Why Enbridge Energy Partners’ Leverage Is Increasing
EEP’s debt-to-EBITDA ratio
Enbridge Energy Partners’ (EEP) net-debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio was 5.8x at the end of 2Q17. The ratio remained relatively stable in 2016 but increased in the first half of 2017.
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As the above graph shows, EEP’s debt-to-EBITDA ratio rose in the first and second quarters of 2017, even though the debt in 1Q17 was at the same level as in 3Q16. Moreover, the debt actually fell in 2Q17.
The rise in EEP’s debt-to-EBITDA ratio in 2017 despite the fall in debt can be attributed to the fall in EBITDA during the year. As we discussed in the previous part, EEP’s EBITDA fell in both the first and second quarters of 2017.
Even though Enbridge Energy Partners is taking steps such as a distribution cut and the sale of its natural gas business to strengthen its balance sheet, its EBITDA growth remains constrained, which might concern investors.
In the next part, we’ll discuss Enbridge Energy Partners’ distributable cash flow as well as its upcoming capital projects.