Enbridge Energy Partners, L.P. Third Quarter 2015 Earnings Presentation

Transcription

1 Enbridge Energy Partners, L.P. Third Quarter 2015 Earnings Presentation November 2, 2015 enbridgepartners.com

2 Legal Notice This presentation 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, could, estimate, expect, forecast, intend, may, plan, position, projection, should, strategy, target, will and similar words. Although the Partnership believes that such forward-looking statements are reasonable based on currently available information, such statements involve risks, uncertainties and assumptions and are not guarantees of performance. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond the Partnership s ability to control or predict. Specific factors that could cause actual results to differ from those in the forward-looking statements include: (1) 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) the Partnership s ability to successfully complete and finance expansion projects or drop-down opportunities; (3) the effects of competition, in particular, by other pipeline systems; (4) shut-downs or cutbacks at the Partnership s facilities or refineries, petrochemical plants, utilities or other businesses for which the Partnership transports products or to whom the Partnership sells 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 assessed in connection with the crude oil release on that line; (6) changes in or challenges to the Partnership s tariff rates; (7) changes in laws or regulations to which the Partnership is subject, including compliance with environmental and operational safety regulations that may increase costs of system integrity testing and maintenance; and (8) permitting at federal, state and local levels in regards to the construction of new assets. Enbridge refers collectively to Enbridge Inc. and its subsidiaries other than the Partnership and its subsidiaries. Forward-looking statements regarding drop-down growth opportunities from Enbridge are further qualified by the fact that Enbridge is under no obligation to offer to sell us interests in its U.S. projects, and we are under no obligation to buy any such interests. Similarly, any forwardlooking statements regarding potential drop-down transactions of interests in Midcoast Operating to Midcoast Energy Partners are further qualified by the fact that we are under no obligation to sell to Midcoast Energy Partners, L.P. any such interests, and Midcoast Energy Partners, L.P. is under no obligation to buy any such interests. As a result, we do not know when or if any such transactions will occur. 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 Annual Report on Form 10-K for the year ended December 31, 2014 and any subsequently filed Quarterly Report 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 ( and at the Partnership s web site. 1 enbridgepartners.com

3 Agenda 1. Financial Results 2. Project Execution EEP Drop-downs from Sponsor 3. Low-Risk Business Model 4. Drop-Down Outlook 5. Looking Ahead 6. Question & Answer Delivering long-term sustainable value and growth to EEP unitholders 2 enbridgepartners.com

4 Volume by System (mmbpd) Q Financial Summary Projects delivering meaningful earnings and cash flow growth Earnings (in $millions, except per unit amounts) Financial Results 3Q15 3Q14 % Change Adjusted EBITDA 1 $460.7 $406.7 ~13% Distributable Cash Flow 2 $248.8 $210.1 ~18% Distribution Coverage 0.96x 0.95x Cash Coverage x 1.14x Debt/EBITDA 4 4.3x 4.1x Liquids Pipelines Deliveries Lakehead Mid-Continent North Dakota Q14 4Q14 1Q15 2Q15 3Q15 Meaningful cash flow contributions from growth projects Strong liquids pipeline deliveries On-Track to Achieve High End of Full Year 2015 Adjusted EBITDA and Distributable Cash Flow Guidance Adjusted EBITDA $1,315MM YTD 3Q15 $1,680-$1,780 guidance range Distributable Cash Flow $734 YTD 3Q15 $900-$960MM guidance range 1 Adjusted EBITDA includes non-controlling interest. 2 Distributable cash flow and Coverage metric excludes deferred distribution attributable to preferred unitholders. 3 Cash coverage excludes Paid-in-Kind distribution. 4 Debt-to-EBITDA metric considers 50% equity treatment for the hybrid financing instruments; MEP debt and MOLP EBITDA deconsolidated; includes distributions received by EEP from MOLP and MEP. 3 enbridgepartners.com Unaudited; adjusted results exclude the effect of: (a) non-cash, mark-to-market net gains and losses; and other adjsutements not in current period. Refer to the Non-GAAP Reconciliation tables presented in the supplemental slides.

5 $ millions Capital Expenditures and Available Liquidity Strong liquidity position to fund capital program 2015 Capital Expenditures ($ millions) Available Liquidity Eastern Access 1 70 US Mainline Expansions Sandpiper Line 3 Replacement 1 65 Liquids Integrity 260 Liquids Other Growth Enhancements 120 2,500 2,000 1,500 Credit Facilities Cash Pro-forma $2,080 $1.6 billion senior unsecured notes closed October 6, 2015 Natural Gas Growth Projects Maintenance Capital Expenditures , Total Capital Expenditures $1, $ /6/2015 pro-forma 9/30/ Eastern Access and US Mainline Expansion capital expenditures are forecasted net of joint funding, with assumed Enbridge 75% funding; U.S. segment of Line 3 Replacement project funding assumes estimated 50% funding by Enbridge and 50% estimated funding by EEP. Participation levels under consideration by Independent Special Committee and have not been determined. Sandpiper capital expenditures are forecasted net of 37.5% joint funding from Marathon Petroleum Corp. 2 Represents EEP s share of Natural Gas capital expenditures of Midcoast Operating, L.P., ( MOLP ) which will be proportionately funded between EEP and Midcoast Energy Partners, L.P. ( MEP ). Forecast reflects current base 48.4% funding by EEP and 51.6% by MEP. 4 enbridgepartners.com

6 Executing on Funding Program Significant progress to secure funding Demonstrated access to capital markets ~$300 million equity closed March 2015 ~$1.6 billion debt closed October 2015 Joint-funding with Enbridge enhances financing flexibility Line 3 Replacement project funding level under consideration by EEP special committee Manageable equity needs Maintaining Investment Grade Credit Rating Remains a Top Priority (BBB/Baa3) (1) (1) Credit ratings by Standard & Poor s and Moody s. Outlook Stable by both agencies 5 enbridgepartners.com

7 Low-Risk Business Model Delivers Stable Cash Flows Liquids pipeline business provides ~90% of Partnership s distributable cash flow 2015e EBITDA (1) Cost of Service (Liquids Segment) Utility style regulatory model: return-of and return-on invested capital Highly predictable cash flows - No volume and commodity price sensitivity Rate base comprised of equity and debt components Fee-Based Liquids Segment ~90% of fee-based component Pipeline toll indexed to PPI % System highly utilized Natural Gas Segment ~10% of fee-based component Commodity Sensitive (2) (Natural Gas Segment) Hedging program largely mitigates commodity price risk Organic growth program transitions EEP to even lower-risk business model (1) Contribution is based on revenues from Liquids segment and gross margin from Natural Gas segment, after deducting non-controlling interest. (2) Commodity sensitive gross margin forecast is before hedging; Approx. 90% of 2015e commodity sensitive gross margin is hedged substantially above current market prices. 6 enbridgepartners.com

8 Effective Credit Risk Management Strong counterparty credit risk profile EEP Customer Credit Quality (1) Investment Grade / Security Received Non-Investment Grade Top 10 Mainline Shippers Shipper 1 Shipper 2 Shipper 3 Shipper 4 Shipper 5 Shipper 6 Shipper 7 Shipper 8 Shipper 9 Shipper 10 AAA/Aaa A/Baa1 BBB/Baa2 AA-/A1 B-/B3 (credit enhancement provided) BBB/Baa2 AA-/Aa1 A-/A3 BB/Ba3 (credit enhancement provided) BBB+/A3 (1) EEP consolidated (including MEP) and net of Accounts Receivable purchased by affiliate of Enbridge Inc. 7 enbridgepartners.com

9 Market Access Growth Projects 2015 growth projects on-track Organic growth projects deliver low-risk, highly certain cash flow growth 2015 Projects Capital ($MM) (1) Timing Line 67 Mainline Expansion +230 kbpd 1 $240 July Line 61 Mainline Expansion kbpd kbpd $395 May 2015 Oct 2015 Storage & Tankage $360 3Q15-3Q16 Organic Growth Projects: Commercially secured Low-risk framework Long-term contracts 2 3 Line 78 Mainline Expansion kbpd 3 $495 4Q 2015 (1) Represents 100% of forecasted capital cost. Eastern Access and US Mainline Expansion projects are jointly funded 75% by Enbridge and 25% by EEP. 8 enbridgepartners.com

10 Matching Supply Push and Demand Pull Lakehead deliveries continuing to increase as additional market access projects enter service Regional takeaway: long-term take-or-pay EEP Lakehead System matches supply and demand Enbridge Access to Refining Capacity Montreal Patoka Ontario/PADD I Eastern PADD II Cushing/USGC Chicago Northern Tier Downstream markets: long-term take-or-pay Total: 8,680 kbpd Source: EIA enbridgepartners.com

11 EEP Distribution Growth Potential Selective drop-downs enhance distribution growth outlook Enbridge evaluating systematic future dropdowns to EEP (1) EEP expects to exercise call-options to upsize interest in Eastern Access and Mainline Expansion projects (at cost) Strategic alignment supports long-term growth outlook Embedded Organic Growth Book Value Call Options Base plan With selective drop downs Mainline Expansions Selective Drop Downs (1) $1,000 (2) (Complete) Illustrative Distribution Growth Profile Eastern Access Eastern Access (~$400) Mainline Expansion Sandpiper Mainline Expansion (~$350) Line 3 Replacement Line 3 Replacement (TBD) 5%+ CAGR ~$500 ~$500 ~$500 ~$ enbridgepartners.com (1) ENB is considering selective drop down opportunities of US liquids pipelines assets to EEP. The above illustrates one potential plan. Numbers shown are in $millions. (2) Alberta Clipper drop down acquisition by EEP closed Jan 2, 2015

12 Looking Ahead Reliable, low-risk business model attractive in all market conditions Expected continued high utilization of our liquids pipeline systems Full year contribution from 2015 growth projects Final phase of Eastern Access expansion in early 2016 ~$300 million Eastern Access and Mainline Expansion call options ~$750 million Extension of Preferred Unit distribution deferral enhances DCF outlook ($90 million/year) $1.9 billion of funding in 2015; strong available liquidity Indicative drop-down plans from Enbridge (1) ~$500 million/year Significant progress made to strengthen Gathering & Processing business Interest costs attributable to recent debt offering 11 enbridgepartners.com (1) ENB is considering selective drop down opportunities of US liquids pipelines assets to EEP. The above illustrates one potential plan. Numbers shown are in $millions.

13 Key Takeaways On-track to deliver high end of 2015 full-year financial guidance Meaningful cash flow contributions from growth projects; strong system deliveries Project execution Growth projects progressing Financial execution Significant progress to secure funding; manageable equity needs through 2019 Low-risk, reliable business model provides stable earnings and cash flow Coverage strengthens as growth projects enter service Strategic alignment with Enbridge supports long-term growth outlook Selective drop-downs from Enbridge would enhance distribution growth potential above 2-5% annual growth target Reliable, low-risk business model attractive in all market conditions 12 enbridgepartners.com

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