Enbridge Energy Partners, L.P. Announces Anticipated Joint Funding Arrangement Terms for Bakken Pipeline System Investment and Long-Term Deferral of Sandpiper Project

HOUSTON, TX–(Marketwired – Sep 1, 2016) –  Enbridge Energy Partners, L.P. (NYSE: EEP)

HIGHLIGHTS

• Enbridge Energy Partners, L.P. (“EEP” or the “Partnership”) today announced that its affiliate will withdraw regulatory applications pending with the Minnesota Public Utilities Commission associated with the Sandpiper project.
• EEP plans to defer the implementation of the Sandpiper project beyond EEP’s current five-year planning horizon.
• EEP has negotiated a tentative joint funding arrangement with its general partner, Enbridge Energy Company, Inc. (“EECI”), through which an equity investment in the Bakken Pipeline will be jointly funded, subject to certain conditions.
  • Investment in the Bakken Pipeline System would be funded 25 percent by EEP and 75 percent by EECI.
  • EEP would issue a new class of limited partner units to EECI to substantially fund its 25 percent share, requiring no capital market transactions by EEP.
  • Joint funding arrangement would provide for a call option for EEP to upsize its interest in the investment by 15 percent, at book value.

Enbridge Energy Partners, L.P. (NYSE: EEP) today announced that its affiliate will be withdrawing regulatory applications pending with the Minnesota Public Utilities Commission for the Sandpiper Pipeline Project (“Sandpiper”). EEP has completed a review of Sandpiper and concluded that the project should be delayed until such time as crude oil production in North Dakota recovers sufficiently to support development of new pipeline capacity. Based on updated projections, EEP believes that new pipeline capacity will not likely be needed until beyond the Partnership’s current five-year planning horizon.

An independent special committee of the board of directors of the delegate of EEP’s general partner (the “Special Committee”) and EECI, a wholly owned subsidiary of Enbridge Inc. (“Enbridge”), have also reached a tentative agreement on the terms of an arrangement through which each party would fund the acquisition of and participate in the returns generated by an effective 27.6 percent interest in the Bakken Pipeline System (“Bakken Pipeline” or the “System”), a transaction previously announced on August 2, 2016. It is anticipated that the investment in the Bakken Pipeline will be jointly funded 75 percent by Enbridge, through EECI, and 25 percent by EEP. EEP expects to fund its 25 percent interest through a combination of debt and equity. EEP would fund the equity portion of its investment through the issuance of a new class of limited partner units, Class F units, to EECI, and the debt portion through borrowing under its credit facility. The expected funding arrangements with EECI would result in the acquisition having a minimal impact on EEP’s liquidity and no capital market transactions by EEP for funding. As part of the proposed joint funding arrangement, EEP is expected to have an option until December 31, 2019 to acquire an additional 15 percent interest from EECI in the investment at a total price equal to the pro rata portion of the capital contributed by EECI for its investment prior to the exercise date. The joint funding arrangement is subject to satisfaction of the closing conditions of the Bakken Pipeline acquisition by the System’s owners, the Special Committee’s recommendation, and approval of the Board of Directors.

The System consists of the Dakota Access Pipeline (“DAPL”) and the Energy Transfer Crude Oil Pipeline (“ETCO”) projects. EEP’s interest in the System will be acquired through an indirect investment in a joint venture (“MarEn”) with Marathon Petroleum. 

“This acquisition of an interest in the Bakken Pipeline represents another important step in expanding our market access strategy”, said Mark Maki, President for the Partnership. “The investment offers strong risk-adjusted returns and includes a significant level of take-or-pay contracts with high credit quality counterparties. The investment is expected to be immediately accretive to EEP’s distributable cash flow when the System is ready for service, which is expected in late 2016. The System also has low-cost expansion potential, offering further financial upside. Joint funding this investment with our sponsor enhances the Partnership’s financing flexibility and improves EEP’s credit profile through enhanced cash flow in 2017. In addition, the acquisition bolsters the prospective asset drop-down potential from our sponsor longer term.”

The anticipated joint funding arrangement provides for funding to be accomplished through EEP’s investment subsidiary, Enbridge Holdings (DakTex) L.L.C. (“Enbridge DakTex”), which is a 75 percent equity interest owner of MarEn. Enbridge DakTex expects to issue 75 percent of its equity interests to EECI for a purchase price of $1.125 billion, and EEP expects to contribute $375 million to Enbridge DakTex with respect to its resulting 25 percent equity interest in Enbridge DakTex. EEP expects to fund its $375 million contribution through the sale of additional Class F limited partnership interests to EECI and a draw on its credit facility. The Class F units would pay distributions in-kind through the period ending December 31, 2018 and then would be cash paying thereafter.

MarEn will own a 49 percent interest in an affiliate of Energy Transfer Partners, L.P. and Sunoco Logistics Partners L.P., which in turn owns 75 percent of the Bakken Pipeline. The closing of the Bakken Pipeline acquisition is anticipated to occur around the end of the third quarter of 2016.

About Enbridge Energy Partners, L.P.
Enbridge Energy Partners, L.P. owns and operates a diversified portfolio of crude oil and, through its interests in Midcoast Energy Partners, L.P. (“Midcoast Partners”) (NYSE: MEP), natural gas transportation systems in the United States. Its principal crude oil system is the largest pipeline transporter of growing oil production from western Canada and the North Dakota Bakken formation. The system’s deliveries to refining centers and connected carriers in the United States account for approximately 23 percent of total U.S. oil imports. Midcoast Partners’ natural gas gathering, treating, processing and transmission assets, which are principally located onshore in the active U.S. Mid-Continent and Gulf Coast areas, deliver approximately 2.0 billion cubic feet of natural gas daily.

Forward-Looking Statements
This news release includes forward-looking statements and projections, which are statements that do not relate strictly to historical or current facts. These statements frequently use the following words, variations thereon or comparable terminology: “anticipate,” “believe,” “consider,” “continue,” “could,” “estimate,” “expect,” “explore,” “evaluate,” “forecast,” “intend,” “may,” “opportunity,” “plan,” “position,” “projection,” “should,” “strategy,” “target,” “will,” “would” and similar words. These statements include those related to the completion and financing of the transactions described in this press release, as well as all matters that are not historical facts. Although EEP believes that such forward-looking statements are reasonable based on currently available information, such statements involve risks, uncertainties and assumptions and are not guarantees of performance. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond EEP’s ability to control or predict. Specific factors that could cause actual results to differ from those in the forward-looking statements include: (1) changes in the demand for or the supply of, forecast data for, and price trends related to crude oil, liquid petroleum, natural gas and NGLs, including the rate of development of the Alberta Oil Sands; (2) the ability of EEP or its joint venture partners, as applicable, to successfully complete and finance projects, including the Bakken Pipeline transaction, or drop-down opportunities; (3) the effects of competition, in particular, by other pipeline systems; (4) shut-downs or cutbacks at EEP’s facilities or refineries, petrochemical plants, utilities or other businesses for which EEP transports products or to whom EEP sells products; (5) hazards and operating risks that may not be covered fully by insurance, including those related to Line 6B and any additional fines and penalties assessed in connection with the crude oil release on that line; (6) costs in connection with complying with the settlement consent decree related to Line 6B and Line 6A, which is still subject to court approval, and/or the failure to receive court approval of, or material modifications to, such decree; (7) changes in or challenges to EEP’s tariff rates; (8) changes in laws or regulations to which EEP is subject, including compliance with environmental and operational safety regulations that may increase costs of system integrity testing and maintenance; and (9) permitting at federal, state and local levels in regards to the construction of new assets.

Except to the extent required by law, we assume no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Reference should also be made to EEP’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including its Annual Report on Form 10-K for the year ended December 31, 2015 and any subsequently filed Quarterly Report on Form 10-Q for additional factors that may affect results. These filings are available to the public over the Internet at the SEC’s web site (www.sec.gov) and at EEP’s web site.