HOUSTON, May 9, 2018 /PRNewswire/ - Enbridge Energy
Partners, L.P. (NYSE: EEP) (EEP or the Partnership) today reported
first quarter 2018 financial results and provided a quarterly
business update. EEP reported net income of $172 million, including net income from
controlling interests of $74 million,
for the first quarter ended March 31,
2018, with earnings per limited partner unit of $0.15. The first quarter results included
non-recurring special items of $44
million, which increased earnings per limited partner unit
by $0.10.
FIRST QUARTER HIGHLIGHTS
- Solid quarter supported by strong Lakehead and North Dakota
System volumes
- Line 3 Replacement Project construction well underway in
Canada and complete in
Wisconsin; Minnesota Public
Utilities Commission (MPUC) permit decisions expected in the second
quarter of 2018; Administrative Law Judge (ALJ) confirms need for
project but recommends alternative route
- Announced quarterly distribution of $0.35 per unit, or $1.40 on an annualized basis, for the quarter
ended March 31, 2018
First quarter 2018 cash provided by operating activities of
$322 million, compared with
$234 million in the first quarter
2017. Distributable cash flow (DCF) was $212
million, compared with $198
million in the prior year quarter. EEP's coverage ratio was
1.30x as declared in the first quarter 2018 and 1.24x as declared
in the first quarter 2017.
For the quarter, adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) were $430 million, compared with $414 million in the prior year quarter. Adjusted
net income from controlling interests was $118 million for the quarter, or $0.25 earnings per limited partner unit, compared
with $69 million, or $0.16 earnings per limited partner unit in the
prior year quarter. Net income from controlling interests was
$74 million for the quarter, or
$0.15 earnings per limited partner
unit, compared with $65 million, or
$0.15 earnings per limited partner
unit in the prior year quarter.
PRESIDENT'S COMMENT
"First quarter 2018 results are solid and in line with our
expectations," commented Mark Maki,
President of the Partnership. "Volumes remained strong on both the
Lakehead and North Dakota Systems as we continue to focus on
maximizing throughput and operating efficiencies as a means to
enhance unitholder value.
"Turning to significant events since last quarter, the
Partnership has been materially affected by the complete shift in
the Federal Energy Regulatory Commission's (FERC) long-standing
policy on income tax allowances for Master Limited Partnerships
(MLPs). The Partnership has taken action to request reconsideration
by FERC on this new policy with an objective to see the restoration
of the income tax allowance for MLPs. At the same time, we are
evaluating options within our control to mitigate the negative
impact of the policy change for EEP. "
FERC ACTIONS
In March, the FERC changed its long-standing policy on the
treatment of income tax amounts included in the rates of pipelines
and other entities subject to cost of service rate regulation
within a MLP. FERC revised a policy in place since 2005 to no
longer permit entities organized as MLPs to recover an income tax
allowance in their cost of service rates. The change in FERC's
policy has had a negative impact on the MLP sector. EEP, along with
other MLPs and trade associations, filed comments to request
clarification, reconsideration and rehearing of FERC's Revised
Policy Statement in April and expects to file comments in response
to the Notice of Inquiry later this month.
As previously disclosed, the 2018 financial impact to EEP from
the combination of US Tax Reform and FERC policy actions is
expected to be a $125 million
reduction to distributable cash flow (DCF), net of noncontrolling
interests, and exclusive of a payback of accumulated deferred
income taxes. While many uncertainties remain in regard to the
implementation of the recent FERC actions, we continue to evaluate
options to mitigate the negative impact of this policy change.
PROJECT EXECUTION
The U.S. Line 3 Replacement Program (U.S. L3R Program), along
with the Canadian Line 3 Replacement Program, will support the
safety and operational reliability of the mainline system, enhance
system flexibility, and allow EEP to optimize throughput on the
mainline.
Construction on the Wisconsin
portion of the U.S. L3R Program commenced in late June 2017, was mechanically completed in
February 2018, and is expected to be
commissioned in May 2018.
On April 23, 2018, an ALJ issued
Findings of Fact, Conclusions of Law and Recommendation (the ALJ
Report) to the MPUC in connection with the Partnership's
applications for a Certificate and Route Permit. The ALJ
recommended that the MPUC grant the Partnership's application for a
Certificate, but only if the MPUC also selects a route that would
require in-trench replacement of the existing Line 3, which is not
the Partnership's preferred route. The ALJ's recommendation is not
binding on the MPUC. The MPUC is expected to issue a ruling in the
Certificate and Route Permit dockets late in the second quarter of
2018. EEP intends to continue its efforts to secure MPUC approval
for its preferred route. On May 9,
2018, EEP filed its exceptions to the ALJ Report with the
MPUC. EEP set out proposed revisions to the ALJ's summary of the
evidentiary record, as well as its points of disagreement with the
ALJ's conclusions and route recommendation.
SEGMENT RESULTS
For purposes of evaluating performance of the Partnership, the
Partnership makes adjustments for unusual, non-recurring or
non-operating factors to reported earnings, segment EBITDA, and
cash flow provided by operating activities, as it allows Management
and its investors to more accurately compare the Partnership's
performance across periods and the factors being adjusted for are
not indicative of the underlying performance and cash flows of the
business. Schedules reconciling adjusted EBITDA, adjusted EBITDA by
segment, adjusted earnings, adjusted earnings per common share and
distributable cash flow to their closest GAAP equivalent are
available as an Appendix to this news release.
Liquids
First quarter adjusted EBITDA increased by $36 million over the comparable period in 2017
primarily due to the following items:
- Higher EBITDA from the Lakehead System resulting from the
timing of operating expenses, and the net effect of recognizing the
Return on Equity (ROE) component of revenue under-collection in
2017, partially offset by the lower tax rate pursuant to United
States Tax Reform, which decreased revenue collected in our
rates
- EBITDA from the Partnership's interest in the Bakken Pipeline
System, which was placed into service in June 2017
- Higher EBITDA from the Mid-Continent System resulting from
higher storage revenue and lower operating costs at the Cushing
Storage Terminal, partially offset by lower transportation revenues
due to the sale of the Ozark Pipeline on March 1, 2017
First quarter adjusted EBITDA excludes a $35 million special item in relation to an
impairment charge on the Partnership portion of Line 10, a
component of the Lakehead System located in the state of
New York, resulting from the
classification as held for sale.
Other
Other primarily reflects the results of the Midcoast gas
gathering and processing assets. This business was sold in the
second quarter of 2017. Remaining amounts in Other represent
unallocated corporate costs.
CONFERENCE CALL DETAILS
The Partnership will host a joint conference call and webcast at
9:00 a.m. Eastern Time (7 a.m. Mountain Time) on May 10, 2018, with Enbridge Inc. (TSX: ENB)
(NYSE: ENB), Enbridge Income Fund Holdings Inc. (TSX: ENF), and
Spectra Energy Partners, LP (NYSE: SEP) to provide an enterprise
wide business update and review 2018 first quarter results.
Analysts, members of the media and other interested parties can
access the call toll free at (877) 930-8043 or outside North America at (253) 336-7522 using the
access code of 4849907#. The call will be audio webcast live at
https://edge.media-server.com/m6/p/6pm7mqpf. A webcast replay and
podcast will be available approximately two hours after the
conclusion of the event and a transcript will be posted to the
website within approximately 24 hours. An audio replay will be
available for seven days after the call toll free at (855) 859-2056
or outside North America at (404)
537-3406 using the replay passcode 4849907#.
The conference call format will include prepared remarks from
the executive team followed by a question and answer session for
the analyst and investor community only. Enbridge's media and
investor relations teams will be available after the call for any
additional questions.
FORWARD-LOOKING STATEMENTS
This news release includes forward-looking statements, which
are statements that frequently use words such as "anticipate,"
"believe," "consider," "continue," "could," "estimate," "evaluate,"
"expect," "explore," "forecast," "intend," "may," "opportunity,"
"plan," "position," "projection," "should," "strategy," "target,"
"will" and similar words. Although the Partnership 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. Any forward-looking statement made by the Partnership
in this release speaks only as of the date on which it is made, and
the Partnership undertakes no obligation to publicly update any
forward-looking statement. Many of the factors that will determine
these results are beyond the Partnership's ability to control or
predict. Specific factors that could cause actual results to differ
from those in the forward-looking statements include: (1) the
effectiveness of the various actions the Partnership have taken
resulting from its strategic review process; (2) changes in the
demand for the supply of, forecast data for, and price trends
related to crude oil and liquid petroleum, including the rate of
development of the Alberta Oil Sands; (3) the Partnership's ability
to successfully complete and finance expansion projects; (4) the
effects of competition, in particular, by other pipeline systems;
(5) shut-downs or cutbacks at the Partnership's facilities or
refineries, petrochemical plants, utilities or other businesses for
which the Partnership transports products or to whom it sell
products; (6) hazards and operating risks that may not be covered
fully by insurance; (7) any fines, penalties and injunctive relief
assessed in connection with any crude oil release; (8) state or
federal legislative and regulatory initiatives or actions that
affect cost and investment recovery or that have an effect on rate
structure, or other changes in or challenges to the Partnership's
tariff rates; (9) changes in laws or regulations to which the
Partnership is subject, including compliance with environmental and
operational safety regulations that may increase costs of system
integrity testing and maintenance; and (10) permitting at federal,
state and local level or renewals of rights of way. Any statements
regarding sponsor expectations or intentions are based on
information communicated to the Partnership by Enbridge Inc., but
there can be no assurance that these expectations or intentions
will not change in the future.
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 the Partnership's filings with the
U.S. Securities and Exchange Commission (the "SEC"), including its
most recently filed 2017 Annual Report on Form 10-K dated
February 16, 2018 and current reports
on Form 8-K for additional factors that may affect results. These
filings are available to the public over the Internet at the SEC's
website (www.sec.gov) and at the Partnership's website.
ABOUT ENBRIDGE ENERGY PARTNERS, L.P.
Enbridge Energy Partners, L.P. owns and operates a
diversified portfolio of crude oil 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
25 percent of total U.S. oil imports. Enbridge Energy
Partners, L.P. is traded on the New York Stock Exchange under the
symbol EEP; information about the Partnership is available on its
website at www.enbridgepartners.com.
ABOUT ENBRIDGE ENERGY MANAGEMENT, L.L.C.
Enbridge Energy Management, L.L.C. manages the business and
affairs of the Partnership, and its sole asset is an approximate 20
percent limited partner interest in the Partnership. Enbridge
Energy Company, Inc., an indirect wholly owned subsidiary of
Enbridge Inc. of Calgary, Alberta,
Canada (NYSE: ENB) (TSX: ENB) is the General Partner of the
Partnership and holds an approximate 35 percent interest in the
Partnership. Enbridge Management is the delegate of the General
Partner of the Partnership.
FOR FURTHER INFORMATION PLEASE CONTACT:
Enbridge Energy Partners, L.P.
Media
|
Investment
Community
|
Michael
Barnes
|
Roni
Cappadonna
|
Toll Free: (888)
992-0997
|
Toll Free: (800)
481-2804
|
Email:
michael.barnes@enbridge.com
|
Email:
investor.relations@enbridge.com
|
NON-GAAP RECONCILIATIONS APPENDICES
Reconciliations of forward looking non-GAAP financial measures
to comparable GAAP measures are not available due to the challenges
with estimating some of the items, particularly with estimating
non-cash unrealized derivative fair value losses and gains, which
are subject to market variability and therefore a reconciliation is
not available without unreasonable effort.
Adjusted Net Income and Segment Adjusted EBITDA
Adjusted net income for the Partnership and adjusted EBITDA
(adjusted earnings before interest, taxes, depreciation and
amortization) for the principal business segment are provided to
illustrate trends in income excluding non-cash unrealized
derivative fair value losses and gains and other items that
Management believes are not indicative of the Partnership's core
operating results. The derivative non-cash losses and gains result
from marking to market certain financial derivatives used by the
Partnership for hedging purposes that do not qualify for hedge
accounting treatment in accordance with the authoritative
accounting guidance as prescribed under generally accepted
accounting principles in the United
States.
Adjusted EBITDA and Distributable Cash Flow
Adjusted EBITDA is used as a supplemental financial measurement
to manage the performance of the entity. Distributable cash flow is
used as a supplemental financial measurement to assess liquidity
and the ability to generate cash sufficient to pay interest costs
and make cash distributions to unitholders. The following
reconciliations of net income to adjusted EBITDA and net cash
provided by operating activities to distributable cash flow are
provided because adjusted EBITDA and distributable cash flow are
not financial measures recognized under generally accepted
accounting principles in the United
States.
APPENDIX A
FINANCIAL RESULTS
EEP reported financial results for the three months ended
March 31, 2018, compared to the same period in 2017, as
summarized in the tables below:
|
Three months
ended
|
|
March
31,
|
|
2018
|
2017
|
(unaudited; in
millions, except per unit amounts)
|
|
|
Net
income(1)
|
$
|
74
|
$
|
65
|
Net income per unit
(basic and diluted)
|
$
|
0.15
|
$
|
0.15
|
Operating Cash
Flow
|
$
|
322
|
$
|
234
|
Adjusted
EBITDA(2)
|
$
|
430
|
$
|
414
|
Distributable Cash
Flow
|
$
|
212
|
$
|
198
|
Distribution Coverage
Ratio (as declared)
|
1.30
|
1.24
|
Adjusted net
income(1)
|
$
|
118
|
$
|
69
|
Adjusted net income
per unit (basic and diluted)
|
$
|
0.25
|
$
|
0.16
|
|
|
(1)
|
Net income and
adjusted net income attributable to general and limited partner
ownership interests in Enbridge Energy Partners, L.P.
|
(2)
|
Includes
noncontrolling interests
|
|
Three months
ended
|
|
March 31,
|
|
2018
|
2017
|
(unaudited; in
millions, except per unit amounts)
|
|
|
Operating
revenues
|
$
|
592
|
$
|
605
|
Operating
expenses:
|
|
|
|
Operating and
administrative
|
133
|
164
|
|
Power
|
77
|
74
|
|
Depreciation and
amortization
|
110
|
109
|
|
Impairment of
long-lived asset
|
35
|
—
|
|
Gain on sale of
assets
|
—
|
(11)
|
Operating
income
|
237
|
269
|
Interest expense,
net
|
104
|
99
|
Allowance for equity
used during construction
|
16
|
10
|
Income from equity
investment in joint venture
|
23
|
—
|
Income from
continuing operations before income taxes
|
172
|
180
|
Income tax
expense
|
—
|
(1)
|
Income from
continuing operations
|
172
|
179
|
Loss from
discontinued operations, net of taxes
|
—
|
(22)
|
Net income
|
172
|
157
|
|
Noncontrolling
interests
|
(98)
|
(68)
|
|
Series 1 preferred
unit distributions
|
—
|
(23)
|
|
Accretion of discount
on Series 1 preferred units
|
—
|
(1)
|
Net income -
controlling interests
|
74
|
65
|
Net income allocable
to common units and i-units:
|
|
|
|
Income from
continuing operations
|
62
|
68
|
|
Loss from
discontinued operations
|
—
|
(14)
|
Net income allocable
to common units and i-units
|
$
|
62
|
$
|
54
|
Net income per common
unit and i-unit (basic and diluted):
|
|
|
|
Income from
continuing operations
|
$
|
0.15
|
$
|
0.19
|
|
Loss from
discontinued operations
|
—
|
(0.04)
|
Net income per common
unit and i-unit
|
$
|
0.15
|
$
|
0.15
|
Weighted average
common units and i-units (basic and diluted)
|
425
|
353
|
APPENDIX B
SEGMENT RESULTS
EEP reported segment results for the three months ended
March 31, 2018, compared to the same period in 2017, as
summarized in the tables below:
|
Three months
ended
|
|
March
31,
|
|
2018
|
2017
|
(unaudited; in
millions)
|
|
|
|
Lakehead
|
$
|
321
|
$
|
351
|
|
Mid-Continent
|
16
|
14
|
|
Bakken
Assets
|
52
|
26
|
Total Liquids
EBITDA
|
$
|
389
|
$
|
391
|
Other
|
(3)
|
(3)
|
Net income
|
$
|
74
|
$
|
65
|
|
Three months
ended
|
|
March 31,
|
|
2018
|
2017
|
(unaudited; in
millions)
|
|
|
|
Lakehead
|
$
|
363
|
$
|
352
|
|
Mid-Continent
|
16
|
14
|
|
Bakken
Assets
|
53
|
30
|
Total Liquids
Adjusted EBITDA
|
$
|
432
|
$
|
396
|
Other(1)
|
(2)
|
18
|
Total Adjusted
EBITDA
|
$
|
430
|
$
|
414
|
|
|
(1)
|
Includes the adjusted
results of our disposed Natural Gas segment for the comparative
period.
|
|
Three months
ended
|
|
March
31,
|
Liquids Systems
Volumes
|
2018
|
2017
|
(thousand barrels
per day)
|
|
Lakehead
System:
|
|
|
United
States
|
2,078
|
2,057
|
|
Canada
|
688
|
691
|
Total Lakehead System
delivery volumes
|
2,766
|
2,748
|
Mid-Continent System
delivery volumes
|
—
|
145
|
Bakken
Assets:
|
|
|
North Dakota System
to Clearbrook
|
215
|
203
|
|
Bakken System to
Cromer(1)
|
44
|
131
|
Total Bakken Assets
delivery volumes
|
259
|
334
|
Total Liquids segment
delivery volumes
|
3,025
|
3,227
|
|
|
(1)
|
Lower spot volumes on
the Bakken Pipeline a component of the Bakken Assets that delivers
volumes into Cromer, Manitoba.
|
APPENDIX C
NON-GAAP RECONCILATION EARNINGS TO
DISTRIBUTABLE CASH FLOW
|
Three months
ended
|
|
March
31,
|
|
2018
|
2017
|
(unaudited; in
millions)
|
|
|
Net income -
controlling interests
|
$
|
74
|
$
|
65
|
Noncash derivative
fair value (gains) losses:
|
|
|
-Liquids
|
2
|
(2)
|
-Natural Gas
(included in Discontinued Operations)
|
—
|
(4)
|
-Other
|
—
|
1
|
Accretion of discount
on Series 1 preferred units
|
—
|
1
|
Sandpiper Project
wind down costs
|
—
|
3
|
Severance
costs
|
1
|
5
|
Impairment of
long-lived asset
|
35
|
—
|
Integration
costs
|
6
|
—
|
Adjusted net
income
|
$
|
118
|
$
|
69
|
Series 1 preferred
unit distributions
|
—
|
23
|
Net income
attributable to noncontrolling interests
|
98
|
68
|
Depreciation and
amortization
|
110
|
109
|
Interest expense,
net
|
104
|
99
|
Income tax
expense
|
—
|
1
|
Interest expense,
income tax expense, and depreciation and amortization -
discontinued operations
|
—
|
45
|
Adjusted
EBITDA
|
$
|
430
|
$
|
414
|
Net income
attributable to noncontrolling interests
|
(109)
|
(97)
|
Interest expense,
net(1)(2)
|
(96)
|
(100)
|
Income tax expense
(benefit)
|
—
|
(2)
|
Distributions in
excess of equity earnings, net of NCI
|
7
|
1
|
Maintenance capital
expenditures
|
(5)
|
(9)
|
Allowance for equity
used during construction(3)
|
(16)
|
(10)
|
Other
|
1
|
1
|
DCF
|
$
|
212
|
$
|
198
|
|
|
(1)
|
Excludes $7 million
and $7 million of amortization related to pre-issuance interest
swaps for the three months ended March 31, 2018 and 2017,
respectively.
|
(2)
|
Excludes $1 million
of amortization related debt issuance costs for the three months
ended March 31, 2018 beginning Q1 2018.
|
(3)
|
Distributable cash
flow excludes allowance for equity used during construction
beginning Q1 2017.
|
APPENDIX D
NON-GAAP RECONCILIATION REPORTED TO
ADJUSTED NET INCOME PER COMMON UNIT AND I-UNIT
|
Three months
ended
|
|
March
31,
|
|
2018
|
2017
|
(unaudited)
|
|
|
Net income per common
unit and i-unit (basic and diluted)
|
$
|
0.15
|
$
|
0.15
|
Noncash derivative
fair value (gains) losses:
|
|
|
-Liquids
|
0.01
|
(0.01)
|
-Natural Gas
(included in Discontinued Operations)
|
—
|
(0.01)
|
Sandpiper Project
wind down costs
|
—
|
0.01
|
Severance
costs
|
0.01
|
0.02
|
Impairment of
long-lived asset
|
0.06
|
—
|
Integration
costs
|
0.02
|
—
|
Adjusted net income
per common unit and i-unit (basic and diluted)
|
$
|
0.25
|
$
|
0.16
|
Weighted average
common units and i-units outstanding
|
425
|
353
|
APPENDIX E
NON-GAAP RECONCILIATION LIQUIDS REPORTED
EBITDA TO ADJUSTED EBITDA
|
Three months
ended
|
|
March
31,
|
|
2018
|
2017
|
(unaudited; in
millions)
|
|
|
EBITDA
|
$
|
389
|
$
|
391
|
Noncash derivative
fair value (gains) losses:
|
2
|
(2)
|
Sandpiper Project
wind down costs
|
—
|
3
|
Severance
costs
|
—
|
4
|
Integration
costs
|
6
|
—
|
Impairment of
long-lived asset
|
35
|
—
|
Adjusted
EBITDA
|
$
|
432
|
$
|
396
|
APPENDIX F
NON-GAAP RECONCILIATION - OPERATING CASH
FLOW TO DISTRIBUTABE CASH FLOW
|
Three months
ended
|
|
March 31,
|
|
2018
|
2017
|
(unaudited; in
millions)
|
|
|
Total net cash
provided by operating activities
|
$
|
322
|
$
|
234
|
Changes in operating
assets and liabilities, net of cash acquired
|
(28)
|
53
|
Equity earnings from
investment in joint venture
|
23
|
—
|
Distributions in
excess of equity earnings, net of NCI
|
7
|
1
|
Maintenance capital
expenditures
|
(5)
|
(9)
|
Noncontrolling
interests
|
(109)
|
(97)
|
Gain on sale of
assets
|
—
|
11
|
Severance
costs
|
1
|
5
|
Integration
costs
|
6
|
—
|
Other
|
(5)
|
—
|
Distributable cash
flow(1)
|
$
|
212
|
$
|
198
|
|
|
(1)
|
Distributable cash
flow excludes allowance for equity used during construction
beginning Q1 2017.
|
View original
content:http://www.prnewswire.com/news-releases/enbridge-energy-partners-lp-reports-first-quarter-2018-results-300645644.html
SOURCE Enbridge Energy Partners, L.P.