DBRS Comments on Enbridge Energy Partners’ Planned Acquisition

DBRS notes that Enbridge Energy Partners, L.P. (EEP or the Partnership) has today agreed to acquire the Elk City Gathering and Processing System (the Acquired Assets) from Atlas Pipeline Partners for approximately $682 million. The transaction is expected to close by late Q3 2010 or in Q4 2010, and will be accretive to earnings upon integration with EEP’s Anadarko system.

The transaction modestly increases EEP’s exposure to its Natural Gas segment, which has a higher business risk profile than its Liquids segment due to volume and commodity price risks, although this is partly offset by contractual and hedging arrangements. However, the overall business risk profile is mitigated by the recent completion of major Liquids segment projects, including the $1.2 billion ($0.4 billion net to EEP) U.S. portion of the Alberta Clipper pipeline (in service on April 1, 2010) and the $150 million North Dakota Phase VI pipeline expansion (in service on January 1, 2010). DBRS estimates that the Liquids, Natural Gas and Marketing segments accounted for 72%, 27% and 1%, respectively, of EEP’s segment EBITDA in the 12 months ending (LTM) June 30, 2010.

DBRS expects that the acquisition, in combination with the Partnership’s growth capex program ($810 million in 2010, including $330 million spent to June 30, 2010), will be funded with relatively equal components of debt and equity over time. Consequently, EEP’s adjusted debt-to-capital ratio (48.5% at June 30, 2010) is likely to rise marginally to the low-50% range, which DBRS considers to be reasonable for the current ratings on the Commercial Paper, Senior Unsecured Notes and Junior Subordinated Notes of R-2 (middle), BBB and BB (high), respectively, all with Stable trends. EEP’s cash flow-to-debt, EBITDA interest coverage and EBIT interest coverage metrics (17.9%, 3.65 times and 2.61 times) for LTM June 30, 2010, remain satisfactory for the current ratings. DBRS also expects that the commodity price risk associated with the Acquired Assets will be hedged in a manner that is consistent with the Partnership’s current hedging strategy within its Natural Gas segment.

The Acquired Assets include approximately 800 miles of natural gas gathering pipelines located in the Anadarko Basin in western Oklahoma and the Texas Panhandle, which includes the Atoka Wash and Granite Wash formations. Also included are one treating plant and three cryogenic plants with current processing capacity of 370 million cubic feet per day (MMcf/d) and natural gas liquids (NGL) production capacity of 20,000 barrels per day (b/d). The Acquired Assets, which were operating at approximately 55% to 60% of capacity during Q1 2010, are located near EEP’s current Anadarko System, providing significant opportunity for operational synergies.

Note:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating North American Energy Utilities (Electric, Natural Gas, and Pipelines), which can be found on the DBRS website under Methodologies.

This is a Corporate (Energy) rating.