Finance & Investing | Capital Markets
Enbridge Partners Lowers Interest in Expansion Projects
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Enbridge Energy Partners LP has exercised its options to decrease its economic interests in the Lakehead system expansions of both the Eastern Access and Mainline Expansion projects from 40 percent to 25 percent.
Additionally, Enbridge Partners and certain of its subsidiaries plan to enter into an agreement on June 28, 2013 with a subsidiary of Enbridge Inc. whereby Enbridge will purchase the accounts receivables of certain of EEP's subsidiaries on a monthly basis through 2016 until EEP's large growth capital commitments are permanently funded.
Enbridge Partners in early May announced its intention to decrease its respective interests in the Eastern Access and Mainline Expansion projects. Enbridge Partners expects to receive approximately $100 million from its general partner before the end of the current quarter related to the 15 percent of the capital it has funded to-date pursuant to these expansion projects.
Pursuant to the Eastern Access and Mainline Expansion Joint Funding Arrangements with its general partner, EEP has the option to decrease its economic interest and associated funding of these liquids market access projects by up to 15 percentage points, from 40 percent to 25 percent, with the option expiring June 30, 2013. EEP will have the option to increase its economic interest by up to 15 percentage points in the Lakehead System expansions of both the Eastern Access and Mainline Expansion projects within one year of the final project in-service dates. Final phases of the Eastern Access and Mainline Expansion projects are currently targeted for completion in 2016.
The primary objective of the accounts receivable transaction is to further enhance EEP's available liquidity, and its cash available from operations for payment of distributions, during the next few years until EEP's large growth capital commitments are permanently funded, as well as providing an annual saving in EEP's cost of funding during this period. The program will apply to all or a portion of the investment grade receivables recorded in EEP's consolidated accounts receivable records. It is anticipated that approximately $215 million of receivables will be purchased each month. The receivables will be purchased each month at their accrued value less a discount to compensate Enbridge for its investment and risk of non-collection. EEP plans to apply the proceeds to maintain liquidity while deferring permanent funding of a corresponding portion of its growth program at an annual saving in funding costs of approximately $10 million. Enbridge Partners expects to enter into the accounts receivable funding arrangement on June 28, 2013.
Mark Maki, president of EEP, commented on the liquidity actions, "Enbridge Partners has an exceptional organic growth program in front of it, primarily low risk attractive return crude oil pipeline investments that will contribute significant growth in distributable cash flow as they come into service over the next several years. Our objective is to fund this program as efficiently as possible to capture the greatest accretion in cash flow per unit, supporting continued modest growth in distributions in the interim while preserving appropriate credit rating metrics. The exercise of the 15 percent pare down options will reduce EEP's near term funding requirements, facilitating the efficient funding of the rest of the program while preserving our flexibility to reacquire these interests once they are generating cash flow."
"The receivables transaction will further reduce both our near term debt and equity funding requirements, deferring permanent funding until the growth projects are generating cash flow while providing a significant saving in cost of funding that will bolster distribution coverage during this period. In combination, these two actions leave us with a very manageable equity funding requirement with ample flexibility on the timing of satisfying that requirement," added Mr. Maki.
Both the exercise of the put options under the Joint Funding Arrangements and the accounts receivable transaction were reviewed and recommended to the Board of Enbridge Energy Management, L.L.C. by a committee of independent directors.