Enbridge Energy Partners (EEP) Says FERC Order May Reduce Revenues by $100M and DCF by $600M

Enbridge Energy Partners, L.P. (NYSE: EEP) provided its preliminary assessment of the potential impacts of the Federal Energy Regulatory Commission's (FERC) recent policy change with respect to the recovery of income tax amounts included in the cost of service rates of pipelines within a master limited partnership (MLP).

On March 15, 2018, FERC changed its long-standing policy on the treatment of income tax amounts included in the rates of pipelines and other entities subject to cost of service rate regulation within an MLP. In its order PL17-1-000, FERC revised a policy in-place since 2005 to no longer permit entities organized as master limited partnerships (MLP's) to recover an income tax allowance in their cost of service rates.

EEP is organized as an MLP and certain of the rates applicable to its expansion projects are tolled annually on a cost of service basis, via the Lakehead Facility Surcharge Mechanism (FSM). EEP intends to ask for rehearing of this policy change at the FERC. FERC's new policy will take effect when the policy is published in the Federal Register which, for purposes of estimating the 2018 impact, is assumed to be March 31, 2018. Should FERC's new policy be approved as announced, the 2018 financial impact to EEP is expected to be an approximate $100 Million reduction in revenues and a $60MM reduction to distributable cash flow (DCF), net of non-controlling interests.

Based on the foregoing preliminary analysis and estimates, EEP is adjusting its 2018 DCF guidance range to $650 million - $700 million from $720 million - $770 million and 2018 total distribution coverage to approximately 1.0x from approximately 1.15x.

Important details of implementing the new policy statement require clarification and EEP will continue to assess the financial impacts as more information becomes available.

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