Enbridge (ENB) Says FERC Order May Decrease DCF by $55M in 2018

Enbridge Inc. (NYSE: ENB) today stated that it does not expect a material impact to its previously disclosed financial guidance over the 2018-2020 horizon as a result of the Federal Energy Regulatory Commission (FERC) revised policy statement on interstate pipeline tax allowance recovery in Master Limited Partnerships (MLPs) nor from FERC's Notice of Proposed Rule-Making (NOPR).

Spectra Energy Partners LP (SEP) does not expect any material impact to its financial guidance from the FERC policy actions. Roughly 60% of SEP's gas pipeline revenue comes from negotiated or market-based tariffs and therefore not directly affected by the FERC policy revisions. The remaining 40% of gas pipeline revenue is from cost of service based tariffs which could be subject to tax recovery disallowance. The liquids assets within SEP are predominantly negotiated tariffs and also not materially affected by the policy revisions. SEP anticipates no immediate impact to its current gas pipeline cost of service rates as a result of the revised policy, and therefore, no impact is expected to its previously provided 2018 financial guidance. Any future impacts would only take effect upon the execution and settlement of a rate case. In the event of a rate case, all cost of service framework components would be taken into consideration, which is expected to offset a significant portion of any impacts related to the new FERC policy. Any unmitigated impacts are not anticipated to materially change SEP's distributable cash flow outlook beyond 2018.

Enbridge Energy Partners, L.P. (EEP) derives a portion of its revenue from a Facility Surcharge Mechanism that applies cost of service tariffs which would be impacted by this policy change. As a result of lower tax rates under US Tax Reform, EEP previously guided to a decrease in distributable cash flow (DCF) of $55 million for 2018. This new FERC policy would cause a further decrease to DCF of roughly $80 million on an annual basis, or roughly $60 million on a prorated basis in 2018.

Under the International Joint Toll mechanism, reductions in the EEP tariff will create an offsetting revenue increase on the Canadian Mainline system owned by Enbridge Income Fund Holdings Inc. (ENF). Financial guidance at ENF remains unchanged; however, this could provide a further tailwind for financial results. The combined impact at both EEP and ENF are offsetting for Enbridge on a consolidated basis.

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