SOURCE: Enbridge Energy Partners, L.P.

Enbridge Energy Partners, L.P.

October 29, 2009 16:07 ET

Enbridge Energy Partners Declares Cash Distribution and Reports Earnings for Third Quarter 2009

HOUSTON, TX--(Marketwire - October 29, 2009) - Enbridge Energy Partners, L.P. (NYSE: EEP) ("Enbridge Partners" or "the Partnership") today declared a cash distribution of $0.99 per unit payable November 13, 2009 to unitholders of record on November 5, 2009 (the ex-dividend date will be November 3, 2009). The Partnership's key financial results for the third quarter of 2009, compared to the same period in 2008, were as follows:

                                             Three Months    Nine Months
                                                 Ended          Ended
                                             September 30,   September 30,
                                            --------------- ---------------
(unaudited, dollars in millions except per
 unit amounts)                               2009    2008    2009    2008
                                            ------- ------- ------- -------
Net income*                                 $  57.2 $ 119.4 $ 243.3 $ 281.3
Net income per unit                            0.37    1.04    1.73    2.58
                                            ------- ------- ------- -------
Adjusted EBITDA*                              247.1   191.7   668.7   570.3
Adjusted net income*                          116.0    80.5   287.7   272.5
Adjusted net income per unit                   0.86    0.71    2.11    2.49
                                            ------- ------- ------- -------

*excluding earnings attributable to noncontrolling interest

Adjusted net income reported above eliminates the impact of non-cash, mark-to-market, gains and losses, which arise from changes in the fair value of certain of the Partnership's derivative instruments that do not qualify for hedge accounting treatment under applicable accounting standards. Also, removed from 2009 adjusted earnings is the impact of unrecorded prior period revenues recognized during the first quarter that affected the Partnership's liquids operations (see Non-GAAP Reconciliations section below), a non-cash impairment charge related to certain of our natural gas pipelines assets that are classified as held for sale on September 30, 2009 and net income attributable to the noncontrolling interest in the Partnership's Alberta Clipper pipeline project.

Terrance L. McGill, president of the Partnership's management company and of its general partner, commented, "We are very pleased with our third quarter adjusted results which were 44% higher than the same period of 2008 and expect adjusted earnings for the year will be between $350 and $375 million. We continued to make significant progress on our expansion program during the quarter. On August 20th we received the Presidential Border Crossing Permit for the Alberta Clipper project and started construction activities immediately thereafter. We expect to complete this project by mid-2010."

For the third quarter of 2009, the Partnership reported progress on its major internal growth initiatives, as follows:

--  Alberta Clipper: The Alberta Clipper project involves construction of
    a new 36-inch diameter, 1,000 mile heavy crude oil pipeline from Hardisty,
    Alberta to Superior, Wisconsin. Alberta Clipper will have an initial
    capacity of 450,000 Bpd and allows for expansions up to 800,000 Bpd by
    adding pump stations. Alberta Clipper will be a common carrier line fully
    integrated with the Enbridge/Lakehead mainline systems for tolling
    purposes. We and Enbridge are progressing with the project, which is
    expected to be in service by mid-2010. The commercial structure for this
    expansion is a cost-of-service based surcharge that will be added to the
    existing transportation rates. We anticipate financing the $1.2 billion of
    expected construction costs for the United States portion of the project
    through our recently announced joint funding arrangement through which our
    general partner will participate jointly in financing a portion of the
    construction project in return for a two-thirds interest in the earnings
    and cash flows. We anticipate that our share of the first full year EBITDA
    resulting from the completion of this project will approximate $57 million.
    
--  North Dakota: We continue to work on an approximate $150 million
    additional expansion consisting of upgrades to existing pump stations,
    additional tankage, as well as extensive use of drag reducing agents, or
    DRA, that are injected into the pipeline. This expansion of our North
    Dakota system, referred to as Phase VI, is expected to increase system
    capacity to 161,000 Bpd from the 110,000 Bpd that is currently available.
    The commercial structure for this expansion is a cost-of-service based
    surcharge that will be added to the existing transportation rates. All
    necessary permits and approvals have been received and the Phase VI
    expansion is expected to be in service in early 2010.
    

COMPARATIVE EARNINGS STATEMENT

                                 Three Months Ended     Nine Months Ended
                                    September 30,         September 30,
                                --------------------  ---------------------
(unaudited, dollars in millions
 except per unit amounts)         2009       2008       2009       2008
                                ---------  ---------- ---------  ----------
Operating revenue               $ 1,363.7  $  2,770.2 $ 4,104.2  $  8,044.7
Operating expenses:
   Cost of natural gas              943.2     2,376.2   2,929.3     7,019.6
   Operating and administrative     133.6       135.2     399.0       363.3
   Power                             33.7        35.0      96.9       104.6
   Depreciation and amortization     65.2        54.8     191.7       153.3
                                ---------  ---------- ---------  ----------
Operating income                    188.0       169.0     487.3       403.9
Interest expense                     60.7        50.7     169.9       129.6
Other income                          2.8         0.2       2.5         1.5
                                ---------  ---------- ---------  ----------
Income from continuing
 operations before income tax
 expense                            130.1       118.5     319.9       275.8
Income tax expense                    2.7         1.9       6.8         5.0
                                ---------  ---------- ---------  ----------
Income from continuing
 operations                         127.4       116.6     313.1       270.8
Income (loss) from discontinued
 operations                         (67.9)        2.8     (67.5)       10.5
                                ---------  ---------- ---------  ----------
Net income                           59.5       119.4     245.6       281.3
Less: Net income attributable
 to noncontrolling interest           2.3          --       2.3          --
                                ---------  ---------- ---------  ----------
Net income attributable to
 general and limited partner
 ownership interests in
 Enbridge Energy Partners, L.P. $    57.2  $    119.4 $   243.3  $    281.3
Allocations to General Partner       13.6        17.8      41.9        35.1
                                ---------  ---------- ---------  ----------
Net income allocable to Limited
 Partners                       $    43.6  $    101.6 $   201.4  $    246.2
Weighted average limited
 partner units (millions)           117.0        96.9     116.0        95.3
                                ---------  ---------- ---------  ----------
Net income per limited partner
 unit (dollars)                 $    0.37  $     1.04 $    1.73  $     2.58
                                ---------  ---------- ---------  ----------

COMPARISON OF QUARTERLY RESULTS

Following are discussions of significant changes in the Partnership's financial results, comparing the third quarter of 2009 with the third quarter of 2008. The comparison refers to adjusted operating income, which excludes the effect of noncash derivative gains and losses, unrecorded revenues and discontinued operations (see Non-GAAP Reconciliations section below).

                                          Three Months      Nine Months
                                             Ended             Ended
    Adjusted Operating Income             September 30,     September 30,
                                        ----------------  ----------------
(unaudited, dollars in millions)          2009     2008     2009     2008
                                        -------  -------  -------  -------
Liquids                                 $ 132.7  $  95.5  $ 326.2  $ 246.8
Natural Gas                                47.3     35.8    126.4    135.1
Marketing                                   0.2      0.4     17.9     17.9
Corporate                                  (0.9)    (1.6)    (3.0)    (4.7)
                                        -------  -------  -------  -------
Adjusted operating income               $ 179.3  $ 130.1  $ 467.5  $ 395.1
                                        -------  -------  -------  -------

Liquids - Third quarter adjusted operating income for the Liquids segment increased to $132.7 million. Operating revenue increased by $52.9 million, primarily driven by transportation rate increases related to the following:

--  Effective April 1, 2009, we increased our transportation rates in
    connection with the completion of Stage 2 of our Southern Access Expansion;
    and
    
--  Annual index rate increases on all three of our major systems that
    become effective on July 1, 2009.
    

In addition, we recognized approximately $7.4 million of revenue as a result of the adoption of regulatory accounting for our Southern Access project. Under regulatory accounting over or under collections of revenue are recognized in the financial statements and these amounts are realized or settled through cash the following year.

Volumes increased, as shown in the table below, primarily due to increases of crude oil supplies from upstream production facilities in connection with the ongoing development of the Alberta Oil Sands.

                                 Three Months Ended     Nine Months Ended
   Liquids Systems Deliveries       September 30,         September 30,
                                --------------------- ---------------------
(thousand barrels per day)         2009       2008       2009       2008
                                ---------- ---------- ---------- ----------
Lakehead                             1,701      1,564      1,642      1,586
Mid-Continent                          241        227        239        238
North Dakota                           113        107        114        109
                                ---------- ---------- ---------- ----------
Total                                2,055      1,898      1,995      1,933
                                ---------- ---------- ---------- ----------

The increases in operating income were partially offset by a $7.8 million increase in depreciation associated with the new assets placed in service over the past year. Operating costs increased by $9.2 million, mainly due to our lease of the Line 13 crude oil pipeline from an affiliate of our general partner coupled with the additional costs of operating our expanded system. Power costs decreased by $1.3 million due the effective utilization of our expanded capacity to more efficiently transport greater volumes of crude oil, coupled with lower utility rates.

Natural Gas - Quarterly adjusted operating income for the Natural Gas segment increased $11.5 million, to $47.3 million primarily due to initiatives taken to reduce operating costs associated with the Natural Gas business and modest improvements to operating margin, partially offset by higher depreciation. Operating margin for the current quarter improved on a normalized basis, despite lower natural gas volumes, due to reduced measurement losses and the absence of approximately $7 million of adjustments to revalue imbalances and inventory realized in connection with the rapidly declining prices for natural gas and NGLs during the third quarter of 2008.

                                    Three Months Ended  Nine Months Ended
Natural Gas Throughput                 September 30,       September 30,
                                    ------------------- -------------------
(MMBtu per day)                       2009      2008      2009      2008
                                    --------- --------- --------- ---------
East Texas                          1,346,000 1,443,000 1,515,000 1,431,000
Anadarko                              570,000   682,000   587,000   648,000
North Texas                           382,000   388,000   393,000   383,000
                                    --------- --------- --------- ---------
Total                               2,298,000 2,513,000 2,495,000 2,462,000
                                    --------- --------- --------- ---------

Marketing - The Marketing segment reported adjusted operating income of $0.2 million, a decrease of $0.2 million from the $0.4 million of adjusted operating income for the same period of 2008. The decline is attributable to a more stable natural gas pricing environment in the current quarter compared with the same quarter last year, which narrowed the basis between receipt and delivery points where natural gas is purchased and sold by our Marketing business.

Partnership Financing - Interest expense increased by $10.0 million, to $60.7 million, for the third quarter. The increase is due primarily to the approximate $0.4 billion increase in average debt outstanding, credit facilities' commitment fees and debt issuance cost amortization. Interest capitalized on construction work in progress totaled $6.9 million for the quarter, which was $0.7 million higher due the start-up of construction on our Alberta Clipper pipeline project.

During the quarter, pursuant to the joint funding arrangement with affiliates of Enbridge, approximately $203.0 million of equity capital in the form of a noncontrolling interest was obtained for construction of the Alberta Clipper pipeline project, coupled with $166.1 million of affiliate debt.

ENBRIDGE ENERGY MANAGEMENT DISTRIBUTION

Enbridge Energy Management, L.L.C. (NYSE: EEQ) declared a distribution of $0.99 per share payable November 13, 2009 to shareholders of record on November 5, 2009. The distribution will be paid in the form of additional shares of Enbridge Energy Management valued at the average closing price of the shares for the 10 trading days prior to the ex-dividend date on November 3, 2009.

MANAGEMENT REVIEW OF QUARTERLY RESULTS

Enbridge Partners will review its quarterly financial results and business outlook in an Internet presentation, commencing at 10 a.m. Eastern Time on Friday, October 30, 2009. Interested parties may watch the live webcast at the link provided below. A replay will be available shortly afterward. Presentation slides and condensed unaudited financial statements will also be available at the link below.

EEP Earnings Release: www.enbridgepartners.com/Q

Alternate Webcast Link: http://www.investorcalendar.com/IC/CEPage.asp?ID=149992

The audio portion of the presentation will be accessible by telephone at (877) 407-0782 and can be replayed until November 13, 2009, by calling (877) 660-6853 and entering Conference Account: 286, ID: 333604. An audio replay will also be available for download in MP3 format from either of the website addresses above.

NON-GAAP RECONCILIATIONS

Adjusted net income and adjusted operating income for the principal business segments are provided to illustrate trends in income excluding derivative fair value losses and gains that affect earnings but do not impact cash flow. These non-cash losses and gains result from marking to market certain financial derivatives used by the Partnership for hedging purposes that do not qualify for hedge accounting treatment in accordance with the authoritative accounting guidance as prescribed under generally accepted accounting principles accepted in the United States.

                                 Three Months Ended     Nine Months Ended
    Adjusted Earnings               September 30,         September 30,
                                --------------------  --------------------
(unaudited, dollars in millions
 except per unit amounts)         2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Net income                      $    59.5  $   119.4  $   245.6  $   281.3
Unrecorded revenues                    --         --      (13.5)        --
Impairment charge                    66.1         --       66.1         --
Hurricane impact                       --        8.7         --        8.7
Noncash derivative fair value
 (gains) losses
   -Natural Gas                       0.3      (36.6)      13.3      (41.4)
   -Marketing                        (9.0)     (11.0)     (19.6)      23.9
   -Corporate*                        1.4         --       (1.9)        --
Net income attributable to
 noncontrolling interest             (2.3)        --       (2.3)        --
                                ---------  ---------  ---------  ---------
Adjusted net income                 116.0       80.5      287.7      272.5
Allocations to General Partner       14.8       11.9       42.7       35.0
                                ---------  ---------  ---------  ---------
Adjusted net income allocable
 to Limited Partners                101.2       68.6      245.0      237.5
Weighted average units (millions)   117.0       96.9      116.0       95.3
                                ---------  ---------  ---------  ---------
Adjusted net income per Limited
 Partner unit (dollars)         $    0.86  $    0.71  $    2.11  $    2.49
                                ---------  ---------  ---------  ---------

*Noncash derivative fair value gains (losses) for the nine months ended September 30, 2009 consisted of realized non-cash derivative gains of $0.9 million from the settlement of interest rate swaps.

                                 Three Months Ended     Nine Months Ended
         Liquids                    September 30,         September 30,
                                --------------------- ---------------------
(unaudited, dollars in millions)   2009       2008       2009       2008
                                ---------- ---------- ---------  ----------
Operating income                $    132.7 $     95.5 $   339.7  $    246.8
Unrecorded revenues                     --         --     (13.5)         --
                                ---------- ---------- ---------  ----------
Adjusted operating income       $    132.7 $     95.5 $   326.2  $    246.8
                                ---------- ---------- ---------  ----------



                                 Three Months Ended    Nine Months Ended
        Natural Gas                 September 30,        September 30,
                                -------------------- ---------------------
(unaudited, dollars in millions)   2009       2008      2009       2008
                                ---------- --------- ---------- ----------
Operating income                $     47.0 $    64.2 $    113.1 $    168.3
Hurricane impact                        --       8.2         --        8.2
Noncash derivative fair value
 losses (gains)                        0.3     (36.6)      13.3      (41.4)
                                ---------- --------- ---------- ----------
Adjusted operating income       $     47.3 $    35.8 $    126.4 $    135.1
                                ---------- --------- ----------  ----------



                                 Three Months Ended    Nine Months Ended
          Marketing                 September 30,        September 30,
                                -------------------- ---------------------
(unaudited, dollars in millions)   2009       2008      2009       2008
                                ---------- --------- ---------- ----------
Operating income (loss)         $      9.2 $    10.9 $     37.5 $     (6.5)
Hurricane impact                        --       0.5         --        0.5
Noncash derivative fair value
 losses (gains)                       (9.0)    (11.0)     (19.6)      23.9
                                ---------- --------- ---------- ----------
Adjusted operating income       $      0.2 $     0.4 $     17.9 $     17.9
                                ---------- --------- ---------- ----------

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 unit holders. The following reconciliation of net cash provided by operating activities to adjusted EBITDA is provided because EBITDA is not a financial measure recognized under generally accepted accounting principles.

                                 Three Months Ended     Nine Months Ended
    Adjusted EBITDA                 September 30,         September 30,
                                --------------------  --------------------
(unaudited, dollars in millions)   2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Net cash provided by operating
 activities                     $   223.5  $   199.5  $   582.9  $   473.2
Unrecorded revenues                    --         --      (13.5)        --
Hurricane impact                       --        8.7         --        8.7
Changes in operating assets and
 liabilities, net of cash acquired  (35.8)     (59.9)     (61.6)     (48.3)
Interest expense (excluding MTM
 adjustments)                        59.3       50.7      170.0      129.7
Income tax expense                    2.7        1.9        6.8        5.0
Settlement of interest rate
 swaps/treasury locks                  --         --        0.7       22.1
Net income attributable to
 noncontrolling interest             (2.3)        --       (2.3)        --
Other                                (0.3)      (9.2)     (14.3)     (20.1)
                                ---------  ---------  ---------  ---------
Adjusted EBITDA                 $   247.1  $   191.7  $   668.7  $   570.3
                                ---------  ---------  ---------  ---------

LEGAL NOTICE

This news release 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," "estimate," "expect," "forecast," "intend," "may," "plan," "position," "projection," "strategy" or "will." Forward-looking 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 Enbridge Partners' 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 natural gas liquids, including the rate of development of the Alberta Oil Sands; (2) Enbridge Partners' ability to successfully complete and finance its capital expansion projects; (3) the effects of competition, in particular, by other pipeline systems; (4) shut-downs or cutbacks at facilities of Enbridge Partners or refineries, petrochemical plants, utilities or other businesses for which Enbridge Partners transports products or to whom Enbridge Partners sells products; (5) hazards and operating risks that may not be covered fully by insurance; (6) changes in or challenges to Enbridge Partners' tariff rates; (7) changes in laws or regulations to which Enbridge Partners is subject, including compliance with environmental and operational safety regulations that may increase costs of system integrity testing and maintenance; and (8) changes in the economy.

Reference should also be made to Enbridge Partners' filings with the U.S. Securities and Exchange Commission; including its Annual Report on Form 10-K for the most recently completed fiscal year and its subsequently filed Quarterly Reports 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.

PARTNERSHIP INFORMATION

Enbridge Energy Partners, L.P. (www.enbridgepartners.com) owns and operates a diversified portfolio of crude oil and natural gas transportation systems in the United States. Its principal crude oil system is the largest transporter of growing oil production from western Canada. The system's deliveries to refining centers and connected carriers in the United States account for approximately 11 percent of total U.S. oil imports; while deliveries to Ontario, Canada satisfy approximately 60 percent of refinery demand in that region. The Partnership's natural gas gathering, treating, processing and transmission assets, which are principally located onshore in the active U.S. Mid-Continent and Gulf Coast area, deliver approximately 3 billion cubic feet of natural gas daily.

Enbridge Energy Management, L.L.C. (www.enbridgemanagement.com) manages the business and affairs of the Partnership and its sole asset is an approximate 13 percent interest in the Partnership. Enbridge Energy Company, Inc., an indirect wholly owned subsidiary of Enbridge Inc. of Calgary, Alberta, (NYSE: ENB) (TSX: ENB) (www.enbridge.com) is the general partner and holds an approximate 27 percent interest in the Partnership.

Contact Information

  • Investor Relations Contact:
    Douglas Montgomery
    Toll-free: (866) EEP INFO or (866) 337-4636
    E-mail: eep@enbridge.com

    Media Contact:
    Larry Springer
    Telephone: (713) 821-2253
    E-mail: usmedia@enbridge.com