A leading master limited partnership, Enbridge Energy Partners, LP (EEP) intends to exercise its option to reduce its economic interests in the Lakehead system expansion of both the Eastern Access and Mainline Expansion projects to 25% from 40%.
In addition, Enbridge Energy and some of its subsidiaries have also proposed to sign an agreement on Jun 28, 2013 with a subsidiary of Enbridge Inc. (ENB) whereby the latter will purchase the accounts receivables of some of EEP's subsidiaries on a monthly basis through 2016 until EEP's large growth capital commitments are permanently funded. During this period, the funding will also provide an annual saving in EEP's cost of funding.
Through this transaction, Enbridge Energy expects to obtain around $100 million from its general partner associated with 15% of the capital that it has financed so far for these expansion projects. Enbridge Energy will get the amount in this ongoing quarter itself.
Moreover, it is projected that receivables worth about $215 million will be purchased each month, at their accrued value minus a discount to reimburse Enbridge for its investment and risk of non-collection. The main goal of the accounts receivable transaction is to boost EEP's available liquidity.
Per the Eastern Access and Mainline Expansion Joint Funding Arrangements with its general partner, the reduction in interest will also reduce the associated funding of these liquids market access projects by about 15 percentage points, from 40% to 25%, with the option expiring on Jun 30.
Within one year of the final project in-service dates, EEP will have the option to increase its economic interest by about 15 percentage points in the Lakehead System expansion of both the projects. Final phases of the Eastern Access and Mainline Expansion projects are currently targeted for completion in 2016.
The funds raised will help in maintaining liquidity while it plans to reschedule permanent funding of a corresponding portion of its growth program. This will lead to an annual saving in funding costs of around $10 million.
Enbridge Energy carries a Zacks Rank #3 (Hold). However, there are other Zacks Ranked #1 (Strong Buy) stocks – Hornbech Offshore Services, Inc. (HOS) and Gulfmark Offshore, Inc. (GLF) – that are expected to perform impressively over the short term.
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