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Spectra Energy Partners (SEP) Reports FY18 Guidance, Long Term Outlook, Receipt of Offer to Eliminate Incentive Distribution Rights

November 29, 2017 4:52 PM EST
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Price: $35.40 --0%

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Spectra Energy Partners, LP (NYSE: SEP) announced today its financial guidance for 2018 as well as its long term financial and business outlook. SEP's performance is expected to continue to benefit from ongoing expansion project execution and solid base business performance over the 2018 – 2020 timeframe. This long term outlook relies upon SEP's disciplined expansion model, strong investment grade balance sheet, solid distribution coverage and a stable, reliable business profile with no direct commodity exposure and limited volume risk.

Business Outlook

Spectra Energy Partners' financial and business outlook for the 2018 – 2020 period continues to be strong. SEP's earnings and cash flow growth are supported by more than $2 billion of projects placed into service in 2017 and an expected incremental $2.5 billion of secured projects to be placed into service over the 2018 – 2019 timeframe, most notably NEXUS and the completion of Atlantic Bridge. Expansion capex net of contributions from non-controlling interests is expected to be $1.4 billion in 2018. Strong gas market fundamentals and SEP's asset footprint connecting to major demand markets and multiple diverse supply basins are expected to provide continued growth opportunities for SEP over the foreseeable future in areas such as the Northeast and Gulf Coast regions of the U.S.

2018 Distributable Cash Flow Guidance

SEP expects 2018 Distributable Cash Flow (DCF) of $1.63 billion to $1.67 billion. The DCF outlook assumes maintenance capex of $230 million.

Distribution Guidance

SEP's distribution growth in 2018 is expected to be $0.0125 per LP unit per quarter, an increase from 2017 of approximately 7%. SEP expects annual total distribution coverage in 2018 of 1.1x to 1.2x. After 2018, the execution of the current secured organic growth plan alone supports distribution growth of 4% – 6% annually in 2019 and 2020, while maintaining distribution coverage of 1.1x to 1.2x. This outlook could be further enhanced with additional organic growth and future drop down transactions.

Target Credit Metrics

SEP expects to maintain its strong investment grade credit profile with enhanced credit metrics through the planning horizon. The partnership's Debt to EBITDA metric is expected to be below 4.0x through 2020.

Offer Received From Enbridge Inc.

Today SEP received a formal offer from Enbridge Inc. (NYSE: ENB), which owns SEP's general partner, to convert all of Enbridge's incentive distribution rights (IDRs) and general partner (GP) economic interests in SEP into a fixed number of additional common units of SEP and a non-economic GP interest in SEP. SEP's board of directors has convened a conflicts committee, comprised of independent members, to review and evaluate Enbridge's proposal. No assurance can be given that Enbridge and SEP will reach agreement on the proposed transaction. The DCF and distribution guidance discussed above does not take into consideration Enbridge's proposal.

Additional information about SEP's financial and business outlook will be discussed at the upcoming Enbridge Inc. investor conferences in New York and Toronto on December 12th and 13th, respectively.



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