Enbridge Energy Partners: 2014 Distribution and Coverage



Distribution growth

In the previous part of this series, we learned that Enbridge Energy Partners (EEP) returns were above those of many of its industry peers last year. Did its unitholders benefit from distributions? In this part, we’ll look more closely at EEP’s distribution and coverage.

In the past ten quarters since 4Q12, Enbridge Energy Partners’ (EEP) distribution per unit has increased by 5% to $0.543 per unit in 4Q14. Distribution has increased twice in the past ten quarters.

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Distributable cash flow

Distributable cash flow, or DCF, is the cash flow available to pay common unitholders after payments have been made to the general partner.

Enbridge Energy Partners DCF increased 14% in 2014, up to $750 million over 2013.

These are the primary reasons EEP has been able to increase DCF:

  • higher EBITDA (earnings before interest, tax, depreciation, and amortization) due to volume growth in the Liquids segment
  • $2.3 billion worth of liquids pipeline projects put into service in 2014
  • an increase in the crude oil pipeline tariff

Distribution coverage

The distribution coverage ratio is the distributable cash flow divided by distributions to limited partners.

Enbridge Energy Partners (EEP) expects its DCF to be in the range of $900 million to $960 million. In the chart above, we consider a mid-point of that range. The distribution coverage ratio was 1.1x in 2014. It may decrease to between 0.9x and 0.96x in 2015.

Distribution comparison

In 4Q14, Enbridge Energy Partners (EEP) distributed $0.54 per unit. In comparison, DCP Midstream Partners (DPM) paid out $0.78 per unit, Sunoco Logistics Partners (SXL) distributed $0.40 per unit, MarkWest Energy Partners (MWE) distributed $0.90 per unit, and Targa Resources Partners (NGLS) doled out $0.81 per unit.

Targa Resources Partners makes up 4.6% of the iShares U.S. Energy ETF (IYE).

Enbridge Energy Partners (EEP) stock outperformed the market in the past year. Does its relative valuation in the market support returns? We’ll find out, next.


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