DBRS Confirms Express Pipeline Limited Partnership & Express Pipeline LLC at A (low), Stable

DBRS Limited (DBRS) confirmed the Issuer Rating and the rating on the Senior Secured Notes due 2020 issued by Express Pipeline Limited Partnership & Express Pipeline LLC (collectively, Express) and guaranteed by Platte Pipe Line Company (Platte), at A (low). Both of the ratings are supported by the combined strength of Express and Platte (collectively, the Express-Platte System). All trends are Stable. The ratings reflect Express’s strong business risk profile supported by firm long-term shipping contracts, which cover a majority of the pipeline’s capacity and provide predictable cash flows with no direct exposure to commodity risk. Express’s Subordinated Secured Notes due 2019 were fully repaid at the end of 2017.

The Express-Platte System is a crude oil pipeline system that offers competitive tolling options for the Western Canadian Sedimentary Basin (WCSB), the Bakken and Rockies crude oil producers shipping to refineries in the U.S. Rockies (Petroleum Administration for Defense District (PADD) IV) and Midwest (PADD II) regions. On the back of the increased effective capacity resulting from the completion of the Express Enhancement project in Q4 2016, average volumes flowing in the pipeline system continued to increase in 2017. Express’s committed long-term take-or-pay contracts and fee-for-service tolling structure with annual toll escalators provide for revenue and cash flow growth. However, the Express-Platte System faces volume risk on the Platte section of the pipeline to Illinois from Wyoming as the segment is fully uncommitted. However, the Platte pipeline section is the only crude oil pipeline connecting PADD IV to PADD II, which is the destination for much of the WCSB’s heavy oil shipments, and volumes are supported by refinery demand in Illinois. DBRS expects Express’s business risk profile to remain stable over the medium term.

Credit metrics have continued to improve with growing cash flow and repayment of debt as Express benefits from high capacity utilization and a stream of contracted cash flows. Capital expenditures in 2018 are expected to stay in line with 2017 levels and can be well supported by internally generated cash flow. In DBRS’s view, the strong competitive positions of the Express and Platte pipelines, as well as the long-term refinery demand for crude oil in their service regions, will continue to support strong shipper interest in the Express-Platte System. DBRS rates Express on a stand-alone basis and does not assume any credit support from its ultimate parent, Enbridge Inc. (rated BBB (high) with a Stable trend by DBRS).

Notes:
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 under Related Documents or by contacting us at info@dbrs.com.

The principal methodologies are Rating Companies in the Pipeline and Diversified Energy Industry and DBRS Criteria: Guarantees and Other Forms of Support, which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

DBRS will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at info@dbrs.com.

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