Enbridge Energy Partners, L.P. Announces Conclusion of

HOUSTON, TX--(Marketwired - Apr 28, 2017) - Enbridge Energy Partners, L.P. (NYSE: EEP) (EEP or the Partnership) announced today that it has concluded its strategic review and taken several comprehensive actions to strengthen the Partnership's financial position and outlook. The actions, taken together with its general partner, Enbridge Energy Company, Inc. (EECI or the General Partner), a subsidiary of Enbridge Inc. (NYSE: ENB) (Enbridge), position the Partnership as a pure-play, liquids pipeline MLP with a low-risk commercial profile, stable cash flows, a strong balance sheet, healthy distribution coverage, visible growth and very limited external capital needs.

Summary of the Actions

• Quarterly distributions are reduced from $0.583 per unit to $0.350 per unit or from $2.332 per unit to $1.40 per unit on an annualized basis. Pro forma 2017 annualized total distribution coverage and cash distribution coverage are expected to approximate 1.2x and 1.5x, respectively;
  
  
• EEP will sell all of its interests in the Midcoast Gas Gathering and Processing business (the Midcoast Sale) to EECI for $2.15 billion, including cash consideration of $1.31 billion and existing indebtedness of Midcoast Energy Partners. L.P. (MEP) (which was $840 million as of March 31, 2017). The Midcoast Sale, along with other restructuring actions, will strengthen EEP's balance sheet through the elimination of approximately $1.4 billion in consolidated indebtedness;
  
  
• The Joint Funding Arrangement for the Bakken Pipeline System investment was finalized with EEP's initial ownership at 25 percent, and includes an option for EEP to purchase an additional 20 percent from Enbridge at net book value;
  
  
• EEP has redeemed all of its Series 1 Preferred Units which are held by EECI for $1.2 billion with proceeds from the issuance to EECI of $1.2 billion of Class A common units. The accrued distributions balance in respect of the Series 1 Preferred Units (Deferred Distribution) of $357 million will be repaid in full to EECI with a portion of the cash proceeds from the Midcoast Sale; and
  
  
• EEP has simplified its capital structure and modified its incentive distribution mechanism to better align limited partner and general partner interests.
  
  

Mark Maki, President of EEP, commented, "The restructuring actions announced today, together with those announced on January 27, 2017, establish EEP as a pure-play liquids pipeline MLP -- with premium low-risk assets, a strong financial position, self-funding capability, conservative distribution coverage and visible growth."

Description of the Actions

Distribution Reduction

The Board of Directors of Enbridge Energy Management, L.L.C. (EEM), the delegate of the Partnership's General Partner, (the Board) has declared a quarterly cash distribution of $0.35 per unit, or $1.40 per unit on an annualized basis, on all of the Partnership's outstanding units for the quarter ended March 31, 2017. The distribution is payable on May 15, 2017 to unitholders of record at the close of business on May 8, 2017. This distribution represents a reduction of approximately 40 percent from EEP's fourth quarter 2016 distribution of $0.583 per unit, or $2.332 per unit on an annualized basis. As a result of the revised distribution level and other restructuring actions, EEP expects total distribution and cash distribution coverage to be approximately 1.2x and 1.5x in 2017, respectively, and will target these coverage levels in the future. 

"A reduction in the distribution to unitholders was a difficult decision for EEP, but is prudent and is required to re-align EEP's distribution level with its cash flow generating capacity," continued Mr. Maki. "Retaining more cash flow allows EEP to internally fund more of its attractive growth projects, removes the need for public equity, and strengthens its balance sheet."

Over the long-term, Management expects distribution growth to approximately follow distributable cash flow growth. Management may consider a distribution increase as early as the second half of 2018 should EEP's operating performance and financial outlook support it. Future quarterly distributions are subject to declaration and approval by EEP's Board.

Midcoast Sale

EEP has entered into a definitive agreement with EECI pursuant to which EECI will acquire all of EEP's ownership interests in the Midcoast Gas Gathering and Processing business, which is expected to close in the second quarter of 2017, subject to customary closing conditions including expiration or termination of the waiting period under the HSR Act. EECI will acquire EEP's 48.4 percent limited partner interest in Midcoast Operating, L.P., EEP's 51.9 percent limited partner interest in MEP, and EEP's 100 percent interest in MEP's general partner for $2.15 billion which includes cash consideration of $1.31 billion and outstanding indebtedness at MEP (which was $840 million as of March 31, 2017). The value of EEP's Midcoast sale is economically equivalent to the per unit price paid by EECI to the public unitholders of MEP, which closed on April 27, 2017. 

The Midcoast Sale will return EEP to being a pure-play liquids pipeline MLP. The sale proceeds will help permanently fund an investment in the Bakken Pipeline System and also provide net cash proceeds to repay debt and strengthen EEP's balance sheet. 

Finalization of Joint Funding Arrangement for Bakken Pipeline System

The Joint Funding Arrangement for the Bakken Pipeline System investment has been finalized. EEP will initially own 25 percent and Enbridge will own 75 percent of their effective 27.6 percent interest. EEP has funded its investment of approximately $375 million from borrowings, to be repaid from the cash to be received from the finalization of the Midcoast Sale. No external equity capital will be required for this investment. As part of the Joint Funding Arrangement, EEP will have a five-year option to acquire an additional 20 percent interest from Enbridge at net book value. The construction of the Bakken Pipeline System's underlying projects is nearing completion and is expected to begin generating cash flow during the second quarter of 2017. With the finalization of the Joint Funding Arrangement, EEP will repay a $1.5 billion intercompany loan to Enbridge, which was used initially by EEP to close the Bakken Pipeline System investment acquisition in February 2017.

Simplified Capital Structure and Enhancement of Balance Sheet

The Partnership has entered into a series of transactions to simplify its capital structure. EEP has redeemed in full its $1.2 billion of outstanding Series 1 Preferred Units held by EECI, which was funded with the proceeds of the issuance to EECI of $1.2 billion (or 64,308,682) Class A common units. EEP has also agreed to repay the $357 million Deferred Distribution balance owing to EECI with proceeds from the Midcoast Sale. These actions simplify EEP's capital structure, further align the general partner and limited partner interests, and enhance EEP's credit profile.

EEP also announced the termination of its accounts receivable sales agreement with Enbridge. This arrangement is no longer necessary and represents a further simplification measure.

Simplification of Incentive Distribution Mechanism

EEP and its General Partner have simplified the incentive distribution mechanism by providing an ongoing incentive for growth without materially impacting EEP's equity cost of capital. In 2014, the Incentive Distribution Rights were restructured, resulting in the creation of 1,000 Incentive Distribution Units and 66.1 million Class D units. Today, EECI has irrevocably waived all of its rights associated with both the Incentive Distribution Units and Class D Units (the Waiver). 

As consideration for the Waiver, EEP has issued 1,000 newly created Class F units to EECI. The Class F units will be entitled to receive incentive distributions equivalent to EEP's 13 percent/23 percent incentive distribution tiers in place prior to EEP's 2014 IDR Restructuring. Specifically, the Class F units are entitled to: (i) 13 percent of all cash distributions in excess of $0.295 per unit ($1.18 annualized), and (ii) a maximum tier of 23 percent of all cash distributions in excess of $0.350 per unit ($1.40 annualized). The distributions to be paid in respect of the Class F Units at EEP's reduced $1.40 per unit annualized distribution rate equate to $15 million per annum, or approximately 2 percent of the Partnership's 2017 pro forma cash flows. 

Business and Financial Outlook

"We are looking forward to EEP's prospects as a restructured pure-play liquids pipeline MLP," said Mr. Maki. "EEP is effectively 'returning to its roots'. The core business fundamentals around EEP's liquids pipelines systems remain strong. Our liquids pipeline systems provide unrivalled connectivity to North America's premier refining centers and our tolls offer the most competitive transportation rates; and we expect demand for these systems to remain strong. As a result of the actions we announced today, EEP will be better positioned to unlock the value in its critical North American liquids pipelines."

Assuming today's announced actions had gone into effect on January 1, 2017, the Partnership would have expected 2017 Adjusted EBITDA and Distributable Cash Flow (DCF) of $1,580 - $1,680 million and $700 - $750 million, respectively. EEP also expects pro forma annualized total distribution and cash distribution coverage levels of approximately 1.2x and 1.5x, respectively. EEP will target distribution coverage ratios similar to these levels through the 2020 planning horizon.

The Partnership expects to grow its distributable cash flow per unit by approximately 3 percent per year on average through its 2020 planning horizon. Distributable cash flow growth will be primarily underpinned by EEP's Mainline liquids pipeline business. EEP will benefit from embedded organic growth associated with rising contracted volumes in the Bakken Pipeline System and higher toll surcharges on its existing 25 percent interest in the Mainline Expansion Project when it fully enters service. In addition, EEP holds purchase options under existing joint funding arrangements to acquire additional interests in three projects at net book value aggregating to $1.6 billion, namely: 20 percent of the Bakken Pipeline System investment, 15 percent of the Mainline Expansion Project and 39 percent of the Line 3 Replacement Program. EEP expects to exercise these options after each project is placed into service once they are producing cash flow. Further organic growth initiatives are under development within EEP's North Dakota and Lakehead systems. These investments are expected to be accretive to distributable cash flow per unit. Finally, liquids pipeline asset drop-downs from Enbridge may be available to supplement or extend EEP's growth horizon; but are not reflected in the approximate 3 percent distributable cash flow growth projection.

EEP expects to maintain an investment grade credit profile. With the elimination of approximately $1.4 billion of debt through the combined restructuring actions, the Partnership's balance sheet is immediately strengthened, and Management expects its credit metrics to improve further through the 2020 planning horizon. The Partnership expects 2017 year end Consolidated Debt to EBITDA of approximately 4.5x to improve to approximately 4.0x by 2020, once its liquids pipeline growth projects are placed into service and the joint funding arrangement call options have been exercised.

Governance Process & Execution Timeline

The restructuring actions announced today complete EEP's strategic review. No further restructuring actions are contemplated.

A committee of the independent directors of the Board (the Special Committee) reviewed and recommended these restructuring actions to the Board, and the Board has approved these actions (with the exception of the reduction in EEP's distribution, which was considered and approved by the full EEM Board).

The Special Committee was assisted by its own independent legal and financial advisors. Robert W. Baird & Co., Inc. acted as financial advisor, and Vinson & Elkins L.L.P. and Morris, Nichols, Arsht & Tunnel LLP acted as legal advisors to the Special Committee. BofA Merrill Lynch acted as financial advisor, and Latham & Watkins LLP and Richards, Layton & Finger, P.A. acted as legal advisors to EECI and Enbridge.

All of the strategic actions are scheduled to close by the end of the first half of this year with the Midcoast Sale being subject to customary closing conditions including expiration or termination of the waiting period under the HSR Act. 

Enbridge Energy Management Distribution

Enbridge Energy Management, L.L.C. (NYSE: EEQ) (Enbridge Management) declared a distribution of $1.40 per share payable on May 15, 2017 to shareholders of record on May 8, 2017. The distribution will be paid in the form of additional shares of Enbridge Management valued at the average closing price of the shares for the 10 trading days prior to the ex-dividend date on May 4, 2017. Enbridge Management's sole asset is its approximate 19 percent limited partner interest in EEP. Enbridge Management's results of operations, financial condition and cash flows depend on the results of operations, financial condition and cash flows of EEP.

Conference Call Details

The Partnership will host a conference call at 9:00 a.m. Eastern Time on April 28, 2017, to discuss the results of the strategic review. The investment community is invited to listen in by calling 1-877-930-8043, passcode 13795955. The call will also be webcast live over the internet and may be accessed on the Partnership's website under Events and Presentations or directly at http://edge.media-server.com/m/p/oeuzpu9t. Presentation slides will also be available on the Events and Presentations section of the Partnership's website.

A webcast replay will be available at the link above approximately two hours after the conclusion of the event. A transcript will be posted to the website within approximately 24 hours.

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 we believe 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 us in this release speaks only as of the date on which it is made, and we undertake no obligation to publicly update any forward-looking statement. Many of the factors that will determine these results are beyond our 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 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) our ability to successfully complete the Midcoast Sale and other expansion projects; (3) the effects of competition, in particular, by other pipeline systems; (4) shut-downs or cutbacks at our facilities or refineries, petrochemical plants, utilities or other businesses for which we transport products or to whom we sell products; (5) hazards and operating risks that may not be covered fully by insurance, including those related to Line 6B and any additional fines and penalties and injunctive relief assessed in connection with the crude oil release on that line; (6) costs in connection with complying with the settlement consent decree related to Line 6B and Line 6A, which is still subject to court approval, or the failure to receive court approval of, or material modifications to, such decree; (7) changes in or challenges to our tariff rates; (8) changes in laws or regulations to which we are subject, including compliance with environmental and operational safety regulations that may increase costs of system integrity testing and maintenance; and (9) permitting at federal, state and local level or renewals of rights of way.

Forward-looking statements regarding sponsor support transactions or sales of assets (to or from Enbridge and its affiliates or otherwise) are further qualified by the fact that neither Enbridge nor its affiliates are under any obligation to provide additional sponsor support and neither Enbridge nor any other party is under any obligation to offer to buy or sell us assets, and we are under no obligation to buy or sell any such assets. As a result, we do not know when or if any such transactions will occur. Any statements regarding sponsor expectations or intentions are based on information communicated to us by Enbridge, 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 Annual Report on Form 10-K and any subsequently filed Quarterly Reports on Form 10-Q or 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.

Non-GAAP Performance Measures
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 unitholders. 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.

Tax Notification
This release serves as qualified notice to nominees as provided for under Treasury Regulation Section 1.1446-4(b)(4) and (d). Please note that 100 percent of Enbridge Energy Partners, L.P.'s distributions to foreign investors are attributable to income that is effectively connected with a United States trade or business. Accordingly, all of Enbridge Energy Partners, L.P.'s distributions to foreign investors are subject to federal income tax withholding at the highest effective tax rate for individuals or corporations, as applicable. Nominees, and not Enbridge Energy Partners, L.P., are treated as withholding agents responsible for withholding distributions received by them on behalf of foreign investors.

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 23 percent of total U.S. oil imports.

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 19 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.