refined  product  and crude oil
pipelines.  For the remainder of 2002,  the  Partnership  anticipates  incurring
approximately  $3,000,000 of additional  maintenance  capital  expenditures  for
various automation upgrades and cathodic protection.


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