SHAREHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2014 |
SHAREHOLDERS' EQUITY [Abstract] | |
SHAREHOLDERS' EQUITY | 3. SHAREHOLDERS' EQUITY |
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Share Distributions |
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Our authorized capital structure consists of two classes of interests: (1) Listed Shares, which represent limited liability company interests with limited voting rights, and (2) voting shares, which represent limited liability company interests with full voting rights, all voting shares of which are held by the General Partner. |
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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's 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. |
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The following table sets forth the details regarding our share distributions, as approved by our board of directors for the years ended December 31, 2014, 2013 and 2012. |
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| | | | | | | | Distribution | | Average | | | | Listed | | Shares | | | | | | |
| | | | | | | | per Unit | | Closing | | Additional | | Shares | | distributed | | | | | | |
Distribution | | | | Distribution | | | of the | | Price of the | | i-units | | distributed | | to General | | | | | | |
Declaration Date | | Record Date | | Payment Date | | | Partnership | | Listed Shares | | owned | | to Public | | Partner | | | | | | |
2014 | | | | | | | | | | | | | | | | | | | | | |
| 31-Oct | | 7-Nov | | 14-Nov | | | $ | 0.555 | | | $ | 35.75 | | | 1,044,292 | | | 922,250 | | | 122,042 | | | | | | | |
| 31-Jul | | 7-Aug | | 14-Aug | | | $ | 0.555 | | | $ | 34.53 | | | 1,064,113 | | | 939,754 | | | 124,359 | | | | | | | |
| 30-Apr | | 8-May | | 15-May | | | $ | 0.5435 | | | $ | 29.14 | | | 1,212,031 | | | 1,070,385 | | | 141,646 | | | | | | | |
| 30-Jan | | 7-Feb | | 14-Feb | | | $ | 0.5435 | | | $ | 27.9 | | | 1,241,652 | | | 1,096,544 | | | 145,108 | | | | | | | |
| | | | | | | | | | | | | | | | 4,562,088 | | | 4,028,933 | | | 533,155 | | | | | | | |
2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| October 31 | | 7-Nov | | 14-Nov | | | $ | 0.5435 | | | $ | 29.25 | | | 1,162,989 | | | 1,027,074 | | | 135,915 | | | | | | | |
| July 29 | | 7-Aug | | 14-Aug | | | $ | 0.5435 | | | $ | 31.85 | | | 908,499 | | | 785,809 | | | 122,690 | | | | | | | |
| April 30 | | 8-May | | 15-May | | | $ | 0.5435 | | | $ | 29.5 | | | 963,274 | | | 833,187 | | | 130,087 | | | | | | | |
| 30-Jan | | 7-Feb | | 14-Feb | | | $ | 0.5435 | | | $ | 30.45 | | | 735,227 | | | 611,430 | | | 123,797 | | | | | | | |
| | | | | | | | | | | | | | | | 3,769,989 | | | 3,257,500 | | | 512,489 | | | | | | | |
2012 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| October 31 | | 7-Nov | | 14-Nov | | | $ | 0.5435 | | | $ | 31.65 | | | 695,596 | | | 578,472 | | | 117,124 | | | | | | | |
| July 30 | | 7-Aug | | 14-Aug | | | $ | 0.5435 | | | $ | 31.43 | | | 688,548 | | | 572,611 | | | 115,937 | | | | | | | |
| April 30 | | 7-May | | 15-May | | | $ | 0.5325 | | | $ | 32.28 | | | 646,118 | | | 537,325 | | | 108,793 | | | | | | | |
| 30-Jan | | 7-Feb | | 14-Feb | | | $ | 0.5325 | | | $ | 34.12 | | | 601,828 | | | 500,493 | | | 101,335 | | | | | | | |
| | | | | | | | | | | | | | | | 2,632,090 | | | 2,188,901 | | | 443,189 | | | | | | | |
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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 $144.0 million, $113.8 million and $85.0 million during the years ended December 31, 2014, 2013 and 2012, respectively. |
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Issuance of Listed Shares |
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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. |
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The following table presents our issuances of additional Listed Shares in 2013. There were no share issuances in 2012 or 2014. |
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| | | | | | | | | | | | | | | | | 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
September 24 | | | 424,686 | | | | $ | 28.02 | | | | $ | 11.9 | | | 18.8 | % | | 18.9 | % | | | | | | | | |
September 13 | | | 8,000,000 | | | | $ | 28.02 | | | | $ | 223.7 | | | 16.8 | % | | 18.8 | % | | | | | | | | |
March 1 | | | 10,350,000 | | | | $ | 26.44 | | | | $ | 272.9 | | | 13.5 | % | | 16.3 | % | | | | | | | | |
| Total | | | 18,774,686 | | | | | | | | | $ | 508.5 | | | | | | | | | | | | | | | |
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(1) | | | | | | | | |
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Net of underwriters' fees and discounts, commissions and issuance expenses, if any. | | | | | | | | |
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Partnership Equity Restructuring |
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Prior to July 1, 2014, the General Partner received incremental incentive cash distributions related to its incentive distribution rights, or Previous IDRs, on the portion of cash distributions that exceeded certain target thresholds on a per unit basis under the Partnership's limited partnership agreement, or Partnership Agreement. The incentive distributions payable to the General Partner were 13%, 23% and 48% of all quarterly distributions of available cash that exceeded target levels of $0.295, $0.35 and $0.495 per limited partner unit, respectively. The net income attributed to the Previous IDRs was equivalent to the amount of the incentive cash distributions. |
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Effective July 1, 2014, the General Partner entered into an equity restructuring transaction, or Equity Restructuring, with the Partnership in which the General Partner irrevocably waived its right to receive cash distributions and allocations of items of income, gain, deduction and loss in excess of 2% in respect of its general partner interest in the Previous IDRs, in exchange for the issuance to a wholly-owned subsidiary of the General Partner of a new class of limited partner interests designated as Class D units, and a new class of limited partner interests designated as IDUs. |
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The IDUs entitle the holder thereof to receive 23% of the incremental cash distributions paid by the Partnership in excess of $0.5435 per unit per quarter on its Class A and Class B common units, collectively, the common units, the i-units we own and the Class D units. In the event of any decrease in the Class A common unit distribution below the current quarterly distribution level of $0.5435 per unit in any quarter during the five years commencing with the fourth quarter of 2014, the distribution paid by the Partnership on the Class D units will be reduced to the amount that would have been paid by the Partnership in respect of the Previous IDRs had the Equity Restructuring not occurred. In addition, the third quarter 2014 distribution on the Class D units was reduced to prevent the aggregate distributions paid by the Partnership in calendar year 2014 with respect to the Previous IDRs, the Class D units and the IDUs from exceeding the distribution that would have been paid by the Partnership in calendar year 2014 in respect of the Previous IDRs had the Equity Restructuring not occurred. |
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As a result of the Equity Restructuring and the associated creation of the Class D units and IDUs, a reallocation in the carrying values of the Partnership's capital accounts was required. The Class D units and IUDs were recorded at fair value, and the remaining balance in the Partnership's capital accounts was allocated to the General Partner, the common units, and i-units on a pro-rata basis. In addition, the reallocation among the Partnership's capital accounts resulted in a negative capital account balance for the Partnership's Class B common units. The Partnership Agreement does not allow for the capital accounts of any limited partner to be negative and, as a result, requires the General Partner and those limited partners with positive capital account balances that participate in earnings of the Partnership based on their ownership interest to allocate income to the capital account of the Class B common units on a pro rata basis to bring the balance to zero. For the year ended December 31, 2014, our pro-rata share of this allocation to the Class B common units was $1.5 million. |
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The reallocation from these noncash transactions 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 $375.4 million, net of a $222.7 million tax benefit. A corresponding reduction to our Shareholders' equity was recorded and is reflected under “Capital account adjustments” on our statements of shareholders' equity. |
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MEP Drop Down Transaction |
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On July 1, 2014, the Partnership sold a 12.6% limited partner interest in Midcoast Operating, L.P., or Midcoast Operating, to MEP for $350.0 million in cash, which reduced its total ownership interest in Midcoast Operating from 61% to 48.4%. The difference between the fair value and the carrying value of the interest in Midcoast Operating was recorded as an adjustment to the Partnership's capital accounts. This noncash adjustment resulted in a reduction of $15.5 million, net of a $9.3 million tax benefit, to the book basis of our investment in the Partnership, based on our proportionate ownership interest in the Partnership at the time of the transaction, with a corresponding reduction to “Capital account adjustments” on our statements of shareholders' equity. |
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Partnership Preferred Unit Issuance |
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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. |
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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. |
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The following table presents the issuances of additional Class A common units by the Partnership for the year presented: |
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| | 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 | |
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(1) |
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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) |
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Before the effect of income taxes. |
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During the year ended December 31, 2012, we recorded $22.7 million of “capital account adjustments” with respect to all the Partnership's Class A common unit issuances. The after-tax effect of this capital account adjustment to our Shareholders' equity at December 31, 2012 was $14.4 million. |
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