uploads///Drop down

Enbridge Energy Partners Looks to Dropdown Growth Opportunities



Dropdown opportunities

One of the more accessible growth opportunities for many MLPs (master limited partnerships) is the possibility of dropdowns from their general partner sponsors.

We discussed reduced capex at Enbridge Energy Partners (EEP) in the preceding section of this series. The company nevertheless expects to benefit from significant dropdown opportunities presented by its general partner, Enbridge Energy Company.

Enbridge, Inc. (ENB), the midstream energy company that operates in Canada and the US, owns Enbridge Energy Company.

Article continues below advertisement

On January 2, 2015, Enbridge Energy Partners (EEP) completed a ~$1 billion acquisition from ENB. EEP acquired the remaining 66.7% interest in the US portion of the Alberta Clipper pipeline, also called Line 67. In line with its expansion plan, Enbridge Energy is increasing Line 67 capacity from 570,000 bpd (barrels per day) to 800,000 bpd.

Dropdown outlook

Enbridge Energy Partners (EEP) is reviewing potentially $10 billion worth of dropdowns in liquids assets from Enbridge, Inc. These include strategic assets such as the Flanagan South, Spearhead, Seaway, Toledo, and Southern Access Extension pipelines. EEP also has future call options in the Eastern Access and Mainline Expansion series of projects. By exercising these options, EEP may increase its participation in these projects by 15% once they’re completed.

DCP Midstream Partners (DPM), another midstream energy operator, also expects to receive asset dropdowns from its general partner sponsor, DCP Midstream LLC. For more on this topic, read Are midstream energy investments safe from falling oil prices?

Williams Partners (WPZ), an MLP, expects to benefit from The Williams Companies Inc. (WMB), WPZ’s general partner and holding company.

Williams Partners makes up 7.3% of the Alerian MLP ETF (AMLP).

In the next part of this series, we’ll look at Enbridge Energy’ Partners’ distribution and coverage ratio.


More From Market Realist