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Enbridge Energy Partners’ Capital Spending Drives Its Growth

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EEP’s distributions

Enbridge Energy Partners (EEP) announced a 3Q16 quarterly cash distribution of $0.58 per limited partner unit, unchanged from its previous quarter’s distribution. EEP has maintained its $0.58 per unit distribution since 2Q15.

Among EEP’s peers, Plains All American Pipeline (PAA) decreased its 3Q16 distributions by 21%. However, Williams Partners’ (WPZ) distribution of $0.85 per unit was flat quarter-over-quarter.

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EEP’s capital expenditure

The above graph shows EEP’s distributable cash flow and total capital expenditure (capex) over the last two years. EEP incurred ~$697 million in capex in the first nine months of 2016.

Due to its completion of major projects and lower-than-anticipated spending on the Sandpiper and other projects in 2016, EEP’s 2016 capex could be significantly lower than it’s been in recent years. EEP expects to incur $0.9 billion toward its total capex for the entirety of 2016.

Interest in Bakken Pipeline System

In August 2016, Enbridge Energy Partners announced an agreement to acquire an effective 27.6% stake in the Bakken Pipeline System, which extends from the Bakken formation in North Dakota to the eastern PADD (Petroleum Administration for Defense Districts) II and US Gulf Coast markets.

The investment is valued at $1.5 billion, of which 75% is expected to be funded by EECI (Enbridge Energy Company), a wholly owned subsidiary of Enbridge (ENB). The balance of 25% is expected to be funded by EEP. We’ll discuss this in more detail in the next part of our series.

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Suspension of Sandpiper project

In September, EEP announced the suspension of its Sandpiper project due to insufficient volumes in North Dakota crude oil production to support the pipeline system. 

EEP has applied for the withdrawal of its regulatory applications relevant to the Sandpiper project. EEP wrote down ~$757 million in asset impairments in 3Q16, resulting in a net earnings impact of $487 million.

EEP’s distributable cash flow

EEP reported distributable cash flow of $214.7 million in 3Q16. It’s on track to achieve its target of adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $1.8 billion–$1.9 billion and distributable cash flow of $860 million–$920 million for 2016.

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