ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations is based on and should be read in conjunction with our financial statements and the accompanying notes beginning in
Item 8. Financial Statements and Supplementary Data
of this Annual Report on Form 10-K.
BUSINESS OVERVIEW
We are a Delaware limited liability company that was formed on May 14, 2002. We have elected to be treated as a corporation for United States federal income tax purposes. Our sole investment is all of a special class of units issued by the Partnership, referred to as i-units, representing limited partner interests in the Partnership. The General Partner owns all of our voting shares and is an indirect, wholly-owned subsidiary of Enbridge.
By an agreement among the Partnership, the General Partner and us, we manage the business and affairs of the Partnership, subject to the General Partner’s right to approve specified actions.
The information set forth under
Part II.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
, in the Partnership’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2017
, is hereby incorporated by reference as our results of operation, cash flows and financial position are dependent on the results of operation, cash flows and financial position of the Partnership.
RESULTS OF OPERATIONS
Our results of operations consist of our share of earnings from the Partnership attributed to our ownership of the i-units, a special class of limited partner interest in the Partnership. Through our ownership of the i-units, we had an approximate
19.9%
,
16.6%
and
15.1%
limited partner voting interest in the Partnership as of
December 31, 2017
,
2016
and
2015
, respectively. Our percentage ownership of the Partnership will change over time as the number of i-units we own becomes a different percentage of the total limited partner interests outstanding due to our ownership of additional i-units and other issuances of limited partner interests by the Partnership. Historically, our share of the Partnership’s earnings was reduced by (i) allocations of income to the Preferred Units, Class D and Class E units, and (ii) curing impacts on limited partnership interests whose capital account balances become negative during the year.
The Partnership Agreement does not permit capital deficits to accumulate in the capital account of any limited partner and thus requires that such capital account deficits brought to zero, or “cured,” by additional allocations from the positive capital accounts of the common units, i-units and the General Partner, generally on a pro-rated basis. From the second quarter of 2014 through the first quarter of 2016, our equity income from the Partnership was adjusted for our pro-rated share of such reallocations. The curing losses were primarily a result of issuances of the Class D units and Class E units by the Partnership in 2014 and 2015, respectively, and by a goodwill impairment in 2015, which reduced the capital balances of the Class A and Class B common units below zero. During the same period, distributions to the Class A and Class B common units exceeded the earnings allocated to such units, which further reduced the capital balances and required additional curing from the positive balances of the Partnership’s i-unit capital accounts.
During the first quarter of 2016, our share of losses in the Partnership, driven primarily from curing losses, exceeded the carrying amount of our investment in the Partnership. As a result, we discontinued application of the equity method of accounting when the carrying amount of our investment was reduced to zero and no longer provide for additional losses as we are not obligated to provide further financial support to the Partnership. Further, we amortize into earnings the remaining accumulated other comprehensive loss on a straight-line basis over the remaining term of the Partnership's underlying hedge contracts. As a result, our net loss for the year ended December 31, 2017, and future losses, will consist of amortization of the remaining accumulated other comprehensive loss.
The following table presents our results of operations for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(in millions)
|
Equity loss from investment in Enbridge Energy Partners, L.P.
|
$
|
(43
|
)
|
|
$
|
(122
|
)
|
|
$
|
(380
|
)
|
Loss before income tax benefit (expense)
|
(43
|
)
|
|
(122
|
)
|
|
(380
|
)
|
Income tax benefit (expense)
|
14
|
|
|
2
|
|
|
(132
|
)
|
Net loss
|
$
|
(29
|
)
|
|
$
|
(120
|
)
|
|
$
|
(512
|
)
|
YEAR ENDED DECEMBER 31, 2017 COMPARED TO YEAR ENDED DECEMBER 31, 2016
For the year ended
December 31, 2017
, our equity loss from investment in the Partnership decreased by
$79 million
as compared to the year ended
December 31, 2016
. The decrease was primarily attributable to the discontinuance of equity method accounting at March 31, 2016, as a result a full year of earnings reflecting amortization of the remaining accumulated other comprehensive income. Although we amortize into earnings the remaining accumulated other comprehensive loss on a straight-line basis over the term of the underlying hedge contracts, in December 2017 the Partnership terminated certain interest rate swaps due to a high probability that the long-term debt associated with the interest rate swaps would not be raised, resulting in a reclassification into earnings of the realized loss from AOCI. As a result, we amortized out of earnings the accumulated other comprehensive loss associated with the interest rate swaps as the underlying hedge contracts were terminated. The impact from terminating the hedge contracts, net of income tax, is $21 million.
For the year ended
December 31, 2017
, our income tax benefit increased by $12 million as compared to the year ended
December 31, 2016
. The increase was primarily due to an income tax benefit recognized on the accumulated other comprehensive loss recognized into earnings
YEAR ENDED DECEMBER 31, 2016 COMPARED TO YEAR ENDED DECEMBER 31, 2015
For the year ended December 31, 2016, our equity loss from investment in the Partnership decreased by $258 million as compared to the year ended December 31, 2015. The decrease was primarily due to the discontinuance of equity method accounting at March 31, 2016, which limited the amount of losses recorded during the applicable period to the amortization of the remaining accumulated other comprehensive income as discussed above.
For the year ended December 31, 2016, our income tax expense decreased by $134 million as compared to the year ended December 31, 2015. The decrease was primarily due to the recognition of a full valuation allowance against our deferred tax asset, which resulted in additional tax expense of $275 million for the year ended December 31, 2015. No similar charge was recorded during the same period in 2016.
LIQUIDITY AND CAPITAL RESOURCES
Our authorized capital structure consists of two classes of limited liability company interests: (i) our Listed Shares, which are traded on the New York Stock Exchange (NYSE) and represent limited liability company interests with limited voting rights, and (ii) our voting shares, which represent limited liability company interests with full voting rights and are held solely by the General Partner. At
December 31, 2017
, our issued capitalization consisted of
$1,760 million
associated with our
89,798,812
Listed Shares outstanding.
We use our capital to invest in i-units of the Partnership. We have, from time to time, raised capital through public equity offerings. Any net cash proceeds we receive from the sale of additional shares will immediately be used to purchase additional i-units. We did not issue additional shares in
2017
,
2016
, or
2015
. The number of our shares outstanding, including the voting shares owned by the General Partner, will at all times equal the number of i-units we own in the Partnership. Typically, owners of the Partnership's Class A common units along with the General Partner owning Class B common units. Class F units and Class E units will receive distributions from the Partnership in cash. We receive additional i-units under the terms of the Partnership Agreement instead of receiving cash distributions on the i-units we own. The number of additional i-units we receive is calculated by dividing the amount of the cash distribution paid by the Partnership on each of its common units by the average closing price of one of our Listed Shares on the NYSE for the 10-day trading period immediately preceding the ex-dividend date for our shares, multiplied by the number of our shares outstanding on the record date. We make share distributions to our shareholders concurrently with the i-unit distributions we receive from the Partnership that increase the number of i-units we own. As a result of our share distributions, the number of shares outstanding is equal to the number of i-units that we own in the Partnership.
We are not permitted to borrow money or incur debt other than with Enbridge and its affiliates without the approval of holders owning at least a majority of our shares.
Under the Enbridge purchase provisions, which are a part of our limited liability company agreement, Enbridge has the right and obligation, under limited circumstances, to purchase our outstanding shares. In addition, Enbridge generally agrees to indemnify us for any tax liability attributable to our formation, our management of the Partnership or our ownership of the i-units. Additionally, Enbridge generally agrees to indemnify us for any taxes arising from a transaction involving the i-units to the extent the transaction does not generate cash sufficient to pay such taxes, in each case, other than any Texas franchise taxes or other capital-based foreign, state or local taxes that are required to be paid or reimbursed by the Partnership under the delegation of control agreement.
If we incur liabilities or other obligations in connection with the performance of our obligations under the delegation of control agreement, we are entitled to be reimbursed or to be indemnified by the Partnership or the General Partner. Thus, we expect that our expenditures associated with managing the business and affairs of the Partnership and the reimbursement of these expenses that we receive will continue to be equal. As previously stated, we do not receive quarterly cash distributions on the i-units we hold. Therefore, we expect neither to generate nor to require significant amounts of cash in ongoing operations. Any net cash proceeds we receive from the sale of additional shares will immediately be used to purchase additional i-units. Accordingly, we do not anticipate any other sources of or needs
for additional liquidity. We have no future obligations as at December 31, 2017. For further details regarding any contingencies, refer to
Item 8. Financial Statements and Supplementary Data
—
Note 7 - Contingencies
.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require management to make estimates, judgments and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. In making judgments and estimates, management relies on external information and observable conditions, where possible, supplemented by internal analysis as required. We believe our most critical accounting policies and estimates discussed below have an impact across the various segments of our business.
ACCOUNTING FOR INVESTMENT IN THE PARTNERSHIP
Prior to March 31, 2016, we used the equity method of accounting for our ownership interest in the Partnership because we exercise significant influence over the Partnership pursuant to a delegation of control agreement among the General Partner, the Partnership, and us. As of
December 31, 2017
, we owned approximately
19.9%
of the Partnership. Our ownership percentage changes as the Partnership issues additional limited partner units. Under the equity method of accounting, changes in the calculation of our ownership percentage affected our net income and comprehensive income.
The Partnership Agreement does not permit capital deficits to accumulate in the capital account of any limited partner and thus requires that such capital account deficits brought to zero, or “cured,” by additional allocations from the positive capital accounts of the common units, i-units, and General Partner, generally on a pro-rated basis. Our equity income from the Partnership is adjusted for our pro-rated share of such reallocations. Until we discontinued equity accounting for our investment in the Partnership on March 31, 2016, our equity earnings were reduced, for our pro-rated share of the allocation needed to cure the capital account deficits of the Class A and Class B common units.
During the first quarter of 2016, our share of losses in the Partnership, driven primarily from curing losses, exceeded the carrying amount of our investment in the Partnership. As a result, we ceased recognition of our equity interest in the earnings of the Partnership when the carrying amount of our investment was reduced to zero and will no longer provide for additional losses as we are not obligated to provide further financial support to the Partnership. Our accumulated other comprehensive income is comprised of our historical interest in the Partnership’s other comprehensive income, which is based primarily on the effective mark-to-market changes in the Partnership’s underlying cash flow hedge contracts. We amortize into earnings the remaining accumulated other comprehensive loss on a straight-line basis over the remaining term of the Partnership’s underlying hedge contracts.
SUBSEQUENT EVENTS
SHARE DISTRIBUTION
On
January 31, 2018
, our board of directors declared a share distribution payable on
February 14, 2018
, to shareholders of record as of
February 7, 2018
, based on the
$0.35
per limited partner unit distribution declared by the Partnership. The Partnership’s distribution increases the number of i-units that we own. The number of i-units we received from the Partnership on
February 14, 2018
was
2,261,583
. The amount of this increase is calculated by dividing $
$0.35
, the cash amount distributed by the Partnership per common unit by
$13.90
, the average closing price of one of our Listed Shares on the NYSE for the 10-day trading period immediately preceding the ex-dividend date for our shares, multiplied by
89,798,812
, the number of shares outstanding on the record date. We distributed an additional
1,997,280
Listed Shares to our public shareholders and
264,303
voting shares to the General Partner in respect of these additional i-units.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
REPORT TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Enbridge Energy Management, L.L.C.:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying statements of financial position of Enbridge Energy Management, L.L.C. (the “Company”) as of December 31, 2017 and 2016, and the related statements of income, of comprehensive income, of shareholders’ equity and of cash flows for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control - Integrated Framework
(2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2017
and 2016, and the results of its
operations and its
cash flows for each of the three years in the period ended December 31, 2017
in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control - Integrated Framework
(2013)
issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A of the Company’s 2017 Annual Report on Form 10-K. Our responsibility is to express opinions on the Company’s financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Houston, Texas
February 15, 2018
We have served as the Company’s auditor since 2002.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
STATEMENTS OF INCOME
(in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
Equity loss from investment in Enbridge Energy Partners, L.P.
|
$
|
(43
|
)
|
|
$
|
(122
|
)
|
|
$
|
(380
|
)
|
Loss before income taxes
|
(43
|
)
|
|
(122
|
)
|
|
(380
|
)
|
Income tax benefit (expense)
|
14
|
|
|
2
|
|
|
(132
|
)
|
Net loss
|
$
|
(29
|
)
|
|
$
|
(120
|
)
|
|
$
|
(512
|
)
|
Net loss per share, (basic and diluted)
|
$
|
(0.34
|
)
|
|
$
|
(1.54
|
)
|
|
$
|
(7.26
|
)
|
Weighted average shares outstanding
|
86
|
|
|
78
|
|
|
71
|
|
Distribution paid per share
|
$
|
1.633
|
|
|
$
|
2.332
|
|
|
$
|
2.306
|
|
The accompanying notes are an integral part of these financial statements.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
Net loss
|
$
|
(29
|
)
|
|
$
|
(120
|
)
|
|
$
|
(512
|
)
|
Equity in other comprehensive income (loss) of Enbridge Energy Partners, L.P., net of tax benefit (expense) of $14, $2 and ($14) respectively
|
29
|
|
|
(12
|
)
|
|
(20
|
)
|
Comprehensive loss
|
$
|
—
|
|
|
$
|
(132
|
)
|
|
$
|
(532
|
)
|
The accompanying notes are an integral part of these financial statements.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
STATEMENTS OF CASH FLOWS
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(29
|
)
|
|
$
|
(120
|
)
|
|
$
|
(512
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating:
|
|
|
|
|
|
|
|
|
Loss from equity investment in Enbridge Energy Partners, L.P.
|
43
|
|
|
122
|
|
|
380
|
|
Deferred income taxes (benefit) expense
|
(14
|
)
|
|
(2
|
)
|
|
132
|
|
Net cash provided by operating activities
|
—
|
|
|
—
|
|
|
—
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
—
|
|
|
—
|
|
|
—
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
—
|
|
|
—
|
|
|
—
|
|
Net increase (decrease) in cash and cash equivalents
|
—
|
|
|
—
|
|
|
—
|
|
Cash and cash equivalents at beginning of year
|
1
|
|
|
1
|
|
|
1
|
|
Cash and cash equivalents at end of period
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
|
|
|
|
|
Supplementary cash flow information
|
|
|
|
|
|
Cash paid for income taxes
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The accompanying notes are an integral part of these financial statements.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
STATEMENTS OF FINANCIAL POSITION
(in millions)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
ASSETS
|
|
|
|
|
|
Cash
|
$
|
1
|
|
|
$
|
1
|
|
Total Assets
|
$
|
1
|
|
|
$
|
1
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
Voting shares – unlimited authorized; 6.77 and 6.17 issued and outstanding at December 31, 2017 and December 31, 2016, respectively
|
$
|
—
|
|
|
$
|
—
|
|
Listed shares – unlimited authorized; 89,798,812 and 81,857,162 issued and outstanding at December 31, 2017 and December 31, 2016, respectively
|
1,760
|
|
|
1,623
|
|
Accumulated deficit
|
(1,732
|
)
|
|
(1,566
|
)
|
Accumulated other comprehensive loss
|
(27
|
)
|
|
(56
|
)
|
Total Liabilities and shareholders' equity
|
$
|
1
|
|
|
$
|
1
|
|
The accompanying notes are an integral part of these financial statements.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
STATEMENTS OF SHAREHOLDERS’ EQUITY
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Listed Shares
|
|
Accumulated Deficit
|
|
Accumulated other comprehensive income (loss)
|
|
Total
|
December 31, 2017
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
1,623
|
|
|
$
|
(1,566
|
)
|
—
|
|
$
|
(56
|
)
|
|
$
|
1
|
|
Net loss
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
Share distributions
|
137
|
|
|
(137
|
)
|
|
—
|
|
|
—
|
|
Equity in other comprehensive income of Enbridge Energy Partners, L.P.
|
—
|
|
|
—
|
|
|
29
|
|
|
29
|
|
Ending balance
|
$
|
1,760
|
|
|
$
|
(1,732
|
)
|
|
$
|
(27
|
)
|
|
$
|
1
|
|
December 31, 2016
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
1,444
|
|
|
$
|
(1,267
|
)
|
—
|
|
$
|
(44
|
)
|
|
$
|
133
|
|
Net loss
|
—
|
|
|
(120
|
)
|
|
—
|
|
|
(120
|
)
|
Share distributions
|
179
|
|
|
(179
|
)
|
|
—
|
|
|
—
|
|
Equity in other comprehensive loss of Enbridge Energy Partners, L.P.
|
—
|
|
|
—
|
|
|
(12
|
)
|
|
(12
|
)
|
Ending balance
|
$
|
1,623
|
|
|
$
|
(1,566
|
)
|
—
|
|
$
|
(56
|
)
|
|
$
|
1
|
|
December 31, 2015
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
1,358
|
|
|
$
|
(594
|
)
|
|
$
|
(24
|
)
|
|
$
|
740
|
|
Net loss
|
—
|
|
|
(512
|
)
|
|
—
|
|
|
(512
|
)
|
Capital account adjustments
|
(75
|
)
|
|
—
|
|
|
—
|
|
|
(75
|
)
|
Share distributions
|
161
|
|
|
(161
|
)
|
|
—
|
|
|
—
|
|
Equity in other comprehensive loss of Enbridge Energy Partners, L.P.
|
—
|
|
|
—
|
|
|
(20
|
)
|
|
(20
|
)
|
Ending balance
|
$
|
1,444
|
|
|
$
|
(1,267
|
)
|
|
$
|
(44
|
)
|
|
$
|
133
|
|
The accompanying notes are an integral part of these financial statements.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS OVERVIEW
The terms “we”, “our”, “us” and “Enbridge Energy Management” as used in this report refer collectively to Enbridge Energy Management, LLC unless the context suggests otherwise.
GENERAL BUSINESS DESCRIPTION
We are a limited partner of Enbridge Energy Partners, L.P., (the Partnership), through our ownership of i-units, a special class of the Partnership’s limited partner interests. Under a delegation of control agreement among us, the Partnership and its general partner, Enbridge Energy Company, Inc., (the General Partner), we manage the Partnership’s business and affairs. The General Partner is an indirect, wholly-owned subsidiary of Enbridge, an energy infrastructure company based in Calgary, Alberta, Canada.
SEGMENTS AND TRANSACTIONS
We have no segments. For other transactions, refer to
Note 4 - Related Party Transactions
.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND USE OF ESTIMATES
These consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (U.S. GAAP). The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as the disclosure of contingent assets and liabilities in the consolidated financial statements. We regularly evaluate these estimates utilizing historical experience, consultation with experts and other methods we consider reasonable in the circumstances. Nevertheless, actual results may differ significantly from these estimates. We record the effect of any revisions to these estimates in our consolidated financial statements in the period in which the facts that give rise to the revision become known. Amounts are stated in United States dollars unless otherwise noted.
VARIABLE INTEREST ENTITIES
Upon inception of a contractual agreement, we perform an assessment to determine whether the arrangement contains a variable interest in a legal entity and whether that legal entity is a Variable Interest Entity (VIE). We assess all aspects of our interests in an entity and use judgment when determining if we are the primary beneficiary. The primary beneficiary has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Other qualitative factors that are considered include decision-making responsibilities, the VIE capital structure, risk and rewards sharing, contractual agreements with the VIE, voting rights and level of involvement of other parties. A reassessment of the primary beneficiary conclusion is conducted when there are changes in the facts and circumstances related to a VIE.
We are a limited partner of the Partnership, through our ownership of i-units, a special class of the Partnership’s limited partner interests. At December 31, 2017, we owned approximately
19.9%
of the Partnership through our ownership of the i-units. Further, under a delegation of control agreement among us, the Partnership and the General Partner, we manage the Partnership’s business and affairs. However, ultimate responsibility to direct the activities that most significantly impact the Partnership’s economic performance continues to rest with the General Partner. Further, the General Partner has the power to direct the activities that most significantly impact our economic performance through its
100%
ownership interest in our voting shares. As a result, we have determined that we are not the primary beneficiary of the Partnership.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
NOTES TO THE FINANCIAL STATEMENTS
ACCOUNTING FOR INVESTMENT IN THE PARTNERSHIP
Prior to March 31, 2016, we used the equity method of accounting for our ownership in the Partnership because we exercise significant influence over the Partnership pursuant to a delegation of control agreement among the General Partner, the Partnership and us. As of December 31, 2017 and
2016
, we owned approximately
19.9%
and
16.6%
of the Partnership, respectively. Our ownership percentage changes as the Partnership issues additional limited partner units. Changes in the calculation of our ownership percentage affect our net income and comprehensive income.
Distributions to holders of the Partnership’s Class E Units, Class F Units, and prior to April 27, 2017, the Preferred Units, Class D Units and Incentive Distribution Units, or IDUs, reduce the amount of income that was allocated to the Partnership’s remaining limited partners: (i) Class A common units, (ii) Class B common units and (iii) i-units on a pro-rated basis based on our ownership interest in the Partnership. Further, the Partnership’s Preferred Units were issued at a discount to the market price of the Class A common units into which they are convertible. This discount represents a beneficial conversion feature, which was amortized ratably from the issuance date to April 27, 2017, when the Preferred Units were redeemed. This amortization resulted in an increase to the capital account of the Preferred Units and a decrease in the Partnership’s earnings allocable to the Class A and Class B common units and the i-units on a pro-rated basis. Thus, our “Equity income (loss) from investment in Enbridge Energy Partners, L.P.” on our statements of income also included a pro-rated share of these costs.
The Partnership Agreement does not permit capital deficits to accumulate in the capital account of any limited partner and thus requires that such capital account deficits brought to zero, or “cured,” by additional allocations from the positive capital accounts of the common units, i-units, and General Partner, generally on a pro-rated basis. Our equity income from the Partnership is adjusted for our pro-rated share of such reallocations. Until we discontinued equity accounting for our investment in the Partnership on March 31, 2016, our equity earnings were reduced for our pro-rated share of the allocation needed to cure the capital account deficits of the Class A and Class B common units.
During the first quarter of 2016, our share of losses in the Partnership, driven primarily from curing losses, exceeded the carrying amount of our investment in the Partnership. As a result, we ceased recognition of our equity interest in the earnings of the Partnership when the carrying amount of our investment was reduced to zero and will no longer provide for additional losses as we are not obligated to provide further financial support to the Partnership.
CAPITAL ACCOUNT ADJUSTMENTS
The Partnership records an adjustment to the carrying value of its book capital accounts for certain changes to its equity structure. We refer to these adjustments as capital account adjustments. We recognize any capital account adjustments recorded by the Partnership to the book capital account it maintains for our i-units by increasing or decreasing our investment in the Partnership and recording a corresponding capital account adjustment directly to “Shareholders’ equity” on our statements of financial position.
NET INCOME PER SHARE
Both basic and diluted earnings per share are computed based on the weighted-average number of our shares outstanding during each period. We have no securities outstanding that may be converted into or exercised for our shares.
INCOME TAXES
We are a limited liability company that has elected to be treated as a corporation for United States federal income tax purposes. We recognize deferred income tax assets and liabilities for temporary differences between the basis of our assets and liabilities for financial reporting and tax purposes. Changes in tax legislation are included in the relevant computations in the period in which the legislation is enacted. Temporary differences and associated deferred tax expense and deferred tax liabilities result from recording our equity in the earnings of the Partnership, which will not become taxable until the Partnership is liquidated or the i-units are otherwise monetized, in addition to capital account adjustments.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
NOTES TO THE FINANCIAL STATEMENTS
We are a party to a tax indemnification agreement with Enbridge. Pursuant to this tax indemnification agreement, Enbridge agrees to indemnify us from any tax liability attributable to our formation or our management of the business and affairs of the Partnership and from any taxes arising out of a transaction involving the i-units owned, to the extent the transaction does not generate cash sufficient to pay our taxes with respect to such transaction, in each case, other than any Texas franchise taxes and other capital-based foreign, state or local taxes that are required to be paid or reimbursed by the Partnership under the delegation of control agreement.
The delegation of control agreement states that the General Partner bears the economic impact for our taxes only in the event we do not have cash sufficient to pay them. As a result, we accrue state income taxes in addition to federal income tax.
COMPREHENSIVE INCOME
Comprehensive income differs from net income due to the equity in other comprehensive income or loss of the Partnership. The Partnership enters into a variety of derivative financial instruments to mitigate its exposure to commodity price and interest rate risk, some of which are qualified cash flow hedges under the applicable authoritative accounting guidance for derivative activities
.
As such, prior to March 31, 2016, changes in the fair market value of the Partnership’s derivative financial instruments produced fluctuations in our comprehensive income, which was reflected as equity in other comprehensive income or loss of the Partnership.
As discussed above, we discontinued equity method accounting for our investment in the Partnership as of March 31, 2016. Our accumulated other comprehensive income is comprised of our historical interest in the Partnership’s other comprehensive income, which is based primarily on the effective mark-to-market changes in the Partnership’s underlying cash flow hedge contracts. We amortize into earnings the remaining accumulated other comprehensive loss on a straight-line basis over the remaining term of the Partnership’s underlying hedge contracts.
3. SHAREHOLDERS' EQUITY
SHARE DISTRIBUTIONS
Our authorized capital structure consists of two classes of interests: (i) Listed Shares, which represent limited liability company interests with limited voting rights, and (ii) voting shares, which represent limited liability company interests with full voting rights. All voting shares are held by the General Partner.
We make share distributions on a quarterly basis at the same time that the Partnership declares and makes cash distributions to the General Partner and limited partner interests other than the i-units. We do not receive cash distributions on the i-units we own and do not otherwise have any cash flow attributable to our ownership of the i-units. Instead, when the Partnership makes cash distributions to the General Partner and other limited partner interests, we receive additional i-units under the terms of the Partnership Agreement. The amount of the additional i-units we receive is calculated by dividing the amount of the per unit cash distribution paid by the Partnership on each of its Class A and B common units by the average closing price of one of our Listed Shares on the NYSE as determined for a
10
trading-day period ending on the trading day immediately prior to the ex-dividend date for our shares multiplied by the number of shares outstanding on the record date. We concurrently distribute additional shares to our shareholders that are equivalent in number to the additional i-units we receive from the Partnership. As a result, the number of our outstanding shares is equal to the number of i-units that we own in the Partnership.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
NOTES TO THE FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Voting Shares
|
Listed Shares
|
2017
|
|
|
Balance at beginning of year
|
6.17
|
|
81,857,162
|
|
Share distributions
|
0.60
|
|
7,941,650
|
|
Balance at end of year
|
6.77
|
|
89,798,812
|
|
|
|
|
2016
|
|
|
Balance at beginning of year
|
5.53
|
|
73,285,734
|
|
Share distributions
|
0.64
|
|
8,571,428
|
|
Balance at end of year
|
6.17
|
|
81,857,162
|
|
|
|
|
2015
|
|
|
Balance at beginning of year
|
5.15
|
|
68,305,182
|
|
Share distributions
|
0.38
|
|
4,980,552
|
|
Balance at end of year
|
5.53
|
|
73,285,734
|
|
The following table sets forth the details regarding our share distributions, as approved by our board of directors for the years ended
December 31, 2017
,
2016
and
2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution
Declaration Date
|
|
Record Date
|
|
Distribution
Payment Date
|
|
Distribution
per Unit
of the
Partnership
|
|
Average
Closing
Price of
the Listed
Shares
|
|
Additional
i-units
owned
|
|
Listed
Shares
Distributed
to Public
|
|
Shares
Distributed
to General
Partner
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 25
|
|
November 7
|
|
November 14
|
|
$
|
0.350
|
|
|
$
|
13.75
|
|
|
2,229,344
|
|
|
1,968,809
|
|
|
260,535
|
|
July 28
|
|
August 7
|
|
August 14
|
|
$
|
0.350
|
|
|
$
|
15.38
|
|
|
1,948,561
|
|
|
1,720,839
|
|
|
227,722
|
|
April 27
|
|
May 8
|
|
May 15
|
|
$
|
0.350
|
|
|
$
|
17.96
|
|
|
1,637,096
|
|
|
1,445,775
|
|
|
191,321
|
|
January 26
|
|
February 7
|
|
February 14
|
|
$
|
0.583
|
|
|
$
|
22.44
|
|
|
2,126,649
|
|
|
1,878,115
|
|
|
248,534
|
|
|
|
|
|
|
|
|
|
|
|
7,941,650
|
|
|
7,013,538
|
|
|
928,112
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 28
|
|
November 7
|
|
November 14
|
|
$
|
0.583
|
|
|
$
|
25.06
|
|
|
1,861,187
|
|
|
1,643,677
|
|
|
217,510
|
|
July 28
|
|
August 5
|
|
August 12
|
|
$
|
0.583
|
|
|
$
|
22.84
|
|
|
1,991,304
|
|
|
1,758,587
|
|
|
232,717
|
|
April 29
|
|
May 6
|
|
May 13
|
|
$
|
0.583
|
|
|
$
|
21.14
|
|
|
2,093,257
|
|
|
1,848,626
|
|
|
244,631
|
|
January 29
|
|
February 5
|
|
February 12
|
|
$
|
0.583
|
|
|
$
|
16.27
|
|
|
2,625,681
|
|
|
2,318,827
|
|
|
306,854
|
|
|
|
|
|
|
|
|
|
|
|
8,571,429
|
|
|
7,569,717
|
|
|
1,001,712
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 30
|
|
November 6
|
|
November 13
|
|
$
|
0.583
|
|
|
$
|
27.10
|
|
|
1,543,182
|
|
|
1,362,836
|
|
|
180,346
|
|
July 30
|
|
August 7
|
|
August 14
|
|
$
|
0.583
|
|
|
$
|
30.68
|
|
|
1,337,969
|
|
|
1,181,605
|
|
|
156,364
|
|
April 30
|
|
May 8
|
|
May 15
|
|
$
|
0.570
|
|
|
$
|
37.25
|
|
|
1,061,026
|
|
|
937,028
|
|
|
123,998
|
|
January 29
|
|
February 6
|
|
February 13
|
|
$
|
0.570
|
|
|
$
|
37.50
|
|
|
1,038,375
|
|
|
917,024
|
|
|
121,351
|
|
|
|
|
|
|
|
|
|
|
|
4,980,552
|
|
|
4,398,493
|
|
|
582,059
|
|
We had non-cash operating activities in the form of i-units distributed to us by the Partnership and corresponding non-cash financing activities in the form of share distributions to our shareholders in the amounts of
$137 million
,
$179 million
and
$161 million
during the years ended
December 31, 2017
,
2016
and
2015
, respectively.
PARTNERSHIP TRANSACTIONS IMPACTING SHAREHOLDERS’ EQUITY
Distribution Reduction
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
NOTES TO THE FINANCIAL STATEMENTS
On April 28, 2017, the Partnership announced the results of Enbridge's strategic review of its United States sponsored vehicles, which was conducted as a result of integration efforts post merger with Spectra Energy Corp. The Partnership reduced its quarterly distribution from
$0.583
per unit to
$0.35
per unit or from
$2.33
per unit to
$1.40
per unit on an annualized basis. As a result, of the distribution reduction our quarterly distribution of additional i-units and corresponding Listed shares distributed to the public was reduced from
$0.583
per unit to
$0.35
per unit.
Issuance of Class A Units
On April 27, 2017, the Partnership funded the redemption of the Series 1 Preferred Units through the issuance of
64 million
Class A common units to the General Partner at a price of
$18.66
per Class A common unit. The Class A common units were recognized on April 27, 2017, at fair value. The fair value of the Class A common units was
$18.57
per unit, the market closing price on April 27, 2017, resulting in a
$1.2 billion
increase to the Class A unit capital account.
Redemption of Series 1 Preferred Units
On April 27, 2017, the Partnership redeemed all of its outstanding Series
1
Preferred Units held by the General Partner at face value of
$1.2 billion
in cash.
Simplification of Incentive Distributions
On April 27, 2017, a wholly-owned subsidiary of the General Partner irrevocably waived all of its rights associated with its
66 million
Class D units and
1,000
IDUs, in exchange for the issuance of
1,000
Class F units. The waiving of the Class D units and IDUs by a wholly-owned subsidiary of the General Partner represents an extinguishment, resulting in a de-recognition of the Class D units and IDUs at their carrying value. The Class F units were recorded at their fair value of
$263 million
and the difference between the fair value of the Class F units and the de-recognized Class D units and IDUs were recorded as an increase of
$3 billion
to the General Partner’s capital account.
Alberta Clipper Drop Down to the Partnership
On January 2, 2015, the Partnership completed a transaction, or the Drop Down, pursuant to which it acquired the remaining
66.7%
interest in the United States segment of the Alberta Clipper Pipeline from the General Partner. The consideration consisted of
18,114,975
units of a new class of limited partner interests designated as Class E units with an aggregate value of
$694 million
issued to the General Partner, plus a cash repayment of approximately
$306 million
of indebtedness.
The Partnership recorded the issuance of the Class E units at a fair value of
$768 million
, which was
$364 million
higher than the
$404 million
carrying value of the Partnership’s related noncontrolling interests in Alberta Clipper. As a result, the Partnership reduced the carrying values of the Class A and Class B common units, the i-units, and the General Partner interest by
$364 million
on a pro-rata basis. The recording of this noncash transaction reduced the book basis of our investment in the Partnership, based on our proportionate ownership interest in the Partnership at the time of the transaction, by
$46 million
, net of a
$27 million
tax benefit. A corresponding reduction to our “Shareholders’ equity” was recorded and is reflected under “Capital account adjustments” in the significant changes in the statements of shareholders’ equity. The recording of this transaction also reduced the carrying values of both classes of the common units below zero.
As discussed above, the Partnership Agreement requires that such capital account deficits are cured by additional allocations from the capital accounts of the i-units and the General Partner on a pro-rated basis. Our pro-rated share of this curing as a result of the Drop Down, was
$29 million
, net of a
$17 million
tax benefit, which is reflected as an additional reduction to the book basis of our investment in the Partnership, with a corresponding reduction to our “Shareholders’ equity.”
4. RELATED PARTY TRANSACTIONS
We are a limited partner in the Partnership and, pursuant to a delegation of control agreement among us, the General Partner and the Partnership, we have assumed the General Partner’s responsibility to manage the business and affairs of the Partnership and its subsidiaries. The delegation of control agreement provides that we will not amend or propose to amend the Partnership’s limited Partnership Agreement, allow a merger or consolidation involving the Partnership, allow a sale or exchange of all or substantially all of the assets of the Partnership or dissolve or liquidate the Partnership without the approval of the General Partner.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
NOTES TO THE FINANCIAL STATEMENTS
The General Partner remains responsible to the Partnership for actions taken or omitted by us while serving as the delegate of the General Partner as if the General Partner had itself taken or omitted to take such actions. The General Partner owns all of our voting shares. The General Partner has agreed not to voluntarily withdraw as general partner of the Partnership and has agreed not to transfer its interest as general partner of the Partnership unless the transferee agrees in writing to be bound by the terms and conditions of the delegation of control agreement that apply to the General Partner.
The Partnership recognizes the delegation of rights and powers to us and indemnifies and protects us and our officers and directors to the same extent as it does with respect to the General Partner. In addition, the Partnership reimburses our expenses to the same extent as it does with respect to the General Partner as general partner. The Partnership also reimburses us for any Texas franchise taxes and any other similar capital-based foreign, state and local taxes not otherwise paid or reimbursed by Enbridge pursuant to the tax indemnification agreement.
The General Partner, we and Enbridge, through its affiliates, provide the Partnership with managerial, administrative, operational and director services pursuant to service agreements among all of us. Pursuant to these service agreements, the Partnership reimburses us, the General Partner and affiliates of Enbridge for the costs of these managerial, administrative, operational and director services. Through an operational services agreement among Enbridge, affiliates of Enbridge and the Partnership, the Partnership is charged for the services of our executive management resident in Canada. Through a general and administrative services agreement among the Partnership, the General Partner, us and Enbridge Employee Services, Inc. (EES), a subsidiary of the General Partner, the Partnership is charged for the services of our executive management resident in the United States. In addition, other employees of EES are assigned to work for the General Partner, the Partnership and us, and employer expenses for these employees are charged by EES to each of us, as appropriate. For the years ended
December 31, 2017
,
2016
and
2015
, all costs from EES incurred by us were charged to the Partnership pursuant to these agreements and were immaterial.
5. INCOME TAXES
The terms of the i-units provide that the units owned by us will not be allocated income, gain, loss or deductions of the Partnership for tax purposes until such time that we dispose of our investment in the Partnership. As a result, actual realization of any long-term deferred income tax asset or liability would only occur upon liquidation of our investment in the Partnership.
During the third quarter of 2015, we updated our forecasts and concurrently reevaluated the reversal of our temporary difference related to the investment in the Partnership. As a result of this revision to our forecast, we determined that Class A and Class B common units would continue to be cured primarily from income allocations of the i-units into the foreseeable future. Based on the estimates of our future operating income included in our forecasts, including curing impacts, we concluded that it is not more likely than not that our deferred tax assets will be realized. As a result, we recognized a full valuation allowance on the net deferred tax asset during the third quarter of 2015. The recognition of the valuation allowance resulted in additional tax expense of
$275 million
for the year ended December 31, 2015. We considered our disclosure of the valuation allowance as shown in the effective rate reconciliation as compared to the table of deferred taxes, and noted that this is consistent with our application of the intraperiod allocation of the valuation allowance between the loss in continuing operations and other comprehensive income.
The tax effects of significant temporary differences representing deferred tax assets and (liabilities) are as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
(in millions)
|
Investment in Partnership
|
$
|
199
|
|
|
$
|
321
|
|
Valuation allowance on investment in Partnership
|
(199
|
)
|
|
(321
|
)
|
Net deferred tax asset (liability)
|
$
|
—
|
|
|
$
|
—
|
|
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
NOTES TO THE FINANCIAL STATEMENTS
Our tax years are generally open to examination by the Internal Revenue Service and state revenue authorities for the calendar years ended 2016, 2015 and 2014. There were
no
cash payments for income taxes during the years ended
December 31, 2017
,
2016
and
2015
.
INCOME TAX RATE RECONCILIATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
(in millions of dollars)
|
Loss before income tax benefit (expense)
|
$
|
(43
|
)
|
|
$
|
(122
|
)
|
|
$
|
(380
|
)
|
Federal Income tax benefit
|
15
|
|
|
43
|
|
|
133
|
|
State Income tax benefit
|
1
|
|
|
2
|
|
|
10
|
|
Adjustment to AOCI unwind tax
|
(2
|
)
|
|
—
|
|
|
—
|
|
Tax Rate change
|
(122
|
)
|
|
(4
|
)
|
|
—
|
|
Valuation allowance
|
122
|
|
|
(39
|
)
|
|
(275
|
)
|
Total income tax benefit (expense)
(1)
|
$
|
14
|
|
|
$
|
2
|
|
|
$
|
(132
|
)
|
Effective income tax rate
(2)
|
32.6
|
%
|
|
1.6
|
%
|
|
(34.7
|
)%
|
|
|
(1)
|
Amortization of accumulated other comprehensive income into earnings is recorded before tax to recognize the related tax benefit. Recognition of the tax benefit in earnings does not impact the balance of the deferred tax asset and associated full valuation allowance, which were previously recorded when the losses were reflected in Other Comprehensive Income.
|
|
|
(2)
|
For the year ended December 31, 2015, the effective income tax rate is negative as we had tax expense on a pre-tax book loss. The tax expense is a result of the valuation allowance as noted above, which resulted in a tax expense instead of a tax benefit on the pre-tax book loss for the year ended December 31, 2015.
|
2017 TAX REFORM
On December 22, 2017, United States legislation referred to as the "Tax Cuts and Jobs Act" (the TCJA) was signed into law. Substantially all of the provisions of the TCJA are effective for taxable years beginning after December 31, 2017. The TCJA includes significant changes to the Internal Revenue Code of 1986 (as amended, the Code), including amendments which significantly change the taxation of individual and business entities. Changes in the Code from the TCJA did not have a material impact on our financial statements in 2017.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
NOTES TO THE FINANCIAL STATEMENTS
6. SUMMARIZED FINANCIAL INFORMATION FOR THE PARTNERSHIP
The following table provides summarized financial information of the Partnership:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(in millions)
|
Operating revenue
|
$
|
2,428
|
|
|
$
|
2,516
|
|
|
$
|
2,303
|
|
Operating expenses
|
1,307
|
|
|
2,035
|
|
|
1,339
|
|
Operating income
|
$
|
1,121
|
|
|
$
|
481
|
|
|
$
|
964
|
|
Income from continuing operations
|
708
|
|
|
116
|
|
|
739
|
|
Net income (loss)
|
651
|
|
|
(41
|
)
|
|
454
|
|
Less: Net income attributable to:
|
|
|
|
|
|
|
|
|
Noncontrolling interest
|
369
|
|
|
26
|
|
|
221
|
|
Series 1 preferred unit distributions
|
29
|
|
|
90
|
|
|
90
|
|
Accretion of discount on Series 1 preferred units
|
8
|
|
|
5
|
|
|
11
|
|
Net income (loss) attributable to Enbridge Energy Partners, L.P.
|
$
|
245
|
|
|
$
|
(162
|
)
|
|
$
|
132
|
|
Less: Net income attributable to the General Partner
(1)
|
$
|
45
|
|
|
$
|
215
|
|
|
$
|
217
|
|
Net income (loss) attributable to common units and i-units
(2)
|
$
|
200
|
|
|
$
|
(377
|
)
|
|
$
|
(85
|
)
|
|
|
|
|
|
|
Current assets
(3)
|
$
|
330
|
|
|
$
|
401
|
|
|
|
Long-term assets
(4)
|
$
|
14,498
|
|
|
$
|
17,709
|
|
|
|
Current liabilities
(5)
|
$
|
935
|
|
|
$
|
1,102
|
|
|
|
Long-term liabilities
(6)
|
$
|
7,154
|
|
|
$
|
9,185
|
|
|
|
Noncontrolling interests
|
$
|
4,969
|
|
|
$
|
3,846
|
|
|
|
Partners’ capital
|
$
|
1,770
|
|
|
$
|
3,977
|
|
|
|
_______________________________
|
|
(1)
|
Net income attributable to the General Partner includes net income attributable to the general partner interest as well as to Class F units and Class E units.
|
|
|
(2)
|
The Partnership allocates its net income among the General Partner and limited partners using the two-class method in accordance with applicable authoritative accounting guidance. Under the two-class method, the Partnership allocates its net income after noncontrolling interests to the General Partner and limited partners, including us, according to the distribution formula for available cash as set forth in the Partnership Agreement.
|
|
|
(3)
|
Current assets included
$139 million
related to discontinued operations in 2016.
|
|
|
(4)
|
Long-term assets included
$4,775 million
related to discontinued operations in 2016.
|
|
|
(5)
|
Current liabilities included
$300 million
related to discontinued operations in 2016.
|
|
|
(6)
|
Long-term liabilities included
$844 million
related to discontinued operations in 2016.
|
7. CONTINGENCIES
We are in discovery in relation to a unitholder derivative action, with trial scheduled in the fourth quarter of 2018. Accordingly, an estimate of reasonably possible losses, if any, associated with causes of action cannot be made until all of the facts, circumstances and legal theories relating to such claims and the defenses are fully disclosed and analyzed. We have not established any reserves relating to this action. We believe the action is without merit and expect to vigorously defend against it. We believe an unfavorable outcome to be more than remote but less than probable.
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
NOTES TO THE FINANCIAL STATEMENTS
8. SUPPLEMENTAL SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
|
(in millions, except per share amounts)
|
2017 Quarters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(2
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
(23
|
)
|
|
$
|
(29
|
)
|
Net loss per share, (basic and diluted)
|
(0.02
|
)
|
|
(0.02
|
)
|
|
(0.02
|
)
|
|
(0.27
|
)
|
|
$
|
(0.34
|
)
|
2016 Quarters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
(117
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
$
|
(120
|
)
|
Net loss per share, (basic and diluted)
|
(1.56
|
)
|
|
(0.02
|
)
|
|
(0.02
|
)
|
|
(0.02
|
)
|
|
$
|
(1.54
|
)
|
ENBRIDGE ENERGY MANAGEMENT, L.L.C.
NOTES TO THE FINANCIAL STATEMENTS
9. SUBSEQUENT EVENTS
SHARE DISTRIBUTION
On
January 31, 2018
, our board of directors declared a share distribution payable on
February 14, 2018
, to shareholders of record as of
February 7, 2018
, based on the
$0.35
per limited partner unit distribution declared by the Partnership. The Partnership’s distribution increases the number of i-units that we own. The number of i-units we received from the Partnership on
February 14, 2018
was
2,261,583
. The amount of this increase is calculated by dividing
$0.35
, the cash amount distributed by the Partnership per common unit by
$13.90
, the average closing price of one of our Listed Shares on the NYSE for the
10
-day trading period immediately preceding the ex-dividend date for our shares, multiplied by
89,798,812
, the number of shares outstanding on the record date. We distributed an additional
1,997,280
Listed Shares to our public shareholders and
264,303
shares to the General Partner in respect of these additional i-units.