Enbridge Energy Partners, L.P. Fourth Quarter 2015 Earnings & 2016 Financial Guidance Presentation February 17, 2016 enbridgepartners.com
Legal Notice This presentation includes forward-looking statements and projections, which are statements that do not relate strictly to historical or current facts. These statements frequently use the following words, variations thereon or comparable terminology: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “position,” “projection,” “should,” “strategy,” “target,” “will” and similar words. Although the Partnership believes that such forward-looking statements are reasonable based on currently available information, such statements involve risks, uncertainties and assumptions and are not guarantees of performance. Future actions, conditions or events and future results of operations may differ materially from those expressed in these forward-looking statements. Many of the factors that will determine these results are beyond the Partnership’s ability to control or predict. Specific factors that could cause actual results to differ from those in the forward-looking statements include: (1) changes in the demand for or the supply of, forecast data for, and price trends related to crude oil, liquid petroleum, natural gas and NGLs, including the rate of development of the Alberta Oil Sands; (2) the Partnership’s ability to successfully complete and finance expansion projects or drop-down opportunities; (3) the effects of competition, in particular, by other pipeline systems; (4) shut-downs or cutbacks at the Partnership’s facilities or refineries, petrochemical plants, utilities or other businesses for which the Partnership transports products or to whom the Partnership sells products; (5) hazards and operating risks that may not be covered fully by insurance, including those related to Line 6B and any additional fines and penalties assessed in connection with the crude oil release on that line; (6) changes in or challenges to the Partnership’s tariff rates; (7) changes in laws or regulations to which the Partnership is subject, including compliance with environmental and operational safety regulations that may increase costs of system integrity testing and maintenance; and (8) permitting at federal, state and local levels in regards to the construction of new assets. “Enbridge” refers collectively to Enbridge Inc. and its subsidiaries other than the Partnership and its subsidiaries. Forward-looking statements regarding “drop - down” growth opportunities from Enbridge are further qualified by the fact that Enbridge is under no obligation to offer to sell us interests in its U.S. projects, and we are under no obligation to buy any such interests. Similarly, any forward- looking statements regarding potential “drop - down” transactions of interests in Midcoast Operating to Midcoast Energy Partners, L.P. are further qualified by the fact that we are under no obligation to sell to Midcoast Energy Partners, L.P. any such interests, and Midcoast Energy Partners, L.P. is under no obligation to buy any such interests. As a result, we do not know when or if any such transactions will occur. Except to the extent required by law, we assume no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. Reference should also be made to the Partnership’s filings with the U.S. Securities and Exchange Commission (the “SEC”), including its Annual Report on Form 10-K for the year ended December 31, 2014 and any subsequently filed Quarterly Report on Form 10-Q for additional factors that may affect results. These filings are available to the public over the Internet at the SEC’s web site (www.sec.gov) and at the Partnership’s web site. 1 enbridgepartners.com
Agenda 1. Overview 2. Defensive Business Model 3. Strong Fundamentals 4. Project Execution 5. 4Q 2015 Financial Results 6. 2016 Financial Guidance 7. Question & Answer 2 enbridgepartners.com
Overview Solid Execution in 2015 • Record liquids pipeline system deliveries: ~2.9 MMbpd average in 2015 • Placed $1.6B of liquids pipelines organic growth projects into service • Closed $1B drop-down acquisition from general partner • Achieved top-end of 2015 adjusted EBITDA and DCF guidance • Secured $1.9B of funding Well Positioned • Strong supply outlook + premier market connectivity drives high system utilization • Defensive cash flows and strong counterparty credit profile • Manageable funding needs; does not expect to access equity market in 2016 Reliable business model in all market environments 3 enbridgepartners.com
Well Positioned for Current Environment Low-risk, reliable business model insulated from low commodity prices Strong Commercial Structures <5% of business cash flows subject to direct commodity price exposure >90% of business cash flows from Liquids segment; segment Cost of Service/Take-or-Pay underpinned by strong low-risk Fee for service Commodity Sensitive (1) commercial structures 2016e EBITDA attributable to EEP (after deducting non-controlling interest) Counterparty Credit Profile (2) >90% of revenues from investment grade customers (1) Commodity sensitive gross margin forecast is before hedging; Greater than 90% of 2016e commodity Investment Grade sensitive cash flows are hedged substantially above current market prices. (2) EEP consolidated (including MEP) and net of Accounts Receivable purchased by affiliate of Enbridge. Non-Investment Grade (Security Received) 4 enbridgepartners.com
Well Positioned for Current Environment Strong Western Canadian supply outlook and demand for pipeline capacity Lakehead Deliveries MMBPD U.S. Mainline at full capacity; 2.5 2015 total system deliveries +10% vs. 2014 2 1.5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2014 2014 2014 2015 2015 2015 2015 Oil Sands Growth ~800 kbpd oil sands supply growth Incremental Oil Sands Blended Supply 12 (Cumulative MMBPD) through 2019 10 8 6 4 2 0 2015 2016 2017 2018 2019 Pipeline Capacity vs. WCSB Supply Basin short >500 kbpd pipeline capacity by 2021 1 Source: CAPP Crude Oil Forecast, Markets and Transportation (June 2015 Operating & In Construction) 5 enbridgepartners.com
Western Canadian Supply Profile vs. Price Long-term investment horizon by oil sands producers History demonstrates steady oil sands production growth in all price environments Kbpd $US/bbl WCSB Production Enbridge Ex-Gretna Deliveries WTI Annual Avg ($US/bbl) 4,000 120 3,500 100 3,000 80 2,500 2,000 60 1,500 40 1,000 20 500 0 0 Sources: CAPP, Bloomberg 6 enbridgepartners.com
Premier Connectivity Drives Strong Demand Key North American markets served by the Enbridge system Enbridge system accesses 8.5 MMbpd of refining capacity Eastern Canada (Total Capacity = ~0.8 MMbpd) Northern PADD II (Total Capacity = ~0.5MMbpd) Chicago Michigan/Ohio (Total Capacity = ~0.8 MMbpd) (Total Capacity = ~0.7 MMbpd) Cushing (Total Capacity = ~1.2 MMbpd) Patoka (Total Capacity = ~0.8 MMbpd) Western PADD III (Total Capacity = ~3.7 MMbpd) Eastern PADD III (Total Capacity = ~3.2 MMbpd) *Excludes NGLs Source: Enbridge estimates and EIA data 7 enbridgepartners.com
Low-Risk Business Model Delivers Stable Cash Flows Liquids pipeline business generates greater than 90% of Partnership’s distributable cash flow 2016e EBITDA (1) Cost of Service (Liquids Segment) • Utility style regulatory model: ‘return - of’ and ‘return - on’ invested capital • Highly predictable cash flows - No volume and commodity price sensitivity • Rate base comprised of equity and debt components Fee-Based Liquids Segment ~85% of fee-based component • Pipeline toll indexed to PPI + 2.65% (3) Commodity Sensitive (2) (Natural Gas Segment) • System highly utilized • Hedging program largely mitigates commodity Natural Gas Segment price risk ~15% of fee-based component Defensive cash flow profile: well positioned in current environment (1) Contribution is based on revenues from Liquids segment and gross margin from Natural Gas segment, after deducting non-controlling interest. (2) Commodity sensitive gross margin forecast is before hedging; Greater than 90% of 2016e commodity sensitive cash flows are hedged substantially above current market prices. (3) FERC index annual adjustment of PPI + 1.23%. (prior index adjustment of PPI + 2.65% expiries June 30, 2016). 8 enbridgepartners.com
Strong Counterparty Credit Profile Major liquids pipeline systems underpinned by strong, investment grade customers Top 10 Mainline Shippers EEP Customer Credit Quality (1) AAA/Aaa A/Baa1 BBB/Baa2 AA-/A1 Credit enhancement to investment grade A-/Baa1 A+/Aa1 BBB/Baa2 Investment Grade Credit enhancement to investment grade Non-Investment Grade / Security Received BBB-/Baa3 (1) EEP consolidated (including MEP) and net of Accounts Receivable purchased by affiliate of Enbridge Inc. 9 enbridgepartners.com
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