Liquids Pipeline Expansion Projects Presentation May 17, EEP Slides posted at

Transcription

1 Liquids Pipeline Expansion Projects Presentation May 17, 2012 EEP Slides posted at

2 Legal Notice This presentation includes certain forward looking information ( FLI ) to provide Enbridge Energy Partners, L.P. ( EEP ) and Enbridge Energy Management, L.L.C. ( EEQ ) investors and potential investors with information about EEP and EEQ and management s assessment of the future plans and operations, which may not be appropriate for other purposes. FLI is typically identified by words such as anticipate, expect, project, estimate, forecast, plan, intend, target, believe and similar words suggesting future outcomes or statements regarding an outlook. Although we believe that our FLI is reasonable based on the information available today and processes used to prepare it, such statements are not guarantees of future performance and you are cautioned against placing undue reliance on FLI. By its nature, FLI involves a variety of assumptions, risks, uncertainties and other factors which may cause actual results, levels of activity and achievements to differ materially from those expressed or implied in our FLI. Material assumptions include assumptions about: the expected supply and demand for crude oil, natural gas and natural gas liquids; prices of crude oil, natural gas and natural gas liquids; inflation; interest rates; the availability and price of labor and pipeline construction materials; operational reliability; anticipated in-service dates and weather, competition, regulation, taxation, costs and insurance recoveries related to Lines 6A and 6B. Our FLI is subject to risks and uncertainties pertaining to operating performance, regulatory parameters, project approval and support, weather, economic conditions, interest rates and commodity prices, including but not limited to those discussed more extensively in our filings with U.S. securities regulators. The impact of any one risk, uncertainty or factor on any particular FLI is not determinable with certainty as these are interdependent and our future course of action depends on management s assessment of all information available at the relevant time. Except to the extent required by law, we assume no obligation to publicly update or revise any FLI, whether as a result of new information, future events or otherwise. All FLI in this presentation is expressly qualified in its entirety by these cautionary statements. You are referred to EEP s and EEQ s SEC filings, including its most recently filed Annual Report on Form 10-K and subsequently filed Quarterly Reports on Form 10-Q, for a more detailed discussion of risk factors. This presentation makes reference to certain financial measures, such as adjusted net income and EBITDA, which are not recognized under generally accepted accounting principles, referred to as GAAP. 2

3 Agenda Fundamentals Project Overview Project Economics Joint Funding Project Execution Summary and Q&A 3

4 Fundamentals North American crude oil supply growth Western Canadian Crude Oil Supply Forecast Bakken Formation Crude Oil Supply Forecast Bpd (thousand) Bpd (thousand) 5,000 4,500 Actual Forecast 1,400 Actual 1,200 Forecast PIRA Forecast October ,400 1,200 4,000 3,500 1,000 1,000 3,000 Oil Sands Heavy ,500 2, ,500 Upgraded Synthetic Light 1,000 Conventional Heavy 500 Conventional Light & Medium Enbridge Pipeline Expansion Existing Pipeline & Refinery Capacity Sources: CAPP Crude Oil Forecast, Markets & Pipeline Report, Growth Case Western Canadian Oil Sands & Conventional Supply Enbridge Production Forecast June 2011 Raymond James Production Forecast Jan 2011 Sources: Raymond James, PIRA, Enbridge and North Dakota Pipeline Authority 4

5 Fundamentals Text goes here Bullet points go here Shifting crude oil supply fundamentals Western Canada North Dakota Minneapolis Montreal North Sea & Offshore Chicago Sarnia Detroit Toledo Westover Historical Crude Oil Flows MidContinent, Offshore & Eastern GOM 5

6 Eastern Access Projects Linking North American crude supply growth to eastern refining centers Text goes here Bullet points go here 4 Montreal 3 Westover Enbridge Inc. Expansions 1. Toledo Pipeline construction early Line 9A reversal to Westover, ON mid Line 9B reversal to Montreal, QE early 2014 Chicago/ Flanagan 5 6 Sarnia 1 2 Toledo EEP Eastern Access Projects ($2.2 billion) 4. Line 5 expansion (+50 kbpd) early Spearhead North (Line 62) expansion (+105 kbpd) early Line 6B replacement (+260 kbpd) early

7 New Market Access - U.S. Gulf Coast Linking North American crude supply growth to USGC refining centers Text goes here Bullet points go here EEP Lakehead Expansions ($360 million) Alberta Clipper (Line 67) expansion from 450 kbpd to 570 kbpd mid 2014 Southern Access (Line 61) expansion from 400 kbpd to 560 kbpd mid 2014 No pipe construction required Substantial expansion capability Cushing Texas City & Port Arthur Chicago/ Flanagan Enbridge Inc. Projects 1. Seaway Pipeline Enbridge Inc. and Enterprise JV Planned reversal starting Q kbpd mixed service early Flanagan South Pipeline Initial capacity 585 kbpd (36 line) In-service mid Seaway Pipeline Twin Enbridge Inc. and Enterprise JV Adding 450k bpd of capacity; 30 line In-service mid

8 Liquids Pipelines Mainline Expansions Increase light crude capacity to eastern Canada Increase heavy crude capacity to Midwest Support US Gulf Coast market access Further low-cost expansion possible Clearbrook Enbridge Liquids System Alberta Clipper Expansion (+120 kbpd) Superior Line 5 Expansion (+ 50 kbpd) Southern Access Expansion (+160 kbpd) Sarnia Spearhead North Expansion (+105 kbpd) Line 6B Replacement (+260 kbpd) Toledo Flanagan Chicago Patoka 8

9 Business Evolution Liquids business will contribute ~ 75% of EEP s operating income by 2013/ Forecast Operating Income Secured Growth Projects Eastern Access Projects 2013/14e Operating Income Liquids Pipelines 2/3 Natural Gas 1/3 Lakehead Expansions North Dakota Expansions Cushing Storage Ajax Gas Plant Texas Express NGL Pipeline Liquids Pipelines 3/4 Natural Gas 1/4 9

10 Project Economics Long-term, sustainable, low-risk commercially secured cash flows = distribution growth at higher end of 2% to 5 % target Capital Expenditure Forecasted EBITDA** DCF ROE LP Accretion Risk Profile Lakehead Expansions (Alberta Clipper & Southern Access) Eastern Access Projects* (Lines 5, 6B, 62) $360 ~ $50 ~ teens% $880 ~ $90 ~teens% 30 year cost of service No capital cost risk No volume risk 30 year cost of service Limited capital cost risk No volume risk Total $1,240 ~ $140 ~ 2% * Eastern Access project to be funded 60% by Enbridge Inc. and 40% by EEP. Capital expenditure and EBITDA represents EEP s base economic share at 40%. ** Estimated EBITDA contribution for first full year of in-service. In millions of dollars 10

11 Commercial Framework - Cost of Service Market access projects utilize cost of service regulatory model Highly predictable cash flows Utility style model Rate-base composed of 55% equity, 45% debt Recover equity return of ~11% on equity rate base o Inflation component deferred, amortized and collected in rates over time o Levels and stabilizes cash flow Recover weighted-average cost of debt on debt rate-base Income tax allowance included Tolled as surcharge in annual rates Annual true-up for over/under recovery Revenues not volume sensitive after true-up Incremental operating costs and depreciation recovered EEP uses cost of service rate-making for its major expansions Unique elements to each arrangements 11

12 Joint Funding Agreement Joint funding agreement with Enbridge Inc. only applies to Eastern Access Projects Enbridge Inc. will provide +/- 60% of funding for these projects New Projects Capital = $2.5 billion In form of 100% equity investment EEP will have option to upsize/downsize interest by up to 15% EEP ownership range of outcomes = 25% - 55% Downsize option until December 31, 2012 Upsize option 12 months from 2014 in-service date Enhances the Partnership s financing flexibility Natural drop-down project at later date Alberta Clipper & Southern Access Expansions 100% EEP Funded ~ $360 million Eastern Access Projects 40% EEP Funded ~ $880 million Structure similar to Alberta Clipper (from 2009) Special Independent Committee recommendation 12

13 $ millions Updated Net Capital Expenditures Forecast Net Capital Expenditures ( ) 2,500 Financing 2,000 1,500 1,000 Maintenance Natural Gas Liquids Maintenance Natural Gas Liquids Maintain credit rating & liquidity $0.4b equity prefunding in 2011 addressed component of requirements Joint funding addresses incremental equity needs for liquids Market Access projects 50/50 Debt to Equity funding target e 2012e Updated 2013e 2014e Capital expenditures forecast net of joint funding, with assumed Enbridge Inc. 60% funding. 13

14 Solid Project Execution Major projects group formed in 2008 History of on-time and on-budget execution Project Name* Cost ($Billion) In Service Status Cost Indicator Schedule Indicator Alberta Clipper $3.7 Apr 2010 In-Service On Budget On Time Cushing Terminal Expansion Projects $0.1 Various In Construction On Budget Ahead of Schedule Woodland Pipeline $0.5 Sept 2012 In Construction 7% below Budget On Time Edmonton Terminal Expansion $0.3 PH1 Sep 2012 PH2 Dec 2012 In Construction 12% below Budget On Time Waupisoo Pipeline Capacity Expansion $0.4 Dec 2012 In Construction 7% below Budget On Time Wood Buffalo Pipeline $0.4 Dec 2012 In Construction 3% below Budget On Time Bakken Expansion Program $0.6 Jan 2013 In Construction 14% below Budget On Time Norealis Pipeline $0.5 Dec 2013 In Construction 2% below Budget On Time Athabasca Pipeline Capacity Expansion $0.4 PH1 Mar 2013 PH2 Jan 2014 Design and Procurement 5% below Budget On Time * Represents a sample of capital projects undertaken by Enbridge and the Partnership. 14

15 Key Takeaways Strong liquids fundamentals and increased utilization support pipeline expansion projects Long-term, sustainable, low-risk commercially secured cash flow stream Financing plan not impacted with additional projects Joint funding arrangement with Enbridge Inc. enhances Partnership s flexibility Demonstrated project execution Achieve higher-end of 2% to 5% distribution growth target 15

16 Supplemental slides posted at