Enbridge Energy Partners Reports Strong 2009 Earnings and Declares Cash Distribution
HOUSTON, TX-- Enbridge Energy Partners, L.P. (NYSE:EEP - News)
("Enbridge Partners" or "the Partnership") today declared a cash
distribution of $0.99 per unit payable February 12, 2010 to unitholders of
record on February 5, 2010 (ex-dividend date is February 3, 2010). The
Partnership's key financial results for the fourth quarter and full year of
2009, compared to the same periods in 2008, were as follows:
Three Months Ended Twelve Months Ended
December 31, December 31,
(unaudited, dollars in millions --------------------- ---------------------
except per unit amounts) 2009 2008 2009 2008
---------- ---------- ---------- ----------
Net income* $ 73.3 $ 121.9 $ 316.6 $ 403.2
Net income per unit 0.50 1.04 2.24 3.64
---------- ---------- ---------- ----------
Adjusted EBITDA* 215.3 196.0 884.0 766.3
Adjusted net income* 89.4 82.8 377.1 355.3
Adjusted net income per unit 0.64 0.67 2.75 3.15
---------- ---------- ---------- ----------
*excluding earnings attributable to noncontrolling interest
Adjusted net income reported above eliminates the impact of non-cash,
mark-to-market, gains and losses, which arise from changes in the fair
value of certain of the Partnership's derivative instruments that do not
qualify for hedge accounting treatment under applicable accounting
standards. Also, removed from 2009 adjusted earnings is the impact of
expired joint tariff revenues recognized during the first and fourth
quarters that affected the Partnership's liquids operations (see Non-GAAP
Reconciliations section below), a non-cash impairment charge related to the
non-core natural gas pipeline assets that were sold in November 2009 and
net income attributable to the noncontrolling interest in the Partnership's
Alberta Clipper pipeline project. Terrance L. McGill, president of the Partnership's management company and
of its general partner, commented: "We are extremely pleased with the
Partnership's 2009 results, which were above our guidance and reflect the
dedication, commitment and decisive actions taken by the talented employees
operating the Partnership, to reduce costs and find effective financing
alternatives for its expansion program, under one of the toughest economic
environments in recent history." McGill added, "We have made significant progress on the Partnership's main
projects. The Phase VI expansion of the North Dakota system was placed in
service on January 1, 2010 and we now expect that the Alberta Clipper
project will be ready for service by April 1, 2010. While we see improving
energy fundamentals, we expect 2010 will also be a challenging year for the
Partnership and we will continue the measures that contributed to the
strong results achieved in 2009. We estimate that the Partnership's 2010
EBITDA will increase by approximately 11% and its net income will be
between $350 million and $380 million for the year." For the fourth quarter of 2009, the Partnership reported progress on its
major internal growth initiatives, as follows:
-- Alberta Clipper: The Alberta Clipper project involves construction of a
new 36-inch diameter, 1,000 mile heavy crude oil pipeline from Hardisty,
Alberta to Superior, Wisconsin. Alberta Clipper will have an initial
capacity of 450,000 Bpd and allows for expansions up to 800,000 Bpd by
adding pump stations. Alberta Clipper will be a common carrier line fully
integrated with the Enbridge/Lakehead mainline systems for tolling
purposes. For both the Canadian and United States segments of the Alberta
Clipper Project, tariffs filed with the appropriate regulators will be
effective on April 1, 2010, the date the project is expected to be ready
for service. The tariff for the United States segment, and its effective
date, will be filed on the basis of the Alberta Clipper US Term Sheet,
despite recent petitions filed by two shippers requesting the Federal
Energy Regulatory Commission ("FERC") to delay the tariff. The Alberta
Clipper US Term Sheet was approved by the Canadian Association of Petroleum
Producers ("CAPP") on June 28, 2007 and by the FERC on August 28, 2008.
Enbridge continues to review the shipper petitions but believes them to be
without merit. The commercial structure for this expansion is a cost-of-
service based surcharge that will be added to the existing transportation
rates. We anticipate that the Partnership's share of the first full year of
EBITDA resulting from the completion of this project will approximate $57
million.
-- North Dakota: The expansion the Partnership's North Dakota system,
referred to as Phase VI, was placed in service on January 1, 2010. This
$150 million additional expansion consisting of upgrades to existing pump
stations, additional tankage, as well as extensive use of drag reducing
agents, or DRA, that are injected into the pipeline, increased system
capacity to 161,000 Bpd from the 110,000 Bpd that was previously available.
The commercial structure for this expansion is a cost-of-service based
surcharge that will be added to the existing transportation rates.
Completion of the Alberta Clipper project will conclude the largest capital
expansion program undertaken by the Partnership in its nearly 20 year
history.
COMPARATIVE EARNINGS STATEMENT
Three Months Ended Twelve Months Ended
December 31, December 31,
(unaudited, dollars in millions -------------------- ---------------------
except per unit amounts) 2009 2008 2009 2008
---------- --------- --------- ----------
Operating revenue $ 1,627.6 $ 1,854.0 $ 5,731.8 $ 9,898.7
Operating expenses:
Cost of natural gas 1,251.5 1,434.9 4,180.8 8,454.5
Operating and administrative 149.6 149.7 548.6 513.0
Power 31.2 36.1 128.1 140.7
Depreciation and amortization 66.0 56.6 257.7 209.9
---------- --------- --------- ----------
Operating income 129.3 176.7 616.6 580.6
Interest expense 58.7 51.0 228.6 180.6
Other income 10.9 0.4 13.4 1.9
---------- --------- --------- ----------
Income from continuing
operations before income tax
expense 81.5 126.1 401.4 401.9
Income tax expense 1.7 2.0 8.5 7.0
---------- --------- --------- ----------
Income from continuing
operations 79.8 124.1 392.9 394.9
Income (loss) from discontinued
operations 2.6 (2.2) (64.9) 8.3
---------- --------- --------- ----------
Net income 82.4 121.9 328.0 403.2
Less: Net income attributable
to noncontrolling
interest 9.1 -- 11.4 --
---------- --------- --------- ----------
Net income attributable to
general and limited partner
ownership interests in
Enbridge Energy Partners, L.P. $ 73.3 $ 121.9 $ 316.6 $ 403.2
Less: Allocations to General
Partner 13.9 14.6 55.8 49.7
---------- --------- --------- ----------
Net income allocable to Limited
Partners $ 59.4 $ 107.3 $ 260.8 $ 353.5
Weighted average Limited
Partner units (millions) 117.6 102.7 116.4 97.1
---------- --------- --------- ----------
Net income per Limited Partner
unit $ 0.50 $ 1.04 $ 2.24 $ 3.64
---------- --------- --------- ----------
COMPARISON OF QUARTERLY RESULTS The following discussions address the primary factors affecting the
Partnership's financial results for the fourth quarter of 2009 as compared
with the fourth quarter of 2008. The comparison refers to adjusted
operating income, which excludes the effect of noncash and nonrecurring
items (see Non-GAAP Reconciliations section below).
Three Months Ended Twelve Months Ended
Adjusted Operating Income December 31, December 31,
(unaudited, dollars in -------------------- --------------------
millions) 2009 2008 2009 2008
--------- --------- --------- ---------
Liquids $ 117.5 $ 95.4 $ 443.7 $ 342.2
Natural Gas 27.8 35.8 154.2 170.9
Marketing 3.4 6.5 21.3 24.4
Corporate (2.2) (0.1) (5.2) (4.8)
--------- --------- --------- ---------
Adjusted operating income $ 146.5 $ 137.6 $ 614.0 $ 532.7
--------- --------- --------- ---------
Liquids - Fourth quarter adjusted operating income for the Liquids segment
increased to $117.5 million. Adjusted operating revenue increased by $35.0
million, primarily driven by transportation rate increases related to the
following:
-- Effective April 1, 2009, we increased our transportation rates in
connection with the completion of Stage 2 of our Southern Access Expansion;
and
-- Annual index rate increases on all three of our major systems that become
effective on July 1, 2009.
Volumes decreased for the fourth quarter of 2009 as compared to the same
period in 2008, as shown in the table below, primarily due to outages and
unplanned maintenance performed by producers which reduced crude oil
supplies from upstream production facilities.
Three months ended Twelve months ended
Liquids Systems Deliveries December 31, December 31,
-------------------- ---------------------
(thousand barrels per day) 2009 2008 2009 2008
---------- ---------- ---------- ----------
Lakehead 1,672 1,721 1,650 1,620
Mid-Continent 236 209 238 231
North Dakota 121 116 116 111
---------- ---------- ---------- ----------
Total 2,029 2,046 2,003 1,962
---------- ---------- ---------- ----------
The increases in operating revenue were partially offset by $10.8 million
of increased adjusted operating costs that are primarily due to our
expanded system, but also include the costs for leasing additional short
term pipeline capacity from an affiliate, increased repair and maintenance
activities and additional pipeline integrity work. The new assets placed
in service over the past year also resulted in $7 million of additional
depreciation expense, although the expanded capacity of the system allows
for the more efficient transport of greater volumes of crude oil resulting
in a $4.9 million reduction in power costs. Natural Gas - Quarterly adjusted operating income for the Natural Gas
segment decreased $8.0 million, to $27.8 million primarily due to reduced
natural gas volumes on our systems. The impact of lower natural gas
volumes was offset by an $13 million reduction in operating costs. The
reduction in operating costs was attributable to the initiatives taken in
2009 to reduce expenditures for operating costs associated with the Natural
Gas business. The decline in adjusted operating income was further offset
by improved system gain/loss experience resulting from process and quality
improvements implemented since 2008.
Three months ended Twelve months ended
Natural Gas Throughput December 31, December 31,
-------------------- ---------------------
(MMBtu per day) 2009 2008 2009 2008
---------- ---------- ---------- ----------
East Texas 1,227,000 1,623,000 1,443,000 1,479,000
Anadarko 519,000 645,000 570,000 647,000
North Texas 371,000 434,000 387,000 395,000
---------- ---------- ---------- ----------
Total 2,117,000 2,702,000 2,400,000 2,521,000
---------- ---------- ---------- ----------
Marketing - The Marketing segment reported adjusted operating income of
$3.4 million, a decrease of $3.1 million from the $6.5 million of adjusted
operating income for the same period of 2008. The decline is attributable
to a more stable natural gas pricing environment in the current quarter
compared with the same quarter last year, which narrowed the basis between
receipt and delivery points where natural gas is purchased and sold by our
Marketing business. Partnership Financing - Interest expense in the fourth quarter of 2009
increased by $7.7 million, to $58.7 million, primarily due to a $4.5
million reduction in capitalized interest coupled with an increase in our
overall weighted average debt outstanding. Interest capitalized on
construction work in progress totaled $5.3 million for the fourth quarter
of 2009, which was $4.5 million lower due to the completion of the second
stage of our Southern Access project in April 2009. During the quarter, pursuant to the joint funding arrangement with
affiliates of Enbridge, approximately $126.7 million of equity capital in
the form of a noncontrolling interest was obtained for construction of the
Alberta Clipper pipeline project, coupled with $103.6 million of additional
affiliate debt borrowings. ENBRIDGE ENERGY MANAGEMENT DISTRIBUTION Enbridge Energy Management, L.L.C. (NYSE:EEQ - News) declared a distribution of
$0.99 per share payable February 12, 2010 to shareholders of record on
February 5, 2010. The distribution will be paid in the form of additional
shares of Enbridge Energy Management valued at the average closing price of
the shares for the 10 trading days prior to the ex-dividend date on
February 3, 2010. MANAGEMENT REVIEW OF QUARTERLY RESULTS Enbridge Partners will review its quarterly financial results and business
outlook in an Internet presentation, commencing at 10 a.m. Eastern Time on
Monday, February 1, 2010. Interested parties may watch the live webcast at
the link provided below. A replay will be available shortly afterward.
Presentation slides and condensed unaudited financial statements will also
be available at the link below. EEP Earnings Release: www.enbridgepartners.com Alternate Webcast Link: www.investorcalendar.com/IC/CEPage.asp?ID=153328 The audio portion of the presentation will be accessible by telephone at
(877) 407-0782 and can be replayed until February 15, 2010 by calling (877)
660-6853 and entering Conference Account: 286, ID: 339482. An audio replay
will also be available for download in MP3 format from either of the
website addresses above. NON-GAAP RECONCILIATIONS Adjusted net income and adjusted operating income for the principal
business segments are provided to illustrate trends in income excluding
derivative fair value losses and gains that affect earnings but do not
impact cash flow. These 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 accepted in the United States.
Three Months Ended Twelve Months Ended
Adjusted Earnings December 31, December 31,
-------------------- --------------------
(unaudited, dollars in millions
except per unit amounts) 2009 2008 2009 2008
--------- --------- --------- ---------
Net income $ 82.4 $ 121.9 $ 328.0 $ 403.2
Expired joint tariff revenues (4.8) -- (18.3) --
Impairment charge (1.6) -- 64.5 --
Project write-offs -- 5.8 -- 5.8
Hurricane impact -- 6.4 -- 15.1
Noncash derivative fair value
(gains) losses
-Natural Gas 23.1 (43.6) 36.4 (85.0)
-Marketing (1.1) (7.7) (20.7) 16.2
-Corporate (1) 0.5 -- (1.4) --
Net income attributable to
noncontrolling interest (9.1) -- (11.4) --
--------- --------- --------- ---------
Adjusted net income (2) 89.4 82.8 377.1 355.3
Less: Allocations to General
Partner 14.3 13.7 57.0 48.7
--------- --------- --------- ---------
Adjusted net income allocable
to Limited Partners 75.1 69.1 320.1 306.6
Weighted average units
(millions) 117.6 102.7 116.4 97.1
--------- --------- --------- ---------
Adjusted net income per Limited
Partner unit $ 0.64 $ 0.67 $ 2.75 $ 3.15
--------- --------- --------- ---------
(1) Noncash derivative fair value gains (losses) for the twelve months
ended December 31, 2009 consisted of realized non-cash derivative gains of
$0.9 million from the settlement of interest rate swaps.
(2) Adjusted net income includes $1.0 million and $(0.4) million for the
three and twelve months ended December 31, 2009, respectively, and
($0.5) million and $10.9 million for the three and twelve months ended
December 31, 2008, respectively, associated with the non-core natural
gas pipeline assets sold in November 2009.
Three Months Ended Twelve Months Ended
Liquids December 31, December 31,
-------------------- ---------------------
(unaudited, dollars in
millions) 2009 2008 2009 2008
--------- --------- --------- ----------
Operating income $ 122.3 $ 95.4 $ 462.0 $ 342.2
Expired joint tariff revenues (4.8) -- (18.3) --
--------- --------- --------- ----------
Adjusted operating income $ 117.5 $ 95.4 $ 443.7 $ 342.2
--------- --------- --------- ----------
Three Months Ended Twelve Months Ended
Natural Gas December 31, December 31,
-------------------- --------------------
(unaudited, dollars in
millions) 2009 2008 2009 2008
--------- --------- --------- ---------
Operating income $ 4.7 $ 69.5 $ 117.8 $ 237.8
Hurricane impact -- 6.4 -- 14.6
Project write-offs -- 3.5 -- 3.5
Noncash derivative fair value
losses (gains) 23.1 (43.6) 36.4 (85.0)
--------- --------- --------- ---------
Adjusted operating income* $ 27.8 $ 35.8 $ 154.2 $ 170.9
--------- --------- --------- ---------
* Adjusted operating income includes $2.0 million and $2.6 million for the
three and twelve months ended December 31, 2008, respectively, associated
with the non-core natural gas pipeline assets sold in November 2009.
Three Months Ended Twelve Months
Marketing December 31, Ended December 31,
------------------ -------------------
(unaudited, dollars in millions) 2009 2008 2009 2008
-------- -------- -------- ---------
Operating income $ 4.5 $ 14.2 $ 42.0 $ 7.7
Hurricane impact -- -- -- 0.5
Noncash derivative fair value
losses (gains) (1.1) (7.7) (20.7) 16.2
-------- -------- -------- ---------
Adjusted operating income $ 3.4 $ 6.5 $ 21.3 $ 24.4
-------- -------- -------- ---------
Three Months Ended Twelve Months
Corporate December 31, Ended December 31,
------------------ -------------------
(unaudited, dollars in millions) 2009 2008 2009 2008
-------- -------- -------- --------
Operating loss $ (2.2) $ (2.4) $ (5.2) $ (7.1)
Project write-offs -- 2.3 -- 2.3
-------- -------- -------- --------
Adjusted operating loss $ (2.2) $ (0.1) $ (5.2) $ (4.8)
-------- -------- -------- --------
Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization) 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 unit holders. The following reconciliation
of net cash provided by operating activities to adjusted EBITDA is provided
because EBITDA is not a financial measure recognized under generally
accepted accounting principles.
Adjusted EBITDA Three Months Ended Twelve Months Ended
December 31, December 31,
(unaudited, dollars in -------------------- --------------------
millions) 2009 2008 2009 2008
--------- --------- --------- ---------
Net cash provided by operating
activities $ 145.5 $ 70.1 $ 728.4 $ 543.3
Expired joint tariff revenues (4.8) -- (18.3) --
Hurricane impact -- 6.4 -- 15.1
Project write-offs -- 5.8 -- 5.8
Changes in operating assets and
liabilities, net of cash
acquired 21.6 66.2 (40.0) 17.9
Interest expense (excluding MTM
adjustments) 58.2 50.9 228.2 180.6
Income tax expense 1.7 2.0 8.5 7.0
Settlement of interest rate
swaps/treasury locks -- -- 0.7 22.1
Net income attributable to
noncontrolling interest (9.1) -- (11.4) --
Other 2.2 (5.4) (12.1) (25.5)
--------- --------- --------- ---------
Adjusted EBITDA* $ 215.3 $ 196.0 $ 884.0 $ 766.3
--------- --------- --------- ---------
*Adjusted EBITDA includes $1.0 million and $11.2 million for the three
and twelve months ended December 31, 2009, respectively, and $3.2 million
and $24.5 million for the three and twelve months ended December 31, 2008,
respectively, associated with the non-core natural gas pipeline assets
sold in November 2009.
LEGAL NOTICE 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," "continue,"
"estimate," "expect," "forecast," "intend," "may," "plan," "position,"
"projection," "strategy" or "will." Forward-looking 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 Enbridge
Partners' 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)
Enbridge Partners' ability to successfully complete and finance its capital
expansion projects; (3) the effects of competition, in particular, by other
pipeline systems; (4) shut-downs or cutbacks at facilities of Enbridge
Partners or refineries, petrochemical plants, utilities or other businesses
for which Enbridge Partners transports products or to whom Enbridge
Partners sells products; (5) hazards and operating risks that may not be
covered fully by insurance; (6) changes in or challenges to Enbridge
Partners' tariff rates; (7) changes in laws or regulations to which
Enbridge Partners is subject, including compliance with environmental and
operational safety regulations that may increase costs of system integrity
testing and maintenance. Reference should also be made to Enbridge Partners' filings with the U.S.
Securities and Exchange Commission; including its Annual Report on Form
10-K for the most recently completed fiscal year and its subsequently filed
Quarterly Reports 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 via the Partnership's web site. PARTNERSHIP INFORMATION Enbridge Energy Partners, L.P. (www.enbridgepartners.com) owns and operates
a diversified portfolio of crude oil and natural gas transportation systems
in the United States. Its principal crude oil system is the largest
transporter of growing oil production from western Canada. The system's
deliveries to refining centers and connected carriers in the United States
account for approximately 11 percent of total U.S. oil imports; while
deliveries to Ontario, Canada satisfy approximately 60 percent of refinery
demand in that region. The Partnership's natural gas gathering, treating,
processing and transmission assets, which are principally located onshore
in the active U.S. Mid-Continent and Gulf Coast area, deliver approximately
3 billion cubic feet of natural gas daily. Enbridge Energy Management, L.L.C. (www.enbridgemanagement.com) manages the
business and affairs of the Partnership and its sole asset is an
approximate 14 percent interest in the Partnership. Enbridge Energy
Company, Inc., an indirect wholly owned subsidiary of Enbridge Inc. of
Calgary, Alberta, (NYSE:ENB - News) (TSX:ENB - News) (www.enbridge.com) is the general
partner and holds an approximate 27 percent interest in the Partnership. | 
