EEP Enbridge Energy, L.P. Class A Common Units (delisted)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

Date of report (Date of earliest event reported): February 18, 2015

ENBRIDGE ENERGY PARTNERS, L.P.

(Exact Name of Registrant as Specified in Charter)

 

DELAWARE		1-10934		39-1715850
(State or Other Jurisdiction of Incorporation)		(Commission File Number)		(IRS Employer Identification No.)

1100 LOUISIANA, SUITE 3300, HOUSTON, TEXAS 77002

(Address of Principal Executive Offices) (Zip Code)

(713) 821-2000

(Registrant’s telephone number, including area code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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Item 2.02. Results of Operations and Financial Condition.

Enbridge Energy Partners, L.P., referred to herein as “we” or “our,” issued a press release on February 18, 2015 announcing its financial results for the quarter ended December 31, 2014, which is attached hereto as Exhibit 99.1. As noted in the press release, a copy of our unaudited condensed consolidated financial statements for the year ended December 31, 2014 is available on our website at www.enbridgepartners.com and is attached hereto as Exhibit 99.2. This information is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any registration statements filed under the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Reference is made to the “Index of Exhibits” following the signature page, which is hereby incorporated into this Item.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

				ENBRIDGE ENERGY PARTNERS, L.P. (Registrant)
				By:		Enbridge Energy Management, L.L.C.
						as delegate of Enbridge Energy Company, Inc., its General Partner
Date: February 18, 2015				By:		/s/ Noor Kaissi
						Noor Kaissi Controller (Duly Authorized Officer)

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Index of Exhibits

 

Exhibit Number		Description
99.1		Press release of Enbridge Energy Partners, L.P., dated February 18, 2015 reporting financial results for the quarter ended December 31, 2014
99.2		Unaudited condensed consolidated financial statements of Enbridge Energy Partners, L.P. for the year ended December 31, 2014

Exhibit 99.1

 

News Release

Enbridge Energy Partners, L.P. Reports 2014 Earnings and Announces 2015 Financial Guidance

HOUSTON — (February 18, 2015) - Enbridge Energy Partners, L.P. (NYSE:EEP) (“Enbridge Partners” or “the Partnership”) reports adjusted EBITDA for the three months ended December 31, 2014 and full year 2014 of $443.3 million and $1.55 billion, respectively.

2014 HIGHLIGHTS

 

•

Delivered 41 percent total shareholder return in 2014.

 

•

Announced cash distribution increases of 4.9 percent in 2014.

 

•

Closed on equity restructure with general partner to enhance Partnership’s prospective cost of capital.

 

•

Completed $1 billion drop down acquisition from our general partner, effective January 2, 2015.

 

•

Announced that Enbridge Inc. (NYSE: ENB) (“Enbridge”) is reviewing a potential U.S. restructuring plan to transfer its directly held U.S. liquids pipeline assets to Enbridge Partners.

 

•

Record Lakehead and North Dakota system deliveries: 20% increase over 2013.

 

•

Adjusted EBITDA for the fourth quarter of $443 million; full year adjusted EBITDA of $1.55 billion.

 

•

Placed $2.3 billion of liquids pipeline organic growth projects into service.

 

•

2015 financial guidance: adjusted EBITDA of $1.68 - $1.78 billion expected; distributable cash flow of $900 - $960 million expected.

“In 2014, the Partnership’s strong financial performance was supported by record deliveries on our Lakehead and North Dakota liquids pipeline systems, in addition to the meaningful cash flow contributions from the execution of our multi-billion dollar organic growth program. We expect deliveries on our liquids pipeline systems to remain strong in 2015 as we continue to progress our market access programs, providing our customers with expanded pipeline takeaway capacity from Western Canada and the Bakken formation to premium North American crude oil markets. With the backdrop of volatile commodity prices, the Partnership’s competitive transportation rates and resulting cash flows are predominantly underpinned by long term low-risk commercial structures, such as cost of service and take-or-pay, which largely mitigate the sensitivity to volume and commodity prices to our business’s distributable cash flow,” said Mark Maki, president for the Partnership.

“Looking forward, our organic growth program is proceeding well and we expect to place several projects into service during 2015 that will increase our cash flows. The Partnership recently closed on the previously announced $1 billion drop down acquisition of the remaining 66.7 percent interest in the U.S. segment of the Alberta Clipper Pipeline from Enbridge. With full year contribution from the Eastern Access projects placed into service during 2014 and organic growth projects targeted to enter service this year, the Partnership anticipates earnings and distributable cash flow growth in 2015. This growth in distributable cash flow positions the Partnership to deliver annual distribution growth of 2 to 5 percent for 2015.”

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“We are excited about the long term outlook for the Partnership. A key development in the fourth quarter was the announcement by Enbridge that it is reviewing a potential restructuring plan that would involve the transfer of its directly held U.S. liquids pipeline assets to the Partnership. While we expect this review to be concluded by mid-year, the potential drop down of Enbridge’s U.S. liquids pipelines systems would add substantial new sources of long-lived and growing cash flows to the Partnership’s already exceptional portfolio of liquids pipeline systems. The restructuring plan under consideration by Enbridge once again demonstrates the strategic alignment and support of our sponsor Enbridge, and its commitment to enhancing the value of the Partnership for all of our investors,” noted Maki.

The Partnership expects adjusted EBITDA for 2015 to increase approximately 12 percent, to between $1.68 billion and $1.78 billion, and expects distributable cash flow for 2015 to increase approximately 15 percent, to be between $900 million to $960 million.

The Partnership’s key financial results for the three and twelve months ended December 31, 2014, compared to the same periods in 2013, were as follows:

 

		Three months ended December 31,								Twelve months ended December 31,
(Unaudited; dollars in millions, except per unit amounts)		2014				2013				2014				2013
Net income(1)		$	214.1			$	(16.8	)		$	371.8			$	4.7
Net income (loss) per unit			0.51				(0.15	)			0.67				(0.39	)
Adjusted EBITDA(2)			443.3				303.3				1,551.0				1,143.4
Adjusted net income(1)			132.5				73.1				460.3				304.5
Adjusted net income per unit			0.27				0.12				0.93				0.54

 

(1)	Net income and adjusted net income attributable to general and limited partner ownership interests in Enbridge Partners.

(2)	Includes non-controlling interest.

Adjusted net income for the three and twelve month periods ended December 31, 2014, as reported above, eliminates the effect of: (a) additional environmental costs, net of insurance recoveries, associated with the Line 6B incident; (b) non-cash, mark-to-market net gains and losses and other adjustments. Refer to the Non-GAAP Reconciliations section below for additional details.

Adjusted net income of $132.5 million for the fourth quarter of 2014 was $59.4 million higher than the same period from the prior year. Higher earnings were primarily attributable to higher transportation rates, higher deliveries and contributions from pipeline expansion projects entering service in our liquids pipeline segment.

During the fourth quarter, the Partnership attributed approximately $22.5 million of earnings to its outstanding Series 1 Preferred units. This amount is deducted from net income to arrive at the amount of net income attributable to the general and limited partners. Preferred distributions are accrued at an annual rate of 7.5 percent through June 30, 2015. The Partnership may defer payment of those accrued amounts until the earlier of May 8, 2018 or the date on which the Partnership redeems the preferred units.

 

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COMPARATIVE EARNINGS STATEMENT

 

		Three months ended December 31,								Twelve months ended December 31,
(Unaudited; dollars in millions except per unit amounts)		2014				2013				2014				2013
Operating revenue		$	2,071.7			$	1,962.0			$	7,964.7			$	7,117.1
Operating expenses:
Commodity costs			1,159.2				1,384.5				5,145.9				4,948.9
Environmental costs, net of recoveries			4.0				89.4				97.3				273.7
Operating and administrative			273.1				240.4				950.0				918.4
Power			62.5				41.9				226.6				147.7
Depreciation and amortization			122.2				100.4				458.2				388.0
Operating income			450.7				105.4				1,086.7				440.4
Interest expense			109.0				94.0				403.2				320.4
Allowance for equity used during construction			9.4				17.9				57.2				43.1
Other income			6.7				15.0				8.9				16.0
Income before income tax expense			357.8				44.3				749.6				179.1
Income tax expense			3.5				1.2				9.6				18.7
Net income			354.3				43.1				740.0				160.4
Less: Net income attributable to:
Noncontrolling interest			113.9				34.0				263.3				88.3
Series 1 preferred unit distributions			22.5				22.4				90.0				58.2
Accretion of discount on Series 1 preferred units			3.8				3.5				14.9				9.2
Net income attributable to general and limited partner ownership interests in Enbridge Energy Partners, L.P.		$	214.1			$	(16.8	)		$	371.8			$	4.7
Less: Allocations to general partner			45.2				32.1				153.4				127.4
Net income (loss) allocable to common units and i-units		$	168.9			$	(48.9	)		$	218.4			$	(122.7	)
Weighted average common units and i-units (basic)			329.8				325.2				328.2				316.2
Net income (loss) per common unit and i-unit (basic)		$	0.51			$	(0.15	)		$	0.67			$	(0.39	)
Weighted average common units and i-units (diluted)			329.8				325.2				328.2				316.2
Net income (loss) per common unit and i-unit (diluted)		$	0.51			$	(0.15	)		$	0.67			$	(0.39	)

 

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COMPARISON OF QUARTERLY RESULTS

Following are explanations for significant changes in the Partnership’s financial results, comparing the three and twelve month periods ended December 31, 2014 with the same periods of 2013. The comparison refers to adjusted operating income, which excludes the effect of non-cash and nonrecurring items (see Non-GAAP Reconciliations section below).

 

		Three months ended								Twelve months ended
Adjusted Operating Income		December 31,								December 31,
(Unaudited; dollars in millions)		2014				2013				2014				2013
Liquids		$	306.4			$	185.8			$	1,012.1			$	658.2
Natural Gas			5.1				4.4				15.2				63.7
Corporate			(3.7	)			(2.2	)			(10.6	)			(7.6	)
Adjusted operating income		$	307.8			$	188.0			$	1,016.7			$	714.3

Liquids – Fourth quarter adjusted operating income for the Liquids segment increased $120.6 million to $306.4 million from $185.8 million for the comparable period in 2013. Higher revenues in the fourth quarter were attributable to an increase in transportation rates and higher deliveries on all our liquids pipeline systems. Total liquids system deliveries increased approximately 20 percent over the same period from the prior year due to crude oil supply growth in western Canada and the Bakken Formation, along with Enbridge and the Partnership’s pipeline expansion projects entering service. The Partnership completed a large component of its Eastern Access Program, specifically the Line 6B Replacement project from Griffith, Indiana to the International Border, in two phases in 2014. The 160-mile segment of the Line 6B Replacement project from Griffith, Indiana to Stockbridge, Michigan entered service May 1, 2014, and the remaining 50-mile segment of the Line 6B Replacement to the International Border, which entered service September 30, 2014. Additionally, the first phase of the Line 61 Mainline Expansion began service August 1, 2014. Collectively, these growth projects contributed to the increase in revenues during the fourth quarter over the comparable period in 2013.

 

		Three months ended								Twelve months ended
Liquids Systems Volumes		December 31,								December 31,
(thousand barrels per day)		2014				2013				2014				2013
Lakehead			2,187				1,918				2,113				1,816
Mid-Continent			222				195				200				201
North Dakota			362				200				318				171
Total			2,771				2,313				2,631				2,188

Natural Gas – Fourth quarter adjusted operating income for the Natural Gas segment was $0.7 million higher compared to the same period of 2013. The increase in adjusted operating income was attributable to higher storage margins resulting from the sale of liquids product inventory in our marketing business and lower operating and administrative expenses, partially offset by decreased gross margin due to lower NGL prices and lower natural gas throughput on our major systems.

 

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		Three months ended								Twelve months ended
Natural Gas Throughput		December 31,								December 31,
(MMBtu per day)		2014				2013				2014				2013
East Texas			1,056,000				1,028,000				1,030,000				1,153,000
Anadarko			858,000				902,000				827,000				949,000
North Texas			297,000				292,000				293,000				317,000
Total			2,211,000				2,222,000				2,150,000				2,419,000
NGL Production
(Barrels per day)		2014				2013				2014				2013
Total System Production			86,136				84,288				83,675				88,236

MANAGEMENT REVIEW OF QUARTERLY RESULTS AND 2015 FINANCIAL GUIDANCE

Enbridge Partners will host a conference call at 10 a.m. Eastern Time on Thursday, February 19, 2015 to review its fourth quarter 2014 earnings and present its 2015 financial guidance. The call will be webcast live over the internet and may be accessed on Enbridge Partners’ website under “Events and Presentations” or directly at

http://edge.media-server.com/m/p/bbk49axk

A replay will be available shortly afterward. Presentation slides and condensed financial statements will also be available at the link below.

EEP Events and Presentations:

www.enbridgepartners.com/Investor-Relations/EEP/Events-and-Presentations

Webcast link: http://edge.media-server.com/m/p/bbk49axk

The audio portion of the live presentation will be accessible by telephone at (866)-318-8619 (Passcode: 26880896) and can be replayed until March 5, 2015 by calling (888) 286-8010 (Passcode: 75558254). An audio replay will also be available for download in MP3 format from either of the website addresses above.

 

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NON-GAAP RECONCILIATIONS

Adjusted net income and adjusted operating income for the principal business segments are provided to illustrate trends in income excluding derivative fair value losses and gains and other nonrecurring items that affect earnings. The derivative non-cash losses and gains result from marking to market certain financial derivatives used by the Partnership for hedging purposes that do not qualify for hedge accounting treatment in accordance with the authoritative accounting guidance as prescribed under generally accepted accounting principles in the United States.

 

		Three months ended								Twelve months ended
Adjusted Earnings		December 31,								December 31,
(Unaudited; dollars in millions except per unit amounts)		2014				2013				2014				2013
Net income attributable to general and limited partner ownership interests in Enbridge Energy Partners, L.P.		$	214.1			$	(16.8	)		$	371.8			$	4.7
Noncash derivative fair value (gains) losses
-Liquids			(14.5	)			(0.4	)			(13.5	)			3.9
-Natural Gas			(111.9	)			(8.1	)			(120.4	)			3.6
-Corporate			26.8				20.9				100.1				21.7
Non-core asset impairment			11.9				—				11.9				—
Severance costs			4.2				—				4.2				—
Option premium amortization			(0.9	)			2.7				(4.1	)			4.7
Make-up rights adjustment			(2.0	)			1.3				6.5				1.6
Deferred tax law adjustment			—				—				—				12.1
Line 6B incident expenses, net of recoveries			1.0				87.1				88.9				260.1
Sale of El Dorado tank farm			—				(17.1	)			—				(17.1	)
Accretion of discount on Series 1 preferred units			3.8				3.5				14.9				9.2
Adjusted net income			132.5				73.1				460.3				304.5
Less: Allocations to general partner			43.6				33.9				155.2				133.4
Adjusted net income allocable to common units and i-units		$	88.9			$	39.2			$	305.1			$	171.1
Weighted average common units and i-units (millions)			329.8				325.2				328.2				316.2
Adjusted net income per common unit and i-unit (dollars)		$	0.27			$	0.12			$	0.93			$	0.54
		Three months ended								Twelve months ended
Liquids		December 31,								December 31,
(Unaudited; dollars in millions)		2014				2013				2014				2013
Operating income		$	321.6			$	97.8			$	938.9			$	392.6
Line 6B incident expenses, net of recoveries			1.0				87.1				82.9				260.1
Noncash derivative fair value (gains) losses			(14.5	)			(0.4	)			(13.5	)			3.9
Make-up rights adjustment			(2.3	)			1.3				3.2				1.6
Severance costs			0.6				—				0.6				—
Adjusted operating income		$	306.4			$	185.8			$	1,012.1			$	658.2

 

		Three months ended								Twelve months ended
Natural Gas		December 31,								December 31,
(Unaudited; dollars in millions)		2014				2013				2014				2013
Operating income		$	132.8			$	9.8			$	158.4			$	55.4
Noncash derivative fair value (gains) losses			(146.9	)			(8.1	)			(158.4	)			3.6
Option premium amortization			(1.2	)			2.7				(5.2	)			4.7
Non-core asset impairment			15.6				—				15.6				—
Severance costs			4.8				—				4.8				—
Adjusted operating income		$	5.1			$	4.4			$	15.2			$	63.7

 

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Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) is used as a supplemental financial measurement to assess liquidity and the ability to generate cash sufficient to pay interest costs and make cash distributions to unitholders. The following reconciliation of net cash provided by operating activities to adjusted EBITDA is provided because EBITDA is not a financial measure recognized under generally accepted accounting principles.

 

		Three months ended								Twelve months ended
Adjusted EBITDA		December 31,								December 31,
(Unaudited; dollars in millions)		2014				2013				2014				2013
Net cash provided by operating activities		$	325.1			$	269.9			$	816.8			$	1,212.4
Changes in operating assets and liabilities, net of cash acquired			30.3				(65.1	)			379.8				(357.2	)
Interest expense(1)			82.2				73.1				303.1				298.7
Income tax expense			3.5				1.2				9.6				18.7
Allowance for equity used during construction			9.4				17.9				57.2				43.1
El Dorado tank farm sale							(17.1	)							(17.1	)
Option premium amortization			(1.2	)			2.4				(5.2	)			4.4
Deferred tax law adjustment			—				—				—				(12.1	)
Line 6B incident recoveries received			—				—				—				(42.0	)
Other			(6.0	)			21.0				(10.3	)			(5.5	)
Adjusted EBITDA		$	443.3			$	303.3			$	1,551.0			$	1,143.4

 

(1)

Interest expense excludes unrealized mark-to-market net losses of $26.8 million and $100.1 million for the three and twelve month periods ended December 31, 2014, respectively. Interest expense excludes unrealized mark-to-market net losses of $20.9 million and $21.7 million for the three and twelve month periods ended December 31, 2013, respectively.

About Enbridge Energy Partners, L.P.

Enbridge Energy Partners, L.P. owns and operates a diversified portfolio of crude oil and, through its interests in Midcoast Energy Partners, L.P. (“Midcoast Partners”), natural gas transportation systems in the United States. Its principal crude oil system is the largest pipeline transporter of growing oil production from western Canada and the North Dakota Bakken formation. The system’s deliveries to refining centers and connected carriers in the United States account for approximately 17 percent of total U.S. oil imports. Midcoast Partners’ natural gas gathering, treating, processing and transmission assets, which are principally located onshore in the active U.S. Mid-Continent and Gulf Coast areas, deliver approximately 2.5 billion cubic feet of natural gas daily. Enbridge Partners is recognized by Forbes as one of the 100 Most Trustworthy Companies in America.

Forward Looking Statements

This news release includes forward-looking statements and projections, which are statements that do not relate strictly to historical or current facts. These statements frequently use the following words, variations thereon or comparable terminology: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “position,” “projection,” “should,” “strategy,” “target,” “will” and similar words. Although the Partnership believes that such forward-looking statements are reasonable based on currently available information, such statements involve risks, uncertainties and assumptions and are not guarantees of performance. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond the Partnership’s ability to control or predict. Specific factors that could cause actual results to differ from those in the forward-looking statements include: (1) changes in the demand for or the supply of, forecast data for, and price trends related to crude oil, liquid petroleum, natural gas and NGLs, including the rate of development of the Alberta Oil Sands; (2) the Partnership’s ability to successfully complete and finance expansion projects; (3) the effects of competition, in particular, by other pipeline systems; (4) shut-downs or cutbacks at the Partnership’s facilities or refineries, petrochemical plants, utilities or other businesses for which the Partnership transports products or to whom the Partnership sells products; (5) hazards and operating risks that may not be covered fully by insurance, including those related to Line 6B and any additional fines and penalties assessed in connection with the crude oil release on that line; (6) changes in or challenges to the

 

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Partnership’s tariff rates; (7) changes in laws or regulations to which the Partnership is subject, including compliance with environmental and operational safety regulations that may increase costs of system integrity testing and maintenance; and (8) permitting at federal, state and local levels in regards to the construction of new assets.

Forward-looking statements regarding “drop-down” growth opportunities from Enbridge Inc. are further qualified by the fact that Enbridge Inc. is under no obligation to offer to sell us interests in its U.S. projects, and we are under no obligation to buy any such interests. Similarly, any forward-looking statements regarding potential “drop-down” transactions of interests in Midcoast Operating to Midcoast Energy Partners are further qualified by the fact that we are under no obligation to sell to Midcoast Energy Partners, L.P. any such interests, and Midcoast Energy Partners, L.P. is under no obligation to buy any such interests. As a result, we do not know when or if any such transactions will occur.

Except to the extent required by law, we assume no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Reference should also be made to the Partnership’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including its Annual Report on Form 10-K for the year ended December 31, 2014 for additional factors that may affect results. These filings are available to the public over the Internet at the SEC’s web site (www.sec.gov) and at the Partnership’s web site.

FOR FURTHER INFORMATION PLEASE CONTACT

 

Investor Relations Contact:		Media Contact:
Sanjay Lad, CFA		Terri Larson, APR
Toll-free: (866) EEP INFO or (866) 337-4636		Telephone: (877) 496-8142
E-mail: eep@enbridge.com		E-mail: usmedia@enbridge.com
Website: www.enbridgepartners.com

# # #

 

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Exhibit 99.2

ENBRIDGE ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

 

		For the year ended December 31,
		2014				2013				2012
		(unaudited; in millions, except per unit amounts)
Commodity sales		$	5,487.8			$	5,155.4			$	4,724.3
Commodity sales - affiliate			206.1				213.1				396.2
Transportation and other services			2,191.8				1,690.0				1,552.0
Transportation and other services - affiliate			79.0				58.6				33.6
			7,964.7				7,117.1				6,706.1
Operating expenses:
Commodity costs			5,026.7				4,829.4				4,282.2
Commodity costs - affiliate			119.2				119.5				287.9
Environmental costs, net of recoveries			97.3				273.7				(91.3	)
Operating and administrative			478.0				480.8				418.8
Operating and administrative - affiliate			472.0				437.6				421.7
Power			226.6				147.7				148.8
Depreciation and amortization			458.2				388.0				344.8
			6,878.0				6,676.7				5,812.9
Operating income			1,086.7				440.4				893.2
Interest expense, net			403.2				320.4				345.0
Allowance for equity used during construction			57.2				43.1				11.2
Other income (expense)			8.9				16.0				(1.2	)
Income before income tax expense			749.6				179.1				558.2
Income tax expense			9.6				18.7				8.1
Net income			740.0				160.4				550.1
Less: Net income attributable to:
Noncontrolling interest			263.3				88.3				57.0
Series 1 preferred unit distributions			90.0				58.2				—
Accretion of discount on Series 1 preferred units			14.9				9.2				—
Net income attributable to general and limited partner ownership interest in Enbridge Energy Partners, L.P.		$	371.8			$	4.7			$	493.1
Net income (loss) allocable to common and i-units		$	218.4			$	(122.7	)		$	369.2
Net income (loss) per common unit and i-unit (basic)		$	0.67			$	(0.39	)		$	1.27
Weighted average common units and i-units outstanding (basic)			328.2				316.2				290.6
Net income (loss) per common unit and i-unit (diluted)		$	0.67			$	(0.39	)		$	1.27
Weighted average common units and i-units outstanding (diluted)			328.2				316.2				290.6
Cash distributions paid per limited partner unit outstanding		$	2.20			$	2.17			$	2.15

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ENBRIDGE ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

		December 31,
		2014				2013				2012
		(unaudited; in millions)
Cash provided by operating activities:
Net income		$	740.0			$	160.4			$	550.1
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			458.2				388.0				344.8
Derivative fair value net (gains) losses			(72.0	)			28.6				18.5
Inventory market price adjustments			11.4				3.4				9.8
Asset impairment charges			15.6				—				—
Environmental costs, net of recoveries			82.2				308.1				72.6
Distributions from investments in joint ventures			12.2				—				—
Equity earnings from investments in joint ventures			(13.2	)			—				—
Deferred income taxes			4.1				14.5				0.1
State income taxes			3.7				8.4				—
Allowance for equity used during construction			(57.2	)			(43.1	)			(11.2	)
Amortization of debt issuance and hedging costs			9.4				10.5				12.7
Gain on sale of assets			—				(17.1	)			—
Other			7.3				(3.9	)			1.4
Changes in operating assets and liabilities, net of acquisitions:
Receivables, trade and other			1.7				125.0				42.7
Due from General Partner and affiliates			0.7				(12.6	)			(3.1	)
Accrued receivables			(50.1	)			286.1				(61.8	)
Inventory			(10.7	)			(21.2	)			11.1
Current and long-term other assets			(47.1	)			(24.1	)			(7.3	)
Due to General Partner and affiliates			22.4				79.1				(12.5	)
Accounts payable and other			(101.1	)			85.1				(8.6	)
Environmental liabilities			(143.1	)			(174.9	)			(100.3	)
Accrued purchases			(89.9	)			13.8				(19.1	)
Interest payable			6.6				4.3				(0.9	)
Property and other taxes payable			26.1				(0.7	)			12.0
Settlement of interest rate derivatives			(0.4	)			(5.3	)			—
Net cash provided by operating activities			816.8				1,212.4				851.0
Cash used in investing activities:
Additions to property, plant and equipment			(2,933.6	)			(2,409.9	)			(1,739.9	)
Changes in restricted cash			(27.6	)			(69.4	)			—
Asset acquisitions			(0.2	)			(0.9	)			—
Proceeds from the sale of net assets			—				44.7				9.5
Investment in joint venture			(36.7	)			(188.6	)			(168.5	)
Distributions from investments in joint ventures in excess of cumulative earnings			27.8				—				—
Other			(6.3	)			(18.8	)			(7.7	)
Net cash used in investing activities			(2,976.6	)			(2,642.9	)			(1,906.6	)
Cash provided by financing activities:
Net proceeds from Series 1 preferred unit issuance			—				1,199.2				—
Net proceeds from unit issuances			—				519.3				457.0
Distributions to partners			(727.9	)			(708.9	)			(660.3	)
Repayments to General Partner			(12.0	)			(12.0	)			(12.0	)
Proceeds from long-term debt, net of discounts			398.1				—				—
Repayments of long-term debt			(200.0	)			(200.0	)			(100.0	)
Net proceeds under credit facilities			1,185.0				335.0				—
Net commercial paper borrowings (repayments)			312.1				(859.9	)			884.9
Contribution from noncontrolling interest			1,391.6				1,148.5				350.9
Distributions to noncontrolling interest			(154.0	)			(53.8	)			(59.9	)
Net cash provided by financing activities			2,192.9				1,367.4				860.6
Net increase (decrease) in cash and cash equivalents			33.1				(63.1	)			(195.0	)
Cash and cash equivalents at beginning of year			164.8				227.9				422.9
Cash and cash equivalents at end of period		$	197.9			$	164.8			$	227.9

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ENBRIDGE ENERGY PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

 

		December 31,
		2014				2013
		(unaudited; in millions)
ASSETS
Current assets:
Cash and cash equivalents		$	197.9			$	164.8
Restricted cash			97.0				69.4
Receivables, trade and other, net of allowance for doubtful accounts of $1.8 million and $0.5 million in 2014 and 2013, respectively			46.2				49.4
Due from General Partner and affiliates			41.4				40.5
Accrued receivables			260.3				210.2
Inventory			94.2				94.9
Other current assets			218.4				47.6
			955.4				676.8
Property, plant and equipment, net			15,692.7				13,176.8
Goodwill			246.7				246.7
Intangible assets, net			254.8				263.2
Other assets, net			597.3				538.0
		$	17,746.9			$	14,901.5
LIABILITIES AND PARTNERS’ CAPITAL
Current liabilities:
Due to General Partner and affiliates		$	143.7			$	121.4
Accounts payable and other			777.7				822.0
Environmental liabilities			141.7				233.7
Accrued purchases			375.7				465.6
Property and other taxes payable			96.5				70.7
Interest payable			74.6				68.0
Note payable to General Partner			306.0				12.0
Current maturities of long-term debt			—				200.0
			1,915.9				1,993.4
Long-term debt			6,675.2				4,777.4
Loans from General Partner and affiliate			—				306.0
Due to General Partner and affiliates			148.3				58.2
Other long-term liabilities			278.1				69.1
			9,017.5				7,204.1
Commitments and contingencies
Partners’ capital:
Series 1 preferred units (48,000,000 authorized and issued at December 31, 2014 and 2013)			1,175.6				1,160.7
Class D units (66,100,000 authorized and issued at December 31, 2013)			2,516.8				—
Class A common units (254,208,428 authorized and issued at December 31, 2014 and 2013)			235.5				2,979.0
Class B common units (7,825,500 authorized and issued at December 31, 2014 and 2013)			—				65.3
i-units (68,305,187 and 63,743,099 authorized and issued at December 31, 2014 and December 31, 2013, respectively)			712.6				1,291.9
Incentive distribution units (1,000 authorized and issued at December 31, 2014)			493.0				—
General Partner			198.3				301.5
Accumulated other comprehensive loss			(211.4	)			(76.6	)
Total Enbridge Energy Partners, L.P. partners’ capital			5,120.4				5,721.8
Noncontrolling interest			3,609.0				1,975.6
Total partners’ capital			8,729.4				7,697.4
		$	17,746.9			$	14,901.5

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NET INCOME PER LIMITED PARTNER UNIT

We allocate our net income among our Series 1 Preferred Units, or Preferred Units, our General Partner interest, and our limited partner units using the two-class method in accordance with applicable authoritative accounting guidance. Under the two-class method, we allocate our net income attributable to our General Partner and our limited partners according to the distribution formula for available cash as set forth in our partnership agreement. We also allocate any earnings in excess of distributions to our General Partner and limited partners utilizing the distribution formula for available cash specified in our partnership agreement. We allocate any distributions in excess of earnings for the period to our General Partner and limited partners based on their sharing of losses of 2% and 98%, respectively, as set forth in our partnership agreement. Until July 1, 2014, we allocated distributions to the General Partner and limited partners as follows:

 

Distribution Targets		Portion of Quarterly Distribution Per Unit		Percentage Distributed to General Partner				Percentage Distributed to Limited partners
Minimum Quarterly Distribution		Up to $0.295			2	%			98	%
First Target Distribution		> $0.295 to $0.35			15	%			85	%
Second Target Distribution		> $0.35 to $0.495			25	%			75	%
Over Second Target Distribution		In excess of $0.495			50	%			50	%

Equity Restructuring Transaction

On July 1, 2014, we entered into an equity restructuring transaction, or Equity Restructuring, with the General Partner in which the General Partner irrevocably waived its right to receive cash distributions and allocations of items of income, gain, deduction, and loss in excess of 2% in respect of its general partner interest in the incentive distribution rights, or Previous IDRs, in exchange for the issuance to a wholly-owned subsidiary of the General Partner of (i) 66.1 million units of a new class of limited partner interests designated as Class D units, and (ii) 1,000 units of a new class of limited partner interests designated as Incentive Distribution Units, or IDUs.

Beginning July 1, 2014, pursuant to our partnership agreement, we calculate distributions to the General Partner and limited partners based upon the distribution rates and percentages set forth in the following table:

 

Distribution Targets		Portion of Quarterly Distribution Per Unit		Percentage Distributed to General Partner and  IDUs(1)				Percentage Distributed to Limited partners
Minimum Quarterly Distribution		Up to $0.5435			2	%			98	%
Target Distribution		> $0.5435			25	%			75	%

 

(1)	For distributions in excess of the Minimum Quarterly Distribution, this percentage includes both the General Partner’s distributions of 2% and the distribution to the Incentive Distribution Unit holder, a wholly-owned subsidiary of our General Partner.

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We determined basic and diluted net income (loss) per common unit and i-unit as follows:

 

		For the year ended December 31,
		2014				2013				2012
		(unaudited; in millions, except per unit amounts)
Net income		$	740.0			$	160.4			$	550.1
Less Net income attributable to:
Noncontrolling interest			(263.3	)			(88.3	)			(57.0	)
Series 1 preferred unit distributions			(90.0	)			(58.2	)			—
Accretion of discount on Series 1 preferred units			(14.9	)			(9.2	)			—
Net income attributable to general and limited partner interests in Enbridge Energy Partners, L.P.			371.8				4.7				493.1
Less distributions:
Incentive distributions to our General Partner			(39.1	)			(129.9	)			(116.3	)
Distributed earnings attributed to our General Partner			(17.3	)			(14.2	)			(13.0	)
Distributed earnings attributed to Class D units			(107.5	)			—				—
Total distributed earnings to our General Partner, Class D units and IDUs			(163.9	)			(144.1	)			(129.3	)
Total distributed earnings attributed to our common units and i-units			(731.0	)			(695.6	)			(636.3	)
Total distributed earnings			(894.9	)			(839.7	)			(765.6	)
Overdistributed earnings		$	(523.1	)		$	(835.0	)		$	(272.5	)
Weighted average common units and i-units outstanding			328.2				316.2				290.6
Basic and diluted earnings per unit:
Distributed earnings per common unit and i-unit (1)		$	2.23			$	2.20			$	2.19
Overdistributed earnings per common unit and i-unit (2)			(1.56	)			(2.59	)			(0.92	)
Net income (loss) per common unit and i-unit (basic and diluted) (3)		$	0.67			$	(0.39	)		$	1.27

 

(1)	Represents the total distributed earnings to common units and i-units divided by the weighted average number of common units and i-units outstanding for the period.

(2)

Represents the common units’ and i-units’ share (98%) of distributions in excess of earnings divided by the weighted average number of common units and i-units outstanding for the period and overdistributed earnings allocated to the common units and i-units based on the distribution waterfall that is outlined in our partnership agreement.

(3)

For the year ended December 31, 2014 and 2013, 43,201,310 anti-dilutive Preferred Units were excluded from the if-converted method of calculating diluted earnings per unit. For the year ended December 31, 2014, 66,100,000 anti-dilutive Class D Units were excluded from the if-converted method of calculating diluted earnings per unit.

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SEGMENT INFORMATION

Our business is divided into operating segments, defined as components of the enterprise, about which financial information is available and evaluated regularly by our Chief Operating Decision Maker, collectively comprised of our senior management, in deciding how resources are allocated and performance is assessed.

Each of our reportable segments is a business unit that offers different services and products that is managed separately, since each business segment requires different operating strategies. We have segregated our business activities into two distinct operating segments:

 

•

Liquids; and

 

•

Natural Gas.

During the first quarter of 2014, we changed our reporting segments. The Marketing segment was combined with the Natural Gas segment to form one new segment called “Natural Gas.” There was no change to the Liquids segment.

This change was a result of our reorganization resulting from the Offering, which prompted management to reassess the presentation of our reportable segments considering the financial information available and evaluated regularly by our Chief Operating Decision Maker. The new segment is consistent with how management makes resource allocation decisions and evaluates performance, and furthers the achievement of our long-term objectives. Financial information for the prior periods has been restated to reflect the change in reporting segments.

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The following tables present certain financial information relating to our business segments and corporate activities:

 

		As of and for the year ended December 31, 2014
		Liquids				Natural Gas				Corporate(1)				Total
		(unaudited; in millions)
Operating revenues:(2)
Commodity sales		$	—			$	5,693.9			$	—			$	5,693.9
Transportation and other services			2,070.4				200.4				—				2,270.8
			2,070.4				5,894.3				—				7,964.7
Commodity costs			—				5,145.9				—				5,145.9
Environmental costs, net of recoveries			97.3				—				—				97.3
Operating and administrative			500.8				438.6				10.6				950.0
Power			226.6				—				—				226.6
Depreciation and amortization			306.8				151.4				—				458.2
			1,131.5				5,735.9				10.6				6,878.0
Operating income (loss)			938.9				158.4				(10.6	)			1,086.7
Interest expense, net			—				—				403.2				403.2
Allowance for equity used during construction			—				—				57.2				57.2
Other income (expense)			—				13.2	(3)			(4.3	)			8.9
Income (loss) before income tax expense			938.9				171.6				(360.9	)			749.6
Income tax expense			—				—				9.6				9.6
Net income (loss)			938.9				171.6				(370.5	)			740.0
Less: Net income attributable to:
Noncontrolling interest			—				—				263.3				263.3
Series 1 preferred unit distributions			—				—				90.0				90.0
Accretion of discount on Series 1 preferred units			—				—				14.9				14.9
Net income (loss) attributable to general and limited partner ownership interests in Enbridge Energy Partners, L.P		$	938.9			$	171.6			$	(738.7	)		$	371.8
Total assets		$	11,871.2			$	5,633.5	(4)		$	242.2			$	17,746.9
Capital expenditures (excluding acquisitions)		$	2,563.4			$	230.0			$	6.0			$	2,799.4

 

(1)	Corporate consists of interest expense, interest income, allowance for equity used during construction, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments.

(2)	There were no intersegment revenues for the year ended December 31, 2014

(3)	Other income (expense) for our Natural Gas segment includes our equity investment in the Texas Express NGL system which began recognizing operating costs during the fourth quarter of 2013.

(4)	Total assets for our Natural Gas segment includes $380.6 million for our long term equity investment in the Texas Express NGL system.

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		As of and for the year ended December 31, 2013
		Liquids				Natural Gas				Corporate(1)				Total
		(unaudited; in millions)
Operating revenues:(2)
Commodity sales		$	—			$	5,368.5			$	—			$	5,368.5
Transportation and other services			1,519.9				228.7				—				1,748.6
			1,519.9				5,597.2				—				7,117.1
Commodity costs			—				4,948.9				—				4,948.9
Environmental costs, net of recoveries			273.7				—				—				273.7
Operating and administrative			461.0				449.8				7.6				918.4
Power			147.7				—				—				147.7
Depreciation and amortization			244.9				143.1				—				388.0
			1,127.3				5,541.8				7.6				6,676.7
Operating income (loss)			392.6				55.4				(7.6	)			440.4
Interest expense, net			—				—				320.4				320.4
Allowance for equity used during construction			—				—				43.1				43.1
Other income (expense)			—				(1.5	)(3)			17.5	(4)			16.0
Income (loss) before income tax expense			392.6				53.9				(267.4	)			179.1
Income tax expense			—				—				18.7				18.7
Net income (loss)			392.6				53.9				(286.1	)			160.4
Less: Net income attributable to:
Noncontrolling interest			—				—				88.3				88.3
Series 1 preferred unit distributions			—				—				58.2				58.2
Accretion of discount on Series 1 preferred units			—				—				9.2				9.2
Net income (loss) attributable to general and limited partner ownership interests in Enbridge Energy Partners, L.P		$	392.6			$	53.9			$	(441.8	)		$	4.7
Total assets		$	9,268.9			$	4,635.1	(5)		$	997.5			$	14,901.5
Capital expenditures (excluding acquisitions)		$	2,330.7			$	251.3			$	18.8			$	2,600.8

 

(1)	Corporate consists of interest expense, interest income, allowance for equity used during construction, noncontrolling interest and other costs such as income taxes, which are not allocated to the business segments.

(2)	There were no intersegment revenues for the year ended December 31, 2013

(3)	Other income (expense) for our Natural Gas segment includes our equity investment in the Texas Express NGL system which began recognizing operating costs during the fourth quarter of 2013.

(4)	Other income (expense) for our Corporate segment includes a gain of $17.1 million from the El Dorado storage facility sale in November of 2013.

(5)	Total assets for our Natural Gas segment includes $371.3 million for our long term equity investment in the Texas Express NGL system.