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This is the 2009 annual report for Enbridge Energy Partners a publicly traded company. The report contains assessments of the year’s operations, business and financial highlights, company’s view of the upcoming year and their prospects in their industries.
enbridge energy partners, l.p. enbridge energy management, l.l.c. 2009 annual review To Our Unitholders and Shareholders 3 Liquids Business 6 Natural Gas Business 10 Governance and Social Responsibility 14 A Choice of Investments 15 Financial Highlights 16 Our Longview plant in Longview, Texas, is one of 16 treating and processing facilities on our East Texas System. Major PartnershiP and affiliated systeMs liquids systeMs EEP Liquids Pipelines ENB Pipelines and Joint Ventures EEP Southern Access Expansion Fort McMurray OIL SANDS EEP/ENB Alberta Clipper Pipeline natural gas systeMs Edmonton EEP Natural Gas Pipelines Hardisty Calgary Regina Clearbrook Superior Toronto Delavan Buffalo Detroit Chicago Flanagan Toledo Wood River Patoka Cushing ANADARKO BASIN Dallas FORT EAST WORTH TEXAS BASIN BASIN Houston 2 To our uNiThoLdErS ANd ShArEhoLdErS as you may recall, at this time last year, we said that enbridge energy Partners (the Partnership) would face challenges in 2009. and, we did. We also said that we were committed to maintaining not only our investment-grade credit rating, but also our distribution. and, we did. Station pipelines transport product to their designated storage tanks at our Cushing, Okla., storage facility, where some 96 tanks hold as much as 16 million barrels of crude. 2009 ANNuAL rEViEw 3 to our unitholders and shareholders d espite one of the most challenging eco- 90 percent complete as of January 2010, with construction nomic environments we have seen, 2009 of the Canadian portion of the Alberta Clipper expansion was a very successful year for the Partner- mechanically complete. We expect that Alberta Clipper ship. Through the year, we maintained will be completed and available for line-fill on April 1, our quarterly distribution at $0.99 per 2010, three months ahead of schedule. This will add unit and our distribution coverage ratio significant earnings and cash flow to the Partnership. remained healthy, ending with coverage of 1.11 times. Financially, we had a solid year in 2009. Adjusted oper- We enhanced our liquidity position, stabilized our credit ating income from the Liquids business was $443.7 ratings and addressed our financing needs by entering million, an increase of $101.5 million from 2008. In our into a joint-funding agreement for the Alberta Clipper Natural Gas business, adjusted operating income was project. We sold non-core natural gas pipeline assets and $154.2 million, a decrease of $16.7 million from 2008. limited our capital expenditures to those projects that The Partnership adjusted net income for the year was were most strategic. We implemented significant cost $377.1 million, 6 percent higher than 2008. Adjusted saving measures throughout 2009 and made significant EBITDA was 15 percent higher than 2008. progress on our expansion program. We did all the things we said we were going to do in 2009 and were able to What’s ahead? Our multi-year, multi-billion-dollar expan- deliver adjusted net income results that were 18 percent sion program is largely complete. However, we believe higher than our expectations at the beginning of the year. solid, long-term fundamentals in both crude oil and natu- The unit price for the Partnership was up 111 percent for ral gas will result in more infrastructure needs; we are well 2009, and the three-year shareholder return was 40 percent positioned to pursue growth opportunities in both lines of for the Partnership versus 31 percent for our peers. business. We do not expect that major expansions to our Lakehead System will be required over the next few years. On the project front, we completed the 400,000 barrels We do, however, see significant growth potential in our per day (Bpd) Southern Access Expansion Stage II. In North Dakota System, where the Bakken Shale is located. January, 2010 we placed in-service the North Dakota Production in the Bakken, one of the most promising Expansion Phase VI, which added 51,000 Bpd of production areas, is expected to quickly ramp-up over the additional capacity to our North Dakota System. The next few years to about 350,000 Bpd. As the full potential U.S. portion of Alberta Clipper was approximately of the play is developed, volumes could well exceed that number. The Partnership is well positioned to capital- ize on that growth by providing additional capacity on our North Dakota System, which supplies the Lakehead System and the North Dakota refining market. Our Cushing crude oil storage facilities are attracting significant interest from third parties looking for contract stor- age capacity. Currently, we have close to 16 million barrels of storage capac- ity with additional expansions possible. With respect to natural gas, we con- tinue to see significant growth potential in areas such as the Haynesville Shale and the Anadarko Granite Wash as well as areas where we don’t currently operate such as the Marcellus Shale Steve Letwin Terry McGill Managing Director President ADjuSTeD eArninGS growth initiatives that would add capacity and volumes to Per unit in dollars our East Texas System in the South Haynesville area of 1.92 Shelby County, Texas. 2.84 2.82 While 2009 results were solid and the economic environ- 3.15 ment is improving, we recognize that we will continue 2.75 to operate under a challenging environment in 2010. The Partnership’s strong competitive position in both liquids 2.5 0.0 0.5 1.0 1.5 2.0 3.0 AnnuAL DiSTribuTiOnS and natural gas provides significant upside potential. We Per unit in dollars are fortunate to have a strong general partner in Enbridge 3.70 Inc. and a smart, dedicated workforce. 3.70 3.725 Our commitment to the environment and our people 3.88 remains strong. One area we always strive to improve is 3.96 safety both for our employees and our neighbors around our facilities. We are committed to providing safe, reli- LiquiDS DeLiverieS able and environmentally responsible energy transporta- 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4 Bpd in thousands tion options. 1,662 1,853 We are deeply saddened by the deaths of two Enbridge 1,877 employees; the first fatality occurred during a hydrogen 1,962 sulfide release at our gas treating plant near Bryans Mill, 2,004 Texas, and the second, a traffic fatality in the Texas Pan- handle. We strive every day to achieve a zero-tolerance nATurAL GAS DeLiverieS safety record and work diligently to meet that goal. Btu/d in billions These incidents reinforce our focus on safety in 2010 0 500 1000 150 1,613 and beyond. 1,895 2,119 We are in a much better financial position going into 2,521 2010 and will continue to work diligently to ensure long- 2,400 term stability of our distribution. Our pledge to you is that we will continue to pursue growth opportunities that are accretive to our unitholders while maintaining our commitment to our sustainable business model that located in the eastern United States. Early estimates have provides safe and reliable transportation services to calculated that the Marcellus Shale contains between an our customers. 0 500 1000 1500 estimated 1.9 - 500 trillion cubic feet (Tcf) of natural gas. Even if only 10 percent of that gas is recovered, it would be enough to supply the entire U.S. for about two years. As such, we are closely monitoring potential development opportunities in areas such as the Marcellus Shale, where we can replicate the success we have had with our gather- ing and processing businesses in Texas. Though volumes decreased on our natural gas systems stephen j. j. letwin terrance l. Mcgill in 2009, we expect this trend to change in 2010 as rig Managing director President counts stabilize and horizontal drilling technology Enbridge Energy Company, inc. Enbridge Energy Company, inc. enhances well productivity. We are working on several February 19, 2010 February 19, 2010 2009 ANNuAL rEViEw 5 BuSiNESS oVErViEw liquids Business 6 LiQuidS BuSiNESS o ur Liquids business accounted for $462.0 million of operating income for the year ended December 31, 2009, representing an increase of $119.8 million over the same period in 2008. The favorable results are primarily attributable to transportation rate increases that went into effect during 2009, partially offset by higher operating and administrative costs and depreciation. Pipeline crew members align joints of the Alberta Clipper pipeline near rosby, Minn. Construction of the 326-mile Alberta Clipper pipeline began in August 2009 and is on track to wrap up by April 2010, three months ahead of schedule. 2009 ANNuAL rEViEw 7 liquids Business LAkeheAD SySTeM We celebrated the 60th anniversary of our Lakehead System in 2009. The first pipeline in the Lakehead System was constructed in 1949, and as of 2010, the U.S. right-of- way will have been expanded to include up to six separate and parallel crude oil and liquid petroleum pipelines. Not only is the Lakehead System a common carrier pipeline that serves as the primary transporter of crude oil and liq- uid petroleum to the United States from western Canada, but it also supplies the major refining markets in the U.S. Great Lakes and upper Midwest as well as in Ontario, Canada. When combined with the Enbridge Inc. main- line system in Canada, it is the longest liquid petroleum pipeline system in the world. In addition, Enbridge Inc.’s newly expanded Spearhead Pipeline connects with the Lakehead System near Chicago and offers crude oil ship- pers increased access to the Mid-Continent and Gulf Coast markets through the Cushing, Okla., Hub. In 2009, average system deliveries on the Lakehead System increased by 1.9 percent, from the same period in 2008 and contributed an additional $9.5 million to operat- ing revenue. Deliveries on the Lakehead System in 2009 averaged 1.65 million Bpd compared with 1.62 million Bpd in 2008. The increase is attributed to increases in crude oil supplies from the continued development of the Operations technicians Greg bowman, left, and Marty Alberta oil sands. Gaunder, right, head out past Cushing’s tanks to perform a maintenance check on the pipelines. Canada continues to be the largest source of U.S. crude oil imports by supplying about 1.2 million Bpd of the U.S. crude oil imports. Approximately 68 percent of western The Ozark Pipeline transports crude oil from Cush- Canadian crude oil exports to the United States in 2009 ing to Wood River, Ill., serving refineries in the U.S. were shipped via the Lakehead System. Of the total Lake- Mid-Continent region. In addition, there are 96 storage head System receipts, some 5 percent are sourced from tanks, ranging in size from 55,000 to 575,000 barrels, domestic production, including increasing deliveries from at our Cushing and El Dorado, Kan., terminals with a our North Dakota System. total capacity of 15.9 million barrels. In 2009, the Mid- Continent System recorded average deliveries of 238,000 Crude oil price volatility in 2008 and 2009 caused some Bpd. In early 2009, Enbridge Inc. completed a 68,300 producers to cancel or defer projects. This is likely to slow Bpd expansion of its Spearhead Pipeline to a capacity the demand for additional capacity on our Lakehead main- of approximately 193,300 Bpd. The Spearhead Pipeline line system in the short-term, but the Canadian Associa- interconnects with our Lakehead System. tion of Petroleum Producers (CAPP) is forecasting future production from the Alberta oil sands to grow steadily nOrTh DAkOTA SySTeM during the next 10 years with an additional 1.4 million The Partnership’s North Dakota System continues to Bpd of incremental supply available by 2019. provide a vital transportation route for producers in east- ern Montana, North Dakota and southern Saskatchewan MiD-COnTinenT SySTeM seeking to transport growing, market-constrained supplies Our Mid-Continent System consists of 480 miles of pipe- of crude oil sourced from the Bakken Play to refineries line and includes the Ozark and West Tulsa Pipelines. in the U.S. Midwest and beyond through deliveries into 8 LiQuidS BuSiNESS Check out Tax Web on enbridgepartners.com Don’t wait for your K-1 to arrive by the U.S. Postal Service! As an Enbridge Energy Partners unitholder you can: • View your tax schedules for the current year. • Print your tax package, including instructions. A • utomatically transfer amounts from your Schedule K-1 to IRS forms filed by individuals. • Download your K-1 information into TurboTax software. • Request changes to incorrect information. S • ave this card as a reminder to access your K-1 from our website in late February each year. NOTE: Enbridge Energy Management, LLC shareholders do not receive K-1s and do not require yearly tax forms. our Lakehead System and into a third-party pipeline at LOOkinG fOrwArD Clearbrook, Minn. The North Dakota System comprises In 2010, we will be proposing increased storage capacity approximately 240 miles of crude oil gathering and a at our Cushing terminal, a critical hub in our infrastruc- 730-mile transmission pipeline. The Phase VI expansion ture. We also will be focused on continued expansion of the North Dakota System was completed at the end of of our North Dakota System as producers look to get 2009 and placed into service on Jan. 1, 2010. This expan- oil sourced from the Bakken play to Midwestern refin- sion—which included upgrades to pumping stations, ing markets. With the 2009 completion of our Southern additional tankage and extensive use of drag reducing Access Expansion and with the Alberta Clipper project agents—increased the North Dakota System’s capacity slated to come online in April 2010, sufficient capacity from 110,000 Bpd to 161,000 Bpd. exists on our mainline system to ensure our ability to deliver secure, reliable North American-sourced crude oil to U.S. and Canadian markets. LAkeheAD SySTeM exPAnSiOn will transport heavy crude oil from Hardisty, Alberta, neArinG COMPLeTiOn to Superior. The approximately 330-mile U.S. segment We continued to make great progress in 2009 on our of this new pipeline—from the international border Lakehead System expansion, with critical milestones near Neche, N.D., to Superior—costs an estimated met and project completion goals on course for 2010 $1.3 billion and is being jointly funded by us and our in-service dates. general partner. SOuThern ACCeSS The Alberta Clipper is expected to be placed in service We completed Stage 2 of our Southern Access expan- in early April 2010 and will have an initial capacity of sion project—a 42-inch diameter pipeline—in 2009. 450,000 Bpd, expandable to 800,000 Bpd with addi- The entire Southern Access Expansion project spans tional pumping stations. 454 miles from Superior, Wis., to Flanagan, Ill. In 2009, we completed the remaining 133 miles of the Stacks of pipe await being hauled to the Alberta project, from Delevan, Wis., to Flanagan, Ill., and Clipper construction route. This pipeyard, located in placed that line into service on April 1. The entire Carlton, Minn., holds enough pipe joints to cover more Southern Access Expansion project has increased than 60 miles. capacity on the Lakehead System by 400,000 Bpd and also increased revenues with a related transporta- tion rate surcharge that went into effect when the line was placed into service. The capacity of Southern Access pipeline can be increased to 1.2 million Bpd through additional pump- ing stations to accommodate future deliveries via the Alberta Clipper pipeline. ALberTA CLiPPer On August 20, 2009, we received our final permits to allow construction to commence on the United States portion of the Alberta Clipper project. Just as the U.S. portion of the build was beginning, Enbridge Inc. was wrapping up construction on the 670-mile Canadian segment. In total, Alberta Clipper is a 1,000-mile, 36- inch diameter pipeline project, which, when completed, 2009 ANNuAL rEViEw 9 BuSiNESS oVErViEw natural gas Business 10 NATurAL GAS BuSiNESS w e own and operate natural gas gathering, treating, processing and transportation systems as well as trucking, rail and liquids marketing operations. We purchase and gather natural gas from the wellhead and deliver it to plants for treating and/or processing and to intrastate or interstate pipelines for transmission to wholesale customers such as power plants, industrial customers and local distribution companies. The Longview plant is a cryogenic plant, which begins with de-methanizing the inlet gas stream coming into the facility. The Longview plant also separates the ethane/propane hydrocarbons. 2009 ANNuAL rEViEw 11 natural gas Business Our three major systems – East Texas, Anadarko and interconnects to interstate pipelines, intrastate pipelines North Texas – are located in natural gas production and wholesale customers. Clarity is positioned for poten- basins that have experienced active drilling production tial upstream and downstream expansions to meet the activities during the last several years. The economic cri- growing demand for natural gas transportation capacity. sis combined with more gas supply than expected led to lower prices and lower drilling rates. However, our natu- In the second quarter of 2009, we completed a $60 mil- ral gas assets remain in basins that have the opportunity lion expansion project to add compression and approxi- to grow even in a moderate pricing environment, due to mately 26 miles of 20-inch diameter pipeline within our existing shale or tight sands formations where horizontal East Texas System. The completed expansion provides fractionation technology can be used to improve produc- an additional 160 million cubic feet per day (MMcf/d) tivity from the natural gas wells. of capacity for this growing region. We are undertaking $180 million in expansions to provide gathering, treating and transportation services to several producers in coun- MAjOr nATurAL GAS SySTeM fACTS ties west and south of Carthage, Texas. east Texas System The Bossier trend, located on the western side of our East Length: 3,400 miles of gathering Texas System within the East Texas Basin, has seen a and transmission pipe significant drop in development with production falling Plants: 9 treating, 7 processing from 2,400 MMcf/d in March 2009 to 1,950 MMcf/d in October 2009, partly due to the drop in natural gas prices. Anadarko System However, this decreased drilling activity in the Bossier is Length: 1,800 miles of gathering expected to be more than offset by the increased activity and transmission pipe focused in and around the Haynesville Shale, a forma- Plants: 6 processing tion that runs from western Louisiana and into eastern Texas, and has the potential of being one of the largest north Texas System natural gas discoveries in the United States. If proven, the discovery could create more drilling activity around our Length: 4,500 miles of gathering pipe East Texas System, increasing the demand for our ser- Plants: 9 processing vices. The potential natural gas production in this region exceeds 1 Bcf/d, primarily from Haynesville wells. We operate approximately 10,000 miles of natural gas gathering and transportation pipelines, nine active natural Our East Texas System comprises approximately 3,400 gas treating plants and 22 active natural gas processing miles of natural gas gathering and transportation pipe- plants with a combined capacity of 2.9 billion cubic feet lines, nine natural gas treating plants and seven natural per day (Bcf/d). Our focus primarily has been on develop- gas processing plants, including three hydrocarbon ing and expanding the service capability of our exist- dewpoint control facilities, or HCDP plants. ing pipeline systems. In late 2009, the Partnership sold non-core natural gas pipeline assets and related treating facilities in Louisiana, Alabama, Mississippi and Tennes- see, including two FERC-regulated interstate natural gas transmission pipeline systems. eAST TexAS SySTeM In February 2009, we completed construction on our Orange Texas Compressor Station, the last remaining facility of our $655 million expansion and extension of the East Texas System, referred to as the Clarity proj- ect. The Clarity pipeline enables us to provide service to major industrial companies in southeast Texas with 12 NATurAL GAS BuSiNESS AnADArkO SySTeM The Partnership’s Anadarko System, located within the Anadarko Basin in the Texas Panhandle and western Oklahoma, has expe- rienced considerable growth as a result of the rapid development of the Granite Wash play in Hemphill and Wheeler Counties in Texas. Although rig counts were down by 63 percent during the first half of 2009, causing a decline in natural gas production in the region, vol- ume recently has begun to rise slightly. While rig counts in early 2010 were still well below the peak levels of 2008, producers are drilling considerably more horizontal wells in the region and the early results have been promis- ing with high initial production rates. Natural Our henderson natural gas processing plant, located in henderson, Texas, gas in this region has a high content of natu- is part of our east Texas System. both a cryogenic processing plant and a ral gas liquids (NGLs), which enhances the propane refrigeration plant are components of the facility. economics of these wells due to the value of the natural gas liquids. OTher nATurAL GAS buSineSSeS Volumes on our Anadarko System are expected to stay The Partnership’s natural gas business also includes level or potentially rise slightly due in part to high prices trucking, rail and liquids marketing operations through for NGLs. our subsidiary Dufour Petroleum that we use to enhance the value of NGLs produced at our processing plants. The Anadarko System consists of approximately 1,800 Dufour’s operations include the transportation of NGLs, miles of natural gas gathering and transportation pipe- crude oil and other products from wellheads and treat- lines in southwestern Oklahoma and the Texas Panhandle ing, processing and fractionation facilities to wholesale and includes six natural gas processing plants. customers, such as distributors, refiners and chemical facilities. Dufour operates a fleet of 210 trucks, 351 trail- nOrTh TexAS SySTeM ers and 110 railcars. A substantial portion of natural gas on our North Texas System is produced in the Barnett Shale area within the The Partnership’s natural gas marketing business, Fort Worth Basin Conglomerate, a mature zone that is Enbridge Marketing, provides natural gas supply, experiencing slow production decline. In contrast, the transportation, balancing, storage and sales services to Barnett Shale area is one of the most active natural gas producers and wholesale customers. Our marketing busi- plays in North America. We anticipate that throughput on ness’s primary objectives are to maximize the value of the North Texas System will increase modestly in each the natural gas purchased by our gathering systems and of the next several years as a result of continued Barnett the throughput on our gathering and intrastate wholesale Shale development. That is, producers will continue to customer pipelines and to mitigate financial risk. Due balance the economics of lower commodity prices with to increased volumes from our gathering assets, our the prolific drilling opportunities of the Barnett Shale. marketing business leases third-party pipeline capacity The North Texas System includes approximately 4,500 downstream from our natural gas assets under firm trans- miles of natural gas gathering pipelines and nine natural portation contracts for various lengths and at rates that gas processing plants. allow our marketing business to diversify its customer base by expanding its service territory. This transporta- At the Longview facility, william Mcbride, plant opera- tion capacity also provides assurance that our natural tor, left, and Pat Moran, plant supervisor, adjust a flow gas will not be shut in, which can result from capacity controller on one of the solar turbines. constraints on downstream pipelines. 2009 ANNuAL rEViEw 13 GoVErNANCE ANd SoCiAL rESPoNSiBiLiTy A t Enbridge Energy Partners, L.P., our com- mitment to ethical conduct, social respon- sibility and good governance is core to our way of doing business. To us, good corporate governance means ensuring that a comprehensive system of stewardship and accountability is in place and functioning among the boards of directors, man- agement and employees of our general partner and Enbridge Energy Management, L.L.C. We believe social responsibility means achieving business suc- cess in ways that uphold our values and high standard of ethics and demonstrate respect for people and the environment. To that end, we believe that social responsibility and promotion of a sustainable future go hand-in-hand with the strong financial perfor- mance our investors expect. The boards of directors, management team and skilled employees of our general partner and Enridge Energy Management, L.L.C. are the backbone of Enbridge Energy Partners, L.P. The boards, which function independently of management, provide Top: in 2009, we were honored with a natural Gas STAr for Continuing guidance on our long-range strategic planning and excellence from the environmental Protection Agency, recognizing the approve all significant decisions that affect our Partnership’s five-year participation in the voluntary program to reduce direction. The governance provided by the experi- methane emissions. bottom left: we are a proud supporter of Texas Chil- enced boards and the value of ties with Enbridge dren’s neurological research institute, the world’s first dedicated pediatric on mutually beneficial expansions are strengths neurological research facility. bottom right: enbridge employees across the that will contribute to future long-term success. united States participate in united way campaigns, including a Day of Caring service project in houston. MeMBers of the enBridge energy CoMPany, inC. (eeCi) and enBridge energy ManageMent, l.l.C. (eeq) Boards of direCtors Martha o. hesse is chairman of the stephen j.j. letwin was elected man- dan Westbrook was elected a boards effective May 1, 2007 and aging director and as a member of director of EECI and EEQ in is a member of the boards’ Audit, the boards of directors of EECI and October 2007 and is a member Finance and Risk Committees. EEQ in May 2006. of the boards’ Audit, Finance and Risk Committees. jeffrey a. Connelly was elected a terrance l. Mcgill was elected director of EECI and EEQ in president and a director of EECI stephen j. Wuori was elected a January 2003 and serves as the and EEQ in May 2006. director in January 2008 and is the chairman of the boards’ Audit, executive vice president – Liquids Finance and Risk Committees. george K. Petty was elected a Pipelines for EECI and EEQ. director of EECI in February 2001 and of EEQ in May 2002 and serves on the boards’ Audit, Finance and Risk Committees. 14 GoVErNANCE ANd SoCiAL rESPoNSiBiLiTy A ChoiCE oF iNVESTMENTS T wo alternatives are available for equity inves- The second choice available to equity investors is tors wanting to own an interest in our portfolio shares of Enbridge Energy Management, L.L.C., which of energy transportation assets. The first is via is a limited liability company that trades publicly on the class A common units representing limited part- NYSE under the symbol EEQ. These shares represent ner ownership interests of Enbridge Energy Partners, an indirect investment in Enbridge Energy Partners, L.P., which are publicly traded on the New York Stock L.P. since Enbridge Management’s only investment is Exchange (NYSE) under the symbol EEP. These units its interest in the Partnership. Further, the performance represent a direct interest in a traditional master lim- of Enbridge Management shares is generally expected ited partnership. An investment in a partnership differs to track that of the Partnership, since its shares are in a number of significant ways from an investment in maintained on a one-for-one basis with a specific class a corporation. of Enbridge Partners limited partner units. An invest- ment in EEQ shares differs from an investment in EEP • A unitholder (partner) in a publicly traded partner- partnership units in a number of significant ways. ship owns units of the partnership rather than shares of stock and receives cash distributions rather than • Enbridge Management shareholders receive quarterly dividends. Cash distributions received generally distributions in the form of additional shares. The reduce a partner’s tax basis in the partnership. The distributions are comparable in value to the quarterly cash distributions are not taxable as long as the part- cash distributions paid to unitholders of Enbridge ner’s tax basis exceeds zero. Partners. • Typically, a corporation is subject to federal and • Enbridge Management distributions are not tax- state income taxes, but a partnership is not. All of the able when received, and shareholders are not issued income, gains, losses and deductions of a partnership either a Schedule K-1 or a 1099 tax form. The sale of are passed through to its partners, who are required Enbridge Management shares is generally subject to to show their allocated share of these amounts on capital gains treatment, thus providing a tax-efficient their income tax returns. Allocated taxable income form of investment. increases a partner’s tax basis in the partnership. • These investment attributes result in shares of • In late February, partners are provided a tax package Enbridge Management being attractive to many (Schedule K-1) required for preparation of their per- individual investors. In addition, Enbridge Manage- sonal income tax returns. By comparison, ment is treated as a corporation for federal a corporate stockholder typically receives income tax purposes, making ownership a Form 1099 in late January detailing enBridge inC. of its shares a more suitable investment for required tax data. (nyse:enB) mutual funds and tax-exempt investors than direct ownership of partnership units. 100% indireCtly oWned enBridge energy CoMPany, inC. 100% 17.2% voting shares listed shares 2% general Partner enBridge energy interest ManageMent, l.l.C. PuBliC (nyse:eeq) 82.8% and 22.5% ManageMent 13.9% liMited Partner liMited Partner and Control interest (i-units) interest enBridge energy 61.6% Partners, l.P. PuBliC as of february 24, 2010 (nyse:eeP) 2009 ANNuAL rEViEw 15 FiNANCiAL hiGhLiGhTS For the year ended December 31, 2009 2008 2007 2006 2005 financial (dollars in millions) Operating revenue $ 5,731.8 $ 9,898.7 $ 7,172.1 $ 6,400.2 $ 6,375.9 Net income 328.0 403.2 249.5 284.9 89.2 Adjusted operating income* 614.0 532.7 381.2 326.8 239.6 Adjusted net income* 377.1 355.3 281.1 228.8 143.7 Per unit (In dollars) Net income 2.24 3.64 2.46 3.62 1.06 Adjusted net income* 2.75 3.15 2.82 2.84 1.92 Cash distributions 3.96 3.88 3.725 3.70 3.70 Operating Deliveries Liquids Segment (Bpd in thousands) Lakehead System 1,650 1,620 1,543 1,517 1,339 North Dakota System 116 111 98 92 87 Mid-Continent System 238 231 236 244 236 Total 2,004 1,962 1,877 1,853 1,662 Deliveries Natural Gas Segment (Btu/d in billions) East Texas System 1,443 1,479 1,180 1,019 860 Anadarko System 570 647 591 582 488 North Texas System 387 395 348 294 265 Total 2,400 2,521 2,119 1,895 1,613 *Adjusted to eliminate certain noncash items and sale of nonstrategic assets. (See reconciliations to GAAP measure below.) non-GAAP reconciliations: Adjusted income figures are provided to illustrate trends absent certain unusual transactions–such as the occasional sale of nonstrategic assets–and excluding adjustments that affect earnings, but do not impact cash flow, such as derivative fair value losses and gains. These noncash losses and gains result from fair market value adjustments for certain financial derivatives used by the Partnership for hedging purposes that, nevertheless, do not qualify for hedge accounting treatment under the applicable authoritative accounting guidance. ADjuSTeD finAnCiAL hiGhLiGhTS For the year ended December 31, (Unaudited, in millions except per unit amounts) 2009 2008 2007 2006 2005 Operating income $ 616.6 $ 580.6 $ 318.4 $ 382.9 $ 185.1 Noncash derivative fair value losses (gains) 15.7 (68.8) 62.8 (64.4) 56.3 Hurricane impact — 15.1 — — — Expired joint tariff revenues (18.3) — — — — Sale of assets Gain on sale of assets — — — — (18.1) Settlement of financial instruments — — — — 16.3 NGL inventory charges — — — 8.3 — Project write-offs — 5.8 — — — Adjusted operating income 614.0 532.7 381.2 326.8 239.6 Interest expense excluding MTM adjustments (230.0) (180.6) (98.4) (110.5) (107.7) Other income 13.4 1.9 4.2 8.4 2.4 Income tax expense (8.5) (7.0) (5.1) — — Income (loss) from discontinued operations (0.4) 8.3 (0.8) 4.1 9.4 Net income attributable to noncontrolling interest (11.4) — — — — Adjusted net income* 377.1 355.3 281.1 228.8 143.7 Allocations to General Partner (57.0) (48.7) (37.5) (29.2) (24.5) Adjusted net income allocable to limited partners $ 320.1 $ 306.6 $ 243.6 $ 199.6 $ 119.2 Weighted average units 116.4 97.1 86.3 70.2 62.1 Adjusted net income per unit $ 2.75 $ 3.15 $ 2.82 $ 2.84 $ 1.92 *Adjusted net income excludes the effect of $64.5 million of losses associated with the disposition of the non-core natural gas assets in 2009 and a gain of $32.6 million in 2007 related to the sale of the Kansas Pipeline System. 16 FiNANCiAL hiGhLiGhTS Company InformatIon 2010 Distribution Dates Stock ExchangE Q1 Q2 Q3 Q4 the partnership’s class a common Payment Date Feb 12 May 14 aug 13 nov 12 units are traded on the nySE under Record Date Feb 5 May 7 aug 5 nov 4 the symbol EEp. Shares of Enbridge Ex-Dividend Date Feb 3 May 5 aug 3 nov 2 Energy management, L.L.C. trade Declaration Date Jan 29 apr 28 Jul 23 oct 27 on the nySE under the symbol EEQ. All dates are tentative until approved by the board of Enbridge Energy Management, L.L.C. To be tranSfEr agEnt entitled to a declared distribution, investors must have purchased units or shares at least one busi- and rEgiStrar ness day in advance of the ex-dividend date. Commencing on the ex-dividend date, units and shares Enbridge Energy partners, L.p. trade without entitlement to the recently declared distribution. and/or Enbridge Energy management, L.L.C. ownership c/o Bny mellon Shareowner Services As of March 3, p. o. Box 358015 (In thousands) 2010 2009 2008 pittsburgh, pa 15252-8015 EEP class A common units 97,443 76,089 59,839 telephone: (888) 749-9483 EEP class B common units 3,913 3,913 3,913 tDD: (800) 231-5469 EEP class C units — 20,314 18,415 (Hearing assisted) EEP i-units/EEQ shares 16,700 15,248 13,815 www.mellon.com/mis/investors/ Total 118,056 115,564 95,982 ExtErnal auditorS EEP unitholders (estimate) 86,000 87,000 80,000 pricewaterhouseCoopers LLp EEQ shareholders (estimate) 10,000 11,000 9,600 1201 Louisiana, Suite 2900 Houston, texas 77002 TRADIng intErnEt For the year ended December 31, enbridgepartners.com 2009 2008 2007 enbridgemanagement.com EEP class A common units High $ 54.44 $ 53.45 $ 61.82 tax WEb Low 24.71 22.33 48.25 Investor tax information Close 53.69 25.50 50.54 (Schedule K-1) is available on the partnership’s website. EEQ shares High $ 54.32 $ 53.99 $ 60.16 k-1 call cEntEr Low 23.50 21.88 47.35 (800) 525-3999 Close 53.12 24.45 52.32 email@example.com invEStor rElationS enbriDge energy partners, L.p. (the “Partnership”), headquartered in Houston, is a publicly traded (866) 337-4636 master limited partnership (or MLP) engaged in two main businesses: crude oil and natural gas midstream services. (866) EEp-Info The Partnership’s major systems serve premium energy basins in north America, which have strong long-term production profiles. (866) EEQ-Info The Partnership’s Class A common units, which trade on the new York Stock Exchange (nYSE) under the fax: (713) 353-5637 symbol EEP, are held by approximately 86,000 investors. An additional 10,000 investors hold an indirect interest firstname.lastname@example.org in the Partnership through ownership of the shares of Enbridge Energy Management, L.L.C. This limited liability company, which manages the business and affairs of the Partnership, trades on the nYSE under the symbol EEQ. email@example.com Enbridge Inc. (“Enbridge”), based in Calgary, Alberta, Canada, holds an approximate 27 percent interest in the Partnership through its U.S. subsidiary, Enbridge Energy Company, Inc. (the general partner of the Partnership). MEdia inquiriES Enbridge shares trade on the nYSE and the Toronto Stock Exchange under the symbol EnB. (713) 821-2253 fax: (713) 821-2230 firstname.lastname@example.org enbridge energy partners, l.p. enbridge energy management, l.l.c. 1100 Louisiana, Suite 3300 Houston, Texas 77002 (888) 650-8900 enbridgepartners.com enbridgemanagement.com
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