Enbridge Inc. Announces Deferral of Sandpiper Project and Reaches Tentative Joint Funding Arrangement With Enbridge Energy Partners, L.P. on Its Bakken Pipeline Investment
September 1, 2016
Enbridge Inc. (TSX:ENB) (NYSE:ENB) today announced that an affiliate of Enbridge Energy Partners, L.P. ("EEP") will be withdrawing regulatory applications pending with the Minnesota Public Utilities Commission for the Sandpiper Pipeline Project ("Sandpiper"). EEP has completed a review of Sandpiper and concluded that the project should be delayed until such time as crude oil production in North Dakota recovers sufficiently to support development of new pipeline capacity. Based on updated projections, EEP believes that new pipeline capacity will not likely be needed until beyond the Company's five-year planning horizon.
Enbridge and an independent special committee ("Special Committee") of the Board of Directors of the delegate of EEP's general partner (the "Board of Directors") have also reached a tentative agreement on the terms of an arrangement through which each party would fund the acquisition of and participate in the returns generated by an effective 27.6% interest in the Bakken Pipeline System ("Bakken Pipeline" or the "System"), a transaction previously announced on August 2, 2016. It is anticipated that the investment in the Bakken Pipeline will be jointly funded 75 percent by Enbridge, through Enbridge Energy Company, Inc. ("EECI"), and 25 percent by EEP. EEP expects to fund its 25 percent interest through a combination of debt and equity. EEP would fund the equity portion of its investment through the issuance of a new class of equity units, Class F units, to EECI. As part of the joint funding arrangement, EEP is expected to have an option until December 31, 2019 to acquire an additional 15 percent interest in the investment at a total price equal to the pro rata portion of the capital contributed by EECI for its share of the investment prior to the exercise date. The joint funding arrangement is subject to satisfaction of the closing conditions of the Bakken Pipeline acquisition by the System's owners, the Special Committee's recommendation and approval of the Board of Directors.
At closing, Enbridge plans to fund its indirect investment in the Bakken Pipeline described above from available liquidity which has been bolstered through the issuance of more than CDN$3.4 billion of equity and CDN$2.3 billion of debt securities across the Enbridge group of companies thus far in 2016. Given recent funding actions and the plan to defer the Sandpiper project beyond the Company's 5 year planning horizon, the investment in the Bakken Pipeline system is not expected to generate an incremental requirement for equity capital at Enbridge over and above amounts indicated in the Company's previously communicated consolidated funding plan for the years 2015 through 2019.
"This acquisition of an interest in the Bakken Pipeline represents another important step in expanding our market access strategy", said Al Monaco, President and CEO. "The System connects the prolific Bakken formation to eastern PADD II and the U.S. Gulf Coast ("USGC"), providing customers with access to premium markets at a competitive cost." Mr. Monaco continued, "The acquisition offers strong risk-adjusted returns and includes a significant level of take-or-pay contracts with high credit quality counterparties. The investment is expected to be immediately accretive to available cash flow from operations when the System is ready for service, which is expected in late 2016. In light of the deferral of Sandpiper, our investment in the Bakken Pipeline will accelerate cash flow generation from our Bakken assets and help alleviate the funding drag associated with a large greenfield project, further enhancing our near term financial outlook and strengthening the Company's consolidated credit metrics".
The Company's and EEP's interest in the Bakken Pipeline will be acquired through an indirect investment in a joint venture with Marathon Petroleum. The joint venture will own a 49 percent interest in an affiliate of Energy Transfer Partners, L.P. and Sunoco Logistics Partners L.P. which in turn owns 75 percent of the System. The closing of the Bakken Pipeline acquisition is anticipated to occur around the end of the third quarter of 2016.
Enbridge Inc. (TSX:ENB) (NYSE:ENB) today announced that an affiliate of Enbridge Energy Partners, L.P. ("EEP") will be withdrawing regulatory applications pending with the Minnesota Public Utilities Commission for the Sandpiper Pipeline Project ("Sandpiper"). EEP has completed a review of Sandpiper and concluded that the project should be delayed until such time as crude oil production in North Dakota recovers sufficiently to support development of new pipeline capacity. Based on updated projections, EEP believes that new pipeline capacity will not likely be needed until beyond the Company's five-year planning horizon.
Enbridge and an independent special committee ("Special Committee") of the Board of Directors of the delegate of EEP's general partner (the "Board of Directors") have also reached a tentative agreement on the terms of an arrangement through which each party would fund the acquisition of and participate in the returns generated by an effective 27.6% interest in the Bakken Pipeline System ("Bakken Pipeline" or the "System"), a transaction previously announced on August 2, 2016. It is anticipated that the investment in the Bakken Pipeline will be jointly funded 75 percent by Enbridge, through Enbridge Energy Company, Inc. ("EECI"), and 25 percent by EEP. EEP expects to fund its 25 percent interest through a combination of debt and equity. EEP would fund the equity portion of its investment through the issuance of a new class of equity units, Class F units, to EECI. As part of the joint funding arrangement, EEP is expected to have an option until December 31, 2019 to acquire an additional 15 percent interest in the investment at a total price equal to the pro rata portion of the capital contributed by EECI for its share of the investment prior to the exercise date. The joint funding arrangement is subject to satisfaction of the closing conditions of the Bakken Pipeline acquisition by the System's owners, the Special Committee's recommendation and approval of the Board of Directors.
At closing, Enbridge plans to fund its indirect investment in the Bakken Pipeline described above from available liquidity which has been bolstered through the issuance of more than CDN$3.4 billion of equity and CDN$2.3 billion of debt securities across the Enbridge group of companies thus far in 2016. Given recent funding actions and the plan to defer the Sandpiper project beyond the Company's 5 year planning horizon, the investment in the Bakken Pipeline system is not expected to generate an incremental requirement for equity capital at Enbridge over and above amounts indicated in the Company's previously communicated consolidated funding plan for the years 2015 through 2019.
"This acquisition of an interest in the Bakken Pipeline represents another important step in expanding our market access strategy", said Al Monaco, President and CEO. "The System connects the prolific Bakken formation to eastern PADD II and the U.S. Gulf Coast ("USGC"), providing customers with access to premium markets at a competitive cost." Mr. Monaco continued, "The acquisition offers strong risk-adjusted returns and includes a significant level of take-or-pay contracts with high credit quality counterparties. The investment is expected to be immediately accretive to available cash flow from operations when the System is ready for service, which is expected in late 2016. In light of the deferral of Sandpiper, our investment in the Bakken Pipeline will accelerate cash flow generation from our Bakken assets and help alleviate the funding drag associated with a large greenfield project, further enhancing our near term financial outlook and strengthening the Company's consolidated credit metrics".
The Company's and EEP's interest in the Bakken Pipeline will be acquired through an indirect investment in a joint venture with Marathon Petroleum. The joint venture will own a 49 percent interest in an affiliate of Energy Transfer Partners, L.P. and Sunoco Logistics Partners L.P. which in turn owns 75 percent of the System. The closing of the Bakken Pipeline acquisition is anticipated to occur around the end of the third quarter of 2016.
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