DBRS Comments on Alliance Pipeline’s Contract Renewal Update by Fort Chicago and Enbridge Income Fund

DBRS notes the joint announcement of Alliance Pipeline Limited Partnership (Alliance Canada) and Alliance Pipeline L.P. (Alliance U.S.; collectively, Alliance) that shippers representing approximately 8% of contracted capacity have elected to extend their existing contracts to at least December 1, 2016 (with the annual renewal option retained), whereas the remaining shippers have elected not to extend their commitments beyond 2015. The pipeline will remain fully contracted under existing firm service contracts until December 1, 2015. Fort Chicago Energy Partners L.P. (Fort Chicago), a 50% owner of Alliance, and Enbridge Income Fund (EIF), a 50% owner of Alliance Canada, have also made similar announcements. Notwithstanding the foregoing, DBRS believes that the current credit ratings of A (low) for Alliance and BBB (high) for both Fort Chicago and EIF, all with Stable trends, are supported by the continuing importance of the pipeline system, which is expected to continue to operate on a competitive basis beyond the contract term expiry in 2015. The pipeline system represents a major contributor to the earnings and cash flow of both Fort Chicago and EIF. The most recent rating reports for these four entities (published on September 10, 2010, for Alliance; September 3, 2010, for Fort Chicago; and November 12, 2010, for EIF) noted DBRS’s expectation that some of the existing shipper contracts would not be extended.

DBRS continues to expect that Alliance will evolve more into a mature conventional pipeline system and become less of a bullet pipeline based on a single toll, providing greater market-based services, including short-haul delivery and receipt points and hub and feeder pipeline systems, such as the northeast British Columbia expansion (BC Expansion) in 2008 and the connection to the Pecan Pipeline (Pecan Interconnect) in early 2010, to reach the rich gas basins. Alliance has received positive feedback about the multi-service approach from existing and potential customers.

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