Capital Account Adjustments On Issuances Of Common Units By Enbridge Energy Partners, L.P. | 12 Months Ended |
Dec. 31, 2013 |
Capital Account Adjustments On Issuances Of Common Units By Enbridge Energy Partners, L.P. | ' |
Capital Account Adjustments On Issuances Of Common Units By Enbridge Energy Partners, L.P. | ' |
Partnership Preferred Unit Issuance |
On May 7, 2013, the Partnership sold to the General Partner 48,000,000 Preferred Units, representing limited partner interests in the Partnership for proceeds of approximately $1.2 billion. These Preferred Units are entitled to annual cash distributions, payable quarterly; however, during the first full eight quarters ending June 30, 2015, the cash distributions will accrue and accumulate and will be payable upon the earlier of the fifth anniversary of the issuance of Preferred Units or redemption of such Preferred Units by the Partnership. On or after June 1, 2016, at the sole option of the holder of the Preferred Units, the Preferred Units may be converted into the Partnership's Class A common units. |
At the time of issuance, the Preferred Units were issued at a discount to the market price of the Class A common units into which they are convertible. This discount represents a beneficial conversion feature, which is distributed ratably from the issuance date through the first available conversion date. The discount and cash distributions to the holder of the Preferred Units results in an increase in the Partnership's preferred capital and a decrease to our i-unit investment ownership in the Partnership through its impact to our “Equity income (loss) from investment in Enbridge Energy Partners, L.P.” on our statements of income. Quarterly cash distributions to the holder of the Preferred Units, whether accrued or paid, will reduce the amount of distributable available cash available to the Partnership's holders of general and limited partner units, including i-units. |
Partnership Issuances of Class A Common Units |
The Partnership records an adjustment to the carrying value of its book capital accounts when it issues additional common units and the new issuance price per unit is greater than or less than the average cost per unit for each class of units. We refer to these adjustments as capital account adjustments. Beginning January 1, 2009, in conjunction with our adoption of the authoritative accounting guidance for noncontrolling interests, we recognize any capital account adjustments recorded by the Partnership to the book capital account it maintains for our i-units by increasing or decreasing our investment in the Partnership and recording a corresponding capital account adjustment directly to “Shareholders' equity” on our statements of financial position. We adopted prospectively the applicable authoritative guidance, except for any relevant presentation and disclosure requirements. Prior to our adoption of this guidance, we historically recognized the capital account adjustment recorded by the Partnership to the book capital account it maintains for our i-units by increasing or decreasing our investment in the Partnership and recording a corresponding gain or loss in our statements of income. Gain or loss recognition is an accounting convention we have historically applied as our method of recognizing these capital account adjustments made by the Partnership. |
The following table presents the issuances of additional Class A common units by the Partnership for the years presented, excluding issuances under the Partnership's Equity Distribution Agreement, or EDA, and the Partnership's Amended and Restated Equity Distribution Agreement, or Amended EDA. |
| | Number of | | Average | | | | | | | Ownership | | Ownership | | Increases in | | | |
| | Class A | | Offering Price | | Net Proceeds | | Percentage in the | | Percentage in the | | the Book | | | |
| | Common units | | per Class A | | to the | | Partnership Prior | | Partnership After | | Value of | | | |
Issuance Date | | Issued | | common unit | | Partnership (1) | | to the Issuance | | the Issuance | | Investment (2) | | | |
(in millions, except units and per unit amount) | | | |
2012 | | | | | | | | | | | | | | | | | | | | | | | | | |
September | | 16,100,000 | | $ | 28.64 | | | | $ | 446.8 | | | 13.9 | % | | 13.1 | % | | | $ | 22.6 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2011 | | | | | | | | | | | | | | | | | | | | | | | | | |
December | | 9,775,000 | | $ | 30.85 | | | | $ | 292 | | | 13.8 | % | | 13.4 | % | | | $ | 18.2 | | | | |
September | | 8,000,000 | | $ | 28.2 | | | | | 218.3 | | | 13.7 | % | | 13.3 | % | | | | 12.1 | | | | |
July | | 8,050,000 | | $ | 30 | | | | | 233.7 | | | 14 | % | | 13.5 | % | | | | 15 | | | | |
2011 Total | | 25,825,000 | | | | | | | $ | 744 | | | | | | | | | | $ | 45.3 | | | | |
______________________________ | | | | |
(1) | Net of underwriters’ fees and discounts, commissions and issuance expenses and including contributions from the General Partner to maintain its 2% general partner interest in the Partnership. | | | |
(2) | Before the effect of income taxes. | | | | | | | | | |
Equity Distribution Agreement |
In June 2010, the Partnership entered into an Equity Distribution Agreement, which we refer to as the EDA, for the issue and sale from time to time of its Class A common units up to an aggregate amount of $150.0 million. On May 27, 2011, the Partnership entered into an Amended Equity Distribution Agreement, which we refer to as the Amended EDA, for the issue and sale from time to time of its Class A common units up to an aggregate amount of $500.0 million from the execution of the agreement through May 20, 2014. The units issued under the Amended EDA are in addition to the units offered and sold under the EDA. |
During the period from execution of the EDA through May 25, 2011, the Partnership sold 2,118,025 Class A common units, representing 4,236,050 units after giving effect to a two-for-one split of its Class A common units that became effective on April 21, 2011, for aggregate gross proceeds of $124.8 million of which $64.5 million are gross proceeds received in 2011, and no further sales were made under that agreement. On May 27, 2011, the Partnership de-registered the remaining aggregate $25.2 million of Class A common units that were registered under the EDA and remained unsold as of that date. |
The following table presents the net proceeds from the Partnership's Class A common unit issuances, resulting from the EDA or the Amended EDA, during the year ended December 31, 2011, and there were no such issuances in 2013 or 2012: |
Issuance Date | | Number of Class A common units Issued | | Average Offering Price per Class A common unit | | Net Proceeds to the Partnership(1) | | Ownership Percentage in the Partnership Prior to the Issuance | | Ownership Percentage in the Partnership After the Issuance | | Increases in the Book Value of Investment(2) |
| | | (in millions, except units and per unit amounts) |
2011 | | | | | | | | | | | | | | | | | | | | | | | | | |
January 1 to March 31 (3) | | 1,773,448 | | | $ | 32.26 | | | | $ | 55.9 | | | | 13.9 | % | | 13.8 | % | | $ | 4.1 | |
April 1 to May 26 (3) | | 225,200 | | | $ | 32.16 | | | | | 7 | | | | 13.8 | % | | 14 | % | | | 0.5 | |
May 27 to June 30 (4) | | 333,794 | | | $ | 30.3 | | | | | 9.9 | | | | 14 | % | | 14 | % | | | 0.7 | |
July 1 to September 30 (4) | | 751,766 | | | $ | 28.38 | | | | | 20.8 | | | | 13.7 | % | | 13.3 | % | | | 1.1 | |
2011 Totals | | 3,084,208 | | | | | | | | $ | 93.6 | | | | | | | | | | | | $ | 6.4 | |
_____________________________ | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Net of commissions and issuance costs of $2.2 million. |
(2) | Contributions made by the General Partner to maintain its 2% general partner interest. |
(3) | Units and unit price adjusted for the April 2011 stock split. |
(4) | Units issued under the Amended EDA. |
During the years ended 2012 and 2011, we recorded $22.7 million and $51.7 million, respectively, of capital account adjustments with respect to all the Partnership's Class A common unit issuances, including any EDA or Amended EDA issuances. The after-tax effect of these capital account adjustments to our Shareholders' equity at 2012 and 2011 was $14.4 million and $32.6 million, respectively. |
5. ISSUANCES OF LISTED SHARES BY US AND COMMON UNITS BY THE PARTNERSHIP |
Issuance of Listed Shares |
In March and September 2013, we completed public offerings of 10,350,000 and 8,424,686 Listed Shares, respectfully, representing limited liability company interests with limited voting rights, at a price to the underwriters of $26.44 and $28.02 per Listed Share, respectively. We received net proceeds of $272.9 million and $235.6 million for the March and September 2013 issuances, respectively, which we subsequently invested in an equal number of the Partnership's i-units. |
In November 2011, we completed a private offering of 860,684 Listed Shares to First Trust Energy Infrastructure Fund, representing limited liability company interests in us with limited voting rights, at a price of $29.86 per Listed Share. We received net proceeds of $25.5 million, which we also subsequently invested in an equal number of the Partnership's i-units. |
The following table presents our issuances of additional Listed Shares from 2011 to 2013. There were no similar issuances in 2012. |
| | | | | | | | | | | | | | | | | Ownership | | Ownership | | | | | |
| | | Number of | | Average | | Net Proceeds | | Percentage in the | | Percentage in the | | | | | |
| | Listed Shares | | Offering Price | | to the | | Partnership Prior | | Partnership After | | | | | |
Issuance Date | | Issued | | per share | | Partnership (1) | | to the Issuance | | the Issuance | | | | | |
(in millions, except shares and per share amount) | | | | | |
2013 | | | | | | | | | | | | | | | | | | | | | | | | | |
24-Sep | | | 424,686 | | | | $ | 28.02 | | | | $ | 11.9 | | | 18.8 | % | | 18.9 | % | | | | | |
13-Sep | | | 8,000,000 | | | | $ | 28.02 | | | | $ | 223.7 | | | 16.8 | % | | 18.8 | % | | | | | |
1-Mar | | | 10,350,000 | | | | $ | 26.44 | | | | $ | 272.9 | | | 13.5 | % | | 16.3 | % | | | | | |
| Total | | | 18,774,686 | | | | | | | | | $ | 508.5 | | | | | | | | | | | | |
2011 | | | | | | | | | | | | | | | | | | | | | | | | | |
14-Nov | | | 860,684 | | | | $ | 29.86 | | | | $ | 25.5 | | | 13.5 | % | | 13.8 | % | | | | | |
______________________________ | | | | | |
(1) | Net of underwriters’ fees and discounts, commissions and issuance expenses, if any. | | | | | | |
Partnership Preferred Unit Issuance |
On May 7, 2013, the Partnership sold to the General Partner 48,000,000 Preferred Units, representing limited partner interests in the Partnership for proceeds of approximately $1.2 billion. These Preferred Units are entitled to annual cash distributions, payable quarterly; however, during the first full eight quarters ending June 30, 2015, the cash distributions will accrue and accumulate and will be payable upon the earlier of the fifth anniversary of the issuance of Preferred Units or redemption of such Preferred Units by the Partnership. On or after June 1, 2016, at the sole option of the holder of the Preferred Units, the Preferred Units may be converted into the Partnership's Class A common units. |
At the time of issuance, the Preferred Units were issued at a discount to the market price of the Class A common units into which they are convertible. This discount represents a beneficial conversion feature, which is distributed ratably from the issuance date through the first available conversion date. The discount and cash distributions to the holder of the Preferred Units results in an increase in the Partnership's preferred capital and a decrease to our i-unit investment ownership in the Partnership through its impact to our “Equity income (loss) from investment in Enbridge Energy Partners, L.P.” on our statements of income. Quarterly cash distributions to the holder of the Preferred Units, whether accrued or paid, will reduce the amount of distributable available cash available to the Partnership's holders of general and limited partner units, including i-units. |
Partnership Issuances of Class A Common Units |
The Partnership records an adjustment to the carrying value of its book capital accounts when it issues additional common units and the new issuance price per unit is greater than or less than the average cost per unit for each class of units. We refer to these adjustments as capital account adjustments. Beginning January 1, 2009, in conjunction with our adoption of the authoritative accounting guidance for noncontrolling interests, we recognize any capital account adjustments recorded by the Partnership to the book capital account it maintains for our i-units by increasing or decreasing our investment in the Partnership and recording a corresponding capital account adjustment directly to “Shareholders' equity” on our statements of financial position. We adopted prospectively the applicable authoritative guidance, except for any relevant presentation and disclosure requirements. Prior to our adoption of this guidance, we historically recognized the capital account adjustment recorded by the Partnership to the book capital account it maintains for our i-units by increasing or decreasing our investment in the Partnership and recording a corresponding gain or loss in our statements of income. Gain or loss recognition is an accounting convention we have historically applied as our method of recognizing these capital account adjustments made by the Partnership. |
The following table presents the issuances of additional Class A common units by the Partnership for the years presented, excluding issuances under the Partnership's Equity Distribution Agreement, or EDA, and the Partnership's Amended and Restated Equity Distribution Agreement, or Amended EDA. |
| | Number of | | Average | | | | | | | Ownership | | Ownership | | Increases in | | | |
| | Class A | | Offering Price | | Net Proceeds | | Percentage in the | | Percentage in the | | the Book | | | |
| | Common units | | per Class A | | to the | | Partnership Prior | | Partnership After | | Value of | | | |
Issuance Date | | Issued | | common unit | | Partnership (1) | | to the Issuance | | the Issuance | | Investment (2) | | | |
(in millions, except units and per unit amount) | | | |
2012 | | | | | | | | | | | | | | | | | | | | | | | | | |
September | | 16,100,000 | | $ | 28.64 | | | | $ | 446.8 | | | 13.9 | % | | 13.1 | % | | | $ | 22.6 | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
2011 | | | | | | | | | | | | | | | | | | | | | | | | | |
December | | 9,775,000 | | $ | 30.85 | | | | $ | 292 | | | 13.8 | % | | 13.4 | % | | | $ | 18.2 | | | | |
September | | 8,000,000 | | $ | 28.2 | | | | | 218.3 | | | 13.7 | % | | 13.3 | % | | | | 12.1 | | | | |
July | | 8,050,000 | | $ | 30 | | | | | 233.7 | | | 14 | % | | 13.5 | % | | | | 15 | | | | |
2011 Total | | 25,825,000 | | | | | | | $ | 744 | | | | | | | | | | $ | 45.3 | | | | |
______________________________ | | | | |
(1) | Net of underwriters’ fees and discounts, commissions and issuance expenses and including contributions from the General Partner to maintain its 2% general partner interest in the Partnership. | | | |
(2) | Before the effect of income taxes. | | | | | | | | | |
Equity Distribution Agreement |
In June 2010, the Partnership entered into an Equity Distribution Agreement, which we refer to as the EDA, for the issue and sale from time to time of its Class A common units up to an aggregate amount of $150.0 million. On May 27, 2011, the Partnership entered into an Amended Equity Distribution Agreement, which we refer to as the Amended EDA, for the issue and sale from time to time of its Class A common units up to an aggregate amount of $500.0 million from the execution of the agreement through May 20, 2014. The units issued under the Amended EDA are in addition to the units offered and sold under the EDA. |
During the period from execution of the EDA through May 25, 2011, the Partnership sold 2,118,025 Class A common units, representing 4,236,050 units after giving effect to a two-for-one split of its Class A common units that became effective on April 21, 2011, for aggregate gross proceeds of $124.8 million of which $64.5 million are gross proceeds received in 2011, and no further sales were made under that agreement. On May 27, 2011, the Partnership de-registered the remaining aggregate $25.2 million of Class A common units that were registered under the EDA and remained unsold as of that date. |
The following table presents the net proceeds from the Partnership's Class A common unit issuances, resulting from the EDA or the Amended EDA, during the year ended December 31, 2011, and there were no such issuances in 2013 or 2012: |
Issuance Date | | Number of Class A common units Issued | | Average Offering Price per Class A common unit | | Net Proceeds to the Partnership(1) | | Ownership Percentage in the Partnership Prior to the Issuance | | Ownership Percentage in the Partnership After the Issuance | | Increases in the Book Value of Investment(2) |
| | | (in millions, except units and per unit amounts) |
2011 | | | | | | | | | | | | | | | | | | | | | | | | | |
January 1 to March 31 (3) | | 1,773,448 | | | $ | 32.26 | | | | $ | 55.9 | | | | 13.9 | % | | 13.8 | % | | $ | 4.1 | |
April 1 to May 26 (3) | | 225,200 | | | $ | 32.16 | | | | | 7 | | | | 13.8 | % | | 14 | % | | | 0.5 | |
May 27 to June 30 (4) | | 333,794 | | | $ | 30.3 | | | | | 9.9 | | | | 14 | % | | 14 | % | | | 0.7 | |
July 1 to September 30 (4) | | 751,766 | | | $ | 28.38 | | | | | 20.8 | | | | 13.7 | % | | 13.3 | % | | | 1.1 | |
2011 Totals | | 3,084,208 | | | | | | | | $ | 93.6 | | | | | | | | | | | | $ | 6.4 | |
_____________________________ | | | | | | | | | | | | | | | | | | | | | | | |
(1) | Net of commissions and issuance costs of $2.2 million. |
(2) | Contributions made by the General Partner to maintain its 2% general partner interest. |
(3) | Units and unit price adjusted for the April 2011 stock split. |
(4) | Units issued under the Amended EDA. |
During the years ended 2012 and 2011, we recorded $22.7 million and $51.7 million, respectively, of capital account adjustments with respect to all the Partnership's Class A common unit issuances, including any EDA or Amended EDA issuances. The after-tax effect of these capital account adjustments to our Shareholders' equity at 2012 and 2011 was $14.4 million and $32.6 million, respectively. |