New York Jun 24, 2015 (Thomson StreetEvents) -- Edited Transcript of Enbridge Energy Partners LP presentation Tuesday, June 23, 2015 at 6:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Mark Maki Enbridge Energy Partners L.P. - President and Principal Executive Officer ================================================================================ Conference Call Participants ================================================================================ * John Edwards Credit Suisse - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- John Edwards, Credit Suisse - Analyst [1] -------------------------------------------------------------------------------- And we're really pleased here to have Enbridge Energy Partners present. And we've got Mark Maki, who is President of Enbridge Energy Partners. And I'll turn it over to Mark. -------------------------------------------------------------------------------- Mark Maki, Enbridge Energy Partners L.P. - President and Principal Executive Officer [2] -------------------------------------------------------------------------------- Thanks, John. Well, good afternoon, everybody. And I -- we'll try to move this along good -- I really want to get to question-and-answer. I think that's where the most value comes from these sessions. So, going to go through the deck relatively quickly with you all here today. Of course, the usual forward-looking statement disclosure. And I will talk about some projections and forecasts, and sometimes they prove wrong. So, take it with the appropriate caution. In terms of investment highlights, I'm going to talk a little bit here about Enbridge Energy Partners. And, you know, we have been around a long time. As far as MLPs go, we were formed back in 1991. And at that time if memory serves me right, Santa Fe, Tapco, Buckeye and us were the four that were out there. And of that group, so Buckeye and Enbridge are left over and, of course, a lot of new ones are out there. But we've been around a long time. And one of the things to take out of that history is this Company has never cut its distribution. In my time with the Company -- we started in 1986 -- I've seen all kinds of upcycles and downcycles in the business, including back when oil was $10.81 a barrel back in 1998, 1999. And at that time, our system saw very little decrease in activity. And the oil sands region in Alberta, in particular, stayed very, very active. And that's important or instructive, because everyone always asks us -- with crude in the $50 to $60 range, aren't the oil sands -- you know, there's nothing going on up there? No. Lots of activity still going on. So -- and the other thing people really tend to lose sight of with Enbridge is the size of our liquids pipeline system. Every day United States runs on about 19 million barrels of crude oil, natural gas liquids, and a little bit of ethanol every day -- 19 million barrels. This Company moves across the border 2.25 million barrels a day into the US. Well, some of that ends up back up in Eastern Canada. But we are the largest conduit for imported oil into the US and imported oil from Canada, in particular, which is the best trading partner the US could have. In terms of our business model for EEP, we are part of the Enbridge family of companies, and I'll talk about the family in just a minute. But our business model basically is built around you've got a strong parent -- C-Corp in Enbridge Inc. And then it has a series of sponsored vehicles, or MLPs. Enbridge Energy Partners is the largest here in the US; also Midcoast Energy Partners. And finally in Canada, a vehicle called Enbridge Income Fund, and very similar to what EEP is. And there was some news on the Income Fund here this last week. But you see our basic investment proposition is one of income, stability, a low-risk business model, and we talk about how we make our money -- you'll understand that in just a little bit -- and then a very strong general partner. Again, it's something unique in this space. Enbridge Inc. -- this map does not do justice to the business. Just to give you a sense for the scale, there are six pipelines across the border from Canada into the US. Diameters all the way up to 48 inches in diameter. We move a lot of oil. Right now our system, especially on heavy oil capacity, is basically fully subscribed -- meaning we've got more barrels that want to move on the system than we have space. We have a relatively small amount of light capacity on the system, and we do expect that to fill in, in time, as well. We've been very busy over the last 10 years in expanding our system, opening it up to new markets, including all the way down to the Houston market in a joint venture with Enterprise, where we reversed the Seaway Pipeline system. And then Enbridge built upstream of Cushing a variety of pipes into the Cushing market to bring oil down to the Gulf Coast. So today, the two Seaway systems, Seaway 1, Seaway 2, are basically about a capacity just of short of 1 million barrels a day of capability. Enbridge's history, it's been around a long time. 1940's, it was formed. If you look at its dividend growth history over its entire existence over the last five years, the last 10 years, it's very hard to find a stock that's done this consistently, has done as well as Enbridge has over time. And you see some of the metrics there on the slide. 10-year total shareholder return on a compound basis of close to 20%. This last year, Enbridge announced it was moving to a higher payout model at the C-Corp., and moving a lot of the assets down to its sponsored vehicles. And that transaction I mentioned earlier with respect to the Income Fund was the movement of its liquids portfolio in Canada, to the Income Fund in Canada, and then lightening up the assets at the parent, and then increasing the payout ratio. So we had a big increase in dividend, and expectations are the dividends are going to grow on the 14% to 16% range at the parent going forward. Again, so, a very, very great story. And this Company is big, as you see in that last bullet. As far as strategic position, we are the dominant carrier for moving oil Sands Oil into the US, and as well, light conventional, heavy conventional, NGLs and light oil from the synthetic upgraders in Canada into the markets here in the US and Canada. The other key position that we have is a very enviable position in the Bakken. We bought a system there back in the mid-1990's, and have expanded that system numerous times, and have a very large expansion underway now -- which I'll get to in just a few minutes -- to move more oil out of the Bakken to the refining complex in the upper Midwest. In terms of supply outlook, we get lots of questions from people about what does the supply outlook look like in the Bakken and in Western Canada, given the current crude oil price? And this is a view fairly recent on the oil sands development or the Western Canadian development. What you see is continued growth from where we currently are in the oil sands region because there's a lot of projects under construction. These are big projects at very substantial tranches of production -- 50,000 to 100,000 barrels a day with each of these projects. And as a result, supply is going to grow. If you are building one of these plants or making one of these investments, you are going to complete it. And the reason for that is, these are long-term investments. Like Mike said in the presentation before, decisions made in the oil sands are long-term in nature. You look at the profile of production over 20 or 30 years -- and these are not a well in North Dakota or a well in the Permian that has a hyperbolic decline. These are -- they ramp up and they stay at a very steady production level for a very long period of time. So it's very important what your view is on long-term crude oil price. If you have a belief that long-term crude oil prices are going to be north of $80, you are making investments in the oil sands and that's what we see. So we expect you are going to see growth. And you see this chart has stripped out or shows you what's coming in terms of future growth and in relation to what's already operating today. And again, I highlight that what's already operating today or under construction is a very modest decline that you see. And for some reason that is all that was ever done. Down in the Bakken, you see again a growth in supply and you see it labeled up against demand and pipeline capacity. Our expectation is the Bakken will continue to grow. It might take a little bit of a hiatus here in the next little while; may flatten out, may decline a little bit. But the key thing for a pipeline guy like us or some of the other players that are in that Basin, you are going to see growth in supply. And we are building more pipelines primarily to offload rail. Today in the Bakken, moving on rails north of 600,000 barrels a day. That's a couple good size pipelines. Ours would be the Sandpiper project, which I'll touch on in just a minute, is one of them. This chart we get a lot from folks or we get the questions about how competitive is pipeline relative to rail? And there's a lot of activity on this chart. But basically, take, say, Western Canada to the Gulf Coast -- to move by rail, someplace between $15 and $22 a barrel to move by rail. To go by pipeline, in that range of basically the $12-to-less a barrel range. And again, very, very competitive. The next thing I wanted to highlight for you is our business model. At EEP, we are a traditional pipeline. We pick oil up, move it from point A to point B. And our biggest business is, whether it's our Lakehead system, which is the big system around the Great Lakes region; our North Dakota system, or our Ozark system, which leaves Cushing and goes into the Wood River market -- those pipelines move oil for a fee. And that's our basic business model. So, very little commodity exposure. We have a very strong position relative to market. One of the other key things that we have is tremendous access to market. And so, on our system, you have optionalities as a shipper to go to markets in Minneapolis, St. Paul, Chicago, Detroit, Toledo, Eastern Canada, all the way down to the US gulf Coast. And to a shipper on our system, that's valuable. So our systems are typically contracted in a couple different ways. On the receipt side in Canada, we tend to have take-or-pay arrangements. The system in the middle tends to be month-to-month arrangements. And then some of our market pipelines, like Seaway, are contract systems again. The significance of that is, the piece in the middle is supported by push into the system and pull out of it. And in addition, our liquids pipeline system has something called cost of service tolling arrangements in place. A very significant portion of our revenues are done in a traditional utility style model. So what this means is, we have a high degree of certainty about what we are going to get in terms of revenues and cash flows. So much more like a utility than a market player or a pipeline that's market-based. Now we touched on some of the work we are doing. We have underway today expansions that will add up to 1.7 million barrels per day of additional market access. And you see a variety of different projects, so I'm not going to go through all of them. We'd be here for half an hour on just this slide. But the point here is, Enbridge has been around a long time. It's been very focused on making sure we enhance access of heavy barrels to logical heavy markets, and light barrels to light markets. So as an example, the refining complex in Montreal City and Quebec City in the Province of Quebec are light oil refineries. Historically, they have run Brent oil or other offshore oil, and have paid a premium at the receipt point for their supply. For them to be able to access Bakken oil or Canadian light is a significant competitive advantage for them. So we have recently begun a project to reverse our line 9 system. We are in the -- basically the final stages of that. We've got some hydro testing and some other work to complete in that system, and then that will open up the Montreal market. So we identified a market for light oil and then build the path for that oil. Heavy oil. The US Gulf Coast is the best place in the world to send heavy oil. The refining complex can handle a variety of different types of crude oil and is used to seeing Venezuelan oil, Mexican oil, which is heavy. And the Canadian barrel looks a lot like those. And so opening up that market for Canadian producers was a big step for us. |