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Will a Focus on Its Core Business Benefit Enbridge Energy Partners?

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EEP’s segments

Enbridge Energy Partners (EEP) operates two segments, Liquids and Natural Gas. With the completion of the sale of its Midcoast Energy Partners interest, EEP now operates a pure-play liquids business. On June 28, 2017, EEP completed the sale of its interest in the Midcoast Gas Gathering and Processing business to Enbridge (ENB).

For 2Q17, Enbridge Energy Partners reported the results of the natural gas business in discontinued operations. As the above graph shows, the company thus reported results for only one segment for the quarter.

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As the graph shows, the contribution of the Natural Gas segment to EEP’s EBITDA had been relatively small. The segment was facing headwinds from the last several quarters primarily due to the continued low commodity price environment, which resulted in reductions in drilling activity by producers in Enbridge Energy Partners’ areas of operations.

“With the gas business removed, we’re excited about the return to EEP’s core business of liquids pipelines,” said Mark Maki, EEP’s president, in the 2Q17 earnings release.

Liquids segment

EEP’s Liquids segment’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) for 2Q17 fell 14% over 2Q16. Lower rates and reduced short-haul transportation volumes impacted the earnings for the segment. The sale of the Ozark Pipeline System during 1Q17 further impacted the earnings.

EEP’s Liquids segment transports crude oil and NGL (natural gas liquids) from reserves. The segment generates revenue based on per barrel rates charged to gather, transport, or ship the crude oil or liquid petroleum.

Enbridge Energy Partners’ adjusted EBITDA for 2Q17 fell year-over-year due to lower Liquids segment EBITDA as well as the absence of contributions from the Natural Gas segment.

In the next part, we’ll discuss Enbridge Energy Partners’ leverage.

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