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

DBRS Limited (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 subject to near-term pressure, will subsequently recover and its business risk profile will continue to improve upon completion of its major liquids pipeline projects. DBRS expects EEP to maintain sufficient liquidity to fully support its needs in the event of difficult capital market conditions. Finally, EEP benefits from the sponsorship of Enbridge Inc. (ENB, rated BBB (high) by DBRS).

EEP’s financial profile and credit metrics improved in the last 12 months (LTM) ending June 30, 2015, compared with LTM ending June 30, 2014, mainly due to incremental cash flow from projects placed into service. However, DBRS expects near-term pressure on credit metrics, before medium-term recovery, due to its large growth capital expenditures (capex) program and high distribution payout ratio. As a master limited partnership, EEP pays out most of its cash flow to unit holders, with growth capex and acquisitions requiring external funding.

EEP’s business risk profile should continue to improve upon completion of its major low-risk (due to strong regulatory and contractual arrangements) liquids pipeline projects through 2017. EEP’s exposure to its higher-risk (due to volume and commodity price risks) Natural Gas segment (subject of a Q4 2013 initial public offering and a subsequent Q3 2014 drop down) is expected to continue to decline. DBRS expects the Liquids segment to account for more than 85% of medium-term segment EBITDA compared with 89% in the LTM June 30, 2015.

EEP’s direct liquidity position was adequate as of July 2, 2015, with $865 million of availability under its direct committed credit facilities on a pro forma basis. The Partnership’s near-term external financing needs remain significant despite relatively low refinancing requirements over the next two years.

Finally, EEP benefits from the sponsorship of ENB, which, through its wholly owned subsidiary, Enbridge Energy Company, Inc. (EECI, EEP’s general partner), has taken ongoing action to improve EEP’s liquidity and minimize its debt growth. On July 30, 2015, the payment deferral for distributions accruing on the preferred units noted issued in 2013 by EEP to EECI ($90 million per year) was extended by three years to June 30, 2018. EECI also agreed to temporarily forego distributions related to the Eastern Access and U.S. Mainline expansion projects ($129 million in the first half of 2015) commencing in Q2 2015 through Q1 2016.

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.

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

The applicable methodologies are Rating Companies in the Pipeline and Diversified Energy Industry (January 2015), DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers (April 2015), DBRS Criteria: Financial Ratio Definitions and Accounting Adjustments – Non-Financial Companies (June 2015) and DBRS Criteria: Preferred Share and Hybrid Criteria for Corporate Issuers (January 2015), which can be found on our website under Methodologies.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.