HOUSTON, TX–(Marketwired – Jan 27, 2017) – Enbridge Energy Partners, L.P. (NYSE: EEP) (“EEP” or the “Partnership”) announced today that the Board of Directors of the delegate of the Partnership’s general partner has declared a quarterly cash distribution of $0.583 per unit, or $2.332 per unit on an annualized basis, on all of the Partnership’s outstanding units for the quarter ended December 31, 2016. The approved distribution remains unchanged from the previous quarter. The distribution is payable on February 14, 2017, to unitholders of record at the close of business on February 7, 2017.
Following a review of EEP’s near-term financial outlook, the Partnership expects to meet its 2016 adjusted EBITDA and Distributable Cash Flow (DCF) guidance of $1.8 – $1.9 billion and $860 – $920 million, respectively. The full 2016 results are expected to be reported on February 16, 2017.
Management expects 2017 adjusted EBITDA and DCF to be $1.7 – $1.8 billion and $750 – $800 million, respectively. The Partnership’s expected financial performance for 2017 reflects further weakening of its natural gas gathering and processing business due to lower realized commodity prices and volume flows. Also, a reduction in drilling activity in the Bakken region has resulted in reduced revenue projections from portions of EEP’s existing North Dakota Liquids assets and in the previously announced deferral of the Sandpiper Pipeline.
As the Partnership and its sponsor, Enbridge Inc. (“ENB” or “Enbridge”), have previously announced, a strategic review of EEP is ongoing with the objectives of improving EEP’s financial position and future outlook. The review is expected to continue into the second quarter of 2017. Three initial strengthening actions are being undertaken now which together alleviate short-term capital expenditure requirements and enhance EEP’s cash flows. These actions are reflected in the Partnership’s 2017 financial outlook.
First, a committee of the independent directors of the delegate of EEP’s general partner (the “Conflicts Committee”), after consultation with its independent legal and financial advisors, has recommended, and the delegate’s Board of Directors (the “Board of Directors”) has approved, a joint funding agreement with Enbridge Energy Company, Inc. (“EECI”), an indirect wholly-owned subsidiary of ENB, for the U.S. portion of the Line 3 Replacement Program (“L3R Program”). Under the terms of the agreement, EECI will fund 99 percent and EEP will fund 1 percent of the capital cost of the U.S. L3R Program, with an option for EEP to increase its interest up to 40 percent in the U.S. portion at book value at any time up to four years after the project goes into service. Through this arrangement, EEP will maintain a strong cash-generating significant opportunity to invest in a strategic growth project, while obtaining relief from funding requirements during the construction period. EECI will pay EEP approximately $450 million for its 99 percent interest in the project, including EEP’s share of the construction costs to date. The U.S. portion of the L3R Program is currently awaiting completion of the Minnesota Public Utilities Commission regulatory review process and is expected to go into service in 2019.
Second, EEP expects to utilize the funds received from the L3R joint funding agreement to exercise its option under the Eastern Access joint funding agreement to acquire an additional 15 percent interest in the Eastern Access project, which is now in service, at its book value of approximately $360 million. The additional interest is expected to generate incremental EBITDA of approximately $50 million per annum. This long-life stable cash flow generating asset is being acquired at an attractive valuation and is highly complementary to EEP’s existing core liquids pipeline business.
Third, Midcoast Energy Partners, L.P. (NYSE: MEP) has entered into a definitive merger agreement with EECI whereby EECI will acquire, for cash, all of the outstanding publicly held common units of MEP at a price of $8 per common unit for an aggregate transaction value of $170.2 million. The public interest to be acquired by EECI represents an approximate 25 percent effective interest in EEP’s natural gas gathering and processing business. This action enables EEP to retain more of its cash flow, reduces its costs associated with an additional public company and simplifies its corporate structure. In connection with the execution of the Merger Agreement, EEP has entered into a support agreement with MEP and EECI whereby EEP has agreed, in its capacity as a holder of MEP units, to vote its units in favor of the merger agreement and the transactions contemplated by the merger agreement.
EEP’s strategic review is ongoing and considering: (i) the sustainability of EEP’s current level of distributions to unitholders, (ii) further cost efficiency measures, (iii) the potential extension of existing supportive actions by its sponsor, ENB, (iv) the sale of a portion or all of its remaining interests in the natural gas gathering and processing assets, including to ENB, and; (v) potential further restructuring of the general partner incentive distribution rights. Our sponsor ENB has indicated that at this time it is not planning a buy-in of EEP and that EEP is expected to remain a publicly-traded limited partnership subsequent to the strategic review and resulting actions.
At the same time, EEP will work with ENB to finalize the optimal joint funding arrangement for the proposed $1.5 billion Bakken Pipeline System investment. In prior joint funding arrangements, EEP has retained 25 to 33 percent interests in large greenfield development projects being undertaken by the Enbridge group with options to acquire additional interests.
Mr. Mark Maki, President for EEP, commented on these developments, “EEP’s current distribution level was established at a time when a significant portion of the distribution was supported by cash flow from the natural gas business. Despite significant progress on the cost structure, our natural gas gathering and processing business has been impacted by a continued cyclical downturn. Therefore, we are taking necessary actions to support the Partnership’s near-term financial position and evaluate further strengthening measures through our strategic review.”
Mr. Maki further noted, “Our Liquids Pipeline business on the whole is performing well financially and operationally. In particular, the Lakehead volumetric performance remains at record levels. EEP unitholders will continue deriving value from these unique and critical infrastructure assets in the short-term and long-term.”
ENBRIDGE ENERGY MANAGEMENT DISTRIBUTION
Enbridge Energy Management, L.L.C. (NYSE: EEQ) (“Enbridge Management”) declared a distribution of $0.583 per share payable on February 14, 2017 to shareholders of record on February 7, 2017. The distribution will be paid in the form of additional shares of Enbridge Management valued at the average closing price of the shares for the 10 trading days prior to the ex-dividend date on February 3, 2017. Enbridge Management’s sole asset is its approximate 17 percent limited partner interest in EEP. Enbridge Management’s results of operations, financial condition and cash flows depend on the results of operations, financial condition and cash flows of EEP.