Enbridge Energy Partners, L.P.
(EEP - Analyst Report
) proposes to invest around $3.4 billion in a Light Oil Market Access Program, which intends to increase accessibility to new markets in response to higher volumes in the North American energy market of North Dakota and western Canada light oil production.
The program comprises a number of projects – some of which will be on a standalone basis while others will be jointly financed by the partnership and Enbridge Inc.
(ENB - Snapshot Report
) . Some projects will be financed entirely by the partnership.
The terms of the joint funding program offers Enbridge Partners the opportunity to increase or decrease its investment in certain projects along with its funding capability. The partnership’s investments will be accepted on a fixed return cost-of-service basis that will protect against throughput risk or capital cost risk.
The projects under the latest program are subject to various regulatory approvals and entail expansion of the company's North Dakota regional pipeline system, increased capacity on its U.S. mainline system and other infrastructure, as well as offers availability from the Enbridge system to refinery markets in eastern Canada and the U.S. Midwest for an additional 400,000 barrels per day (bpd) of light oil.
North Dakota System Expansion or the Sandpiper project involves expansion of Bakken takeaway capacity by 225,000 bpd to reach a total of 580,000 bpd. The project, estimated to cost $25 billion, is scheduled to come online in early 2016. This project will be entirely financed by Enbridge Partners and consists of extension of several distinct Lakehead mainline systems held within the Partnership.
The Eastern Access Project intends to augment capacity on the pipeline to 570,000 bpd, up from earlier announced level of 500,000 bpd. The estimated cost of the extension is $0.4 billion. Enbridge and the partnership will contribute 60% and 40%, respectively, with options to reduce or increase its economic interest by about 15%.
The U.S. Mainline System extension includes two projects - Chicago Area Connectivity (Line 62 Twin Flanagan to Griffith) and Superior to Flanagan (Line 61 capacity expansion) estimated to cost $0.5 billion and $1.3 billion, respectively. This project aims to provide the rising light crude demand to the booming regions of Chicago, Ontario and Quebec.
Enbridge Energy Partners carries a Zacks #3 Rank (Short term Hold rating). Longer term, we maintain our Neutral recommendation.