Investment in ProLiance Holdings, LLC

The Company has an investment in ProLiance Holdings, LLC (ProLiance), an affiliate of the Company and Citizens Energy Group (Citizens). On June 18, 2013, ProLiance exited the natural gas marketing business through the disposition of certain of the net assets, along with the long-term pipeline and storage commitments, of its energy marketing business, ProLiance Energy, LLC (ProLiance Energy), to a subsidiary of Energy Transfer Partners, ETC Marketing, Ltd (ETC). Other minor operating results of the remaining ProLiance investments are reflected in Other Businesses. The Company's remaining investment in ProLiance relates primarily to an investment in LA Storage, LLC (LA Storage). Consistent with its ownership percentage, the Company is allocated 61 percent of ProLiance’s profits and losses; however, governance and voting rights remain at 50 percent for each member, and therefore, the Company accounts for its investment in ProLiance using the equity method of accounting.

As a result of ProLiance exiting the natural gas marketing business on June 18, 2013, the Company recorded its share of the loss on the disposition, termination of long-term pipeline and storage commitments, and related transaction and other costs totaling $43.6 million pre-tax, or $26.8 million net of tax, during the second quarter of 2013. At the time of sale, ProLiance Holdings funded an estimated equity shortfall at ProLiance Energy of $16.6 million. To fund this estimated shortfall, the Company issued a note to ProLiance Holdings for its 61 percent ownership share of the $16.6 million shortfall, or $10.1 million, which was utilized by ProLiance Holdings to invest additional equity in ProLiance Energy. This interest-bearing note is classified as Other nonutility investments in the Consolidated Balance Sheets.

The Company's remaining investment in ProLiance at December 31, 2014, shown at its 61 percent ownership share, is as follows and reflects that it relates primarily to ProLiance's investment in LA Storage, LLC (LA Storage) discussed below.



	As of
	December 31,
(In millions)	2014
Cash	$	4.8
Investment in LA Storage	21.6
Other midstream asset investment	4.2
Total investment in ProLiance	$	30.6
Included in:
Investments in unconsolidated affiliates	20.5
Other nonutility investments	10.1

LA Storage, LLC Storage Asset Investment

ProLiance Transportation and Storage, LLC (PT&S), a subsidiary of ProLiance, and Sempra Energy International (SEI), a subsidiary of Sempra Energy (SE), through a joint venture, have a 100 percent interest in a development project for salt-cavern natural gas storage facilities known as LA Storage. PT&S is the minority member with a 25 percent interest, which it accounts for using the equity method. The project, which includes a pipeline system, is expected to include 17 Bcf of capacity, and has the potential for further expansion. This pipeline system is currently connected with several interstate pipelines, including the Cameron Interstate Pipeline operated by Sempra Pipelines & Storage, and will connect area liquefied natural gas regasification terminals to an interstate natural gas transmission system and storage facilities.

Approximately 12 Bcf of the storage, which comprises three of the four FERC certified caverns, is fully tested but additional work is required to connect the caverns to the pipeline system. The timing and extent of development of these caverns is dependent on market conditions, including pricing, need for storage capacity, and development of the liquefied natural gas market, among other factors. At December 31, 2014, ProLiance's investment in the joint venture was $35.4 million.

The joint venture received a demand for arbitration from Williams Midstream Natural Gas Liquids, Inc. (Williams) in February 2011 related to a sublease agreement. Williams alleges that the joint venture was negligent in its attempt to convert certain salt caverns to natural gas storage and seeks damages of $56.7 million. The joint venture intends to vigorously defend itself and has asserted counterclaims substantially in excess of the amounts asserted by Williams. As such, as of December 31, 2014, ProLiance has no material reserve recorded related to this matter and this litigation has not materially impacted ProLiance's results of operations or statement of financial position.

Transactions with ProLiance

Purchases from ProLiance for resale and for injections into storage for the years ended December 31, 2013, and 2012, totaled $200.5 million, and $274.5 million, respectively. The Company did not have any purchases from ProLiance for the year ended December 31, 2014. The Company purchases in 2013 and 2012 from ProLiance all occurred prior to June 18, 2013 when ProLiance exited the natural gas marketing business.