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    Enbridge to Invest $1.2 Billion in Enbridge Energy Partners Through Preferred Unit Private Placement
  • 08May

    Enbridge to Invest $1.2 Billion in Enbridge Energy Partners Through Preferred Unit Private Placement

    Partnership Expects to Exercise Joint Funding Option to Reduce Funding Requirements
    CALGARY, ALBERTA and HOUSTON, TEXAS--(Marketwired - May 8, 2013) - Enbridge Inc. (TSX:ENB)(NYSE:ENB) ("Enbridge") and Enbridge Energy Partners, LP (NYSE:EEP) ("EEP" or the "Partnership") today announced that they have entered into an agreement whereby Enbridge will invest $1.2 billion in preferred units issued by EEP, and which is expected to close later today.
    Additionally, EEP expects to exercise its options to pare down its economic interests in the Lakehead system expansions of both the Eastern Access and Mainline Expansion projects from 40 percent to 25 percent, by the June 30, 2013 deadline. The Partnership retains the option to increase its participation in either project back up to 40 percent for a period lasting until one year after the in-service date of each. Collectively, the preferred unit issuance and option exercise would reduce the amount of near term third party financing required by EEP to fund its current organic growth program by over $1.9 billion.
    "The Partnership's attractive and unrivaled $8.5 billion organic growth program will deliver long-term, low risk cash flow growth to our unitholders. The preferred unit private placement and the exercise of the joint funding options significantly reduce the amount of third party funding required," said Mark Maki, President of the Partnership. "The combination of these two actions will relieve the equity issuance overhang which we believe is currently exerting downward pressure on the Partnership's valuation. These actions provide improved coverage and significant flexibility to smooth our funding activities over a longer period of time, while preserving the upside from a full 40% participation once the projects come into service and start generating substantial highly visible cash flows."
    "Enbridge's overall strategy for its sponsored vehicles is to optimize the funding of our enterprise-wide slate of attractive growth projects. At present that is best accomplished by providing flexibility to the Partnership to access additional equity funding at a time and pricing which are more favorable," said Richard Bird, Executive Vice President, Chief Financial Officer and Corporate Development. "This will enhance our existing investment in the Partnership through improving the valuation of EEP's units, which will also reduce the cost of funding the remaining growth investment within EEP. Our Enbridge funding plan has always provided for the funding of 75% of the projects which are subject to the joint funding agreement, so there is no incremental funding required at the Enbridge level as a result of exercise of the pare down option by the Partnership. We expect that the preferred unit investment will be bridge funding until such time as it will be advantageous for the Partnership to raise common equity
    to redeem the units. Consequently we do not plan to issue permanent capital to fund this investment."
    The preferred units with a price per unit of $25.00 (par value) will have a fixed yield of 7.5 percent, reset every five years. Under the preferred units terms, quarterly cash distributions will not be payable in cash during the first eight quarters and will be added to the redemption value. Quarterly cash distributions will be payable beginning in the ninth quarter and deferred distributions are payable on the fifth anniversary or when redemption of the units takes place.
    The preferred units will be redeemable at EEP's option on the five year anniversary of the issuance and every fifth year thereafter, at par and including the deferred distribution. Earlier redemption is permitted under certain events including the ability to redeem the preferred units using the net proceeds from EEP's equity issuances or from the sale of assets and from the issuance of debt, in equal amounts. In the event that the preferred units have not been redeemed in full at the fifth anniversary to the issuance, the deferred distribution will be payable at that time. In addition, on or after June 1, 2016, at Enbridge's sole option, the preferred units can be converted into approximately 43.2 million common units of EEP.
    Pursuant to the Eastern Access and Mainline Expansion Joint Funding Agreements with Enbridge, EEP has the option to pare down its economic interest and associated funding of these liquids market access projects by up to 15 percentage points, from 40 percent to 25 percent, with the option expiring June 30, 2013. EEP will have the option to increase its economic interest by up to 15 percentage points in the Lakehead System expansions of both the Eastern Access and Mainline Expansion projects within one year of the final project in-service dates. Final phases of the Eastern Access project and the Mainline Expansion Program are currently targeted for completion in 2016.
    Both the preferred unit issuance and the respective Joint Funding Agreements were reviewed and recommended to the Board of Enbridge Energy Management, L.L.C. by a committee of independent Directors.
    Proceeds from the preferred unit issuance will be used by EEP to repay commercial paper, to finance a portion of its capital expansion program relating to its core liquids and natural gas systems and for general partnership purposes. Some or all of the net proceeds of this offering may be invested temporarily in short-term investment grade securities pending their use for such purposes.

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