SHAREHOLDERS' EQUITY | 3. SHAREHOLDERS' EQUITY SHARE DISTRIBUTIONS Our authorized capital structure consists of two classes of interests: (i) Listed Shares, which represent limited liability company interests with limited voting rights, and (ii) voting shares, which represent limited liability company interests with full voting rights. All voting shares are held by the General Partner. We make share distributions on a quarterly basis at the same time that the Partnership declares and makes cash distributions to the General Partner and limited partner interests other than the i-units. We do not receive cash distributions on the i-units we own and do not otherwise have any cash flow attributable to our ownership of the i-units. Instead, when the Partnership makes cash distributions to the General Partner and other limited partner interests, we receive additional i-units under the terms of the Partnership Agreement. The amount of the additional i-units we receive is calculated by dividing the amount of the per unit cash distribution paid by the Partnership on each of its Class A and B common units by the average closing price of one of our Listed Shares on the NYSE as determined for a 10 trading-day period ending on the trading day immediately prior to the ex-dividend date for our shares multiplied by the number of shares outstanding on the record date. We concurrently distribute additional shares to our shareholders that are equivalent in number to the additional i-units we receive from the Partnership. As a result, the number of our outstanding shares is equal to the number of i-units that we own in the Partnership. Voting Shares Listed Shares 2017 Balance at beginning of year 6.17 81,857,162 Share distributions 0.60 7,941,650 Balance at end of year 6.77 89,798,812 2016 Balance at beginning of year 5.53 73,285,734 Share distributions 0.64 8,571,428 Balance at end of year 6.17 81,857,162 2015 Balance at beginning of year 5.15 68,305,182 Share distributions 0.38 4,980,552 Balance at end of year 5.53 73,285,734 The following table sets forth the details regarding our share distributions, as approved by our board of directors for the years ended December 31, 2017 , 2016 and 2015 . Distribution Declaration Date Record Date Distribution Payment Date Distribution per Unit of the Partnership Average Closing Price of the Listed Shares Additional i-units owned Listed Shares Distributed to Public Shares Distributed to General Partner 2017 October 25 November 7 November 14 $ 0.350 $ 13.75 2,229,344 1,968,809 260,535 July 28 August 7 August 14 $ 0.350 $ 15.38 1,948,561 1,720,839 227,722 April 27 May 8 May 15 $ 0.350 $ 17.96 1,637,096 1,445,775 191,321 January 26 February 7 February 14 $ 0.583 $ 22.44 2,126,649 1,878,115 248,534 7,941,650 7,013,538 928,112 2016 October 28 November 7 November 14 $ 0.583 $ 25.06 1,861,187 1,643,677 217,510 July 28 August 5 August 12 $ 0.583 $ 22.84 1,991,304 1,758,587 232,717 April 29 May 6 May 13 $ 0.583 $ 21.14 2,093,257 1,848,626 244,631 January 29 February 5 February 12 $ 0.583 $ 16.27 2,625,681 2,318,827 306,854 8,571,429 7,569,717 1,001,712 2015 October 30 November 6 November 13 $ 0.583 $ 27.10 1,543,182 1,362,836 180,346 July 30 August 7 August 14 $ 0.583 $ 30.68 1,337,969 1,181,605 156,364 April 30 May 8 May 15 $ 0.570 $ 37.25 1,061,026 937,028 123,998 January 29 February 6 February 13 $ 0.570 $ 37.50 1,038,375 917,024 121,351 4,980,552 4,398,493 582,059 We had non-cash operating activities in the form of i-units distributed to us by the Partnership and corresponding non-cash financing activities in the form of share distributions to our shareholders in the amounts of $137 million , $179 million and $161 million during the years ended December 31, 2017 , 2016 and 2015 , respectively. PARTNERSHIP TRANSACTIONS IMPACTING SHAREHOLDERS’ EQUITY Distribution Reduction On April 28, 2017, the Partnership announced the results of Enbridge's strategic review of its United States sponsored vehicles, which was conducted as a result of integration efforts post merger with Spectra Energy Corp. The Partnership reduced its quarterly distribution from $0.583 per unit to $0.35 per unit or from $2.33 per unit to $1.40 per unit on an annualized basis. As a result, of the distribution reduction our quarterly distribution of additional i-units and corresponding Listed shares distributed to the public was reduced from $0.583 per unit to $0.35 per unit. Issuance of Class A Units On April 27, 2017, the Partnership funded the redemption of the Series 1 Preferred Units through the issuance of 64 million Class A common units to the General Partner at a price of $18.66 per Class A common unit. The Class A common units were recognized on April 27, 2017, at fair value. The fair value of the Class A common units was $18.57 per unit, the market closing price on April 27, 2017, resulting in a $1.2 billion increase to the Class A unit capital account. Redemption of Series 1 Preferred Units On April 27, 2017, the Partnership redeemed all of its outstanding Series 1 Preferred Units held by the General Partner at face value of $1.2 billion in cash. Simplification of Incentive Distributions On April 27, 2017, a wholly-owned subsidiary of the General Partner irrevocably waived all of its rights associated with its 66 million Class D units and 1,000 IDUs, in exchange for the issuance of 1,000 Class F units. The waiving of the Class D units and IDUs by a wholly-owned subsidiary of the General Partner represents an extinguishment, resulting in a de-recognition of the Class D units and IDUs at their carrying value. The Class F units were recorded at their fair value of $263 million and the difference between the fair value of the Class F units and the de-recognized Class D units and IDUs were recorded as an increase of $3 billion to the General Partner’s capital account. Alberta Clipper Drop Down to the Partnership On January 2, 2015, the Partnership completed a transaction, or the Drop Down, pursuant to which it acquired the remaining 66.7% interest in the United States segment of the Alberta Clipper Pipeline from the General Partner. The consideration consisted of 18,114,975 units of a new class of limited partner interests designated as Class E units with an aggregate value of $694 million issued to the General Partner, plus a cash repayment of approximately $306 million of indebtedness. The Partnership recorded the issuance of the Class E units at a fair value of $768 million , which was $364 million higher than the $404 million carrying value of the Partnership’s related noncontrolling interests in Alberta Clipper. As a result, the Partnership reduced the carrying values of the Class A and Class B common units, the i-units, and the General Partner interest by $364 million on a pro-rata basis. The recording of this noncash transaction reduced the book basis of our investment in the Partnership, based on our proportionate ownership interest in the Partnership at the time of the transaction, by $46 million , net of a $27 million tax benefit. A corresponding reduction to our “Shareholders’ equity” was recorded and is reflected under “Capital account adjustments” in the significant changes in the statements of shareholders’ equity. The recording of this transaction also reduced the carrying values of both classes of the common units below zero. As discussed above, the Partnership Agreement requires that such capital account deficits are cured by additional allocations from the capital accounts of the i-units and the General Partner on a pro-rated basis. Our pro-rated share of this curing as a result of the Drop Down, was $29 million , net of a $17 million tax benefit, which is reflected as an additional reduction to the book basis of our investment in the Partnership, with a corresponding reduction to our “Shareholders’ equity.” |