Presentation - Enbridge Energy Partners

Enbridge Energy Partners, L.P.
Fourth Quarter 2015 Earnings &
2016 Financial Guidance Presentation
February 17, 2016
en b r i d gep ar tn ers. co m
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, L.P. 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 (www.sec.gov) and at the Partnership’s web site.
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Agenda
1. Overview
2. Defensive Business Model
3. Strong Fundamentals
4. Project Execution
5. 4Q 2015 Financial Results
6. 2016 Financial Guidance
7. Question & Answer
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Overview
Solid Execution in 2015
• Record liquids pipeline system deliveries: ~2.9 MMbpd average in 2015
• Placed $1.6B of liquids pipelines organic growth projects into service
• Closed $1B drop-down acquisition from general partner
• Achieved top-end of 2015 adjusted EBITDA and DCF guidance
• Secured $1.9B of funding
Well Positioned
• Strong supply outlook + premier market connectivity drives high system utilization
• Defensive cash flows and strong counterparty credit profile
• Manageable funding needs; does not expect to access equity market in 2016
Reliable business model in all market environments
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Well Positioned for Current Environment
Low-risk, reliable business model insulated from low commodity prices
<5% of business cash flows
subject to direct commodity price
exposure
>90% of business cash flows
from Liquids segment; segment
underpinned by strong low-risk
commercial structures
Strong Commercial Structures
Cost of Service/Take-or-Pay
Fee for service
Commodity Sensitive(1)
2016e EBITDA attributable to EEP (after deducting non-controlling
interest)
Counterparty Credit Profile (2)
>90% of revenues from
investment grade customers
(1)
(2)
4
Commodity sensitive gross margin forecast is before hedging; Greater than 90% of 2016e commodity
sensitive cash flows are hedged substantially above current market prices.
EEP consolidated (including MEP) and net of Accounts Receivable purchased by affiliate of Enbridge.
en b r i d gepar tner s. com
Investment Grade
Non-Investment Grade (Security Received)
Well Positioned for Current Environment
Strong Western Canadian supply outlook and demand for pipeline capacity
Lakehead Deliveries
MMBPD
U.S. Mainline at full capacity;
2015 total system deliveries +10% vs. 2014
2.5
2
1.5
~800 kbpd oil sands supply growth
through 2019
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Oil Sands Growth
Incremental Oil Sands Blended Supply
12
10
8
6
4
2
0
(Cumulative MMBPD)
2015
2016
2017
2018
2019
Pipeline Capacity vs. WCSB Supply
Basin short >500 kbpd pipeline
capacity by 2021
1Source:
CAPP Crude Oil Forecast, Markets and Transportation (June
2015 Operating & In Construction)
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Western Canadian Supply Profile vs. Price
Long-term investment horizon by oil sands producers
History demonstrates steady oil sands production growth
in all price environments
Kbpd
$US/bbl
WCSB Production
4,000
Enbridge Ex-Gretna Deliveries
WTI Annual Avg ($US/bbl)
120
3,500
100
3,000
80
2,500
2,000
60
1,500
40
1,000
20
500
0
0
Sources: CAPP, Bloomberg
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Premier Connectivity Drives Strong Demand
Key North American markets served by the Enbridge system
Enbridge system accesses 8.5 MMbpd of refining capacity
Eastern Canada
(Total Capacity = ~0.8 MMbpd)
Northern PADD II
(Total Capacity = ~0.5MMbpd)
Chicago
(Total Capacity = ~0.8 MMbpd)
Michigan/Ohio
(Total Capacity = ~0.7 MMbpd)
Cushing
(Total Capacity = ~1.2 MMbpd)
Patoka
(Total Capacity = ~0.8 MMbpd)
Western PADD III
(Total Capacity = ~3.7 MMbpd)
Eastern PADD III
(Total Capacity = ~3.2 MMbpd)
*Excludes NGLs
Source: Enbridge estimates and EIA data
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Low-Risk Business Model Delivers Stable Cash Flows
Liquids pipeline business generates greater than 90% of Partnership’s distributable cash flow
2016e 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
~85% of fee-based component
• Pipeline toll indexed to PPI + 2.65%(3)
• System highly utilized
Natural Gas Segment
Commodity Sensitive(2) (Natural Gas Segment)
• Hedging program largely mitigates commodity
price risk
~15% of fee-based component
Defensive cash flow profile: well positioned in current environment
(1)
(2)
(3)
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Contribution is based on revenues from Liquids segment and gross margin from Natural Gas segment, after deducting non-controlling interest.
Commodity sensitive gross margin forecast is before hedging; Greater than 90% of 2016e commodity sensitive cash flows are hedged substantially above current market prices.
FERC index annual adjustment of PPI + 1.23%. (prior index adjustment of PPI + 2.65% expiries June 30, 2016).
en b r i d gepar tner s. com
Strong Counterparty Credit Profile
Major liquids pipeline systems underpinned
by strong, investment grade customers
EEP Customer Credit Quality (1)
Top 10 Mainline Shippers
AAA/Aaa
A/Baa1
BBB/Baa2
AA-/A1
Credit enhancement to investment grade
A-/Baa1
A+/Aa1
BBB/Baa2
Investment Grade
Non-Investment Grade / Security Received
Credit enhancement to investment grade
BBB-/Baa3
(1)
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EEP consolidated (including MEP) and net of Accounts Receivable purchased by affiliate of Enbridge Inc.
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Liquids Pipelines Remaining Contract Life
Long-term, low-risk commercial structures underpin liquids pipeline revenues
Lakehead System:
Cost-of-Service
0
10 years
Mainline Expansions
Eastern Access
Alberta Clipper(2)
Fee-based
Southern Access
(1)
(2)
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Lakehead base toll indexed to PPI + 2.65%(1)
North Dakota System:
Mid-Continent System:
toll indexed to PPI + 2.65%(1)
toll indexed to PPI + 2.65%(1)
FERC index annual adjustment of PPI + 1.23%. (prior index adjustment of PPI + 2.65% expiries June 30, 2016).
30 year cost of service agreement, with 15 year initial term.
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20 years
30years
Solid Project Execution
Expanded market access increases liquids pipelines system utilization
Organic growth projects deliver low-risk, highly certain cash flow growth
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2015 EEP Projects
Capital
($MM)(1)
Line 67 Mainline Expansion
+230 kbpd
1
$240

Line 61 Mainline Expansion
+ 240 kbpd
2
+ 150 kbpd
$395


Storage & Tankage
$380
Line 78 Mainline Expansion
+ 570 kbpd
3
$540
4
Organic Growth Projects:



2
Commercially secured
3
Line 9 Reversal and Expansion
(1)
Represents 100% of capital cost. Eastern Access and US Mainline Expansion projects are jointly funded 75% by Enbridge and 25% by EEP.
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May 2015
Oct 2015

Nov 2015
Timing
5
Southern Access Extension
July 2015
3Q15-3Q16
2015 ENB
Market Access Projects
Low-risk framework
Long-term contracts
Timing
5
4

4Q 2015

4Q 2015
Sandpiper & Line 3 Replacement Update
In service dates move to early 2019; near-term capital requirements are significantly lower
MPUC Regulatory Timeline Clarified
• Certificate of Need/Route Permit
processes rejoined
• EIS to precede evidentiary phase
• Expected in-service early 2019
• New Canadian assessment
processes not expected to impact
timelines
Line 3
Sandpiper
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Enbridge U.S. Liquids Pipelines Drop-Down Backlog
Selective drop-down strategy from sponsor supports long-term growth outlook
Risk
Profile
Pipeline System
E Flanagan South





F Seaway/Seaway Twin

G Spearhead

H Toledo

A
 Eastern Access
B Mainline Expansion
C
C Line 3 Replacement
B
A
H
D
E
F
G
D Southern Access Extension
 Cost-of-Service/Take-or-Pay
 Indexed Toll (fee-based)
Execute selective drop-down opportunities when market conditions strengthen
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2015 Financial Summary
Strong Operational Performance + Project Execution
= Solid Financial Performance
Fourth Quarter 2015 Highlights
Financial Results
Earnings
 Record Lakehead System
4Q 2015
4Q 2014
FY 2015
FY 2014
%
Change
Adjusted EBITDA1
$450.7
$443.3
$1,766.0
$1,551.0
14%
Adjusted Net Income2
$96.9
$132.5
$497.6
$460.3
 Record North Dakota
Adjusted Net Income per unit2
$0.11
$0.27
$0.80
$0.93
System deliveries
4Q 2015
4Q 2014
FY 2015
FY 2014
$214.5
$214.4
$948.6
$809.3
($millions, except per unit
amounts)
Cash Flow
($millions)
Distributable Cash Flow3
deliveries
2015
2014
0.92x
0.90x
Cash Coverage (as declared)3,4
1.11x
1.09x
Debt/EBITDA5
4.6x
4.3x
Coverage (as
declared)3
%
Change
17%
 Project Execution:
• Line 61 expansion to
•
950 kbpd in service
Line 78 in service
Unaudited; adjusted results exclude the effect of non-cash, mark-to-market net gains and losses and other adjustments. Refer to the Non-GAAP Reconciliation tables presented in the supplemental slides.
1Adjusted EBITDA includes non-controlling interest.
2Adjusted net income after non-controlling interest and deferred distribution attributable to preferred unitholders. Preferred units deferred distribution of $22.5 million in 4Q 2015.
3 Distributable cash flow and Coverage metric excludes deferred distribution attributable to preferred unitholders.
4 Cash coverage excludes Paid-in-Kind distribution.
5 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.
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Financial Outlook 2016
Earnings & Cash Flow Outlook
Projects Deliver EBITDA & Volume Growth
$ millions
Enbridge Energy
Partners
2016e
$1,766.0
$1,800 – 1,900
$948.6
$860 – 920
Coverage
0.92x
0.80 – 0.90x
Cash Coverage
1.11x
0.95 – 1.05x
Adjusted EBITDA(1)
Distributable Cash Flow
4,000
3,000
1,500
2,000
1,000
1,000
0
500
2012
Liquids Volumes (kbpd)
2016e
2,315
2,600– 2,800
North Dakota (2)
353
320 – 350
Mid-Continent
212
200 – 220
2,880
3,120 – 3,370
Total
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en b r i d gep ar tn ers. com (1)
(2)
2013
2014
2015
2016e
Natural Gas & NGL Volumes
2015
Lakehead
Liquids Volumes
2,000
2015
($ millions)
kbpd
Adj EBITDA
2015
2016e
Anadarko (Mmbtu/d)
773
520 – 580
East Texas (Mmbtu/d)
964
880 – 980
North Texas (Mmbtu/d)
265
200 – 225
2,002
1,600 – 1,785
81,632
70,000 – 75,000
Total (Mmbtu/d)
NGL Production (bpd)
Adjusted EBITDA on a fully consolidated basis; inclusive of non-controlling interest and other income.
North Dakota volume forecast does not include 100,000 bpd of take-or-pay volumes on Bakken Pipeline.
Distributable Cash Flow Outlook
Higher earnings offset by increased interest costs
2016 DCF Outlook
Distributable Cash Flow
($ MM)
1,200
1,100
1,000
900
800
700
600
500
2015
Mainline
Expansion
Liquids
Volumes and
Rates
EA Call
Option
Exercise
Interest
Expense
•
Full year contribution from 2015 growth projects
•
Increased liquids pipelines system deliveries
•
Eastern Access call option exercise
•
Higher cash interest
•
Natural gas business
•
North Dakota gathering and rail
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Natural Gas North Dakota Allowance Oil Property Tax
Business
Gathering &
& Other
Rail
2016E
Capital and Investment Expenditures
~20% Reduction in 2016e capex over 2015; strong liquidity position
Available Liquidity
2016 Capital and Investment Expenditures ($ millions)
55
US Mainline Expansions1
90
Sandpiper1
85
Line 3 Replacement
185
Liquids Integrity
280
Liquids Other Growth Enhancements
100
Natural Gas Growth Projects2
25
Maintenance Capital Expenditures2
80
Total Capital Expenditures
900
Eastern Access call option exercise
360
Line 3 Replacement joint funding scenario3
Capital and Investment Expenditures
Credit Facilities
Cash
$1,176
134
1,000
$ millions
Eastern Access1
500
1,042
~(350)
+/- 900
0
12/31/2015
1
Eastern Access and US Mainline Expansion capital expenditures are forecasted net of joint funding, with assumed Enbridge 75% funding. Sandpiper capital expenditures are forecasted net of 37.5% joint
funding from Marathon Petroleum Corp. The joint funding by Enbridge is based on the respective economic interest in the Eastern Access and Mainline Expansions project series and do not take into account
the temporary adjustment to distributions and contributions pursuant to Amendment of OLP limited partnership agreement.
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.
3 The Line 3 Replacement project participation level with Enbridge is under consideration by an Independent Committee of the Board of Directors and has not been determined. This amount reflects one
possible scenario and represents the approximate dollars that would be remitted to EEP by Enbridge as the capital contribution of Enbridge for an economic interest in the jointly funded project.
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Key Takeaways
Strong business fundamentals
• Connectivity to large producing basins and key North American refining centers
• Expanded market access underpins strong system utilization outlook
Well positioned for current environment
•
•
Defensive and low-risk business model
Strong counterparty risk profile
Manageable funding needs
•
•
Does not expect to access equity market in 2016; strong liquidity position to
fund base capital program
Maintaining investment grade credit rating remains a priority
Strong sponsor in Enbridge Inc.
Reliable, low-risk business model attractive in all market conditions
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