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 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 weak due to its large capex program, will recover from recent levels and that there will be continued improvement in its business risk profile following the completion of some of its major liquids pipeline projects in 2014 and 2015. 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 supported by the strong sponsorship of Enbridge Inc. (ENB, rated A (low) by DBRS; see separate report).

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

EEP’s business risk profile is expected to continue to improve following completion of some of its major low-risk (due to strong regulatory and contractual arrangements) liquids pipeline projects in 2014 and 2015. 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 and a subsequent secondary offering) is expected to continue to decline. DBRS expects the Liquids segment to account for more than 80% of segment EBITDA over the medium term compared with 85% in the last 12 months ending June 30, 2014.

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), reached a joint funding agreement under which ENB will effectively fund half of the $2.6 billion U.S. Line 3 Replacement crude oil pipeline project and EEP will fund the remaining half during Q1 2014. During Q2 2014, EECI agreed to an EEP equity restructuring proposal expected to enhance the market value of EEP’s common units.

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 methodologies are DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers, DBRS Criteria: Financial Ratios and Accounting Treatments – Non Financial Companies, Preferred Share and Hybrid Criteria for Corporate Issuers (Excluding Financial Institutions) and Rating 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.