DBRS Confirms Enbridge Energy Partners, L.P. at BBB, BB (high) and R-2 (middle), Stable Trends

DBRS has today confirmed the Issuer Rating of Enbridge Energy Partners, L.P. (EEP or the Partnership) at BBB and the ratings on the Partnership’s Senior Unsecured Notes, Junior Subordinated Notes and Commercial Paper (CP) at BBB, BB (high) and R-2 (middle), respectively, all with Stable trends. The ratings incorporate DBRS’s expectation that EEP’s credit ratios, which are under pressure due to its large growth capex program, will recover from recent levels, while also recognizing expected continued improvement in its business risk profile following completion of its major liquids pipeline projects in 2013 and 2014. DBRS expects EEP to maintain sufficient liquidity to fully support its needs in the event of difficult capital market conditions. Finally, EEP’s ratings are also supported by the strong sponsorship of Enbridge Inc. (ENB, rated A (low)).

DBRS expects EEP’s credit metrics to remain under pressure as a result of its large growth capex program and high distribution payout. As a master limited partnership (MLP), EEP pays out most of its cash flow to unitholders, with growth capex and acquisitions requiring external funding (debt and/or units). DBRS expects EEP’s debt-to-capital ratio to remain near 50% and its cash flow-to-debt and interest coverage metrics to remain relatively weak in the near term, prior to recovering over the medium term.

EEP’s business risk profile is expected to continue improving following completion of many of its major low-risk (due to strong regulatory and contractual arrangements) liquids pipeline projects in 2013 and 2014. As a result, EEP’s exposure to its higher-risk (due to volume and commodity price risks) Natural Gas segment (the subject of an initial public offering (IPO)) is expected to continue to decline. DBRS expects the Liquids segment to account for approximately 80% of segment EBITDA over the medium term compared with 74% in the last 12 months (LTM) ending June 30, 2013.

Finally, EEP’s ratings are also supported by the strong sponsorship of ENB, which, through its wholly owned subsidiary, Enbridge Energy Company, Inc. (EECI, EEP’s general partner (GP)), concluded a joint funding agreement under which ENB will effectively fund three-quarters of the $2.5 billion Eastern Access and the $2.4 billion U.S. Mainline Expansion crude oil pipeline projects, with the remaining one-quarter funded by EEP. During Q2 2013, EEP issued $1.2 billion of preferred units to EECI and used the proceeds to reduce CP.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating North American Pipeline and Diversified Energy Companies, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.